<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 8, 2000
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
DECODE GENETICS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 8731 04-3326704
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
------------------------
<TABLE>
<S> <C>
LYNGHALS 1 KARI STEFANSSON, M.D., DR. MED.
REYKJAVIK, ICELAND C/O SMITH, STRATTON, WISE, HEHER & BRENNAN
+ 354-570-1900 600 COLLEGE ROAD EAST
(Address, Including Zip Code, and Telephone PRINCETON, NEW JERSEY 08540
Number, Including Area Code, of Registrant's 609-924-6000
Principal Executive Office) (Name, Address, Including Zip Code, and Telephone
Number,
Including Area Code, of Agent for Service)
</TABLE>
------------------------
Copies to:
<TABLE>
<S> <C>
DIANE M. FRENIER, ESQ. PAUL E. KUMLEBEN, ESQ.
MARSHA E. NOVICK, ESQ. DAVIS POLK & WARDWELL
SMITH, STRATTON, WISE, HEHER & BRENNAN 99 Gresham Street
600 College Road East London EC2V 7NG
Princeton, New Jersey 08540 United Kingdom
609-924-6000 + 44-207-418-1300
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS POSSIBLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SHARE OFFERING PRICE(1) REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.001 par value(2)...... shares $ $200,000,000 $52,800
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457 under the Securities Act of 1933, as amended.
(2) Includes shares that the underwriters have the option to
purchase to cover over-allotments, if any.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
The information in this preliminary prospectus is not complete and may be
changed. We may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This
preliminary prospectus is not an offer to sell these securities and it is
not soliciting an offer to buy these securities in any jurisdiction where
the offer or sale is not permitted.
PRELIMINARY PROSPECTUS (Subject to Completion)
Issued , 2000
Shares
LOGO
COMMON STOCK
------------------------
deCODE genetics, Inc. is offering shares of its common stock. This is our
initial public offering and no established public market currently exists for
our common stock. We anticipate that the initial public offering price
will be between $ and $ per share.
------------------------
Our shares have been approved for quotation, subject to official notice of
issuance, on the Nasdaq National Market and the European Association of
Securities Dealers Automated Quotation in each instance under the symbol
"DCGN."
------------------------
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 8.
------------------------
PRICE $ A SHARE
------------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS DECODE
-------- ------------- -----------
<S> <C> <C> <C>
Per Share....................................... $ $ $
Total........................................... $ $ $
</TABLE>
deCODE has granted the underwriters an option to purchase up to an additional
shares of our common stock to cover over-allotments.
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved these securities, or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
Morgan Stanley & Co. Incorporated expects to deliver the shares to purchasers
on , 2000
------------------------
MORGAN STANLEY DEAN WITTER
LEHMAN BROTHERS
, 2000
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Special Note Regarding Forward-Looking
Statements.......................... 3
Prospectus Summary.................... 4
Risk Factors.......................... 8
Use of Proceeds....................... 22
Dividend Policy....................... 23
Capitalization........................ 24
Dilution.............................. 25
Exchange Rates........................ 26
Selected Consolidated Financial
Data................................ 27
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 28
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Business.............................. 33
Management............................ 54
Certain Transactions.................. 60
Principal Stockholders................ 61
Description of Securities............. 63
Certain Tax Considerations............ 66
Shares Eligible for Future Sale....... 70
Underwriters.......................... 72
Legal Matters......................... 74
Experts............................... 74
Where You Can Find More Information... 74
EASDAQ Information.................... 75
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
------------------------
ABOUT THIS PROSPECTUS
In this prospectus, "deCODE," "we," "us" and "our" each refers to deCODE
genetics, Inc. and its wholly-owned subsidiary Islensk erfethagreining ehf., an
Icelandic company.
deCODE genetics(TM), the deCODE genetics logo, DecodeGT(TM), Allegro(TM),
and GeneMiner(TM) are trademarks of deCODE genetics, Inc. GeneChip(R) is a
registered trademark of Affymetrix Inc. Other trade names and trademarks
appearing in this prospectus are the property of their respective holders.
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with different information. If anyone
provides you with different or inconsistent information, you should not rely on
it. We are offering to sell, and seeking offers to buy, shares of common stock
only in jurisdictions where offers and sales are permitted. You should assume
that the information contained in this prospectus is accurate only as of the
date of this prospectus, unless such information is stated to be given as of
another date. Our business, financial condition, results of operations and
prospects may have changed since any such date.
UNTIL , 2000, ALL DEALERS THAT BUY, SELL OR TRADE COMMON STOCK,
WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
2
<PAGE> 4
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. These statements
relate to future events or our future financial performance. In some cases, you
can identify forward-looking statements by terminology such as "may," "will,"
"should," "could," "expect," "plan," "anticipate," "believe," "estimate,"
"predict," "intend," "potential," or "continue," the negative of such terms or
other comparable terminology. These statements are only predictions. Actual
events or results may differ materially. In evaluating these statements, you
should specifically consider various factors, including the risks outlined under
"Risk Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business." These factors may cause our actual
results to differ materially from any forward-looking statement.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other person
assume responsibility for the accuracy and completeness of the forward-looking
statements. We are under no duty to update any of the forward-looking statements
after the date of this prospectus to conform such statements to actual results
or to any changes or exceptions.
3
<PAGE> 5
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary may not contain all of the information that you should consider
before deciding to invest in our common stock. We urge you to read this entire
prospectus carefully, including the "Risk Factors" section and our consolidated
financial statements and the notes to those statements.
DECODE
OUR COMPANY
deCODE is a genomics and health informatics company which is developing
products and services for the healthcare industry. We develop and apply modern
informatics technology to discover new knowledge about health and disease
through data-mining. We believe that certain unique qualities of the Icelandic
population, together with our advanced bioinformatics and high throughput
genotyping facility, should place deCODE at a competitive advantage to perform
genetic and medical research to identify disease genes and drug and diagnostic
targets. As the international effort to sequence the human genome progresses, we
believe that the principal task will be to transform raw genomic data into
knowledge about human health and disease and then into tangible products and
services. We believe that deCODE is well-positioned to place the human genome
sequence in a meaningful context through which we and our partners can generate
value.
deCODE was founded in 1996 and its operations, as well as its approximately
300 employees, are based in Iceland. In 1998, we entered into a significant
research collaboration and cross-license agreement with F.Hoffmann-La Roche, or
Roche, under which we may receive a total of more than $200 million in research
funding and milestone payments. To date our accomplishments include:
- the identification of eight locations for disease-causing genes;
- the identification of twelve specific candidate disease genes;
- the achievement of four milestones in our research collaboration
agreement with Roche;
- the completion of a high-throughput genotyping facility;
- the development of automated software algorithms for data capture,
analysis and interpretation; and
- near completion of a computerized genealogy database covering the
Icelandic population.
We believe that discovery of health care knowledge requires bringing
together three key types of data: information from the healthcare system,
information about relationships among individuals covered by this system and
associated molecular genetics data. We believe that operating in Iceland
accomplishes this by allowing us to benefit from the following four important
characteristics of the Icelandic nation in our medical and genetic research:
- extensive genealogical records dating back to the settlement of the
country in the ninth century;
- relative genetic homogeneity with a population descended from a small
number of settlers;
- a centralized healthcare system since 1915; and
- a well-educated population.
We believe that bringing these four factors together greatly enhances our
research and development efforts in generating future products and services for
the healthcare industry.
deCODE is pursuing its access to public and proprietary data through three
avenues of commercialization:
- discovery services, with a focus on gene and drug target discovery;
- database services, with a focus on the construction and
commercialization of the Icelandic Health Sector Database, or the IHD,
containing non-personally identifiable data from Icelandic healthcare
records, and the deCODE Combined Data Processing capability, or the
DCDP, to cross-reference data from the IHD with genealogical and
genotypic data; and
- healthcare informatics, with a focus on bioinformatics, decision-support
tools and privacy products.
4
<PAGE> 6
We believe that the DCDP will permit users to build more complete models of
the interplay of genes, the environment and disease than are currently
available.
OUR STRATEGY
Our strategy is to use our population-based genomics approach to transform
genomic data and healthcare data into products and services. The key elements of
our strategy are as follows:
- Gene and Drug Target Discovery. deCODE plans to pursue gene and drug
target discovery and the characterization of genes that contribute to
the causes of common diseases. In addition, we will use studies of gene
expression and protein-protein interaction systems to define molecular
pathways, which may contain drug targets.
- Database Subscription and Consulting Services. deCODE expects to
develop and operate the DCDP, which is intended to cross-reference
non-personally identifiable healthcare information on the Icelandic
population in the IHD with genealogy data and genetic data obtained
through consent. In addition, we are developing new mathematical
algorithms to extract further knowledge from the DCDP. Services we plan
to offer to future subscribers of the DCDP will include gene discovery
and drug target validation, pharmacogenomics, disease management and
health management.
- Pharmacogenomics Partnerships. In collaboration with pharmaceutical
companies, we intend to apply pharmacogenomics to understand differences
in drug response among individuals. We believe that genomics will permit
the identification of the genetic differences that cause different
people to respond differently to the same drugs and that, as a result,
it will be possible to individualize the selection of drugs for
patients.
- Sale and Marketing of Healthcare Informatics Products. We plan to
exploit market opportunities for software tools that we develop during
the design and construction of the IHD and DCDP and in our disease gene
discovery efforts. The software tools that we have already developed
include GeneMiner, DecodeGT, an encryption system, and a comprehensive
sample database. We expect to offer healthcare informatics services,
such as decision-support software and privacy solutions.
- Formation of Collaborations. We intend to seek corporate collaborations
or joint ventures with pharmaceutical and biotechnology companies to
provide research alliances, product development and commercialization
for our gene and drug target discovery programs.
deCODE was incorporated in Delaware in 1996. Our principal office is
located at Lynghals 1, Reykjavik, Iceland, our telephone number is +354-570-1900
and our address on the world wide web is www.decode.com.
5
<PAGE> 7
THE OFFERING
Common stock to be
offered.................... -- shares
Common stock to be
outstanding immediately
after this offering...... -- shares
Use of Proceeds............ We estimate that our net proceeds from this
offering will be approximately $ -- million,
based on an initial public offering price of
$ -- per share. We plan to use the net proceeds
from this offering for the development and
operation of the DCDP, to fund our research and
discovery programs, for capital expenditures and
for working capital and general corporate purposes.
See "Use of Proceeds."
Dividend Policy............ We intend to retain earnings, if any, for use in
our business and do not anticipate paying dividends
on our common stock in the foreseeable future. See
"Dividend Policy."
Quotations................. Our shares have been approved for quotation,
subject to official notice of issuance, on the
Nasdaq National Market and the European Association
of Securities Dealers Automated Quotation, or
EASDAQ, in each instance under the symbol "DCGN."
- ---------------
Unless we specifically state otherwise, the information in this prospectus
does not take into account the issuance of up to -- shares of our common
stock which the underwriters have the option to purchase solely to cover
over-allotments. If the underwriters exercise their over-allotment option in
full, -- shares of our common stock will be outstanding after the offering.
The number of shares of our common stock to be outstanding immediately
after this offering includes 22,969,544 shares of our common stock that will be
issued upon the automatic conversion of all our outstanding shares of preferred
stock upon the closing of this offering. See "Description of
Securities -- Preferred Stock."
The number of shares of our common stock to be outstanding immediately
after this offering does not take into account 2,125,037 shares of our common
stock that are reserved for issuance upon exercise of outstanding options and
warrants. For a description of the options, see "Description of
Securities -- Stock Options" and "Certain Transactions." For a description of
the warrants, see "Description of Securities -- Warrants and Other Rights to
Purchase."
6
<PAGE> 8
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table presents consolidated summary financial data for
deCODE. The data presented in this table are derived from "Selected Consolidated
Financial Data" and the consolidated financial statements and the notes to those
statements which are included elsewhere in this prospectus. You should read
those sections for a further explanation of the financial data summarized here.
You should also read "Management's Discussion and Analysis of Financial
Condition and Results of Operations," which describes a number of factors that
have affected our financial results.
<TABLE>
<CAPTION>
INCEPTION
(AUGUST 23,
1996) TO YEAR ENDED DECEMBER 31,
DECEMBER 31, -----------------------------------------
1996 1997 1998 1999
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenue................................. $ 0 $ 0 $ 12,705,000 $ 16,444,075
Operating Expenses
Research and development.............. 737,764 6,080,096 19,282,364 31,823,950
General and administrative............ 454,873 1,967,684 4,893,202 7,863,299
----------- ----------- ------------ ------------
Total operating expenses................ 1,192,637 8,047,780 24,175,566 39,687,249
Operating loss.......................... (1,192,637) (8,047,780) (11,470,566) (23,243,174)
Equity in net earnings (loss) of
affiliate............................. 0 0 0 (1,484,081)
Interest income, net.................... 40,005 (8,461) 562,336 1,549,481
Taxes................................... 0 0 0 0
----------- ----------- ------------ ------------
Net loss................................ (1,152,632) (8,056,241) (10,908,230) (23,177,774)
Accrued dividends and amortized discount
on preferred stock.................... (181,852) (620,385) (2,571,523) (7,542,787)
Premium on repurchase of preferred
stock................................. 0 0 0 (30,887,044)
----------- ----------- ------------ ------------
Net loss available to common
stockholders.......................... $(1,334,484) $(8,676,626) $(13,479,753) $(61,607,605)
=========== =========== ============ ============
Basic and diluted net loss per share.... $ (1.10) $ (3.85) $ (3.06) $ (9.56)
Shares used in computing basic and
diluted net loss per share(1)......... 1,213,925 2,254,413 4,400,576 6,446,055
Unaudited pro forma basic and diluted
net loss per share.................... $ (0.84)
Shares used in computing unaudited pro
forma basic and diluted net loss per
share(1).............................. 27,559,365
</TABLE>
The following table presents a summary of our balance sheet at December 31,
1999: on an actual basis; on a pro forma basis after giving effect to the
issuance of 22,969,544 shares of our common stock upon the automatic conversion
upon the closing of this offering of our Series A preferred stock, Series B
preferred stock and Series C preferred stock into shares of common stock; and on
a pro forma basis as adjusted to give effect to the issuance of 22,969,544
shares of our common stock upon that automatic conversion and the sale of
-- shares of common stock pursuant to this offering. This information is
based on an initial public offering price of $ -- per share less the
estimated underwriters discounts and commissions.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
-----------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents......................... $29,668,249 $29,668,249
Total assets...................................... 79,130,186 79,130,186
Total long-term liabilities....................... 4,874,291 4,874,291
Redeemable, convertible preferred stock........... 116,209,595 0
Total stockholders' equity (deficit).............. (68,024,730) 48,184,865
</TABLE>
- ---------------
(1) See Note B of Notes to Consolidated Financial Statements for an explanation
of the determination of the shares used in computing basic and diluted net
loss per share and unaudited pro forma basic and diluted net loss per
share.
7
<PAGE> 9
RISK FACTORS
The shares of common stock offered by this prospectus involve a substantial
risk of loss. Before making an investment in the common stock, you should
carefully read this entire prospectus and should give particular attention to
the following risk factors. You should recognize that other significant risks
may arise in the future, which we cannot foresee at this time. Also, the risks
that we now foresee might affect us to a greater or different degree than
expected. There are a number of important factors that could cause our actual
results to differ materially from those indicated by the forward-looking
statements contained in this prospectus. These factors include, without
limitation, the risk factors listed below and other factors presented throughout
this prospectus.
WE MAY NOT SUCCESSFULLY DEVELOP OR DERIVE REVENUES FROM ANY PRODUCTS OR SERVICES
DISCOVERY SERVICES
Our gene discovery programs are still in the early stages of development
and may not result in marketable products. Our technology and development focus
is primarily directed toward identifying genes or gene fragments which are
responsible for, or indicate the presence of, certain diseases. We have only
identified twelve specific candidate genes under our research programs and have
not yet validated any disease genes. Our technologies and approach to gene
discovery may not enable us to identify successfully the specific genes that
cause or predispose individuals to the complex diseases that are the targets of
our gene discovery program, even where we have identified candidate genes. In
addition, the diseases we are targeting are generally believed to be caused by a
number of genetic and environmental factors. It may not be possible to address
such diseases through gene-based therapeutic or diagnostic products.
Accordingly, even if we are successful in identifying specific genes, our
discoveries may not lead to the development of commercial products.
Even if we, or our collaborators, are able to develop pharmaceutical
products, those products will fail to produce revenues unless they:
- are safe and effective;
- meet regulatory standards in a timely manner;
- successfully compete with other technologies and products;
- avoid infringing on the proprietary rights of others;
- can be manufactured in sufficient quantities at reasonable costs; and
- can be marketed successfully.
We are not certain that we will be able to achieve these conditions for
product revenues. We expect that it will be a number of years, if ever, before
we will recognize revenue from therapeutic or diagnostic product sales or
royalties on such sales.
Our initiatives in pharmacogenomics and functional genomics are not certain
to provide any revenues. There may be no market for these services because of
competition, lack of market acceptance or our inability to develop these
services successfully. We may not be able to develop our functional genomics
capabilities to a state that is adequate for realizing revenues.
DATABASE SERVICES
We, through our wholly-owned subsidiary Islensk erfethagreining ehf.,
received a license permitting us to develop and operate the IHD in January 2000,
and accordingly, are at the very early stages of its development. The collection
of genotypic data, that is another integral part of the DCDP, is also in the
early stages of development. We expect that it will take several years before
the DCDP is fully developed. We are presently devoting substantial resources to
the development of the DCDP and its components. We plan to continue to devote
substantial resources to this development for the foreseeable future. We cannot
be sure that the DCDP will result in marketable products or services. Our
intended method for cross-referencing genealogical, genotypic and
8
<PAGE> 10
healthcare data is central to the development of the DCDP and is unproven. The
success of our database services is contingent upon:
- the development of the IHD and collection of genotypic data;
- the creation of database and cross-reference software that is free from
design defects or errors;
- compliance with governmental requirements regarding the IHD;
- the security and reliability of encryption technology;
- the cooperation of the Icelandic healthcare system;
- the ability to obtain blood samples from consenting Icelanders and
consents to the use of their genotypic data by cross-referencing through
the DCDP;
- the usefulness of information derived through the DCDP in disease
management, analysis of drug response, gene discovery and drug target
validation; and
- the development of marketing and pricing methods that are accepted by
the intended users of the DCDP.
The failure to successfully commercialize our database services will have a
material adverse effect on our business operations.
HEALTHCARE INFORMATICS
Our bioinformatics, decision-support and privacy protection products have,
to date, been tested only in connection with our own use of them and they may
not meet the needs of potential customers. We are at an early stage of
development of our medical decision-support systems, or MDSS, for healthcare
providers, and we have generated no revenues from sales or licenses of
bioinformatics, decision-support, or privacy protection products. To date we
have not produced any decision-support tools and there can be no assurance that
we can successfully develop or commercialize MDSS or that there will be a market
for our bioinformatics, decision-support or privacy protection products for
healthcare delivery.
OUR BUSINESS MODEL IS BASED ON UNPROVEN APPROACHES
The products we hope to develop involve new and unproven approaches. They
are based on the assumption that information about genes may help scientists
better understand complex disease processes. Scientists generally have a limited
understanding of the role of genes in diseases, and few products based on gene
discoveries have been developed. Of the products that exist, all are diagnostic
products. To date, we know of no therapeutic products based on disease gene
discoveries. If our assumption about the role of genes in the disease process is
wrong, our gene discovery programs may not result in products, the genetic data
included in our database and informatics products may not be useful to our
customers and those products may lose any competitive advantage.
IF WE CONTINUE TO INCUR OPERATING LOSSES FOR A PERIOD LONGER THAN ANTICIPATED,
OR IN AN AMOUNT GREATER THAN ANTICIPATED, WE MAY BE UNABLE TO CONTINUE OUR
OPERATIONS
We incurred net losses available to common stockholders of $61,607,605 for
the year ended December 31, 1999, $13,479,753 for the year ended December 31,
1998, and $8,676,626 for the year ended December 31, 1997. As of December 31,
1999 we had an accumulated deficit of $76,713,517. To date, we have never
generated a profit and we have not generated any significant revenues except for
payments received in connection with our research collaboration with Roche and
interest revenues. The development of our technologies will require substantial
increases in expenditures over the next several years. In addition, we expect to
spend more in connection with our internal research programs and the preparation
of the IHD, the DCDP and informatics. As a result, we expect to incur operating
losses for several years. If the time required to generate product revenues and
achieve profitability is longer than anticipated or the level of operating
losses is greater than anticipated, we may not be able to continue our
operations.
9
<PAGE> 11
WE MAY NOT BE ABLE TO OBTAIN SUFFICIENT ADDITIONAL FUNDING TO MEET OUR EXPANDING
CAPITAL REQUIREMENTS
We have used substantial amounts of cash to fund our research and
development activities. We expect our capital and operating expenditures to
increase over the next several years as we expand our research and development
activities, construct the IHD and the DCDP, collect the genotype data and
develop healthcare informatics products. Many factors will influence our future
capital needs, including:
- the progress of our discovery and research programs;
- the number and breadth of these programs;
- our ability to attract collaborators for, subscribers to or customers
for our products and services;
- our achievement of milestones under our research collaboration agreement
with Roche;
- our ability to establish and maintain additional collaborations;
- our collaborators' progress in commercializing our gene discoveries;
- the level of our activities relating to commercialization rights we
retain in our collaborations;
- competing technological and market developments;
- the costs involved in enforcing patent claims and other intellectual
property rights; and
- the costs and timing of regulatory approvals.
We intend to rely on Roche and future collaborators for significant funding
in support of our research efforts. In addition, we may seek additional funding
through public or private equity offerings and debt financings. Additional
financing may not be available when needed. If available, such financing may not
be on terms favorable to us or our stockholders. Stockholders' ownership will be
diluted if we raise additional capital by issuing equity securities. If we raise
additional funds through collaborations and licensing arrangements, we may have
to relinquish rights to certain of our technologies or product candidates, or
grant licenses on unfavorable terms. These situations could have a material
adverse effect on us. If adequate funds are not available, we would have to
scale back or terminate our discovery and research programs and product
development, and our business, financial condition and results of operations
would be materially adversely affected. We believe that the net proceeds from
this offering, existing cash and investment securities and anticipated cash flow
from Roche will be sufficient to support our current operating plan at least
through 2001. We have based this belief on assumptions that may prove wrong.
IF WE DO NOT MAINTAIN THE GOODWILL AND RECEIVE THE COOPERATION OF THE ICELANDIC
POPULATION, WE MAY BE UNABLE TO PURSUE OUR GENE IDENTIFICATION PROGRAMS,
PHARMACOGENOMICS OR FUNCTIONAL GENOMICS EFFORTS, COLLECT GENOTYPE DATA OR
DEVELOP THE IHD AND THE DCDP
Our approach to gene identification and the development and maintenance of
genotype data, the IHD and the DCDP depend on the goodwill and cooperation of
the Icelandic population, including the Icelandic government and the healthcare
system. Our development of the IHD will be impaired if individual Icelanders
refuse to allow information from their medical records to be included in the IHD
or healthcare providers attempt to prevent us from having access to medical
records of their patients. Our development of genotype data and our cross-
referencing through the DCDP of that data with information about the
manifestations of disease, or phenotypes, in the IHD require that a substantial
portion of the Icelandic population provide us with blood samples for genotyping
and consent to the use of their DNA to cross-reference molecular genetics data
with the IHD. Because certain mutations may be carried only by a small portion
of the Icelandic population, the unwillingness of even a small portion of the
population to participate in our programs could diminish our ability to develop
and market information based on the use of genotypic data. Accordingly, if we do
not maintain the goodwill of the Icelandic people and receive the cooperation of
individual Icelanders and the medical profession, our business and financial
condition will be materially adversely affected.
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OUR RELIANCE ON THE ICELANDIC POPULATION IN OUR GENE DISCOVERY PROGRAMS AND
DATABASE SERVICES MAY LIMIT THE APPLICABILITY OF OUR DISCOVERIES TO CERTAIN
POPULATIONS
In general, the genetic make-up and prevalence of disease vary across
populations around the world. Common complex diseases generally occur with a
similar frequency in Iceland as in other western countries. We are already
studying some of these diseases in our gene discovery programs. However, the
populations of other western nations may be genetically predisposed to certain
diseases because of mutations not present in the Icelandic population. As a
result, we and our partners may take more time or may be unable to develop
diagnostic products that are effective on all, or a portion, of those people
with such diseases. Similarly, any difference between the Icelandic population
and the populations of other countries may have an effect on the usefulness of
the IHD and DCDP in studying disease in populations of countries other than
Iceland.
OUR CREATION AND OPERATION OF THE IHD IS BASED UPON A LICENSE FROM THE ICELANDIC
MINISTRY OF HEALTH AND SOCIAL SECURITY AND IS SUBJECT TO GOVERNMENT SUPERVISION
AND REGULATION
We are only permitted to construct the IHD and cross-reference it with our
genealogical and genetic data, through the DCDP, in accordance with the
stipulations of the license, or the IHD license, granted by the Ministry of
Health and Social Security, or the Ministry, pursuant to the Act on a Health
Sector Database no. 139/1998, or the Act. The license permits the processing of
healthcare data from healthcare records and other relevant data into the IHD.
Our construction and operation of the IHD will be subject to the supervision of
the IHD Monitoring Committee, the Data Protection Commission of Iceland and an
Interdisciplinary Ethics Committee. These committees report to the Ministry. In
addition, the operation of the IHD is subject to the review of the Icelandic
Bioethics Committee. The Ministry may withdraw our license in the event that we
violate the terms and conditions of the IHD license, the Act or the rules
promulgated pursuant to the Act. In addition, the Act could be amended in ways
which would adversely affect our ability to develop or market the IHD and,
consequently, the DCDP. Because the Act and the rules were recently adopted by
the Icelandic parliament and government, there is no precedent interpreting the
Act or the rules.
Our preparation of the IHD is subject to technical requirements imposed by
the Data Protection Commission in areas such as data encryption and privacy
protection. These requirements are subject to change from time to time and may
require greater technical capabilities than we currently have. Compliance with
these requirements can be expensive and time-consuming and may delay the
development of the IHD and the DCDP or make such development more expensive than
anticipated. In addition, our compliance is subject to evaluation by the
agencies imposing these requirements. We cannot control the time required for
this evaluation, and accordingly, the evaluation process may lead to delay in
the development of the IHD and the DCDP.
The Interdisciplinary Ethics Committee has the power to withdraw permission
for any types of research programs in the IHD not conducted in accordance with
international rules of bioethics.
At the expiration of the IHD license, we are required to ensure that the
Ministry or a party entrusted by the Ministry will receive, without payment of
consideration, intellectual property rights necessary for the creation and
operation of the database for public health purposes and for scientific
research.
We are subject to a very extensive indemnity clause in our agreement with
the Ministry, pursuant to which:
- we have agreed not to make any claim against the government if the Act
or the license are amended as a result of the Act or rules relating to
the IHD being found to be inconsistent with the rules of the European
Economic Area, or EEA, or other international rules and agreements to
which Iceland is or becomes a party;
- we have agreed that if the Icelandic State, by a final judgment, is
found to be liable or subject to payment to any third party as a result
of the passage of legislation on the IHD and/or issuance of the IHD
license, we will indemnify it against all damages and costs in
connection with the litigation; and
- we have agreed to compensate any third parties with whom the Icelandic
government negotiates a settlement of liability claims arising from the
legislation on the IHD and/or the issuance of the IHD
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license, provided that the Icelandic government demonstrates that it was
justified in agreeing to make payments pursuant to the settlement.
WE MAY NOT BE ABLE TO ENTER INTO AGREEMENTS WITH ICELANDIC HEALTH INSTITUTIONS
AS REQUIRED BY THE IHD LICENSE IN ORDER TO COLLECT DATA FROM THE INSTITUTIONS
The IHD license requires us to enter into agreements with Icelandic health
institutions and self-employed health service workers regarding access to and
the processing of information from medical records. We cannot be certain that we
will be able to enter into such agreements or that such agreements will be on
terms favorable to us. We cannot be certain that individuals within health
institutions will adhere to the requirements of such agreements. Our inability
to enter into such agreements on favorable terms or in a timely manner, or to
obtain others' compliance with the terms of such agreements, could have a
material adverse effect on us.
THE IHD LICENSE WILL EXPIRE IN JANUARY 2012
Even if we are successful in creating and marketing the IHD and the DCDP,
the IHD license will expire in January 2012 unless we are able to obtain an
extension. There is no assurance that we will obtain further access rights on
favorable terms, if at all. Our negotiations with healthcare institutions, the
process of genotyping and the development of database infrastructure, among
other factors, will determine when we can begin marketing the DCDP. We expect
that the IHD and the DCDP will not be fully operational for up to five years.
The IHD license will be subject to a review in 2008, and at that time, in
accordance with an agreement we entered into with the Ministry simultaneously
with the granting of the IHD license, we and the Ministry will enter into
discussions on renewal of the license at the end of the term. The Ministry is
not obligated to renew the IHD license and there can be no guarantee that it
will do so. Failure to maintain the IHD license or to complete the IHD or the
DCDP in a timely fashion will materially adversely affect our business and
financial condition.
WE MAY NOT BE ABLE TO FORM AND MAINTAIN THE COLLABORATIVE RELATIONSHIPS THAT OUR
BUSINESS STRATEGY REQUIRES
Our strategy for deriving revenues from the discovery of genes and the
development of products based upon our discoveries depends upon the formation of
research collaborations and licensing arrangements with several partners at the
same time. We currently have a research collaboration only with Roche. To
succeed, we will have to maintain this relationship and establish additional
collaborations. We cannot be sure that we will be able to establish additional
research collaborations or licensing arrangements necessary to develop and
commercialize products using our technology, that any future collaborations or
licensing arrangements will be on terms favorable to us, or that current or
future collaborations or licensing arrangements ultimately will be successful.
If we are not able to manage multiple programs successfully, our programs will
suffer.
We also expect to rely on collaborations in other parts of our business
such as the construction of the DCDP. During the development of the DCDP, we
intend to pursue collaborations to assist us in the development of certain of
its components. Such collaborations may involve the use of particular
technologies or collaborative development and marketing activities. If we are
unable to enter into such collaborations on favorable terms, our ability to
commercialize the DCDP will be adversely affected.
To develop our healthcare informatics products, we also plan to rely on
collaborative relationships. To date we have not established any such
collaborative relationships. If we are unable to form or maintain such
collaborative arrangements, our healthcare informatics operations will be
adversely affected.
OUR DEPENDENCE ON COLLABORATIVE RELATIONSHIPS MAY LEAD TO DELAYS IN PRODUCT
DEVELOPMENT AND DISPUTES OVER RIGHTS TO TECHNOLOGY
Under our current strategy, and for the foreseeable future, we do not
expect to develop or market pharmaceutical products on our own. As a result, we
will be dependent on collaborators for the pre-clinical study and clinical
development of therapeutic and diagnostic products and for regulatory approval,
manufacturing and marketing of any products that result from our technology. Our
agreements with pharmaceutical collaborators or collaborators for gene research
projects will typically allow them significant discretion in electing whether to
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pursue such activities. We cannot control the amount and timing of resources
collaborators will devote to our programs or potential products. Our
collaborations may have the effect of limiting the areas of research that we may
pursue either alone or with others.
In addition, we expect to develop our database products, in part, with
various collaborators, and we may develop healthcare informatics tools which are
designed to work in conjunction with or to enhance the healthcare informatics
tools of other developers. These arrangements may place responsibility for key
aspects of product development and marketing on our collaborative partners.
Accordingly, the performance of these key aspects is uncertain and beyond our
direct control. The failure of our collaborators to perform their obligations
could result in our database products containing erroneous data, design defects,
viruses or software defects that are difficult to detect and correct and may
adversely affect our revenues and the market acceptance of our products.
If any pharmaceutical, healthcare informatics or database collaborator were
to breach or terminate its agreement with us, or otherwise fail to conduct
collaborative activities successfully and in a timely manner, the development or
commercialization of products, services, technologies or research programs may
be delayed or terminated.
Competing products, developed by our collaborators or to which our
collaborators have rights, may result in their withdrawal of support for our
products and services.
Disputes may arise in the future over the ownership of rights to any
technology developed with collaborators. These and other possible disagreements
between us and our collaborators could lead to delays in the collaborative
research, development or commercialization of products. Such disagreements could
also result in litigation or require arbitration to resolve. Any such event
could have a material adverse effect on our business.
ETHICAL AND PRIVACY CONCERNS MAY LIMIT OUR ABILITY TO DEVELOP AND USE THE IHD
AND DCDP AND MAY LEAD TO LITIGATION AGAINST US OR THE ICELANDIC GOVERNMENT
The passage of the Act and the granting by the Ministry of the IHD license
have raised ethics and privacy concerns in Iceland and internationally, among
healthcare professionals and others. Ethical and privacy concerns about the
development and use of the IHD and DCDP may lead to litigation in U.S.,
Icelandic or other national courts, or in international courts such as the
European Court of Human Rights in Strasbourg, e.g., on the basis of an alleged
breach of the patient-doctor confidential relationship, constitutional privacy
issues, international conventions dealing with protection of privacy issues or
human rights conventions. The results of such litigation could materially
adversely affect our results of operations.
CERTAIN PARTIES HAVE ANNOUNCED AN INTENTION TO INSTITUTE LITIGATION TESTING THE
CONSTITUTIONALITY OF THE ACT
In February 2000, an organization known as The Association of Icelanders
for Ethics in Science and Medicine, or Mannvernd, and a group of physicians and
other citizens issued a press release announcing their intention to file
lawsuits against the State of Iceland and any other relevant parties, including
deCODE, to test the constitutionality of the Act. According to the press
release, the intended lawsuit will allege that the Act and the IHD license
involve human rights violations and will challenge the validity of provisions of
the Act which allow the use of presumed consent for the processing of health
data into the IHD and the grant of a license to operate a single database.
deCODE believes that any such litigation would be without merit and intends to
defend vigorously any such action in which we become a party. However, in the
event that the Icelandic State by a final judgment is found to be liable or
subject to payment to any third party as a result of the passage of legislation
on the IHD and/or the issuance of the IHD license, our agreement with the
Ministry requires us to indemnify the Icelandic State against all damages and
costs incurred in connection with such litigation. In addition, the pendency of
such litigation could lead to delay in the development of the IHD and the DCDP,
and an unfavorable outcome would prevent us from developing and operating the
IHD and the DCDP. This would have a material adverse effect on our business and
financial condition.
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ANY FAILURE TO PROTECT CONFIDENTIAL DATA ADEQUATELY COULD CAUSE US TO INCUR
LIABILITY OR COULD RESULT IN LOSS OF OUR LICENSE
The Act and our license require us to encrypt all patient data and to take
other actions to ensure confidentiality of data included in the IHD and restrict
access to it. We are developing the IHD in accordance with the technology,
security and organizational terms established by the Data Protection Commission.
Such terms may be periodically reviewed and amended by the Data Protection
Commission in light of new technology or change of circumstances. We will be
required to comply with the revised data protection terms within an established
deadline. Although the security terms established by the Data Protection
Commission have, to date, received some criticism by one expert in this field,
we believe that they are, and will continue to be, in line with international
best industry-practice standards. In addition, the customers for other products
we may develop may impose confidentiality requirements. Accidental disclosures
of confidential data may result from technical failures in encryption technology
or from human error by our employees or those of our customers or collaborators.
Any failure to comply fully with all confidentiality requirements could lead to
liability for damages incurred by individuals whose privacy is violated, the
loss of the IHD license, the loss of our customers and reputation and the loss
of the goodwill and cooperation of the Icelandic population including healthcare
professionals. Any of these events would have a material adverse effect on our
business and financial condition.
ETHICAL AND PRIVACY CONCERNS MAY LIMIT THE USE OF GENETIC TESTING
Existing genetic predisposition tests developed by other companies have
raised ethical concerns. It is possible that employers or others could
discriminate against people who have a genetic predisposition to certain
diseases. Concern regarding possible discrimination may result in governmental
authorities enacting restrictions or bans on the use of all, or certain types
of, genetic testing. Similarly, such concerns may lead individuals to refuse to
use genetics tests even if permissible. These factors may limit the market for,
and therefore the commercial viability of, products developed by us and our
collaborators.
THERE IS INTENSE COMPETITION FOR THE DEVELOPMENT AND MARKETING OF PRODUCTS BASED
UPON THE IDENTIFICATION OF DISEASE-CAUSING GENES
A number of companies are attempting to rapidly identify and patent genes
that cause diseases or an increased susceptibility to diseases. Competition in
this field is intense and is expected to increase. We have numerous competitors,
including major pharmaceutical and diagnostic companies, specialized
biotechnology firms, universities and other research institutions, the United
States-funded Human Genome Project and other government-sponsored entities. Many
of our competitors have considerably greater capital resources, research and
development staffs and facilities, and technical and other resources than we do,
which may allow them to discover important genes before we do. We believe that a
number of our competitors are developing competing products and services that
may be commercially successful and that are further advanced in development than
our potential products and services. To succeed, we, together with our
collaborators, must discover disease-predisposing genes, characterize their
functions, develop genetic tests or therapeutic products and related information
services based on such discoveries, obtain regulatory and other approvals, and
launch such services or products before competitors. Even if our collaborators
or we are successful in developing effective products or services, our products
and services may not successfully compete with those of our competitors. Our
competitors may succeed in developing and marketing products and services that
are more effective than ours or that are marketed before ours.
Our collaboration with Roche does not prevent it from initiating its own
gene research or developing products based upon its, or any other party's, gene
research. Such products may compete with any products developed as a result of
our gene discovery programs. We expect that future collaborations may allow our
future partners to undertake research and develop products on their own or with
third parties.
Competitors have established, and in the future may establish, patent
positions with respect to gene sequences related to our research projects. Such
patent positions or the public availability of gene sequences comprising
substantial portions of the human genome could decrease the potential value of
our research projects
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and make it more difficult for us to compete. We may also face competition from
other entities in gaining access to DNA samples used for research and
development purposes.
We expect competition to intensify as technical advances are made and
become more widely known. Our future success will depend in large part on
maintaining a competitive position in the genomics field. Rapid technological
development by us or others may result in products or technologies becoming
obsolete before we recover the expenses we incur in developing them. Less
expensive or more effective technologies could make future products obsolete. We
cannot be certain that we will be able to make the necessary enhancements to any
products we develop to compete successfully with newly emerging technologies.
THERE IS INTENSE COMPETITION IN THE FIELD OF DATABASE SERVICES
A number of databases are being marketed or are under development by
companies or governments to assist participants in the healthcare industry and
academic researchers in the management and analysis of their own genomic data
and data available in the public domain. Although we believe that our existing
genealogy database and our license to construct and operate the IHD provide us
with a unique opportunity to cross-reference databases that include genetic
makeup, genealogy, medical history, disease symptoms, resource use and treatment
outcomes, we cannot be sure that any databases created by us will achieve
greater market acceptance than those of our competitors.
THERE IS INTENSE COMPETITION IN THE FIELD OF HEALTHCARE INFORMATICS
The healthcare informatics field is highly competitive. Many companies
compete with us to develop healthcare informatics similar to our expected
products, including products relating to medical record maintenance, MDSS and
systems design. We expect that competition will continue to intensify. Many of
our competitors have significantly greater financial resources and market
presence than we have. We cannot be sure that any products that we develop in
the field of healthcare informatics, including MDSS, will compete effectively
with those of our competitors.
REGULATORY AUTHORITIES MAY DETERMINE THAT OUR LICENSE TO DEVELOP THE IHD
INFRINGES UPON COMPETITION RULES IN THE EUROPEAN ECONOMIC AREA
Iceland is a member of the European Free Trade Association, or EFTA,
together with Norway, Switzerland and Liechtenstein. Through this membership,
Iceland has become a part of the EEA which was created by the EEA agreement
between EFTA and the European Union, or EU. The EEA agreement extends the EU
internal market and its regulations to EFTA countries that adopt certain EU
legislation. Accordingly, Iceland is subject to both EFTA and EU competition and
public procurement rules. In April 1999, Mannvernd, announced that it had filed
a complaint with the EFTA Surveillance Authority alleging that the passage of
the Act constitutes a violation by the Government of Iceland of its obligations
under the EEA agreement. A determination that the Act or our IHD license is in
breach of such rules could result in a revocation or dilution of the license and
could have a negative impact on the profitability and marketing potential of the
DCDP.
OTHERS MAY CLAIM INTELLECTUAL PROPERTY RIGHTS TO OUR GENEALOGY DATABASE
We are aware that there are other firms and individuals who have prepared,
or are currently preparing, genealogy databases similar to the one we have
developed. If any parties should successfully claim that the creation or use of
any of our databases infringes upon their intellectual property rights, it could
have a material adverse effect on our business. Recently, two holders of
copyrights in approximately 100 Icelandic genealogy books have filed a copyright
infringement suit against us in Iceland claiming that we have used data from
these books in the creation of our genealogy database, in violation of their
rights. The claimants seek a declaratory judgment to prevent our use of the
database and monetary damages in the amount of approximately $9,000,000. We
believe that this suit is without merit and intend to defend it vigorously, but
if it were successful it could have a material adverse effect on our database
and gene discovery services.
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WE MAY NOT BE ABLE TO PROTECT THE PROPRIETARY RIGHTS THAT ARE CRITICAL TO OUR
SUCCESS
Our success will depend on our ability to protect our genealogy database
and genotypic data and any other proprietary databases that we develop,
proprietary software and other proprietary methods and technologies. Despite our
efforts to protect our proprietary rights, unauthorized parties may be able to
obtain and use information that we regard as proprietary.
Our commercial success will depend in part on obtaining patent protection.
The patent positions of pharmaceutical, biopharmaceutical and biotechnology
companies, including ours, are generally uncertain and involve complex legal and
factual considerations. We cannot be sure that any of our pending patent
applications will result in issued patents, that we will develop additional
proprietary technologies that are patentable, that any patents issued to us or
our partners will provide a basis for commercially viable products, will provide
us with any competitive advantages or will not be challenged by third parties,
or that the patents of others will not have an adverse effect on our ability to
do business.
In addition, patent law relating to the scope of claims in the area of
genetics and gene discovery is still evolving. There is substantial uncertainty
regarding the patentability of genes or gene fragments without known functions.
The laws of some European countries provide that genes and gene fragments may
not be patented. The Commission of the EU has passed a directive which prevents
the patenting of genes in their natural state. The U.S. Patent and Trademark
Office initially rejected a patent application by the National Institutes of
Health on partial genes. Accordingly, the degree of future protection for our
proprietary rights is uncertain and, we cannot predict the breadth of claims
allowed in any patents issued to us or to others. We could also incur
substantial costs in litigation if we are required to defend ourselves in patent
suits brought by third parties or if we initiate such suits.
Others may have filed and in the future are likely to file patent
applications covering genes or gene products that are similar or identical to
our products. We cannot be certain that our patent applications will have
priority over any patent applications of others. The mere issuance of a patent
does not guarantee that it is valid or enforceable; thus even if we are granted
patents we cannot be sure that they would be valid and enforceable against third
parties. Further, a patent does not provide the patent holder with freedom to
operate in a way that infringes the patent rights of others. Any legal action
against us or our partners claiming damages and seeking to enjoin commercial
activities relating to the affected products and processes could, in addition to
subjecting us to potential liability for damages, require us or our partners to
obtain a license in order to continue to manufacture or market the affected
products and processes. There can be no assurance that we or our partners would
prevail in any action or that any license required under any patent would be
made available on commercially acceptable terms, if at all. If licenses are not
available, we or our partners may be required to cease marketing our products or
practicing our methods.
If expressed sequence tags, single nucleotide polymorphisms, or SNPs, or
other sequence information become publicly available before we apply for patent
protection on a corresponding full-length or partial gene, our ability to obtain
patent protection for those genes or gene sequences could be adversely affected.
In addition, other parties are attempting to rapidly identify and characterize
genes through the use of gene expression analysis and other technologies. If any
patents are issued to other parties on these partial or full-length genes or
uses for such genes, the risk increases that the sale of our or our
collaborators' potential products or processes may give rise to claims of patent
infringement. The amount of supportive data required for issuance of patents for
human therapeutics is highly uncertain. If more data than we have available is
required, our ability to obtain patent protection could be delayed or otherwise
adversely affected. Even with supportive data, the ability to obtain patents is
uncertain in view of evolving examination guidelines, such as the utility and
written description guidelines proposed by the U.S. Patent and Trademark Office.
While we require employees, academic collaborators and consultants to enter
into confidentiality agreements, there can be no assurance that proprietary
information will not be disclosed, that others will not independently develop
substantially equivalent proprietary information and techniques, otherwise gain
access to our trade secrets or disclose such technology, or that we can
meaningfully protect our trade secrets.
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If the information processed by the DCDP is disclosed without our
authorization, demand for our products and services may be adversely affected.
WE CANNOT BE CERTAIN THAT REGULATORY APPROVALS WILL BE OBTAINED FOR PRODUCTS
RESULTING FROM OUR GENE DISCOVERY PROGRAMS
New drugs and diagnostic products must be approved by government agencies
in the countries in which they are to be marketed. We cannot be certain that
regulatory approval for any drugs or diagnostic products resulting from our gene
discovery programs will be obtained. The regulatory process can take many years
and require substantial resources. Because some of the products likely to result
from our disease research programs involve the application of new technologies
and may be based upon a new therapeutic approach, they may be subject to
substantial additional review by various government regulatory authorities. As a
result, these authorities may grant regulatory approvals for these products more
slowly than for products using more conventional technologies. Furthermore,
regulatory approval may impose limitations on the use of a drug or diagnostic
product.
After initial regulatory approval, a marketed product and its manufacturer
are subject to continuing review. Discovery of previously unknown problems with
a product may have adverse effects on our business, financial condition and
results of operations, including withdrawal of the product from the market.
OUR DEPENDENCE UPON A SINGLE THIRD PARTY FOR SEQUENCING MACHINES MAY IMPAIR OUR
RESEARCH PROGRAMS
We currently use a single manufacturer to supply the gene sequencing
machines that we use in our gene discovery programs. While other types of gene
sequencing machines are available from other manufacturers, we do not believe
that the other machines are as efficient as the machines we currently use. We
cannot be sure that the gene sequencing machines will remain available in
sufficient quantities at acceptable costs. If we cannot obtain additional gene
sequencing machines at commercially reasonable rates, or if we are required to
change to a new supplier of gene sequencing machines, our gene discovery
programs would be adversely affected.
WE MAY NOT BE ABLE TO OBTAIN NECESSARY TECHNOLOGY
We have acquired or licensed certain components of our technologies from
third parties. Changes in or termination of these third party agreements could
materially adversely affect our discovery or research programs. We cannot be
certain that we will be able to acquire any new technologies which we need.
WE WILL HAVE TO RELY ON OTHERS FOR CLINICAL TRIALS, MANUFACTURING, MARKETING,
REGULATORY COMPLIANCE AND SALES CAPABILITIES, WHICH MAY IMPAIR OUR ABILITY TO
DELIVER PRODUCTS
In our research collaborations, we will seek to retain rights to develop
and market certain therapeutic and diagnostic products or services. If we are
able to retain these rights and successfully develop products, we expect to
contract with others for conducting clinical trials, manufacturing, marketing
and sales.
We are not certain that we will be able to enter into such arrangements on
favorable terms, if at all. Our dependence upon third parties for the conduct of
clinical trials, the obtaining of governmental approvals or the manufacture,
marketing or sales of products may adversely affect our ability to develop and
deliver products on a timely and competitive basis. Our current facilities and
staff are inadequate for commercial production and distribution of products. If
we choose in the future to engage directly in the development, manufacturing and
marketing of certain products, we will require substantial additional funds,
personnel and production facilities.
EFFORTS TO REDUCE HEALTHCARE COSTS MAY AFFECT OUR OPERATIONS
Our success will depend in part on the extent to which government and
health administration authorities, private health insurers and other third party
payors will pay for our products. Reimbursement for newly approved healthcare
products is uncertain. Third party payors, including Medicare in the U.S., are
increasingly challenging the prices charged for medical products and services.
Government and other third party payors are increasingly attempting to contain
healthcare costs by limiting both coverage and the level of reimbursement for
new
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therapeutic products. We cannot be certain that any third party insurance
coverage will be available to patients for any products we discover or develop.
If government or other third party payors do not provide adequate coverage and
reimbursement levels for our products, the market acceptance of these products
may be materially reduced.
OUR OPERATIONS MAY BE IMPAIRED UNLESS WE CAN SUCCESSFULLY MANAGE OUR GROWTH
We have recently experienced significant growth in the number of our
employees and the scope of our operations. We intend to hire additional
personnel to construct the IHD and DCDP and to develop our healthcare
informatics products. Our management and operations are, and may continue to be,
under significant strain due to this growth. To manage such growth, we must
strengthen our management team and attract and retain skilled employees. Our
success will also depend on our ability to improve our management information,
research information and operational control systems and to expand, train and
manage our workforce.
USE OF THERAPEUTIC OR DIAGNOSTIC PRODUCTS DEVELOPED AS A RESULT OF OUR PROGRAMS
MAY RESULT IN LIABILITY CLAIMS
The users of any therapeutic or diagnostic products developed as a result
of our discovery or research programs or the use of our database or medical
decision-support products may bring product liability claims against us. We
currently do not carry liability insurance to cover such claims. We are not
certain that we or our collaborators will be able to obtain such insurance or,
if obtained, that sufficient coverage can be acquired at a reasonable cost. If
we cannot protect against potential liability claims, we or our collaborators
may find it difficult or impossible to commercialize products. A liability claim
or product recall could have a material adverse effect on us.
WE MAY BE UNABLE TO HIRE AND RETAIN THE KEY PERSONNEL UPON WHOM OUR SUCCESS
DEPENDS
We depend on the principal members of our management and scientific staff,
including Dr. Kari Stefansson, Chairman, President, Chief Executive Officer and
Secretary, Hannes Smarason, Executive Vice President and Senior Business and
Finance Officer, Dr. Jeffrey Gulcher, Vice President, Research and Development
and Dr. C. Augustine Kong, Director of Statistics. If any of these people leaves
us, our ability to conduct our operations may be negatively affected. Our future
success also will depend in part on our ability to attract, hire and retain
additional personnel. There is intense competition for such qualified personnel
and we cannot be certain that we will be able to continue to attract and retain
such personnel. Failure to attract and retain key personnel could have a
material adverse effect on us.
OUR OPERATIONS INVOLVE A RISK OF INJURY FROM HAZARDOUS MATERIALS
Our research and manufacturing activities involve the generation, use and
disposal of hazardous materials and wastes, including various chemicals and
radioactive compounds. We are subject to laws and regulations governing the use,
storage, handling and disposal of these materials, including standards
prescribed by Iceland and applicable EU standards. Although we believe that our
safety procedures comply with such laws and regulations, the risk of
environmental contamination or injury cannot be eliminated. In the event of such
an occurrence, we could be held liable for any damages that result, which could
exceed our resources. Although we believe that we comply in all material aspects
with applicable environmental laws and regulations and do not expect to make
additional material capital expenditures in this area, we cannot predict whether
new regulatory restrictions on the production, handling and marketing of
biotechnology products will be imposed. Any such new regulatory restrictions
could require us to incur significant costs to comply or could have a material
adverse effect on our operations.
OUR MANAGEMENT HAS BROAD DISCRETION OVER THE USE OF THE PROCEEDS FROM THIS
OFFERING
The net proceeds of this offering are estimated to be approximately
$ -- million, or about $ -- million if the underwriters exercise their
over-allotment option in full. This calculation is based on an initial public
offering price of $ -- per share. The information contained in this
prospectus regarding our use of these proceeds is based upon the current state
of our business operations, our current business plan and
18
<PAGE> 20
strategy, and current economic and industry conditions. The amount and timing of
our expenditures will vary depending on our progress in developing and
constructing the databases, the progress of our research and discovery programs,
technological changes, changing competitive conditions, and general economic
conditions. The estimated allocations of our use of the net proceeds of this
offering are subject to reapportionment among the listed purposes, and to other
general corporate purposes, including working capital. The actual amount of the
uses of proceeds cannot be predicted with any degree of certainty. Our
management will retain broad discretion as to the allocation of the proceeds of
this offering, including the timing and conditions of the use of the proceeds.
CURRENCY FLUCTUATIONS MAY AFFECT OUR FINANCIAL CONDITION
Our revenues and cash reserves are denominated in U.S. dollars, but a
portion of our operating costs are denominated in Icelandic kronas. A
strengthening of the Icelandic krona against the U.S. dollar may, therefore,
have a negative impact on our financial condition.
WE DO NOT EXPECT TO PAY DIVIDENDS IN THE FORESEEABLE FUTURE
We have never paid dividends on our common stock and we do not intend to
pay any dividends on our common stock for the foreseeable future.
YEAR 2000 RISKS MAY HARM OUR BUSINESS
Despite the passing of January 1, 2000, the risks posed by Year 2000 issues
could still adversely affect our business in a number of significant ways.
Although we believe that our internally developed systems and technology are
Year 2000 compliant, our information technology systems nevertheless could be
substantially impaired or cease to operate due to latent Year 2000 problems.
Additionally, we rely on information technology and automated laboratory
equipment supplied by third parties. Year 2000 problems experienced by us or any
of such third parties could materially adversely affect our business.
THE INTERESTS OF OUR CONTROLLING STOCKHOLDERS MAY CONFLICT WITH OUR INTERESTS
AND THE INTERESTS OF OUR OTHER STOCKHOLDERS
After this offering, our directors, executive officers and current 5%
stockholders (including an affiliate of Roche), and certain of their affiliates,
will beneficially own approximately -- % of the common stock. These
stockholders, if they all act together, will then effectively have the ability
to elect all of our directors. They will also be able to determine the outcome
of most corporate actions requiring stockholder approval, including our merger
with or into another company, a sale of substantially all of our assets and
amendments to our certificate of incorporation. The decisions of these
stockholders may conflict with our interests or those of our other stockholders.
OUR RIGHT TO ISSUE PREFERRED STOCK AND ANTI-TAKEOVER PROVISIONS COULD MAKE A
THIRD-PARTY ACQUISITION OF US DIFFICULT AND OTHERWISE ADVERSELY AFFECT COMMON
STOCKHOLDERS
Our Board of Directors is authorized to designate and issue up to 7,016,666
shares of preferred stock as to which the Board can determine the price, rights,
preferences and privileges of those shares without any further vote or action by
the stockholders. If you own common stock, your ownership rights will be subject
to, and may be adversely affected by, the rights of the owners of preferred
stock that we may issue in the future. As a result, the issuance of preferred
stock could have a material adverse effect on the market value of the common
stock. An additional issuance of preferred stock would give us financial
flexibility for possible acquisitions and other corporate purposes. However, it
could make it more difficult for a third party to acquire a majority of our
outstanding voting stock.
Further, we are subject to the anti-takeover provisions of Section 203 of
the Delaware General Corporation Law. Under this law, if anyone becomes an
"interested stockholder" in deCODE, we may not enter a "business combination"
with that person for three years without special approval. These provisions
could delay or prevent a change of control. Certain other provisions of our
certificate of incorporation and bylaws, including those
19
<PAGE> 21
providing for preferred stock, could also delay or prevent changes of control or
management. These provisions could adversely affect the market price of the
common stock.
OUR COMMON STOCK HAS NEVER BEEN PUBLICLY TRADED AND WE CANNOT PREDICT THE EXTENT
TO WHICH A TRADING MARKET WILL DEVELOP
Before this offering, there has been no public market for our common stock,
although some banking institutions in Iceland have been making a market for
privately negotiated transactions among non-U.S. persons in our Series B
preferred stock. Our Series B preferred stock transfer records indicate that
approximately 10 million shares of Series B preferred stock were transferred
during 1999 in approximately 7,000 transactions and approximately 1.1 million
shares of Series B preferred stock were transferred during January 2000 in
approximately 2,700 transactions. The majority of these transactions had an
Icelandic financial institution as one of the counterparties. We cannot predict
the extent to which an active public market for the common stock will develop or
be sustained after this offering. We will negotiate the initial public offering
price with the representatives of the underwriters. The initial public offering
price of our common stock may not be indicative of future market prices.
OUR COMMON STOCK PRICE IS LIKELY TO BE HIGHLY VOLATILE
The market price of our common stock is likely to be highly volatile. In
addition to various risks described elsewhere in this prospectus, the following
factors could also cause price volatility:
- announcements made by us or our competitors concerning the results of
research activities, technological innovations or new commercial
products;
- changes in or adoption of new government regulations;
- regulatory actions;
- changes in patent laws;
- developments concerning proprietary rights;
- variations in operating results; and
- actual, announced or threatened litigation.
Extreme price and volume fluctuations occur in the stock market from time
to time and can particularly affect the prices of technology and biotechnology
stocks. These extreme fluctuations are often unrelated to the actual performance
of the affected issuers. These broad market fluctuations may adversely affect
the market price of our common stock.
FUTURE SALES BY OUR CURRENT STOCKHOLDERS MAY ADVERSELY AFFECT OUR STOCK PRICE
AND OUR ABILITY TO RAISE FUNDS IN NEW STOCK OFFERINGS
Sales of our common stock by our current stockholders in the public market
after this offering could cause the market price of our stock to fall. Sales may
also make it more difficult for us to sell equity securities or equity-related
securities in the future at a time and price that our management deems
acceptable, or at all. Upon the completion of this offering, we will have
-- shares of common stock outstanding, assuming no exercise of options or
warrants and assuming no exercise of the underwriters' over-allotment option. Of
these outstanding shares of common stock, the -- shares sold in this
offering will be freely tradable, without restriction under the Securities Act
of 1933, as amended (the "Securities Act"), unless purchased by our
"affiliates." The remaining -- shares of common stock held by existing
stockholders are "restricted securities" and may be resold in the United States
public market only if registered or pursuant to an exemption from registration.
Immediately following the completion of this offering, holders of --
shares of common stock and options, and warrants to purchase -- shares of
common stock will be entitled to certain registration rights. Upon registration,
these shares may be freely sold in the public market.
20
<PAGE> 22
Stockholders who will hold an aggregate of -- % of our common stock after
the offering have agreed, pursuant to certain lock-up agreements, that they will
not sell any shares of common stock for a period of 180 days after the date of
this prospectus without the prior written consent of the underwriters.
Shareholders who will hold an aggregate of -- % of our common stock after
the offering have signed an agreement providing that, upon request of deCODE or
the underwriters, they will not sell any shares of common stock for a period
ending 180 days after the effective date of the registration statement of which
this prospectus is a part.
Upon expiration of the lock-up agreements:
- -- shares of common stock will be immediately eligible for resale
(subject to the volume limitations of Rule 144 in the case of sales by
affiliates);
- -- shares of common stock will be immediately eligible for resale
(subject to the volume limitations of Rule 144); and
- -- shares of common stock will be eligible for resale from time to time
thereafter upon expiration of the applicable holding periods under Rule
144 (subject to the volume limitations of Rule 144).
PURCHASERS IN THIS OFFERING WILL SUFFER IMMEDIATE DILUTION
If you purchase common stock in this offering, the value of your shares
based upon our actual book value will immediately be less than the offering
price you paid (known as "dilution"). Based upon the net tangible book value of
the common stock at December 31, 1999, your shares will be worth $ -- less
per share than the price you paid in the offering. If options and warrants we
previously granted are exercised, additional dilution is likely to occur.
Following the completion of this offering, options and warrants to purchase
2,125,037 shares of common stock, at the weighted-average exercise price of
$ -- will be outstanding.
21
<PAGE> 23
USE OF PROCEEDS
We estimate that we will receive net proceeds from this offering of about
$ -- million, or about $ -- million if the underwriters exercise their
over-allotment option in full. For purposes of this calculation, we have assumed
an initial public offering price of $ -- per share.
We expect to use approximately $ -- million of the net proceeds of this
offering for the development and construction of the DCDP. In addition, we
intend to spend approximately $ -- million to fund our discovery and
research programs.
We also intend to spend approximately $ -- million of the net proceeds
of this offering for capital expenditures. These expenditures will include the
purchase of:
- laboratory automation equipment;
- production equipment;
- computer equipment;
- furniture;
- fixtures; and
- additional office and laboratory facilities.
The remainder of the net proceeds are expected to be used for working
capital and general corporate purposes. We may also use a portion of the net
proceeds to acquire businesses, technologies, or products complementary to our
business even though we do not currently have any specific plans to do so.
Pending use of the net proceeds for the purposes described above, we intend
to invest the net proceeds in short-term, interest-bearing, investment-grade
securities.
22
<PAGE> 24
DIVIDEND POLICY
We have never declared or paid any dividends on our common stock. Following
this offering, our dividend practices with respect to our common stock will be
determined and may be changed from time to time by our Board of Directors. Any
issuance of dividends will be based upon our earnings, financial condition,
capital requirements and other factors considered important by our Board of
Directors. Under Delaware law and our certificate of incorporation, our Board of
Directors is not required to declare dividends on our common stock. We expect to
retain all earnings, if any, generated by our operations for the development and
growth of our business and do not anticipate paying any dividends to our
stockholders for the foreseeable future.
Each share of our outstanding classes of preferred stock bears dividends at
the rate of 8% of the original purchase price per share, payable when declared
by the Board of Directors. To date, the Board of Directors has not declared any
dividends on the preferred stock. Our certificate of incorporation provides that
all the outstanding preferred stock will convert to common stock upon the
closing of this offering, at which time all undeclared dividends will be
canceled.
23
<PAGE> 25
CAPITALIZATION
The following table shows as of December 31, 1999: our actual
capitalization; our pro forma capitalization after giving effect to the
automatic conversion upon the closing of this offering of our Series A preferred
stock, Series B preferred stock and Series C preferred stock; and our pro forma
capitalization as adjusted to give effect to that automatic conversion and the
sale of -- shares of our common stock pursuant to this offering. This
information assumes an initial public offering price of $ -- per share less
the estimated underwriters discounts and commissions. For information pertaining
to our common stock and our preferred stock, see "Description of Securities."
<TABLE>
<CAPTION>
DECEMBER 31, 1999
------------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Long-term obligations, net of current portion..... $ 4,874,291 $ 4,874,291 $
Series A, B, and C convertible preferred stock;
32,641,926 shares authorized, 22,967,226 shares
outstanding actual and no shares outstanding pro
forma........................................... 116,209,595 0
Stockholders' equity (deficit)
Common Stock; $0.001 par value, 48,000,000
shares authorized, 9,604,012 shares
outstanding actual; 32,573,556 shares
outstanding pro forma and -- shares
outstanding pro forma as adjusted............ 9,604 32,574
Additional paid-in capital...................... 32,023,850 145,205,296
Notes receivable from stockholders.............. (9,597,830) (9,597,830)
Deferred compensation........................... (10,744,069) (10,744,069)
Dividends accreted on convertible preferred
stock........................................ (3,005,179) 0
Accumulated deficit............................. (76,713,517) (76,713,517)
Accumulated other comprehensive income.......... 2,411 2,411
------------ ------------ ------------
Total stockholders' equity (deficit)............ (68,024,730) 48,184,865
------------ ------------ ------------
Total capitalization............................ $ 53,059,156 $ 53,059,156 $
============ ============ ============
</TABLE>
The information contained above does not include 2,155,037 shares of our
common stock issuable upon exercise of outstanding options to purchase common
stock and warrants to purchase preferred stock that will convert into warrants
to purchase common stock upon the closing of this offering. See "Description of
Securities" for additional information regarding the outstanding warrants and
options.
24
<PAGE> 26
DILUTION
If you invest in our common stock, your interest will be diluted to the
extent of the difference between the public offering price per share of our
common stock and the pro forma as adjusted net tangible book value per share of
common stock after this offering. Pro forma net tangible book value per share
represents the amount of our total tangible assets less total liabilities,
divided by the pro forma number of shares of common stock outstanding. As of
December 31, 1999, our pro forma net tangible book value was approximately
$ -- or $ -- per share of common stock after taking into account the
issuance of -- shares of common stock upon the automatic conversion, upon
the closing of this offering, of our Series A preferred stock, Series B
preferred stock and Series C preferred stock. Without taking into account any
other changes in our net tangible book value after December 31, 1999, other than
to give effect to this offering of -- shares of common stock at an assumed
initial offering price of $ -- per share, less estimated underwriting
discounts and commissions, our pro forma as adjusted net tangible book value, at
December 31, 1999, would have been approximately $ -- or $ -- per share.
This represents an immediate increase in the net tangible book value of
$ -- per share of our common stock to present stockholders and an immediate
dilution of $ -- per share or -- % of the initial public offering price to
new investors. The following table shows this dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share(1).......... $
Pro forma net tangible book value per share at December
31, 1999............................................... $
Increase per share attributable to new investors..........
-----------
Pro forma as adjusted net tangible book value per share
after this offering.......................................
-----------
Dilution per share to new investors......................... $
===========
</TABLE>
- ---------------
(1) The assumed initial public offering price set forth in the above table
represents the midpoint of the range set forth on the cover page of this
prospectus, before deducting underwriting discounts and offering expenses
payable by us to the underwriters.
The following table summarizes, on a pro forma basis as of December 31,
1999, the differences between existing stockholders and investors in this
offering with respect to the number and percentage of shares of our common stock
purchased from us, the amount and percentage of consideration paid, and the
average price paid per share of our common stock, before deduction of
underwriting discounts and commissions:
<TABLE>
<CAPTION>
SHARES OWNED CONSIDERATION
----------------------- ------------------------- AVERAGE PRICE
NUMBER PERCENTAGE AMOUNT PERCENTAGE PER SHARE
--------- ---------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders........ % $ % $
New investors................
--------- ---- ----------- ----
Total........................ 100% $ 100%
========= ==== =========== ====
</TABLE>
The information contained above does not include 2,155,037 shares of our
common stock issuable upon exercise of outstanding options to purchase common
stock and warrants to purchase preferred stock that will convert into warrants
to purchase common stock upon closing of this offering. See "Description of
Securities" for additional information regarding the outstanding warrants and
options. To the extent that any of these options and warrants are exercised,
there will be further dilution to investors.
25
<PAGE> 27
EXCHANGE RATES
Our revenues are denominated in U.S. dollars. However, a portion of our
costs are denominated in Icelandic kronas as a result of the fact that all our
operations take place in Iceland.
The following table sets forth, for the periods and dates indicated,
information regarding the buying exchange rate of the Icelandic krona against
the U.S. dollar as registered by the Central Bank of Iceland, expressed in
Icelandic kronas per U.S. dollar.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, AVERAGE(1) HIGH LOW PERIOD END
- ----------------------- ---------- ----- ----- ----------
<S> <C> <C> <C> <C>
1997................................................. 70.89 73.43 66.56 71.98
1998................................................. 71.05 73.26 67.00 69.32
1999................................................. 72.42 75.44 68.89 72.35
2000 (through March 7, 2000)......................... 73.37 74.02 71.27 73.77
</TABLE>
- ---------------
(1) The average of the rates for the last business day of each month in the
period, except for March 2000 for which the rate used is March 7, 2000.
On March 7, 2000 the buying exchange rate of the Icelandic krona against
the U.S. dollar was 73.77.
26
<PAGE> 28
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with our consolidated financial statements and the notes to those
statements and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this prospectus. The consolidated
statement of operations data for the fiscal years ended December 31, 1997, 1998
and 1999 and the consolidated balance sheet data at December 31, 1998 and 1999
are derived from consolidated financial statements included elsewhere in this
prospectus that have been audited by PricewaterhouseCoopers ehf., independent
auditors. The consolidated statement of operations data for the period from
inception (August 23, 1996) to December 31, 1996 and the consolidated balance
sheet data at December 31, 1996 and 1997 are derived from audited consolidated
financial statements not included in this prospectus. Historical results are not
necessarily indicative of future results.
<TABLE>
<CAPTION>
INCEPTION
(AUGUST 23, 1996) TO YEAR ENDED DECEMBER 31,
DECEMBER 31, -------------------------------------------
1996 1997 1998 1999
-------------------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenue......................... $ 0 $ 0 $ 12,705,000 $ 16,444,075
Operating Expenses
Research and development...... 737,764 6,080,096 19,282,364 31,823,950
General and administrative.... 454,873 1,967,684 4,893,202 7,863,299
----------- ----------- ------------ ------------
Total operating expenses........ 1,192,637 8,047,780 24,175,566 39,687,249
----------- ----------- ------------ ------------
Operating loss.................. (1,192,637) (8,047,780) (11,470,566) (23,243,174)
Equity in net earnings (loss) of
affiliate..................... 0 0 0 (1,484,081)
Interest income, net............ 40,005 (8,461) 562,336 1,549,481
Taxes........................... 0 0 0 0
----------- ----------- ------------ ------------
Net loss........................ (1,152,632) (8,056,241) (10,908,230) (23,177,774)
Accrued dividends and amortized
discount on preferred stock... (181,852) (620,385) (2,571,523) (7,542,787)
Premium on repurchase of
preferred stock............... 0 0 0 (30,887,044)
----------- ----------- ------------ ------------
Net loss available to common
stockholders.................. $(1,334,484) $(8,676,626) $(13,479,753) $(61,607,605)
=========== =========== ============ ============
Basic and diluted net loss per
share......................... $ (1.10) $ (3.85) $ (3.06) $ (9.56)
Shares used in computing basic
and diluted net loss per
share(1)...................... 1,213,925 2,254,413 4,400,576 6,446,055
Unaudited pro forma basic and
diluted net loss per share.... $ (0.84)
Shares used in computing
unaudited pro forma basic and
diluted net loss per
share(1)...................... 27,559,365
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------------------------------------------
1996 1997 1998 1999
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents........... $ 3,975,311 $ 2,714,225 $ 25,075,844 $ 29,668,249
Total assets........................ 7,801,556 6,770,492 38,540,115 79,130,186
Total long-term liabilities......... 1,440,673 1,331,156 6,946,330 4,874,291
Redeemable, convertible preferred
stock............................. 6,881,851 12,603,990 42,044,519 116,209,595
Total stockholders' equity
(deficit)......................... (1,328,469) (9,907,939) (17,108,563) (68,024,730)
</TABLE>
- ---------------
(1) See Note B of Notes to Consolidated Financial Statements for an explanation
of the determination of the shares used in computing basic and diluted net
loss per share and unaudited pro forma basic and diluted net loss per
share.
27
<PAGE> 29
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read this section in conjunction with our consolidated financial
statements and related notes thereto appearing elsewhere in this prospectus.
OVERVIEW
deCODE was incorporated in August 1996. We have incurred losses since our
inception, principally as a result of research and development and general and
administrative expenses in support of our operations. On December 31, 1999, we
had an accumulated deficit of $76,713,517. We anticipate incurring additional
losses over at least the next several years as we expand our internal and
collaborative gene discovery efforts, continue our technology development and
construct the DCDP and healthcare informatics. We expect that our losses will
fluctuate from quarter to quarter and that such fluctuations may be substantial
especially because progress in our scientific work and milestone payments which
are related to progress can fluctuate between quarters.
In February 1998, we entered into a research collaboration and
cross-license agreement with Roche regarding research into the genetic causes of
twelve diseases. Under the terms of the agreement, Roche has made equity
investments and is funding our gene discovery programs in the twelve diseases.
For the year ended December 31, 1999, revenues from Roche constituted 96% of our
total revenues. See "Business."
We anticipate that collaborations will remain an important element of our
business strategy and future revenues. Our ability to generate revenue growth
and become profitable is dependent, in part, on our ability to enter into
additional collaborative arrangements, and on our ability and our collaborative
partners' ability to successfully commercialize products incorporating, or based
on, our work. There can be no assurance that we will be able to maintain or
expand our existing collaborations, enter into future collaborations to develop
applications based on existing or future research agreements or successfully
commercialize the DCDP.
Our failure to successfully develop and market products over the next
several years, or to realize product revenues, would have a material adverse
effect on our business, financial condition and results of operations. Royalties
or other revenues generated from commercial sales of products developed using
our technologies are not expected for at least several years, if at all. We
currently only have an agreement with Roche which provides all of our
collaborative research funding.
Our operating results through December 31, 1999 reflect the expenses
incurred in our gene discovery activities, partly offset by the revenues
received pursuant to our research collaboration agreement with Roche in
connection with these activities. During 2000 we will continue these activities,
but our operating results will also reflect the substantial costs we expect to
incur in commencing the development of the IHD and the DCDP. While we intend to
enter into collaborations to help fund and develop the DCDP, until we do so
there will be no revenue from our database service activities to offset against
these costs.
On December 3, 1999, the staff of the Securities and Exchange Commission
issued Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements" (SAB 101), that summarizes the staff's views in applying generally
accepted accounting principles to revenue recognition in financial statements.
The accounting and disclosure requirements that are described in SAB 101 apply
to all registrants. deCODE has adopted the requirements of SAB 101 and has
restated prior years in accordance with the going public exemption under
Accounting Principles Board Opinion No. 20, "Accounting Changes."
RESULTS OF OPERATIONS
COMPARISON OF YEARS ENDED DECEMBER 31, 1999 AND 1998
Revenues. Our revenues increased to $16,444,075 for the year ended
December 31, 1999 as compared to $12,705,000 for the year ended December 31,
1998, an increase of 29%. The increase was primarily due to revenues related to
milestone payments received pursuant to our research collaboration agreement
with Roche; the increase also reflected the recognition of twelve months of
research funding provided by Roche in 1999
28
<PAGE> 30
compared to eleven months in 1998, and the receipt of laboratory equipment and
consumables from Affymetrix in the first fiscal quarter of 1999 as consideration
for services provided by us on its behalf.
Research and Development. Our research and development expenses increased
to $31,823,950 for the year ended December 31, 1999 as compared to $19,282,364
for the year ended December 31, 1998, an increase of 65%. This increase was
primarily attributable to the continued expansion of operations including our
hiring of additional research personnel and the resulting salary and benefits
costs, an expansion of our laboratory facility and the resulting depreciation,
and our increased research efforts.
General and Administrative. Our general and administrative expenses
increased to $7,863,299 for the year ended December 31, 1999 as compared to
$4,893,202 for the year ended December 31, 1998, an increase of 61%. This
increase was principally attributable to the increase in personnel and related
salaries and benefits costs.
Stock Compensation Expense. Stock compensation expense was $8,043,995 for
the year ended December 31, 1999 compared to $5,219,642 for the year ended
December 31, 1998, an increase of 54%. This increase was attributable to
expenses for options and shares awarded to employees and others with exercise or
purchase prices below the deemed fair value for financial reporting purposes.
Equity in Net Earnings (Loss) of Affiliate. deCODE's equity in net
earnings (loss) of affiliate, Gagnalind hf., for the year ended December 31,
1999 is comprised of deCODE's share of the earnings of Gagnalind hf. and
amortization of the difference between deCODE's cost and the underlying equity
in the net assets of Gagnalind hf. at acquisition.
Interest Income, net. Our interest income increased to $2,185,441 for the
year ended December 31, 1999 as compared to $922,230 for the year ended December
31, 1998, an increase of 137%. This increase primarily derived from interest on
payments received in connection with a stock issuance. The increase was also
attributable to increased cash reserves resulting from milestone payments
pursuant to our research collaboration agreement with Roche. Our interest
expenses increased to $635,959 for the year ended December 31, 1999 as compared
to $359,894 for the year ended December 31, 1998, an increase of 77%. This
increase in interest expense primarily resulted from new equipment leasing
arrangements which we entered into in the second half of 1998 and were in effect
for all of 1999.
Net Loss. As a result of the foregoing factors, our net loss for the year
ended December 31, 1999 increased to $23,177,774 as compared to $10,908,230 for
the year ended December 31, 1998, an increase of 112%. As of December 31, 1999,
we had accumulated losses of $76,713,517 and did not owe any federal income
taxes. Realization of deferred tax assets is dependent on future earnings if
any.
Net Loss Available to Common Stockholders. Our net loss available to common
stockholders more than quadrupled to $61,607,605 for the year ended December 31,
1999 as compared to $13,479,753 for the year ended December 31, 1998. This
increase was primarily due to increases in the above described costs and
expenses over the same period and to the increase in accrued dividends and
amortized discount on preferred stock and premiums on the repurchase of
preferred stock.
COMPARISON OF YEARS ENDED DECEMBER 31, 1998 AND 1997
Revenues. Our revenues were $12,705,000 for the year ended December 31,
1998. We did not have any revenues for the year ended December 31, 1997.
Revenues in 1998 were solely attributable to payments received pursuant to our
research collaboration agreement with Roche.
Research and Development. Our research and development expenses more than
tripled to $19,282,364 for the year ended December 31, 1998 from $6,080,096 for
the year ended December 31, 1997. This increase was primarily attributable to
continued expansion of our operations, including our hiring of more research and
development personnel, purchases of laboratory supplies, investment in
laboratory equipment and expansion of our facilities.
General and Administrative. Our general and administrative expenses more
than doubled to $4,893,202 for the year ended December 31, 1998 from $1,967,684
for the year ended December 31, 1997. This increase was primarily attributable
to the increase in personnel and related salaries and benefits costs.
29
<PAGE> 31
Stock Compensation Expense. Stock compensation expense was $5,219,642 for
the year ended December 31, 1998, compared to $11,851 for the year ended
December 31, 1997. This increase was attributable to expenses for options and
shares awarded to employees and others with exercise or purchase prices below
the deemed fair value for financial reporting purposes.
Interest Income, net. Our interest income increased more than five-fold to
$922,230 for the year ended December 31, 1998 from $163,076 for the year ended
December 31, 1997. This increase was due to greater cash reserves primarily
resulting from our sale of Series B preferred stock to Icelandic investors in
1998 and also from payments received pursuant to our research collaboration and
stock purchase agreements with Roche. Our interest expense increased to $359,894
for the year ended December 31, 1998 from $171,537 for the year ended December
31, 1997, an increase of 110%. This increase was mainly due to additional
equipment lease obligations entered into during 1998, which enabled us to
support our research and development activities.
Net Loss. As a result of the foregoing factors, our net loss for the year
ended December 31, 1998 increased to $10,908,230 as compared to $8,056,241 for
the year ended December 31, 1997, an increase of 35%. As of December 31, 1998,
we had accumulated losses of $20,275,235 and did not owe any federal income
taxes. Realization of deferred tax assets is dependent on future earnings if
any.
Net Loss Available to Common Stockholders. Our net loss available to common
stockholders increased to $13,479,753 for the year ended December 31, 1998 as
compared to $8,676,626 for the year ended December 31, 1997, an increase of 55%.
This increase was primarily due to increases in the above-described costs and
expenses over the same period and to the increase in accrued dividends and
amortized discount on preferred stock.
LIQUIDITY AND CAPITAL RESOURCES
Our cash and cash equivalents totalled $29,668,249 at December 31, 1999. We
have financed our operations since inception primarily through private
placements of equity securities, our collaboration with Roche and capital
leases. As of December 31, 1999, we had received an aggregate of $39,053,695
pursuant to our collaboration agreement with Roche in fixed research funding,
milestone payments and equity contributions. Inflation has not had a material
effect on our business.
Our investing activities have consisted of the acquisition of an office and
laboratory facility in Reykjavik, Iceland, acquisitions of equipment and
expenditures for building improvements. At December 31, 1999, our gross
investment in office and laboratory space, equipment and building improvements
since inception was $17,802,672. In addition, during 1999, deCODE acquired an
approximate 56% equity interest in Gagnalind hf., an Icelandic software company,
in exchange for cash and shares of our common stock and Series B preferred
stock.
In February and March 1999, we sold 110,000 shares of Series B preferred
stock resulting in aggregate cash proceeds of $825,000. In February and May
1999, we sold 1,111,111 shares of Series C preferred stock and 111,111 warrants
to purchase shares of Series C preferred stock for an aggregate purchase price
of $3,333,445. In August 1999, we repurchased a total of 2,358,074 shares of
Series A preferred stock, issued and subsequently repurchased 250,000 shares of
Series B preferred stock in exchange for 333,333 shares of common stock and
repurchased 100,000 shares of Series C preferred stock, at an initial purchase
price of $7.50 per share, later adjusted upward to $13.95 per share. In August
1999 we issued 5,000,000 shares of Series B preferred stock at an initial
purchase price of $7.50 per share, later adjusted upward to $15.00 per share.
The net cash used in our operating activities was $11,646,931 for the year
ended December 31, 1999 compared to $2,067,278 for the year ended 1998. The
increase was primarily due to higher research and development costs which were
only partly offset by payments from Roche.
As of December 31, 1999, we had net operating losses carried forward of
approximately $18,867,000 to offset Icelandic and U.S. taxable income. If not
utilized, the net operating loss carry-forwards will begin to expire in the year
2004 in Iceland and in the year 2018 in the United States.
We had no material commitments for capital expenditures at December 31,
1999. We anticipate that the net proceeds from this offering will enable us to
increase capital expenditures over the next several years to expand
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our facilities and purchase additional equipment in support of additional
collaborations, increased internal research and development and development of
the DCDP.
We expect our cash requirements to increase significantly in future periods
because of planned expansion of our operations. The planned expansion will be in
support of expected growth in research collaboration agreements, database
construction, and internal research and discovery programs. We believe that the
net proceeds from this offering, together with existing cash and cash
equivalents, and anticipated cash flows under our research collaboration
agreement with Roche, will be sufficient to support our operations through at
least 2001. Our belief is based on our current operating plan, which could
change in the future and require additional funding sooner than anticipated.
Even if we have sufficient cash for our current operating plan, we may seek to
raise additional capital because of favorable market conditions or other
strategic factors.
Our future capital requirements depend on numerous factors, including:
- the progress of our discovery and research programs;
- the number and breadth of these programs;
- our ability to attract collaborators for, subscribers to or customers
for our products and services;
- our achievement of milestones under our research collaboration agreement
with Roche;
- our ability to establish and maintain additional collaborations;
- our collaborators' progress in commercializing our gene discoveries;
- the level of our activities relating to commercialization rights we
retain in our collaborations;
- competing technological and market developments;
- the costs involved in enforcing patent claims and other intellectual
property rights; and
- the costs and timing of regulatory approvals.
We will require significant additional capital in the future, which we may
seek to raise through public or private equity offerings, debt financing or
additional collaborations and licensing arrangements. No assurance can be given
that additional financing or collaborations and licensing arrangements will be
available when needed, or that if available, will be obtained on favorable
terms. If adequate funds are not available when needed, we may have to curtail
operations or attempt to raise funds on unattractive terms. See "Risk
Factors -- We may not be able to obtain sufficient additional funding to meet
our expanding capital requirements."
IMPACT OF CURRENCY FLUCTUATIONS
We publish our consolidated financial statements in U.S. dollars. Currency
fluctuations can affect the financial results of deCODE as revenues and cash
reserves are in U.S. dollars but a portion of operating costs are in Icelandic
kronas. A strengthening of the Icelandic krona against the dollar can thus
adversely affect the "buying power" of our cash reserves and revenues. On the
other hand, weakening of the Icelandic krona can strengthen our financial
position. All long-term liabilities are U.S. dollar denominated. deCODE has not
previously engaged in, and does not now contemplate entering into, currency
hedging transactions. deCODE may enter into such transactions on a
non-speculative basis to the extent that it may in the future have substantial
foreign currency exposure, for example, in connection with payments from
collaborative partners or due to investments.
RECENT ACCOUNTING PRONOUNCEMENT
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities." This standard establishes a new model for accounting
for derivatives and hedging activities and supersedes and amends a number of
existing standards. Upon the standard's initial application, all derivatives are
required to be recognized in the balance sheet as either assets or liabilities
and measured at fair value. In addition, all hedging relationships must be
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designated, reassessed and documented. Currently, the standard is to be
effective for fiscal years and quarters beginning after June 15, 2000.
Considering deCODE's current activities, it is not anticipated that the adoption
of the new standard will have a significant impact on deCODE's financial
position or results of operations.
QUANTITATIVE AND QUALITATIVE DISCLOSURES
The primary objective of our investment activities is to preserve principal
while maximizing income we receive from our investments without significantly
increasing risk. Some of the securities in our investment portfolio may be
subject to market risk. This means that a change in prevailing interest rates
may cause the market value of the investment to fluctuate. For example, if we
hold a security that was issued with a fixed interest rate at the
then-prevailing rate and the prevailing interest rate later rises, the market
value of our investment will probably decline. To minimize this risk in the
future, we intend to maintain our portfolio of cash equivalents and short-term
investments in a variety of securities, including commercial paper, money market
funds and government and non-government debt securities. In general, money
market funds are not subject to market risk because the interest paid on such
funds fluctuates with the prevailing interest rate. As of December 31, 1999, all
of our cash and cash equivalents were in money market and checking accounts.
THE IMPACT OF THE YEAR 2000
We started our operations in 1996 and do not expect the Year 2000 problem
to have a significant impact on our information technology infrastructure or the
gene sequencing machines and other equipment contained in our laboratory. We
have received assurances from our vendors that their products are Year 2000
compliant and we are not aware of any problems which developed after January 1,
2000. Currently, we are not aware of any Year 2000 problems within deCODE. Given
the fact that all our hardware and software is relatively new, we have not
performed extensive testing except where we were not able to obtain assurance
from a provider or had reason to believe that a product might have Year 2000
problems.
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BUSINESS
OVERVIEW
deCODE is a genomics and health informatics company which is developing
products and services for the healthcare industry. We develop and apply modern
informatics technology to discover new knowledge about health and disease
through data-mining. We believe that certain unique qualities of the Icelandic
population, together with our advanced bioinformatics and high throughput
genotyping facility, should place deCODE at a competitive advantage to perform
genetic and medical research to identify disease genes and drug and diagnostic
targets. As the international effort to sequence the human genome progresses, we
believe that the principal task will be to transform raw genomic data into
knowledge about human health and disease and then into tangible products and
services. We believe that deCODE, is well-positioned to place the human genome
sequence in a meaningful context through which we and our partners can generate
value.
deCODE was founded in 1996 and its operations, as well as its approximately
300 employees, are based in Iceland. In 1998, we entered into a significant
research collaboration and cross-license agreement with Roche, under which we
may receive a total of more than $200 million in research funding and milestone
payments. To date our accomplishments include:
- the identification of eight locations for disease-causing genes;
- the identification of twelve specific candidate disease genes;
- the achievement of four milestones in our research collaboration
agreement with Roche;
- the completion of a high-throughput genotyping facility;
- the development of automated software algorithms for data capture,
analysis and interpretation; and
- near completion of a computerized genealogy database covering the
Icelandic population.
We believe that discovery of healthcare knowledge requires bringing
together three key types of data: information from the healthcare system,
information about relationships among individuals covered by this system and
associated molecular genetics data. We believe that operating in Iceland
accomplishes this by allowing us to benefit from the following four important
characteristics of the Icelandic nation in our medical and genetic research:
- extensive genealogical records dating back to the settlement of the
country in the ninth century;
- relative genetic homogeneity with a population descended from a small
number of settlers;
- a centralized healthcare system since 1915; and
- a well-educated population.
We believe that bringing these four factors together greatly enhances our
research and development efforts in generating future products and services for
the healthcare industry.
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The following diagram illustrates our business model:
[BUSINESS MODEL]
Our business model is based on four sets of information:
- genealogy records of almost all living Icelanders and most of their
ancestors for whom records exist, dating back to the settlement of
Iceland in the ninth century;
- genotype data from consenting Icelanders;
- the IHD, which we plan to create and operate from healthcare records of
Icelanders pursuant to the IHD license; and
- other public and proprietary data to which we have access.
Our three avenues of commercialization are as follows:
Discovery Services. We believe that the development and application of
proprietary bioinformatics tools in the context of an appropriate population
will accelerate our ability to discover disease-related genes and associated
drug targets. This strategy is designed to enable us to derive value both from
diagnostic and therapeutic products and from pharmacogenomic services. We are
currently working on discovery in collaboration with Roche and in our own
research programs. We expect to seek additional partners for this business unit
from among pharmaceutical and biotechnology companies.
Database Services. We are in the early stages of developing the DCDP, a
tool which, subject to ongoing compliance with regulatory requirements, will
cross-reference genealogical records, data from the IHD and genotypes of
consenting participants. The DCDP is intended to generate knowledge about
diseases and their genetic risk factors, disease management, and to provide
insights into the interplay between environment and disease, outcomes and
resource use in delivering healthcare. deCODE believes that the DCDP will be
unique both in cross-referencing genetic and healthcare information and in
providing an unprecedented level of detail of the interplay between genes,
environment and disease. As more information is generated, both inside and
outside deCODE, we believe that the DCDP will become even more powerful. We
anticipate that the customer base for the DCDP will include a variety of
participants in the healthcare industry, such as pharmaceutical and
biotechnology companies and healthcare providers.
Healthcare Informatics. The third unit of our business, healthcare
informatics, is derived from our discovery and database services. The products
being developed by this business unit are expected to result from
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knowledge and experience acquired in our two principal business units, discovery
services and database services. In the future, the integration of genetics and
medicine will add a new level of complexity to the decision making process in
the delivery of healthcare. The need for medical decision-support systems, or
MDSS, for healthcare providers is expected to increase over the next several
years. We are developing MDSS, which will include insights from the DCDP, for
healthcare providers and we will seek to commercialize bioinformatics tools
developed in our gene and drug target discovery efforts. We also plan to provide
privacy protection products based on our expertise in encryption tools for
complex and sensitive medical and genetic data.
SCIENTIFIC BACKGROUND
The map of the human genome is about to be unraveled. In December 1999, the
sequence of the entire chromosome 22 was announced and the sequences of other
chromosomes are expected to follow. The target of the Human Genome Project is to
complete the first draft sequence of the human genome by May 2000. The challenge
will then be to transform this raw sequence data into specific knowledge about
disease and healthcare.
GENOMICS
The blueprint of all biological activity, which consists of
deoxyribonucleic acid, or DNA, is located within the nucleus of every cell and
is commonly referred to as the genome. The genome is the total DNA content of an
organism. DNA is composed of four bases. The sequence or order of these bases is
the code that ultimately determines structure and function in all organisms. The
human genome is broken up into 23 pairs of chromosomes and every individual
inherits a set of 23 chromosomes from each parent. Genes are segments of DNA
located throughout the genome. The human genome consists of approximately three
billion bases and is estimated to contain more than 100,000 genes. Each cell
uses or "expresses" only those genes (approximately 10% of the 100,000 genes)
necessary for its specific role. Accordingly, different types of cells express
different sets of genes.
When a gene is turned on or expressed, it produces a derivative copy of its
DNA sequence called messenger RNA, which is used as a template to direct the
production of a protein. Proteins are large molecules composed of amino acids
and control all biological processes. The order of the bases in DNA determines
the order of amino acids in a protein. Proteins in turn make up molecular
pathways, which cells use to carry out their specific functions. Diseases can
occur when a molecular pathway in a normal biological function is upset or
blocked as a result of a mutated or a defective gene. The ability to detect a
mutation and to understand the process by which it contributes to disease is
crucial to understanding the fundamental mechanisms of a disease. In the
simplest form, genetic diseases result from a mutation in only one gene and the
disease is usually passed from generation to generation. Common diseases are
thought to have a complex genetic basis; they generally skip one or more
generations and may result from interactions between genes or from the
interaction between genetic and environmental factors.
Soon, the entire human genome sequence will be discovered. We believe that
by itself, this knowledge is of limited value and that the importance of this
discovery will only reach its full potential if this sequence data is explored
along with detailed knowledge about health history, genetic profile and
genealogy.
POPULATION GENOMICS
Population genomics is a field of genomics which applies modern genetic and
molecular biology techniques to an entire population to discover how genetic
factors contribute to the cause of diseases. Since almost all common diseases
have a genetic component, the discovery of the cause of disease can often be
reduced to finding the gene or genes mutated in patients who have the disease as
compared to those who do not. Since this approach does not require a
preconceived notion about which tissues or proteins or genes are important in
the disease, it represents a systematic strategy for creating specific knowledge
about disease. The challenge is to find a population which is small enough to
allow the necessary cooperation but large enough to deliver meaningful results.
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FUNCTIONAL GENOMICS
Functional genomics is a field of genomics that attempts to determine the
manner in which disease genes specifically impact the disease process. It is the
study of the function of genes, including how expression of a particular gene is
regulated and the function of the protein that the gene encodes. Researchers
employing functional genomics techniques may analyze large numbers of genes to
compare patterns of gene expression in diseased and healthy tissues or may
compare genes in humans to those in other species, in each case in an effort to
determine the molecular pathways that cause disease.
GENOMICS AND HEALTHCARE PRODUCTS
Genomics and Diagnostics. Gene-based diagnostic tests for both disease
identification and management represent an important tool that can be used by
physicians to identify and monitor patients with increased risk of a disease.
These tests can complement clinical tests and may lead to more cost-effective
use of expensive tests and to a greater level of accuracy. Knowledge of
predisposition towards a disease may allow patients to alter their lifestyles or
to take medication that prevents the disease.
Genomics and Therapeutics. The lack of precise knowledge about the causes
of diseases makes it difficult for the pharmaceutical industry to select targets
for new drugs. Identifying specific disease genes may result in very specific
and, therefore, potentially more valuable drug targets than are otherwise
available. The disease gene products themselves may be attractive drug targets.
In addition, they mark a key molecular pathway that is composed of several other
potential drug targets.
Genomics and Drug Response. The efficacy and safety of existing and new
drugs may be enhanced by pharmacogenomics. Pharmacogenomics is the application
of genomics technology to the analysis and identification of genes involved in
drug response. It is believed that genomics will permit the identification of
the genetic differences that cause different people to respond differently to
the same drugs. This may lead to tailor-made treatments for individuals,
maximizing efficacy and minimizing side effects.
DECODE'S UNIQUE APPROACH
POPULATION GENOMICS AND THE VALUE OF THE ICELANDIC POPULATION
We believe that our unique approach, coupled with the application of
extensive bioinformatics to population genomics, has a number of distinct
advantages because of the following characteristics of the Icelandic nation:
Extensive Genealogy. Genealogy has been a national pastime in Iceland
since the country was settled in the ninth century. Numerous sources of
genealogical information, including parish records, census data and written
manuscripts, are readily available.
Relative Genetic Homogeneity. Common diseases in most countries have a
large number of genetic causes. In an isolated population that is genetically
simpler, the number of genetic causes is likely to be fewer than in more
genetically diverse populations. Thus, studying a more homogeneous population,
like the Icelanders, simplifies the problem of finding and subsequently
understanding disease genes and mutations causing common diseases. The Icelandic
population was founded by Norwegian and British settlers who arrived in Iceland
in the ninth and tenth centuries. Because Iceland has experienced little
immigration over the last eleven centuries, most of the 275,000 living
Icelanders are descended from these original "founding" settlers. Our ability to
trace the Icelandic population back approximately 1,100 years also facilitates
gene discovery. Because many present-day Icelanders may share a particular
disease gene with one of the founding settlers, they may also have such disease
gene in common with other Icelanders. We can make use of this "founder" effect
to facilitate the identification of disease genes. It has been demonstrated that
the disease genes found in Iceland are, in general, also found in other
populations. Even if the disease genes in Iceland are different from those found
in other populations, the identification of any disease gene marks a key
molecular pathway likely to be involved in the disease in other populations as
well. Therefore, we believe the discovery of a disease gene in Iceland may
enhance the identification of drug targets for any population.
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Centralized Healthcare System. Iceland has had a centralized national
healthcare system since 1915. It presently consists of a base of 55 primary care
centers, two major hospitals in Reykjavik which are being merged, one central
hospital in Akureyri, and several smaller ones. Outside the primary care
centers, the healthcare system is highly specialized and patients with most of
the major illnesses are cared for by specialty clinics. Our clinical
collaborators work at these centers, as well as in the major hospitals.
Well-educated Population. The level of public education is high in Iceland
and illiteracy is negligible. Historically, the Icelandic population has been
cooperative when approached by physicians and scientists working on biomedical
research in the Icelandic community.
DISCOVERY SERVICES
The extensive genealogy database and associated bioinformatics that we have
built in Iceland are the core of our novel genealogical approach to identifying
human disease genes and associated drug targets.
We believe that working with the Icelandic population puts us in a position
to accelerate the discovery and development of new proprietary diagnostic and
therapeutic products capable of addressing diseases at their root causes, rather
than simply identifying and treating their symptoms. These programs may permit
doctors to make earlier diagnoses, use healthcare resources more
cost-effectively and select safer and more effective drugs for patients on the
basis of their genetic make-up.
The genealogical approach that we have developed depends on the
genealogical database and bioinformatics tools that we have built. In the study
of any particular disease, we first define the disease classification broadly
but rigorously. (For example, we first labeled stroke patients as "stroke"
rather than as a series of less common subtypes of stroke). After our clinical
collaborators compile a list of all patients who have been diagnosed with the
disease, the list is encrypted and run through our genealogy database which
yields very large extended families of patients, sometimes containing hundreds
of individuals. The genealogy naturally links together those patients who are
likely to share a gene or genes for the disease. The patients are genotyped to
determine which genes or pieces of chromosomes they have in common. The
genealogical approach compensates for the inadequacies of "consensus criteria"
for disease classification, which utilizes specific symptoms accepted by a
consensus committee of physicians to determine who is "affected" by the disease,
and increases the chance that the form of the disease studied is the one
actually inherited. We believe that no other organization uses genealogy in this
manner. Our unique approach to human genetics has allowed us to map genes in
diseases in which many others have previously failed. By using this approach,
deCODE expects to be able to assign function to the raw data contained in the
human genome sequence.
The following diagram describes our approach to gene discovery. A
description of each step and a list of supporting tools and technologies used in
each step follows the diagram.
[GENETIC DISCOVERY]
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Genetic Mapping
We have developed an extensive computerized genealogy database that
currently includes almost all 275,000 living Icelanders along with most of their
ancestors for whom records exist. This represents most of the Icelanders who are
known through records ever to have lived in Iceland. We believe that this is the
most complete genealogy database of any nation. We have shown that the accuracy
of maternal connections in the database is greater than 99.3%.
Before we start a study looking for genes that cause or contribute to a
particular disease, we obtain approvals from both the Bioethics Committee and
the Data Protection Commission. All patients who participate in our research
program by giving a blood sample sign an informed consent form approved by the
Bioethics Committee. We have developed a sophisticated encryption system to
protect the personal privacy of all participating volunteers.
In our present disease-based research projects the first step of our
genealogical approach is for our clinical collaborators to compile a list of
patients who have been diagnosed with a particular disease in Iceland. After the
Data Protection Commission has encrypted the patient list, it is sent to us and
run through an encrypted version of our genealogy database. The genealogy
database and associated data-mining tools that we have developed enable us to
determine the relationships among all members of a large patient list and
demonstrate information flow through the generations.
Using DNA from patients and their relatives who grant us informed consent,
we are able to generate high-resolution genotypes with our high-throughput
genotyping facility using 1,000 microsatellite markers. A microsatellite marker
is a segment of DNA containing variable short repeats that can be used to derive
a genotype. Our high-throughput genotyping facility and bioinformatics systems
substantially decrease the amount of labor involved in reading the genotypes.
We have developed a statistical informatics program that is used to
determine which portion of the genome is shared among most or all of the
patients within a family. This technique can systematically screen every segment
of the human genome for shared genotypes and can narrow the location of a
disease gene or genes to a small fraction (1/1000) of the human genome. That
segment marks the location of the disease gene that is mutated in the patients
with the disease. We use stringent criteria to determine that we have
successfully found a disease gene location before moving onto the next step of
gene discovery.
Physical Mapping, Fine-Mapping, and Sequencing
Once the chromosomal region containing the disease gene has been narrowed
to two to three million base pairs, a higher resolution map is developed. To
accomplish this, we construct a physical map using large overlapping pieces of
human DNA. We have developed an automated high-throughput physical mapping
method which is based on sophisticated proprietary software developed at deCODE
and uses robotics. By integrating a robust hybridization system (i.e., matching
of a small piece of DNA to large segments of DNA), automated analysis of the
hybridization data, and data-mining techniques, we construct low-resolution and
high-resolution maps of the human genome spanning from 30 to 80 million bases.
We use low-resolution and high-resolution physical maps to find new
microsatellite markers and genetic variations known as single
nucleotide-polymorphisms, or SNPs, and use them to create more precise sets of
genotypes of the patients. SNP markers differ from microsatellite markers in
several ways. SNPs represent a single base change in the genomic sequence and
microsatellite markers represent short repeats of sequence. There is more
information contained in microsatellite markers than SNPs (one microsatellite
marker contains three to five times more information than a SNP) and so they are
well-suited for our genetic studies using large families. Currently, the cost of
genotyping microsatellite markers is much less than genotyping SNPs (especially
given the relative information content). However, the SNPs are more numerous
than microsatellite markers and therefore more useful for fine-mapping and
association studies.
Many patients may share several closely spaced genotypes which serve to
narrow the region containing a disease gene. We believe that the relative
genetic homogeneity and the age of the Icelandic population will enable us to
reduce the size of the chromosomal region containing the disease gene to as few
as 250,000 base pairs. We
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believe that this segment would contain fewer than ten candidate genes, thus
reducing the amount of time required to screen the genes for mutations.
Once we have narrowed a region, we sequence this narrow region using
automated DNA sequencers and then use our bioinformatics tools to identify new
genes. The genes are screened in turn for mutations that occur in patients with
the disease and rarely in those without. Typically, only one gene in this
segment will be the disease gene, but we may find disease genes on other
chromosomes that can be discovered in the same manner. We believe that our
ability to go from gene mapping to disease gene identification will be further
enhanced as the sequencing of the human genome is completed.
Functional Genomics
After we have succeeded in identifying a disease gene under our population
genomics approach, we will define molecular pathways in which the disease gene
plays a role. This is essential information both for understanding the biology
of the disease and also for identifying additional specific drug targets that
interact with the disease genes.
We have established three complementary systems designed to isolate
specific drug targets from "upstream," "downstream" and "proximal" pathways that
may be involved in the disease process. We believe these three functional
approaches will expand the number of potential drug targets that are associated
with the specific disease genes identified using our population genomics
approach.
Our proximal analysis uses a high-throughput yeast two-hybrid screening
system that can identify proteins that physically interact with the disease gene
product. As very few proteins work alone in the body, these partner proteins are
likely to be involved in the normal biology of the disease gene. We carry out
the screening in yeast cells, using methods of increasing stringency intended to
eliminate false positive protein-protein interactions. We have also developed
protein-interaction assays that can be used for membrane proteins that may be
difficult to analyze using two-hybrid technology. Complementing the two-hybrid
system with our membrane protein interaction assays is essential since
approximately 50% of known drug targets are membrane associated and may not have
been found using the two-hybrid system alone. We are also able to crossmatch the
genes identified as partners of the first disease gene with additional
population genomics data since they might be mutated in the same disease.
Potential drug targets from upstream pathways include proteins that control
the expression level of the disease gene (i.e., those gene products that are
responsible for turning the disease gene on or off in particular tissues or
under particular conditions). We plan to link the control region of newly
identified disease genes to a "reporter" gene and establish precisely which
region governs expression. DNA from this region will be used to retrieve
specific binding proteins that are responsible for turning the disease on.
Finally, we plan to use gene expression analysis using Affymetrix GeneChip
technology to validate our conclusions and to identify other genes which are
regulated in tandem with the disease gene.
Our downstream analysis is designed to uncover genes that are influenced by
the overexpression, underexpression or misexpression of the disease gene. We
have established efficient systems to turn a gene on or off in cells, as well as
to express mutated versions revealed in the course of gene discovery. We employ
DNA chip technology in our efforts to find genes whose expression patterns are
altered by different scenarios of disease gene expression. Some of these genes
may play a role together with the disease gene product in disrupting the normal
biology and leading to disease.
DATABASE SERVICES
The main focus of our database services will be first on the development
and then on the operation of the DCDP.
Description of the DCDP
We believe that the DCDP will represent the first opportunity in the world
to cross-reference genetic, phenotypic and genealogic data on a large scale. It
will provide a comprehensive opportunity to assign function to
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genomic sequence. It will be designed to enable users to pose specific queries
to it through a software program, or query layer, which will process the
request. With these tools, users are expected to be able to query the various
data sets cross-referenced by the DCDP. The users' interactions will be confined
to the query layer; users will not have direct access to the data accessed by
the DCDP.
We believe that the DCDP will permit users to build more complete models of
the interplay of genes, environment and disease than are currently available
primarily as a result of the following:
- the healthcare data contained in the IHD will include not only basic
disease diagnosis but also details of laboratory results, treatments and
outcomes;
- the IHD will contain a population rather than the handpicked patient
lists used in existing approaches; and
- the IHD will contain medical information collected over time.
There are three sources of data for the DCDP, which are as follows:
Data from the Icelandic Healthcare System. Under the terms of the IHD
license we will be able to process medical information, environmental exposure
information and resource use information from the Icelandic healthcare system.
The key data sources include:
- hospitals and ambulatory services;
- primary healthcare centers;
- private specialty clinics; and
- hospital and private laboratory results.
A computerized network of medical records will be organized in each
participating healthcare institution. Information processed in the IHD will take
place in a manner designed to ensure that personal data remains non-personally
identifiable. The type of healthcare data will include admission data,
diagnostic work-up and results, diagnoses, treatment and operations for each
patient visit, medical and social history, allergies, risk factor exposure,
pharmaceutical treatment and outcomes.
Genealogy Data. The DCDP will access the same genealogy data that we use
in our current discovery services.
Genotypic Data. We plan to derive genotypes of consenting Icelanders who
give us blood samples in accordance with applicable regulations and consent to
have their genotypic data stored and cross-referenced with the IHD.
Our genealogy database is complete for our applications. We are in the
early stages of development of the other two sources of data.
The License
On December 17, 1998, the Icelandic parliament passed the Act, allowing the
Ministry to grant an operating license to create and run the IHD. On January 22,
2000, the IHD license was granted to Islensk erfethagreining ehf., our
wholly-owned Icelandic subsidiary. The license, which has a term of twelve
years, allows us to collect data from medical records of Icelandic healthcare
institutions and self-employed health professionals, and to transfer such data
in encrypted form into a centralized database containing non-personally
identifiable information. It also permits us to cross-reference the IHD data
with genealogical data and genotypic data obtained through consent.
Pursuant to the terms of the IHD license and the Act, before we can begin
collecting information and transferring it into the IHD, we must fulfill
numerous conditions, such as paying fees and costs associated with the license
and obtaining government approval of our privacy protection measures, and must
enter into agreements with healthcare institutions and self-employed health
professionals allowing us access to their medical records. Some medical
professionals, including the board of directors of the Icelandic Medical
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<PAGE> 42
Association, or IMA, have opposed the proposals for the establishment of the IHD
on ethical and privacy grounds. We do not believe that these views are
representative of the Icelandic medical profession as a whole or that they will
materially affect our ability to enter into such agreements. Once we have
entered into the required agreements, an independent security expert must verify
that our information systems and operating procedures comply with the data
security requirements of the Icelandic Data Protection Commission before we can
process the data we obtain from these healthcare providers.
In addition to the scrutiny of the Data Protection Commission, our security
system for the IHD will benefit from the advice and monitoring of deCODE's
Security Advisory Board of internationally renowned experts in the fields of
computer security, data and privacy protection and security of healthcare
informatics. We expect this board of experts to meet periodically to review any
security issues we may encounter in our operations and in the development and
operation of the IHD and to provide us with technical advice for solving such
issues and maintaining or exceeding international best industry-practice
standards. We expect the Security Advisory Board to be appointed and operational
by May 2000.
HEALTHCARE INFORMATICS
Physicians are routinely required to cross-reference specific details
regarding their individual patients with their general knowledge of best medical
practice in clinics and hospitals. One of the main challenges facing physicians
today is how to deal with the vast and growing amount of medical knowledge. In
addition, the number of medical tests ordered and drugs that patients take are
leading to more information stored per patient. Some hospitals and clinics have
begun to use information technology to help store patient records. However, the
actual analysis and decision-making about diagnosis and treatment is still
mostly carried out by the un-aided human mind of the physician combining general
medical knowledge with specific patient data.
While this approach has worked well in the past, it is an increasingly
difficult task which sometimes leads to delays in diagnosis and medical
mistakes. The complexity of physicians' decision-making may increase in the
future if genetics is integrated with the delivery of healthcare in the form of
predictive testing and treatments tailor-made to individual patients.
deCODE believes that the "information load" on physicians will continue to
grow as the genetic dimension of healthcare leads to risk prediction and a shift
from generalized treatment guidelines to personalized care. This trend toward
personalized healthcare presents the following three opportunities in healthcare
informatics:
- We will use what is learned from our discovery programs and the DCDP to
provide MDSS necessary to deliver and interpret this increased volume of
data to a variety of end-users.
- We will use our experience in privacy protection in the DCDP to meet the
increased need for privacy solutions that will accompany the increased
volume of personally sensitive healthcare information.
- We will use our expertise in the gene and drug target discovery unit to
develop and market bioinformatics tools.
We also plan to pursue market opportunities for other software tools that
we have developed during the design and construction of the IHD and DCDP and in
our disease gene discovery efforts, including GeneMiner, DecodeGT and a
comprehensive sample database.
OUR STRATEGY
deCODE's strategy is to use its population-based approach to transform
genomic and healthcare data into products and services for the healthcare
sector. The key elements of our strategy are as follows:
Gene and Drug Target Discovery. deCODE plans to pursue gene and drug
target discovery and the characterization of genes that contribute to the causes
of common diseases. In addition, we will use studies of gene expression and
protein-protein interaction systems to define molecular pathways, which may
contain drug targets. We will focus on diseases that have the potential to
result in the discovery of new proteins and drug candidates. We will also seek
to identify disease genes for the purpose of developing diagnostic products.
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<PAGE> 43
Database Subscription and Consulting Services. deCODE expects to build and
operate the DCDP, which is intended to process and cross-reference
non-personally identifiable healthcare information on the Icelandic population
(in the IHD) with genealogy data and genetic data obtained through consent. In
addition, we are developing new mathematical algorithms to extract further
knowledge from the DCDP. Services we plan to offer to future subscribers of the
DCDP will include principally gene discovery and drug target validation,
pharmacogenomics, disease management and health management. Subscribers are
expected to include pharmaceutical companies, healthcare organizations, national
health services and government agencies that will pay subscription fees and, in
some cases, a share of product revenues they generate as a result of using the
database.
Pharmacogenomics Partnerships. In collaboration with pharmaceutical
companies, we intend to apply pharmacogenomics to understand differences in drug
response among individuals. We believe that genomics will permit the
identification of the genetic differences that cause different people to respond
differently to the same drugs and that, as a result, it will be possible to
individualize the selection of drugs for patients. We believe that the
integration of medical treatment and outcome information with genetic
information will give us an advantage in the generation of pharmacogenomics
information. We expect to generate revenues from these partnerships through
fixed research funding and milestone and royalty payments.
Sale and Marketing of Healthcare Informatics Products. We plan to exploit
market opportunities for software tools that we develop during the design and
construction of the IHD and DCDP and in our disease gene discovery efforts. The
software tools that we have already developed include GeneMiner, DecodeGT, an
encryption system, and a comprehensive sample database. We expect to offer
healthcare informatics services, such as MDSS and privacy solutions. The
decision-support tools would, for example, be useful in areas such as medical
record keeping and its standardization and in medical decision making. deCODE
may provide specialized services to customers such as governmental agencies and
medical institutions which will enable them to collect and process information
in a standardized form. We intend to capitalize on our experience in the
protection of privacy of medical and genetic data to market systems for the
protection of privacy in healthcare. The customers for these services could
include industry, public institutions and governments.
Formation of Collaborations. We intend to seek corporate collaborations or
joint ventures with pharmaceutical and biotechnology companies to provide
research alliances, product development and commercialization for our gene and
drug target discovery programs. We expect to generate revenues from these
collaborations through research funding and milestone and royalty payments. We
also plan to seek collaborators for the development and marketing of our
database and healthcare informatics products and services.
PRODUCTS AND SERVICES
Our current services and those under development can be classified into
three categories, all of which are based on analyzing data from the Icelandic
population using our proprietary bioinformatics tools: discovery services;
database services; and healthcare informatics.
DISCOVERY SERVICES
Current Discovery Programs
We have started gene discovery programs associated with 27 common diseases,
12 of which are collaborative programs with Roche. The inheritance patterns of
many common diseases are complex, indicating that the diseases are probably
caused by mutations in one or more genes and/or through interactions between
genes and environment. We believe that these diseases represent large market
opportunities for therapeutic and diagnostic products because:
- their causes are not fully understood;
- current treatments are of limited effectiveness;
- there are currently no approaches to tailor treatment to cause; and
- large numbers of individuals are affected by these diseases.
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The identification of disease genes is expected to provide insights into
the causes of common diseases and to help the development of highly-specific
diagnostic and therapeutic products, including small molecule products,
recombinant proteins, gene therapy and antisense therapy. The following table
sets forth the current status of our gene discovery programs.
<TABLE>
<CAPTION>
PROGRESS STATUS
-----------------------------------------------------------
ONE OR MORE DISEASE
DISEASE ANALYZING LOCUS CANDIDATE GENES GENE
CATEGORY DNA IDENTIFIED(2) IDENTIFIED(3) VALIDATION(4)
- -------- --------- ------------- --------------- -------------
<S> <C> <C> <C> <C>
AUTOIMMUNE DISEASES
Atopy/Allergy.......................................... X
Inflammatory bowel disease............................. X
Insulin dependent diabetes............................. X
Psoriasis.............................................. X X X
Rheumatoid arthritis................................... X
CANCER
Lung cancer............................................ X
Melanoma............................................... X
Prostate cancer........................................ X
CARDIOPULMONARY DISEASES
Asthma................................................. X
Chronic obstructive pulmonary disease(1)............... X
Hypertension(1)........................................ X
Myocardial infarction(1)............................... X
Peripheral arterial occlusive disease(1)............... X
Cerebrovascular disease (stroke)(1).................... X X X
CENTRAL NERVOUS SYSTEM DISEASES
Alzheimer's disease(1)................................. X X X
Anxiety disorder(1).................................... X
Bipolar disease/depression(1).......................... X
Familial essential tremor.............................. X X
Multiple sclerosis..................................... X X X
Narcolepsy............................................. X (5) X
Parkinson's disease.................................... X
Schizophrenia(1)....................................... X X X
EYE DISEASES
Macular degeneration................................... X
FEMALE HEALTH
Endometriosis.......................................... X
METABOLIC DISEASE & OTHER
Non-insulin dependent diabetes(1)...................... X
Osteoporosis(1)........................................ X
Osteoarthritis(1)...................................... X X X
</TABLE>
- ---------------
(1) Gene discovery programs in collaboration with Roche.
(2) Locus describes a specific region in the human genome that has been linked
to a genetic trait or disease and that meets stringent criteria of
statistical significance.
(3) Candidate gene describes a particular gene that is suspected to cause or
contribute to a genetic trait or disease on the basis of its location
within a locus meeting stringent statistical criteria.
(4) Disease gene validation means identification of mutations in the candidate
gene in Iceland and other populations of patients.
(5) Loci identified by third party.
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The following is a description of the diseases in which our programs are
most advanced.
Autoimmune Diseases. We are currently studying several autoimmune diseases
such as inflammatory bowel disease (Crohn's and ulcerative colitis), psoriasis,
atopy and rheumatoid arthritis. All four are in large genome-wide linkage scans,
and we have found the location of a novel psoriasis gene.
- Psoriasis. Psoriasis is a chronic inflammatory disease that leads to
disfiguring skin lesions and arthritis. We have completed a genome-wide
linkage scan of Icelandic familial material and have confirmed linkage
and association to a region of the genome that regulates immune response
known as the MHC. Our genome-wide scan also identified a novel region of
the genome that interacts with the MHC to cause psoriasis. Our second
location represents the second gene mapped outside the MHC that fulfills
the criteria for genome-wide significance. We are in the process of
fine-mapping both gene locations.
Cardiopulmonary Diseases. We are studying a variety of common diseases
such as asthma, chronic obstructive pulmonary disease, myocardial infarction,
peripheral vascular disease and stroke. We have already achieved a milestone
with Roche for finding the location of a gene associated with stroke.
- Cerebrovascular disease (Stroke). Stroke represents diseases that
directly or indirectly affect the blood vessels in the brain and cause
central nervous system damage from either blockage of cerebral blood
flow or rupture of an intracranial artery. It is the third leading cause
of death. We have formed a research alliance with local physicians who
care for a majority of the stroke patients diagnosed in Iceland. We have
collected almost 2,000 DNA samples from informative families and
genotyped most of them. Using our genealogical approach, we have mapped
the location of one stroke gene that meets the criteria for genome-wide
significance. This represents the first gene ever mapped for the common
forms of stroke.
Central Nervous System Diseases. We are studying the genetic basis for
psychiatric and central nervous system diseases. We have achieved two milestones
in our collaboration with Roche by mapping the location of genes contributing to
the following diseases.
- Alzheimer's Disease. Alzheimer's disease is the most common cause of
dementia. We have carried out a genome-wide scan that included 1,200
Icelanders. We have mapped late onset Alzheimer's disease to a novel
chromosome location. We are currently fine-mapping the gene location.
- Schizophrenia. Schizophrenia is a debilitating psychiatric disorder. No
group has ever reported the isolation of a schizophrenia gene. We and
our clinical collaborators have collected a significant number of DNA
samples from the largest families in Iceland. We have carried out a
genome-wide scan, and we are currently fine-mapping and sequencing one
small region of the genome. We have also identified three candidate
disease genes.
Metabolic and Other Diseases. We are studying the genetic basis for
osteoarthritis, non-insulin-dependent diabetes, osteoporosis and endometriosis.
We have achieved a research milestone in our collaboration with Roche for
mapping a gene associated with osteoarthritis.
- Osteoarthritis. Osteoarthritis is a degenerative disease of the joints.
There are currently no known genes causing the common forms of
osteoarthritis. We have mapped three genes linked to osteoarthritis. We
are currently fine-mapping and sequencing these regions to search for
the disease genes themselves.
Collaborations
Our strategy for pursuing business opportunities is to establish alliances
with pharmaceutical companies, biotechnology firms and other healthcare
institutions to perform research into the genetic basis of a given disease or
group of diseases. Depending on the nature of each prospective business
opportunity, we may conduct the research in return for one or more of the
following: up-front equity investments; direct payments for research funding;
payments upon the achievement of scientific milestones; shared or exclusive
rights to diagnostics and therapeutics; and royalties on products marketed by
our collaborators. In some instances, we may negotiate for access to our
collaborators technologies, including libraries of chemical compounds, to
enhance our operations outside of the collaboration.
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Hoffmann-La Roche. In February 1998, we entered into a research
collaboration and cross-license agreement with Roche to collaborate on the
discovery of genetic variations which affect the cause of diseases for the
purpose of developing new methods to diagnose diseases and obtain drug targets
useful in drug discovery. The agreement provides for a steering committee, the
membership of which is equally divided between the parties, to oversee the
collaborative research programs. Under the terms of the agreement, Roche is
funding the collaborative gene discovery programs in twelve diseases, including
four cardiovascular diseases, four psychiatric/neurologic diseases and four
metabolic diseases, by making specified payments according to a payment
schedule. Roche's obligation under the agreement to fund these programs will
continue until February 1, 2003 provided that Roche elects to extend the
research term of the agreement for the one-year periods commencing on the third
and fourth anniversaries of the agreement. In addition to research funding
payments, we are entitled to receive payments from Roche upon the achievement of
specified scientific development and marketing milestones. We have reached four
milestones in this collaboration.
The agreement gives Roche exclusive worldwide rights to develop and
commercialize therapeutic and diagnostic products based on gene discoveries.
Roche is required to pay us royalties on sales of any such products. We retained
the exclusive, worldwide rights to develop and commercialize gene therapy and
antisense products based on our gene discoveries and will be required to pay
Roche royalties on sales of any such products.
In connection with the agreement, Roche Finance Ltd, or Roche Finance, an
affiliate of Roche, has purchased shares of our Series C preferred stock and has
an option to purchase additional shares at any time prior to the end of February
2001. Roche Finance has also purchased warrants to buy shares of our Series C
preferred stock and will be entitled to purchase additional warrants if it
exercises its option to acquire additional shares of Series C preferred stock.
These will become warrants to purchase an equivalent amount of common stock upon
the completion of this offering.
Pursuant to an agreement, we license our GeneMiner bioinformatic software
product to Roche.
In addition to the research collaboration with Roche, we have entered into
the following collaborations:
Affymetrix Inc. In November 1998, we entered into a DNA array internal use
license agreement. Under the non-exclusive agreement, Affymetrix has licensed
its DNA array technology to us for use in our gene expression experiments and
for purposes of exploring the technology's genotyping capabilities. Access to
Affymetrix's technology, coupled with our unique population based approach, now
provides us with a powerful solution for performing and analyzing array-based
gene expression experiments. The use of this technology is consistent with our
objectives to augment our existing technology portfolio to include alternative
gene discovery and gene functionality tools. It will also help us to explore the
options of array-based genotyping approaches using SNPs.
License from The Beth Israel Deaconess Medical Center. We have obtained an
exclusive license from The Beth Israel Deaconess Medical Center, or Beth Israel,
in Boston, Massachusetts to develop and commercialize therapeutic and diagnostic
products anywhere in the world based on Beth Israel's interest in patents and
know-how relating to the linkage between a particular segment of DNA and
multiple sclerosis. Under the terms of the agreement, we are obligated to pay
license fees and other payments upon the achievement of specified milestones. We
are also obligated to pay royalties to Beth Israel on the sales of products that
may result from the licensed technology.
Hospital and Physician Collaborations. We have entered into collaboration
agreements and arrangements with the three largest hospitals in Iceland, the
Icelandic Heart Association and with several physician groups pursuant to which
the hospitals and physicians will help to construct lists of patients with
specific diseases and provide expertise and clinical and research data related
to our research projects. Under these arrangements, we will reimburse expenses.
In addition if we sell the results of a project to a third party, we will make
specified upfront payments and will pay a portion of any performance-based
milestones and royalties we receive from these third parties. Payments generally
go into specially designated funds for further research.
Pharmacogenomics
Through its access to relevant data (e.g., through the cross-referencing of
genetic and phenotypic information), deCODE plans to offer pharmacogenomic
services to pharmaceutical and biotechnology
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companies. In this way, we believe that we will be able to assist pharmaceutical
companies in tailoring drugs to specific parts of the patient population.
Tailor-made drugs will better ensure both effectiveness and safety. In addition,
it is expected that genetic information may lead to faster and more successful
clinical trials, which may result in cost savings. Pharmacogenomics may also
enable pharmaceutical companies to explore the use of older chemical compounds
which have been abandoned. Because the development cost of these compounds has
already been incurred, the additional cost to bring these products to market may
be reduced.
Internal Programs
We also plan to work on some diseases without partnering with
pharmaceutical companies, and we are currently pursuing a number of disease
projects independent of research sponsorships. In the event we complete any
independent projects, we intend to pursue the commercial development of our gene
and drug target discovery through the development and marketing of therapeutics
and diagnostic products. We may do this by using our own resources to turn
discoveries from our internal projects into therapeutic or diagnostic products
and developing our own marketing capabilities, by licensing our discoveries to
others who would be required to pay us royalties on sales of any products they
develop using the results of our gene discovery programs or by entering into
collaborative arrangements for the development and marketing of products from
these programs.
DATABASE SERVICES
The DCDP is intended to allow users to ask questions about relationships
between genetic and environmental data and disease. We believe the DCDP should
increase the utility of human genome sequence data by providing a medical and
environmental context, which should facilitate the development of new products
and services for healthcare.
Products
Gene Discovery and Drug Target Validation. We expect the DCDP to be used
in gene discovery programs and drug target validation by pharmaceutical and
biotechnology companies as a way of confirming their own provisional findings or
providing an impetus for further research. We expect that the DCDP will be used
to search the human genome for gene mutations that are linked to the occurrence
of a particular disease.
Pharmacogenomics. We expect the DCDP to improve understanding of how drug
response can vary across a population due to underlying genetic differences. For
example, a customer might search for a region of the genome that appears to be
shared by patients with similar drug responses. Pharmacogenomic analysis with
the DCDP is therefore an opportunity for pharmaceutical companies to market
products which more closely meet the needs of a diverse market.
Disease Management. The DCDP is uniquely positioned to provide new
insights and help design disease management programs. By carefully analyzing
clinical data and correlating such data with genetic factors, healthcare
providers may develop programs that cover the lifespan of the disease, from
preventive actions to determining the most appropriate treatments for each
individual. For a healthcare provider, which is constantly making the
cost/quality tradeoff, this is a unique way to design programs which optimize
both cost and quality.
Health Economics. We believe that a major trend in healthcare is the shift
from managing disease towards maintaining individual health. Providers are under
pressure to stop focusing on therapeutic areas in isolation and to begin
considering an individual's risk of disease in general. In order to do this,
providers will need to understand inter-relationships between different
therapeutic areas and health indicators so that they can analyze the costs and
benefits of various treatments or behavioral modifications. We believe that the
DCDP will naturally lend itself to this kind of analysis by processing data
across the major therapeutic areas as well as information on well-being and
lifestyle. For example, a customer may use the DCDP to analyze a particular
preventive measure known to reduce the risk of a target disease to see if that
measure may increase the patient's risk of developing other diseases.
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Customers
We believe that the potential customer base for the DCDP consists of
members of the healthcare industry, including:
- Pharmaceutical and Biotechnology Companies. The DCDP may be used by
pharmaceutical and biotechnology companies in their gene discovery and
pharmacogenomics programs.
- Health Organizations. Healthcare providers, including health
maintenance organizations, managed care groups and hospital groups may
use the DCDP to help them determine the most appropriate method of care
for patients.
- National Health Services and Government Agencies. National health
services and government agencies may use the database to save money by
determining the most effective allocation of resources.
We anticipate that our customers will pay for access to the database by
means of a fixed subscription plus, in the case of pharmaceutical and
biotechnology companies, a share of any product revenues they generate as a
result of using the database.
Collaborations
During our development of the DCDP, we intend to establish alliances with
partners who can contribute to the creation of the DCDP and IHD and complement
our efforts. Potential areas of collaboration include access to comparable data
from populations outside Iceland, assistance from potential users with the
design of products and technical expertise from vendors or consultants. We
anticipate that any partner would contribute to funding of the development of
the DCDP.
HEALTHCARE INFORMATICS
We have identified three product opportunities in healthcare informatics to
leverage capabilities derived from our gene discovery and database operations.
Products
Bioinformatics. To aid in our gene and drug target discovery work, we have
developed numerous proprietary bioinformatics tools for genealogy analysis,
project management, gene mapping, physical mapping, and gene identification
which we hope to commercialize as independent products.
A description of these tools is illustrated below:
<TABLE>
<CAPTION>
TYPE DESCRIPTION
- ---- -----------
<S> <C>
Genealogy tools: - Clustering algorithms are used to compare lists of
patients with the genealogy database to determine relevant
patient relationships.
- Special datamining algorithms are used to determine the
genetic component of traits.
Project management tools: - Our sample manager is used to track blood and DNA samples
that have arrived in the laboratory, throughout the
discovery process.
- Our project manager is used to keep track of all patient
blood samples, DNA samples, pedigrees, and medical
information in research projects.
Genotyping tools: - Our genotype viewer automates the fractionation of data
according to quality, decreasing the amount of labor.
- The marker manager manages large genetic marker sets
collated in the laboratory and is used to view and define
maps for statistical analysis.
- Our genotype manager manages the imports and exports of
the genotypes for a given set of patients and markers.
</TABLE>
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<TABLE>
<CAPTION>
TYPE DESCRIPTION
- ---- -----------
<S> <C>
- The Observer is a quality control tool for genotyping and
sequencing facilities.
Statistical tools: - The Allegro linkage analysis program has computational
power which is one to two orders of magnitude more efficient
than previously developed statistical analysis programs
known in the public domain.
Physical mapping tools: - Our software automates the process of reading physical
mapping hybridization data through image analysis and uses
data-mining tools that combine multiple data sources.
Gene discovery tools: - GeneMiner is used to discover new genes through the use
of sequence information alone; it analyzes up to a million
base pairs of sequence; its graphical interface allows
user annotation; and it permits integration of third
party information (exon and gene predictors, sequence
comparison programs, mouse and human homology comparisons
and repeat similarity)
</TABLE>
Privacy Protection. deCODE has developed expertise in encryption
mechanisms and security management to fulfill the Icelandic Data Protection
Commission's requirements. For example, our encryption tools provide for privacy
of blood samples that enter our laboratory. We believe that the opportunity to
commercialize this expertise will grow as the healthcare industry seeks to take
advantage of the benefits offered by information technology to manage complex
healthcare data while maintaining patient confidentiality.
Medical Decision-Support Software. In deciding how to treat patients,
physicians are routinely required to make the appropriate link between the
specific details regarding patients and their general knowledge of best medical
practice. One of the main challenges facing physicians today is how to deal with
the vast and growing amount of information about best medical practice and the
specific circumstances of their patients. Medical decision-support software
provide computer-based assistance to physicians in assimilating and using
available information. deCODE expects to offer products which will include ways
of combining medical knowledge with patient information such as symptoms and
test results to assist physicians in determining diagnosis and treatment while
addressing patients' concerns about the confidentiality of their personal
medical data.
Customers
Bioinformatics. We believe that the customers for our bioinformatics tools
will mainly consist of pharmaceutical and biotechnology companies. However, we
also expect to attract customers in other areas of the healthcare industry.
These customers will use our tools to aid in their gene and drug target
discovery programs.
Privacy Products. We believe that privacy products can potentially be sold
to any company handling sensitive data about individual persons, whether or not
the data are healthcare-related. However, pharmaceutical companies, healthcare
providers and payors with substantial quantities of individual data protected by
privacy restrictions will serve as our primary target. One such opportunity is
to develop a secure Internet environment for government agencies collecting
nation-wide patient data from mobile field staff. Other opportunities relate to
developing and supporting medical decision-support services and enabling secure
remote access by patients, physicians and other users or to a distributed
network.
Medical Decision-Support Software. Products and services in the field of
decision support have a broad potential customer base in the healthcare
industry. deCODE's initial focus will be on healthcare providers, government
agencies, physicians and HMOs, all of whom use support tools that capture and
analyze patient data to assist them in healthcare decision-making.
RESEARCH AND DEVELOPMENT EXPENSES
Our research and development expenses were $31,823,950 in 1999, $19,282,364
in 1998 and $6,080,096 in 1997. Of these amounts, we estimate that $21,003,807
in 1999, $12,726,360 in 1998 and $0 in 1997 were customer sponsored research
activities.
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PATENTS AND PROPRIETARY RIGHTS
We will be able to protect our proprietary rights from unauthorized use by
third parties only to the extent that our proprietary rights are covered by
valid and enforceable patents or are effectively maintained as trade secrets.
Accordingly, patents and other proprietary rights protections are an essential
element of our business. We currently rely on patents, trade secret law and
contractual non-disclosure and confidentiality arrangements to protect our
proprietary information. We intend to seek patent protection in the United
States and other jurisdictions to protect technology, inventions and
improvements to inventions that are commercially important to the development of
our business, including genes we discover, mutations of genes and related
processes and inventions, technologies which may be used to discover and
characterize genes, and therapeutic and diagnostic processes and other
inventions based on these genes. We have no issued patents but have filed eleven
patent applications in the United States. We also intend to seek patent
protection or rely upon trade secret rights to protect other technologies that
may be used to develop databases and healthcare informatics products and
services.
COMPETITION
We face, and will continue to face, intense competition in our gene
discovery programs from organizations such as major pharmaceutical companies,
specialized biotechnology firms, universities and other research institutions,
the Human Genome Project and other government-sponsored entities. A number of
entities are attempting to rapidly identify and patent genes responsible for
causing diseases or an increased susceptibility to diseases and to develop
products based on these discoveries.
Competition is also intense in the healthcare informatics and database
areas. Many companies are focusing on medical record systems and cost-oriented
patient databases as well databases containing genomics information.
Many of our competitors, either alone or together with their collaborative
partners, have substantially greater financial resources and larger research and
development staffs than we do. These competitors may discover, characterize or
develop important genes, drug targets or drug leads before we or our
collaborators do or may obtain regulatory approvals of their drugs more rapidly
than we or our collaborators do. They may develop healthcare informatics and
database products before we do or which are technically superior to ours or
prove to be more useful to our potential customers.
Developments by others may render pharmaceutical product candidates or
technologies developed by us or our collaborators obsolete or non-competitive.
Any product candidate that we or our collaborators successfully develop may
compete with existing therapies that have long histories of safe and effective
use.
Our competitors may obtain patent protection or other intellectual property
rights that could limit our rights, or our customers' ability, to use our
technologies, healthcare informatics products or databases, or commercialize
therapeutic or diagnostics products. In addition, we face, and will continue to
face, intense competition from other companies for collaborative arrangements
with pharmaceutical and biotechnology companies, for establishing relationships
with academic and research institutions and for licenses to proprietary
technology.
Our ability to compete successfully will depend, in part, on our ability,
and that of our collaborators, to:
- develop proprietary products;
- develop and maintain products that reach the market first, and are
technologically superior to and more cost effective than other products
on the market;
- obtain patent or other proprietary protection for our products and
technologies;
- attract and retain scientific and product development personnel;
- obtain required regulatory approvals; and
- manufacture, market and sell products that we develop.
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<PAGE> 51
GOVERNMENT REGULATION
Regulation by governmental authorities will be a significant factor in our
ongoing research and development activities and in our proposed business
relating to the DCDP. In addition, the development, production and marketing of
any pharmaceutical products which we or a partner may develop is subject to
regulation by governmental authorities.
THE IHD LICENSE
The DCDP and the IHD are subject to applicable Icelandic law. The IHD will
be developed and operated pursuant to an operating license from the Ministry and
will be subject to the Act, the regulations promulgated under the Act, the
license and an agreement between the licensee and the Ministry, all of which
impose numerous requirements on our activities.
As required by the license, concurrently with the issuance of the license,
we, through our Icelandic subsidiary, entered into an agreement with the
Ministry. This agreement provides that we must pay the Icelandic government a
fixed annual fee of 70 million Icelandic kronas (approximately $1,000,000) and
an additional annual fee of 6% of its net profit, up to a maximum of 70 million
Icelandic kronas per year (approximately $1,000,000). The agreement also
provides that our rights to the IHD will be transferred to the Ministry on the
expiration or termination of the license.
The license and the agreement under which we received the license also
require us to:
- pay the costs incurred by the health institutions (including the costs
of medical record software) in connection with the entering of data from
medical records before transfer to the IHD;
- financially segregate the operation of the IHD from our other activities
by maintaining a separate operating unit and separate accounts for IHD
operations;
- pay the costs of the governmental agencies which monitor our IHD
activities;
- indemnify and agree not to sue the Icelandic government for any
liability resulting from the passage of the legislation on the IHD and
its operation and/or the issuance of the IHD; and
- observe international bioethics rules.
The license prohibits us from, among other things:
- abusing our position by charging unreasonable fees, refusing business to
our competitors or discriminating among customers by imposing
discriminatory or other onerous business terms on our customers; or
- assigning or pledging our rights in the license.
The Act places a number of duties on us, as the IHD licensee, and imposes a
number of conditions on the IHD license. Under the Act, we are prohibited from
allowing direct access to the IHD and must keep the IHD and processing of the
database in Iceland. Our employees and contractors must sign an irrevocable
confidentiality oath prior to commencing employment or performing services on
our behalf. At the expiration of the IHD license, we are required to ensure that
the Ministry or a party entrusted by the Ministry will receive, without payment
of consideration, intellectual property rights necessary for the creation and
operation of the database for public health purposes and for scientific
research.
The IHD license may be revoked if we or our employees violate the terms of
the Act, if the conditions of the license are not fulfilled, or if we become
unable to operate the IHD. If we or our employees or any person assigned to
process data violate the provisions of the Act or applicable regulations with
regard to confidentiality, we will be required to compensate any persons to whom
the data relate for financial loss which the violation causes. If results
obtained from cross-referencing data in the DCDP prove to be personally
identifiable, the Data Protection Commission may, among other actions, order the
destruction of such results in their entirety or in part or revoke its approval
of the procedures and work processes applied by us to ensure privacy of the IHD
data.
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<PAGE> 52
The IHD license will be reviewed by the Ministry no later than October 1,
2008. During the course of the review, we and the Ministry will enter into
discussions for the renewal of the license after its expiration in 2012 provided
that deCODE continues to meet the requirements of all applicable laws and
regulations. The Ministry may also review the IHD license from time to time
following our request, on its own initiative or if the IHD license contravenes
any applicable laws or regulations.
Our creation and operation of the IHD and the DCDP will involve oversight
by the Ministry, with the assistance of an IHD Monitoring Committee, an
Interdisciplinary Ethics Committee, the Bioethics Committee of Iceland and the
Data Protection Commission of Iceland. These bodies will help to ensure our
compliance with applicable laws and regulations.
The Monitoring Committee consists of three members who are appointed by the
Minister of Health and Social Security. The Monitoring Committee will ensure
that the licensee complies with the Act and applicable regulations by monitoring
negotiations and agreements for the transfer of data and reporting any events of
noncompliance with the Act to the Ministry. The Monitoring Committee is charged
with protecting the interests of the public health authorities, health
institutions, self-employed health service workers and scientists in the process
of making agreements between us and those parties.
The Interdisciplinary Ethics Committee will review query types and monitor
research projects for compliance with internationally accepted ethical standards
for scientific research involving human beings. Members of the Interdisciplinary
Ethics Committee are appointed by the Ministry and may halt any query or
research project deemed by the committee to violate such standards.
The Bioethics Committee of Iceland is a standing committee appointed by the
Ministry that oversees scientific research relating to human beings in Iceland.
It has no direct supervisory function over our IHD license but will provide
ethical advice to the Monitoring Committee based upon quarterly reports
containing lists of queries and patient data submitted to the IHD.
Members of the Data Protection Commission, which is a standing committee
responsible for overseeing rights of privacy and data protection in Iceland, are
appointed by the Minister of Justice and include health, legal and computer
specialists. The Data Protection Commission establishes the technology, security
and organizational terms with which we must comply in the development of the IHD
pursuant to the IHD license. The Data Protection Commission may periodically
review such terms in light of new technologies, experience or change of
circumstances, and we will be required to comply with the revised data
protection terms within the deadline established by the Data Protection
Commission. The Data Protection Commission will monitor the security of the
collection, use and access to patients' information and may intervene to prevent
breaches of such security. The Data Protection Commission will ensure that we
comply with the privacy laws applicable in Iceland and will administer the
access limitations to data and encryption methodology used for the IHD.
PHARMACEUTICAL PRODUCTS
Our success will depend, in part, on the development and marketing of
products based on our research and development. Our ability and our partners'
ability to successfully manufacture and market therapeutic or diagnostic
products will be subject to strict regulatory controls on the clinical testing,
manufacture, labelling, supply and marketing of the products. Most countries
require a company to obtain and maintain regulatory approval for a product from
the relevant regulatory authority to enable the product to be marketed.
Obtaining regulatory approval and complying with appropriate statutes and
regulations is time-consuming and requires the expenditure of substantial
resources.
Most European countries and the United States have very high standards of
technical appraisal and consequently, in most cases, a lengthy approval process
for pharmaceutical products. The regulatory approval processes, which usually
include pre-clinical and clinical studies, as well as post-marketing
surveillance to establish a compound's safety and efficacy, can take many years
and require the expenditure of substantial resources. Data obtained from such
studies is susceptible to varying interpretations that could delay, limit or
prevent regulatory approval. Delays or rejections may also be encountered based
upon changes in drug approval
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<PAGE> 53
policies in applicable jurisdictions. There can be no assurance that we or our
collaborative customers will obtain regulatory approval for any drugs or
diagnostic products developed as the result of our gene discovery programs.
Because many of the products which may result from our research and
development programs are likely to involve the application of new technologies,
such products may be subject to substantial additional review by various
governmental regulatory authorities. As a result, regulatory approvals may
require more time than for products using more conventional technologies. In
addition, ethical concerns about the use of genetic predisposition testing, and
in particular about the risk that such testing could lead to discrimination by
insurance providers or employers, may lead to poor market acceptance or to
regulatory controls that would adversely affect the development of or demand for
diagnostic products based on our research.
ENVIRONMENTAL
Our research facilities and laboratory are located in Reykjavik, Iceland.
We operate under applicable Icelandic and European Union laws and standards,
with which we believe that we comply, relating to environmental, hazardous
materials and other safety matters. Our research and manufacturing activities
involve the generation, use and disposal of hazardous materials and wastes,
including various chemicals and radioactive compounds. These activities are
subject to standards prescribed by Iceland and the EU.
EMPLOYEES
As of December 31, 1999, we had approximately 310 employees, of whom
approximately 295 were employed full-time, 47 held Ph.D. or M.D. degrees and
approximately 171 held college degrees. 267 employees were engaged in, or
directly supported, research and development activities, of whom 185 worked
within the laboratory facilities and 50 held positions associated with the
development of informatics. 38 employees were engaged in business development,
finance, administration and facilities management. In addition, we utilized
part-time employees and outside contractors and consultants as needed and plan
to continue to do so. We anticipate hiring approximately 100 software developers
in 2000-2001.
We have entered into individual employment contracts with our employees in
accordance with standard Icelandic hiring practices. We believe that the
relationship with our employees is good. Furthermore, to help protect our
proprietary know-how and data, each employee must agree not to disclose any
trade secret or confidential information without our prior consent. Employees
also assign to us all patent rights and technical information which they develop
during employment.
FACILITIES
Our headquarters are located at Lynghals 1, Reykjavik, Iceland, a business
district. This three-story building, which we lease pursuant to a sale/leaseback
arrangement, has 3,300 square meters, or approximately 30,000 square feet, of
floor space including our laboratory space, executive offices, support and
administrative space. The lease expires in 2008, at which time the property will
be transferred to us, provided we have complied fully with the lease. We may
also build a 1,500 square meter, or approximately 13,500 square foot, facility
on adjacent land. In addition, we maintain a facility for approximately 15
genealogists located in Thornverholt 14, Reykjavik and we lease 533 square
meters, or approximately 5,000 square feet, of additional office space for our
database department at Hlietharsmari 19, Kopavogur, Iceland. We have also
entered into a lease for a 1,923 square meter, or approximately 19,000 square
foot, facility located at Hlietharsmari 15, Kopavogur, Iceland to conduct
database and informatics activities.
On February 14, 2000, we entered into an agreement with the City of
Reykjavik and the University of Iceland pursuant to which, subject to municipal
approval, we will be entitled to enter into a lease and construct a 10,000
square meter, or approximately 108,000 square foot, facility to replace our
current headquarters facility. If such approval is granted, we expect to
complete the project within the next two years.
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LEGAL PROCEEDINGS
We are not a party to any material legal proceedings except for an action
commenced on January 13, 2000 in the District Court of Reykjavik in Iceland by
Thornorsteinn Jonsson and Genealogia Islandorum hf., the holders of copyrights
to approximately 100 books of genealogical information. They allege that our
genealogy database infringes their copyrights and seek damages in the amount of
approximately $9,000,000 and a declaratory judgment to prevent us from using the
allegedly infringing data. We believe the suit is without merit and intend to
defend this action vigorously.
In January and February 2000, two individuals advised deCODE that they
believe they are entitled to shares of deCODE's common stock. deCODE believes
these assertions are without merit and intends to defend any actions which these
parties may commence.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Our executive officers and directors as of the date of this prospectus are
as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Kari Stefansson(2)................... 50 Chairman of the Board of Directors, President, Chief
Executive Officer and Secretary
Hannes Smarason...................... 32 Executive Vice President and Senior Business and
Finance Officer
Axel Nielsen......................... 34 Vice President, Finance and Treasurer
Jeffrey Gulcher...................... 40 Vice President, Research and Development
Kristjan Erlendsson.................. 50 Vice President, Clinical Collaborations
Hakon Guethbjartsson................. 34 Vice President, Informatics
Sigurethur Bjornsson................. 36 Vice President, Medical Informatics
Jean-Francois Formela(1)............. 43 Director
Andre Lamotte........................ 51 Director
Terrance McGuire(1)(2)(3)............ 43 Director and Assistant Secretary
Guy Nohra(1)(3)...................... 39 Director
Sir John Vane........................ 72 Director
</TABLE>
- ---------------
(1) Member of Audit Committee.
(2) Member of Nominating Committee.
(3) Member of Compensation Committee.
Following are brief descriptions of our current executive officers and
directors:
Kari Stefansson, M.D., Dr. Med. has served as our President, Chief
Executive Officer, Secretary and a Director since he co-founded deCODE in August
1996. Dr. Stefansson was appointed to serve as the Chairman of our Board of
Directors in December 1999. From 1993 until April 1997, Dr. Stefansson was a
professor of Neurology, Neuropathology and Neuroscience at Harvard University.
In addition, from 1993 through December 1996 he was Director of Neuropathology
at Beth Israel Hospital in Boston, Massachusetts. From 1983 to 1993, he held
faculty positions in Neurology, Neuropathology and Neurosciences at the
University of Chicago. Dr. Stefansson received his M.D. and Dr. Med. from the
University of Iceland in 1976 and 1986, respectively.
Hannes Smarason has served as our Executive Vice President and Senior
Business and Finance Officer since March 2000. From March 1999 to March 2000, he
served as our Senior Vice President, Chief Business Officer and Treasurer and
from January 1997 to March 1999, he served as our Chief Financial Officer and
Vice President of Business Development. Before joining us, he worked with
McKinsey & Co. in Boston from 1992 through December 1996 as a consultant. Mr.
Smarason received his B.S. in Mechanical Engineering and Management from the
Massachusetts Institute of Technology and his M.B.A. from the Massachusetts
Institute of Technology Sloan School of Management.
Axel Nielsen has served as our Vice President, Finance and Treasurer since
March 2000. From March 1999 to March 2000, he served as our Chief Financial
Officer and from June 1998 to March 1999, he served as our controller. Mr.
Nielsen was employed by Icelandair as the Director of Strategic Affairs from
July 1997 to June 1998. From August 1995 to June 1997 he worked with McKinsey &
Co. in London as a consultant. Mr. Nielsen received a B.Sc. in Computer Science
from the University of Iceland in 1989, a Cand. Oecon. in Business and Finance
from the University of Iceland in 1991, and an M.B.A. from the Massachusetts
Institute of Technology Sloan School of Management in 1995.
Jeffrey Gulcher, M.D., Ph.D. has served as our Vice President, Research and
Development since he co-founded the company in August 1996. Dr. Gulcher was on
staff in the Department of Neurology at Beth Israel Hospital in Boston,
Massachusetts and Harvard University Medical School from June 1993 to October
1998.
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<PAGE> 56
Dr. Gulcher received his Ph.D and M.D. from the University of Chicago in 1986
and 1990, respectively, and completed his neurology residency at the Longwood
Program of the Neurology Department of the Harvard Medical School in 1996.
Dr. Kristjan Erlendsson joined us in September 1998 to oversee
collaboration projects and was elected to serve as our Vice President for
Clinical Collaborations in March 1999. From March 1996 to August 1998, he was
Director of Hospital Affairs at Iceland's Ministry of Health and Social
Security. Since 1988, Dr. Erlendsson has served as Executive Director of Medical
Education at the University of Iceland. He has also been a Consultant in
Internal Medicine, Allergy and Clinical Immunology at Landspitalinn University
Hospital since 1985. Dr. Erlendsson received his M.D. from the University of
Iceland in 1976, trained in internal medicine at the University of
Connecticut-New Britain General Hospital from 1978 to 1981, and did a
postdoctoral fellowship in allergy and clinical immunology at Yale
University-Yale New Haven Hospital from 1981 to 1984.
Hakon Guethbjartsson, Ph.D. has served as our Vice President, Informatics
since March 2000. In 1996, Dr. Guethbjartsson joined us to direct our Department
of Informatics. Dr. Guethbjartsson received his B.Sc. in electrical engineering
in 1990 and his M.Sc. in electrical engineering and computer science in 1992
from the University of Iceland. In 1996, he received his Ph.D. from the
Massachusetts Institute of Technology and performed post-doctoral research
concerning magnetic resonance imaging at Brigham and Woman's Hospital in Boston
until he joined deCODE.
Sigurethur Bjornsson has served as our Vice President, Medical Informatics
since February 1999. Mr. Bjornsson served as Chief Executive Officer of Thor
Investments and Chief Financial Officer of Hof Holdings from February 1996 to
January 1999 and Director of Information Technology for Hof Holdings from
November 1992 to January 1996. Mr. Bjornsson studied mathematics at the
University of Iceland from 1984 to 1987.
Jean-Francois Formela, M.D. has served as a director of deCODE since August
1996, and as a member of our Audit Committee since February 1998. Dr. Formela is
a General Partner of Atlas Venture Associates II, L.P. Before joining Atlas
Venture in 1993, Dr. Formela was Senior Director, Medical Marketing and
Scientific Affairs at Schering-Plough in the U.S. where he also held
biotechnology licensing and marketing responsibilities. Dr. Formela is a
director of Biochem Pharma and several private companies. Dr. Formela holds an
M.D. from Paris University School of Medicine and an M.B.A. from Columbia
Business School.
Andre Lamotte has served as a director of deCODE since August 1996. In
1989, Dr. Lamotte founded Medical Science Partners, or MSP, which specializes in
early stage life sciences investments, in affiliation with Harvard University,
and has served as the Managing General Partner since then. Before founding MSP,
Dr. Lamotte served as a General Manager at Pasteur Merieux from April 1983 to
April 1988. He also currently serves as the Managing General Partner of Medical
Science Partners II, L.P. and Medical Science II Co-Investment, L.P. Dr. Lamotte
is a director of Ascent Pediatrics, Inc. Dr. Lamotte holds a Ph.D. in chemistry
from the Massachusetts Institute of Technology and an M.B.A. from Harvard
University.
Terrance G. McGuire has served as a director of deCODE since August 1996
and as Assistant Secretary since January 1998. He currently serves as Chairman
of three board committees: the Compensation Committee, the Audit Committee and
the Nominating Committee. Since March 1996, he has been a Founding General
Partner of Polaris Venture Partners. Since 1992, he has served as a general
partner of Alta V Management Partners L.P., which is the general partner of Alta
V Limited Partnership. He is a director of Akamai Technologies, Inc., Aspect
Medical Systems, Inc., Inspire Pharmaceuticals, Inc., Wrenchead.com, Inc.,
Paradigm Genetics, Inc. and several other private healthcare and information
technology companies. Mr. McGuire received his B.S. in Physics and Economics
from Hobart College, his M.S. in Engineering from Dartmouth College and his
M.B.A from the Harvard Business School.
Guy P. Nohra has served as a director of deCODE since August 1996. He is a
founder and general partner of Alta Partners, a venture capital partnership
investing in information technologies and life science companies. Prior to
founding Alta Partners in 1996, Mr. Nohra was a partner of Burr, Egan, Deleage &
Co., which he joined in 1989 and served as a Vice President from 1989-1997.
Previously, Mr. Nohra was a Product Manager of Medical Products with Security
Pacific Trading Corporation where he was responsible for a multi-million dollar
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product line and travelled extensively in Korea, Taiwan, Hong Kong, China and
Southeast Asia. In 1982, he received his B.A. from Stanford University and 1989
he received his M.B.A from the University of Chicago Graduate School of
Business. Mr. Nohra is serving or has served on the board of directors of
Vesica, Pilot Cardiovascular, InnerDyne, Interpore, R2 Technologies, VitaGen and
several private life science companies.
Sir John Vane has served as a director of deCODE since January 1997. In
1982, Sir John received the Nobel Prize in Physiology or Medicine for his work
in prostaglandins and for discovering the mode of action of aspirin. He
graduated in Chemistry, took a D.Phil. in Pharmacology and spent 20 years in
academic research. As a consultant to Squibb, he initiated the program on
inhibiting angiotensin-converting enzyme which led to the marketing of
Captopril. During 12 years as Director of Research and Development at the
Wellcome Foundation, he oversaw the development of Tracrium, Flolan, Zovirax and
Lamictal. In 1986, he founded the William Harvey Research Institute and built
the Institute to over 100 members, first as Chairman, then as Director General,
and, since 1997, as Honorary President. Sir John acts as a consultant to, and
board member of, several pharmaceutical and biopharmaceutical companies. Sir
John also has served as a partner of Vane Associates since 1997. He became a
Fellow of the Royal Society in 1974, was knighted in 1984 and has received
numerous other honorary fellowships and doctorates.
Other Significant Management Member
C. Augustine Kong, Ph.D., who is 41 years old, has served as our Director
of Statistics as a full time consultant since 1996. He is on leave as an
associate professor in the Department of Human Genetics at the University of
Chicago, where he has been a member of the faculty since 1986. Dr. Kong received
his Ph.D. in statistics from Harvard University in 1986.
Members of our Board of Directors serve for a term of one year and until
their successors are elected and qualify. Our executive officers are elected by
our Board of Directors and serve until their successors are elected and qualify.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1999, our compensation committee consisted of Terrance McGuire and
Guy Nohra. Neither of the members of our compensation committee has at any time
been an officer or employee of deCODE. No interlocking relationship exists
between our Board of Directors or compensation committee and the board of
directors or compensation committee of any other company, nor has any
interlocking relationship existed in the past.
DIRECTOR COMPENSATION
Our directors do not receive cash compensation for services on our Board of
Directors or any board committee, except as described below. We entered into an
agreement with Vane Associates (of which Sir John Vane is a partner) on December
1, 1997, pursuant to which we agreed to grant Sir John options to purchase up to
an aggregate of 60,000 shares of our common stock for his participation on our
Board of Directors. Pursuant to the agreement, Sir John received a stock option
for 15,000 shares on December 1, 1997, at an exercise price of $0.20 per share,
a stock option for 15,000 shares on December 1, 1998, at an exercise price of
$4.00 per share, and a stock option for 15,000 shares on December 1, 1999, at an
exercise price of $18.29 per share. In addition, Sir John will receive a stock
option for 15,000 shares on December 1, 2000, at an exercise price equal to the
fair market value on the date of grant subject to the continued satisfaction of
certain obligations under our agreement with Vane Associates. We reimburse all
directors for their expenses incurred in connection with attendance at Board of
Directors and committee meetings.
BOARD COMMITTEES
Our Board of Directors has established an audit committee, a nominating
committee and a compensation committee. Our audit committee, which consists of
Terrance McGuire, Guy Nohra and Jean-Francois Formela, reviews the results and
scope of our annual audit and the services provided by our independent auditors.
Our nominating committee, which consists of Kari Stefansson and Terrance
McGuire, reviews the qualifications of
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candidates and proposes nominees to serve as directors on our board and nominees
for membership on our board committees. Our compensation committee, which
consists of Terrance McGuire and Guy Nohra, makes recommendations to the Board
of Directors with respect to our general and specific compensation policies and
practices and administers our 1996 Equity Incentive Plan.
SCIENTIFIC ADVISORY BOARD
We are advised by an international scientific advisory board, which is
currently composed of four members with expertise in the fields of statistics,
molecular biology, genetic research and medicine. Our scientific advisory board
meets periodically to review specific projects with those members who are
experts in the subjects being discussed. In addition, we may consult individual
board members as to matters in their respective areas of expertise. Our
scientific advisory board currently is composed of the following individuals:
Professor Peter Donnelly, Chairman. Dr. Donnelly graduated with a Ph.D. in
statistics from Oxford University. He was Professor of Statistics and Ecology
and Evolution at the University of Chicago before he returned to Oxford as
Professor of Statistical Science and Chairman of the Department of Statistics.
In addition to being on our scientific advisory board. Dr. Donnelly has agreed
to spend one month a year assisting us on statistical and population genetic
issues.
Karl Tryggvason, M.D., Ph.D. Dr. Tryggvason is Professor of Medical
Chemistry at the Karolinska Institute in Stockholm, Sweden, and the leading
author of over 150 scientific publications. Dr. Tryggvason is a permanent member
of the Nobel Assembly, and was recently re-elected to the Nobel Committee for
Physiology or Medicine.
Helgi Valdimarsson, M.D. Dr. Valdimarsson is Professor of Immunology and
former chairman of the Department of Medicine at the University of Iceland.
Guethmundur Thornorgeirsson, M.D. Dr. Thornorgeirsson is Professor of
Internal Medicine at the University of Iceland and the chairman of the
scientific board of the Icelandic Heart Association.
SECURITY ADVISORY BOARD
We are in the process of establishing a Security Advisory Board that will
consist of experts in the fields of computer security, data and privacy
protection and security of medical informatics. We expect this board to meet
periodically to review security issues in our operations and in the development
and operation of the IHD and to advise us on the development of appropriate
security measures. We expect the Security Advisory Board to be appointed and
operational by May 2000.
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EXECUTIVE COMPENSATION
The following table provides certain information concerning the annual and
long-term compensation for the fiscal year ended December 31, 1999 of: (i) our
Chief Executive Officer; and (ii) our four highest-paid executive officers as of
December 31, 1999 whose salary and bonus earned during the fiscal year ended
December 31, 1999 exceeded $100,000. These individuals are referred to as the
"Named Officers" here and elsewhere in the prospectus.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION(1) STOCK OPTION AWARDS
--------------- (NUMBER OF SHARES ALL OTHER
NAME AND PRINCIPAL POSITION SALARY UNDERLINING OPTIONS) COMPENSATION
- --------------------------- --------------- -------------------- ------------
<S> <C> <C> <C>
Kari Stefansson............................... $304,551 -- $43,686(2)
Chairman of the Board of Directors, President,
Chief Executive Officer and Secretary
Hannes Smarason............................... $146,597 260,000 --
Executive Vice President and Senior Business
and Finance Officer
Jeffrey Gulcher............................... $162,323 -- --
Vice President, Research and Development
Kristjan Erlendsson........................... $132,460 -- --
Vice President, Clinical Collaborations
Sigurethur Bjornsson.......................... $114,062 -- --
Vice President, Medical Informatics
</TABLE>
- ---------------
(1) Includes compensation paid in Icelandic kronas. Figures reflect an exchange
rate of 72.55 Icelandic kronas to $1.00, the exchange rate determined by
the Central Bank of Iceland on December 31, 1999.
(2) Includes the value of housing and an automobile provided by us for the
benefit of the Named Officer.
The following table provides certain information concerning grants of stock
options to the Named Officers during the fiscal year ended December 31, 1999.
The percent of the total options set forth below is based on an aggregate of
840,500 options granted to employees in 1999.
OPTION GRANTS IN LAST FISCAL YEAR INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED
ANNUAL RATES OF
NUMBER OF PERCENTAGE OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -----------------
NAME GRANTED FISCAL 1999 PER SHARE DATE 5% 10%
- ---- ---------- ------------- ----------- ---------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Kari Stefansson............... 0 -- -- -- -- --
Hannes Smarason............... 260,000 30.9% $5.63 8/26/09 $ 0(1) $ 0(1)
Jeffrey Gulcher............... 0 -- -- -- -- --
Kristjan Erlendsson........... 0 -- -- -- -- --
Sigurethur Bjornsson.......... 0 -- -- -- -- --
</TABLE>
- ---------------
(1) This option was exercised prior to December 31, 1999 pursuant to an early
option exercise right.
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The following table sets forth certain information concerning exercisable
and unexercisable stock options held by the Named Officers as of December 31,
1999.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY
SHARES ACQUIRED VALUE FISCAL YEAR END(1) OPTIONS OF FISCAL YEAR-END
NAME ON EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- --------------- -------- ------------------------- --------------------------
<S> <C> <C> <C> <C>
Kari Stefansson........... 0 -- 0/0 $0/0
Hannes Smarason........... 260,000 $ 0 0/0 $0/0
Jeffrey Gulcher........... 0 -- 0/0 $0/0
Kristjan Erlendsson....... 0 -- 0/0 $0/0
Sigurethur Bjornsson...... 0 -- 0/0 $0/0
</TABLE>
- ---------------
(1) All of the options granted to date to employees (including officers) have
provided for an early exercise right, which has been exercised. See
"Description of Securities -- Stock Options" and "Certain Transactions" for
information pertaining to the early exercise right and promissory notes
delivered by certain Named Officers in connection with their exercise of
such rights.
EMPLOYMENT AGREEMENTS
At the time of commencement of employment, our executive officers generally
receive offer letters specifying basic terms and conditions of their employment.
We have entered into employment agreements with Mr. Erlendsson and Mr. Bjornsson
that allow either party to terminate the agreement upon three months and six
months prior notice, respectively.
Our executive officers have signed agreements which require them to
maintain the confidentiality of our information and to assign inventions to us.
These agreements also prohibit these officers from competing with us during the
terms of their employment and for two years thereafter by engaging in any
capacity in any business which is, or on the date of termination of their
employment was, competitive with our business.
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CERTAIN TRANSACTIONS
In January 1998 and August 1999, we granted to Hannes Smarason, our
Executive Vice President and Senior Business and Finance Officer, options to
purchase 300,000 and 260,000 shares of our common stock, respectively. In
November 1998, we granted to Sigurethur Bjornsson, our Vice President, Medical
Informatics, an option to purchase 120,000 shares of our common stock. Messrs.
Smarason and Bjornsson immediately exercised their options pursuant to the early
exercise right granted to all our employees. At the times of exercise, Mr.
Smarason delivered to us promissory notes in the principal amounts of $59,700
and $1,462,240 and Mr. Bjornsson delivered to us a promissory note in the amount
of $479,880. Each of these promissory notes bears interest in the amount of six
percent (6%) per annum. The notes are due and payable on January 1, 2001,
November 1, 2003 and February 1, 2003, respectively. The shares purchased by Mr.
Bjornsson and Mr. Smarason in 1998 vest at the rate of 1/4 on the first
anniversary of the date of employment and 1/48 on the last day of each month
thereafter. The shares purchased by Mr. Smarason in 1999 vest at the rate of
1/48 on the first day of each month, commencing December 1, 1999. As of December
31, 1999, the principal and accrued interest on the notes delivered by Mr.
Smarason in 1998 and 1999 was $66,769 and $1,487,432, respectively, and the
principal and accrued interest on the note delivered by Mr. Bjornsson was
$512,340.
Kari Stefansson, our Chairman, Chief Executive Officer and President, and
Mr. Smarason are stockholders in an Icelandic company which has entered into a
research collaboration with deCODE for discovery of compounds made from
thermophilic organisms. We provide funding for, and own the rights to all
intellectual property created in, this collaboration. During 1998 and 1999 we
made research funding payments to the company in the aggregate amount of
$593,955.
In February and May 1999, we sold to Roche Finance shares of Series C
preferred stock and warrants to purchase shares of Series C preferred stock for
an aggregate purchase price of $3,333,445.
In August 1999, we
- repurchased 13,559 shares of Series A preferred stock held by Alta
Embarcadero Partners, LLC, 507,711 shares of Series A preferred stock
held by Alta California Partners, L.P., 260,635 shares of Series A
preferred stock held by Atlas Venture Europe Fund, B.V., 260,635 shares
of Series A preferred stock held by Atlas Venture Fund II, L.P., 146,628
shares of Series A preferred stock held by Medical Science Partners, II,
L.P., 395,714 shares of Series A preferred stock held by Polaris Venture
Partners, L.P. and 23,040 shares of Series A preferred stock held by
Polaris Venture Partners Founders' Fund, L.P.;
- issued (and repurchased) 250,000 shares of Series B preferred stock to
Kari Stefansson in exchange for 333,333 shares of common stock held by
him; and
- repurchased 100,000 shares of Series C preferred stock held by Roche
Finance.
The initial purchase price we paid for the shares of Series A preferred
stock, Series B preferred stock and Series C preferred stock was $7.50 per
share. Pursuant to the agreement of the parties, this price was subject to later
upward adjustment to reflect possible adjustment in the price at which we sold
shares of Series B preferred stock to a third party in August 1999. In December
1999, the purchase price was adjusted to $13.95 per share with the additional
amounts paid in February 2000. Mr. Nohra, one of our directors, is a general
partner of Alta Partners, which provides investment advisory services to Alta
California Partners, L.P. and Alta Embarcadero Partners, LLC. Dr. Formela, one
of our directors, is a general partner of Atlas Venture Associates II, L.P., the
general partner of Atlas Venture Fund II, L.P. Mr. McGuire, one of our
directors, is a general partner of Polaris Venture Partners, L.P. and Polaris
Venture Partners Founders' Fund, L.P. Mr. Lamotte, one of our directors, is the
Managing General Partner of Medical Science Partners II, L.P.
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<PAGE> 62
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of our common stock as of December 31, 1999, and as of that date as
adjusted to give effect to the offering, by (i) each person who is known by us
to own beneficially more than 5% of our common stock; (ii) each of our Named
Officers and current directors; and (iii) all of our directors and Named
Officers as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE PERCENTAGE
BENEFICIALLY OWNED OWNED BEFORE OWNED AFTER
NAME OF BENEFICIAL OWNER BEFORE OFFERING(1) OFFERING(1) OFFERING(1)
- ------------------------ ------------------ --------------- -----------
<S> <C> <C> <C>
Roche Finance Ltd(2)............................. 4,483,334 13.4% %
124 Grenzacherstrasse (including 2.9%
CH-4070 Basel in
Switzerland stock options
and warrants)
Entities affiliated with Alta California 2,335,082 7.1% %
Partners, L.P.(3).............................. (including 1%
One Embarcadero Center, Suite 4050 in
San Francisco, CA 94111 warrants)
Entities affiliated with Atlas Venture(4)........ 2,335,082 7.1% %
222 Berkeley Street, Suite 1950 (including 1%
Boston, MA 02116 in
warrants)
Entities affiliated with Polaris Venture 1,875,848 5.7% %
Partners, L.P.(5).............................. (including 1%
1000 Winter Street in
Suite 3350 warrants)
Waltham, MA 02154
Kari Stefansson.................................. 3,125,292 9.6% %
Hannes Smarason.................................. 560,000 1.7% *
Jeffrey Gulcher.................................. 481,200 1.5% *
Kristjan Erlendsson.............................. 125,000 * *
Sigurethur Bjornsson............................. 120,000 * *
Jean-Francois Formela(4)......................... 2,335,082 7.1% %
(including 1%
in
warrants)
Andre Lamotte(6)................................. 686,514 2.1% %
Terrance McGuire(5).............................. 1,875,848 5.7% *
(including 1%
in
warrants)
Guy Nohra(3)..................................... 2,335,082 7.1% %
(including 1%
in
warrants)
Sir John Vane(7)................................. 45,000 *
All directors and executive officers as a group 11,689,018 35.0% %
(10 persons)(8)................................ (including 3%
in
stock options
and warrants)
</TABLE>
- ---------------
* Less than one percent
(1) Beneficial ownership is determined in a manner prescribed by the rules of
the Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of common stock subject
to stock options and warrants currently exercisable or exercisable within
60 days are considered outstanding for computing the percentage ownership
of the person holding the options and the
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<PAGE> 63
percentage ownership of any group of which the holder is a member, but are
not considered outstanding for computing the percentage ownership of any
other person. Except as indicated by footnote, or otherwise subject to
community property laws, the persons named in the table have sole voting
and investment power with respect to all shares of common stock shown as
beneficially owned by them.
Applicable percentage of ownership is based on 32,573,556 shares of common
stock outstanding on the date of this prospectus giving effect to the
automatic conversion of all outstanding shares of our preferred stock into
shares of common stock upon the closing of this offering and on
-- shares of common stock outstanding after this offering.
(2) Includes 3,511,111 shares of common stock issuable upon conversion of
shares of Series C preferred stock and 361,111 shares of common stock
issuable upon conversion of shares of Series C preferred stock which, in
turn, are issuable upon exercise of warrants owned by Roche Finance,
555,556 shares of common stock issuable upon conversion of shares of Series
C preferred stock that Roche Finance has an option to acquire, and 55,556
shares of common stock issuable upon conversion of shares of Series C
preferred stock issuable upon exercise of warrants which Roche Finance has
an option to acquire.
(3) Includes (1) 2,030,846 shares of common stock issuable upon conversion of
shares of Series A preferred stock owned by Alta California Partners, L.P.
and 244,416 shares of common stock issuable upon conversion of shares of
Series A preferred stock which, in turn, are issuable upon exercise of
warrants owned by Alta California Partners, L.P. and (2) 54,236 shares of
common stock issuable upon conversion of shares of Series A preferred stock
owned by Alta Embarcadero Partners, LLC and 5,584 shares of common stock
issuable upon conversion of shares of Series A preferred stock which, in
turn, are issuable upon exercise of warrants owned by Alta Embarcadero
Partners, LLC. Mr. Nohra is a general partner of Alta Partners, L.P., which
provides investment advisory services to Alta California Partners, L.P. and
Alta Embarcadero Partners, LLC. In addition, the principals of Alta
Partners are general partners of Alta California Management Partners, L.P.
(which is a general partner of Alta California Partners, L.P.), and Alta
Embarcadero Partners, LLC. Mr. Nohra disclaims beneficial ownership of all
such shares held by all of the foregoing funds.
(4) Includes (1) 1,042,541 shares of common stock issuable upon conversion of
shares of Series A preferred stock owned by Atlas Venture Fund II, L.P.,
and 125,000 shares of common stock issuable upon conversion of shares of
Series A preferred stock which, in turn, are issuable upon exercise of
warrants owned by Atlas Venture Fund II, L.P., and (2) 1,042,541 shares of
common stock issuable upon conversion of shares of Series A preferred stock
owned by Atlas Venture Europe Fund B.V., and 125,000 shares of common stock
issuable upon conversion of shares of Series A preferred stock which, in
turn, are issuable upon exercise of warrants owned by Atlas Venture Europe
Fund B.V., a wholly owned subsidiary of Atlas InvesteringsGroep N.V., which
is a limited partner in Atlas Venture Fund II L.P. Mr. Formela is a general
partner of Atlas Venture Associates II, L.P., which is the sole general
partner of Atlas Venture Fund II, L.P.
(5) Includes (1) 1,582,854 shares of common stock issuable upon conversion of
shares of Series A preferred stock owned by Polaris Venture Partners, L.P.
and 189,496 shares of common stock issuable upon conversion of shares of
Series A preferred stock which, in turn, are issuable upon exercise of
warrants owned by Polaris Venture Partners, L.P., and (2) 92,161 shares of
common stock issuable upon conversion of shares of Series A preferred stock
owned by Polaris Venture Partners Founders' Fund, L.P. and 11,337 shares of
common stock issuable upon conversion of shares of Series A preferred stock
which in turn, are issuable upon exercise of warrants owned by Polaris
Venture Partners Founders' Fund, L.P. Mr. McGuire is a general partner of
both Polaris Venture Partners Founders' Fund, L.P. and Polaris Venture
Partners, L.P.
(6) Includes 586,514 shares of common stock issuable upon conversion of shares
of Series A preferred stock owned by Medical Science Partners II, L.P. and
100,000 shares of common stock issuable upon the conversion of shares of
Series A preferred stock which, in turn, are issuable upon exercise of
warrants held by Medical Science Partners II, L.P. Mr. Lamotte is the
Managing General Partner of Medical Science Partners, II, L.P.
(7) Includes 45,000 shares of common stock underlying options granted to Sir
John that were exercisable within 60 days of December 31, 1999. Does not
include 15,000 shares of common stock underlying options which
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<PAGE> 64
will be granted to Sir John in December 2000 subject to the continued
satisfaction of certain obligations under our consulting contract with Vane
Associates (of which Sir John is a partner).
(8) Includes 45,000 shares of common stock underlying options that were
exercisable within 60 days of December 31, 1999, as well as 800,833 shares
of common stock issuable upon conversion of shares of Series A preferred
stock which, in turn, are issuable upon the exercise of the warrants and
other rights to purchase described in footnotes 3 through 7 above.
DESCRIPTION OF SECURITIES
Our authorized capital stock consists of 80,641,926 shares, of which
48,000,000 shares are common stock, $0.001 par value, and 32,641,926 shares are
preferred stock. Our Board of Directors has the power and authority to designate
7,016,666 shares of preferred stock into classes or series. Immediately
following this offering, there will be shares of common stock and no
shares of preferred stock outstanding.
COMMON STOCK
As of December 31, 1999, there were 9,604,012 shares of common stock issued
and outstanding and held of record by approximately 350 stockholders. In
addition, as of December 31, 1999, there were outstanding options to purchase
45,000 shares of common stock.
Holders of shares of common stock are entitled to one vote at all meetings
of stockholders for each share held by them. The common stock has no preemptive
rights or other rights to subscribe for additional shares, no conversion right
and no right of redemption. Subject to the rights and preferences of the holders
of any preferred stock, the holders of the common stock are entitled to receive
such dividends as, when and if declared by the Board of Directors out of funds
legally available therefor for that purpose. We have not paid dividends on the
common stock. The payment of dividends, if any, in the future with respect to
the common stock is within the discretion of the Board of Directors and will
depend on our earnings, capital requirements, financial condition and other
relevant factors. At present, our Board of Directors does not intend to declare
any dividend on the common stock in the foreseeable future.
PREFERRED STOCK
Of our 32,641,926 authorized preferred shares, 11,041,926 shares are
designated as Series A preferred stock, 10,000,000 shares are designated as
Series B preferred stock, and 4,583,334 shares are designated as Series C
preferred stock. As of December 31, 1999, 9,562,301 shares of Series A preferred
stock (held by 20 holders of record), 9,893,814 shares of Series B preferred
stock (held by approximately 5,000 holders of record), and 3,511,111 shares of
Series C preferred stock (held by one holder of record) were outstanding. In
addition, as of December 31, 1999, there were outstanding warrants to purchase
1,137,814 shares of Series A preferred stock and warrants and options to
purchase 972,223 shares of Series C preferred stock. Upon the closing of this
offering, all outstanding shares of preferred stock will be converted into
22,969,544 shares of common stock. In addition, all outstanding warrants to
purchase shares of preferred stock will be converted into warrants and options
to purchase shares of common stock.
Each share of our outstanding classes of preferred stock bears dividends at
the rate of 8% of the original purchase price per share, payable when declared
by the Board of Directors. To date the Board of Directors has not declared any
dividends on the preferred stock. Our certificate of incorporation provides that
the outstanding preferred stock will convert to common stock upon the closing of
this offering, at which time all undeclared dividends will be cancelled.
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<PAGE> 65
With respect to the 7,016,666 shares of preferred stock not currently
designated as an existing series, our Board of Directors is authorized, except
as otherwise limited by Delaware law, without further action by the
stockholders:
- to issue shares of preferred stock in one or more series;
- to fix or alter the dividend rights, dividend rates, conversion rights,
voting rights, terms of redemption (including sinking fund provisions),
redemption price or prices, and liquidation preferences of any wholly
unissued series of preferred stock;
- to designate the number of shares constituting, and the designation of,
any series of preferred stock; and
- to increase or decrease the number of shares of a series subsequent to
the issue of shares of that series, but not below the number of shares
of that series then outstanding.
WARRANTS AND OTHER RIGHTS TO PURCHASE
As of December 31, 1999, we had outstanding warrants to purchase 1,137,814
shares of Series A preferred stock at $1.00 per share, a warrant to purchase
250,000 shares of Series C preferred stock at $2.00 per share, a warrant to
purchase 55,555 shares of Series C preferred stock at $3.00 per share, a warrant
to purchase 55,556 shares of Series C preferred stock at $3.00, and an option to
purchase (i) 555,556 shares of Series C preferred stock at $4.00 per share and
(ii) a warrant to purchase 55,556 shares of Series C preferred stock at $4.00
per share. The warrants to purchase 1,137,814 shares of Series A preferred stock
expire on August 26, 2005, the warrant to purchase 250,000 shares of Series C
preferred stock expires on February 2, 2007, the warrant to purchase 55,555
shares of Series C preferred stock expires on February 5, 2008, the warrant to
purchase 55,556 shares of Series C preferred stock expires on May 20, 2009, and
the option to purchase 555,556 shares of Series C preferred stock and a warrant
to purchase 55,556 shares of Series C preferred stock expires on February 1,
2001. Immediately following this offering all of the outstanding warrants will
be converted into warrants to purchase an identical number of shares of common
stock at the exercise price set forth in the applicable warrant.
STOCK OPTIONS
We established our 1996 Equity Incentive Plan, or the 1996 Plan, for the
purposes of attracting and retaining the best available personnel, to provide
additional incentive to our employees and consultants and to promote our
success. Our incentive plan provides for: (i) the grant of stock options to
employees and consultants; (ii) the grant of stock bonuses to employees,
directors and consultants; and (iii) the grant of rights to purchase restricted
stock, on such terms and conditions our Board of Directors or a board committee
determines. The powers of our Board of Directors or board committee, as the case
may be, include the determination of which employees and consultants are to
receive stock option grants, the exercise price, number of shares and the
vesting schedule of the grants.
At the discretion of our Board of Directors or board committee, any options
granted may permit the early exercise of the options, in whole or in part, prior
to vesting. We retain the right, upon termination of the option holder's
employment or consulting arrangement, to repurchase the shares of common stock
acquired as a result of an early exercise that are unvested on the date of
termination, at the price per share paid by the option holder at the time of
exercise of the option. All of the options granted to employees to date have
provided for an early exercise right.
The total number of shares of common stock authorized for issuance under
the 1996 Plan is 5,000,000. As of December 31, 1999, 1,041,000 shares of common
stock were eligible for issuance upon the exercise of options available to be
granted under the 1996 Plan.
REGISTRATION RIGHTS OF STOCKHOLDERS
Pursuant to the terms of an investor rights agreement, the holders of
-- shares of common stock (including -- shares of common stock issuable
upon exercise of warrants) (the "Registrable Shares") will have the right to
require us to file a registration statement under the Securities Act covering
the registration of
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<PAGE> 66
their shares at any time after 180 days from the effective date of the
registration statement of which this prospectus is a part if the holders of 50%
of such shares demand registration and the number of shares to be registered has
an aggregate public offering price of at least $5,000,000. We are not required
to effect more than two registrations for the holders pursuant to these demand
registration rights.
In addition, holders of -- shares of common stock are entitled to
piggyback registration rights with respect to the registration of these shares
under the Securities Act. If we propose to register any shares of common stock
under the Securities Act either for our account or for the account of our other
security holders, the holders of shares having piggyback rights are entitled to
receive notice of the registration and are entitled, with some limitation, to
include their shares in the registration.
Further, at any time after we become eligible to file a registration
statement on Form S-3, any holder or holders of the then outstanding Registrable
Shares may require us to file registration statements under the Securities Act
on Form S-3 with respect to their shares of common stock.
The above described registration rights are subject to conditions and
limitations, including the right of the underwriters of an offering to limit the
number of shares of common stock which security holders may include in a
registration. Further, we may defer a registration for a period of 90 days if we
furnish to the holders requesting registration a certificate signed by the
chairman of the board stating that in the good faith judgment of the Board of
Directors it would be seriously detrimental to deCODE and our stockholders for
the requested registration to be effected at that time. We are generally
required to bear all of the expenses of all such registrations, including the
reasonable fees of a single counsel acting on behalf of all selling holders,
except underwriting discounts and selling commissions. Registration of any of
the shares of common stock held by security holders with registration rights
would result in such shares becoming freely tradable without restriction under
the Securities Act immediately upon effectiveness of such registration.
DELAWARE LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS
We are subject to Section 203 of the Delaware General Corporation Law
("DGCL") which is an anti-takeover provision. In general, the statute prohibits
a publicly-held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years after the date of
the transaction in which the person became an interested stockholder unless the
business combination is approved in a prescribed manner. A "business
combination" includes a merger, asset sale or other transaction resulting in
financial benefit to the stockholder. An "interested stockholder" is a person
who, together with affiliates and associates, owns (or within three years prior,
did own) 15% or more of a corporation's voting stock.
Certain provisions in our certificate of incorporation, in our bylaws and
under Delaware law could make it more difficult for other companies to acquire
us, even if doing so would benefit our stockholders. For example, our
certificate of incorporation and bylaws provide for the issuance of preferred
stock. The use of preferred stock may have the effect of delaying, deferring or
preventing a change in control. Further, use of the preferred stock may have an
adverse impact on the ability of our stockholders to participate, if applicable,
in a tender offer or exchange offer for the common stock, which would diminish
the value of the common stock.
The DGCL authorizes a corporation in its certificate of incorporation to
limit the personal liability of its directors for violations of their fiduciary
duty of care. Accordingly, our certificate of incorporation states that a
director will not be personally liable to deCODE or to our stockholders for
monetary damages resulting from any breach of fiduciary duty as a director,
except for the breach of the director's duty of loyalty to us or our
stockholders, acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, or a transaction from which the
director derives an improper personal benefit. The DGCL also authorizes a
corporation to indemnify its directors and officers, and our bylaws require that
we indemnify each director and executive officer to the fullest extent allowable
under the DGCL. We believe that these provisions will assist us in attracting
and retaining qualified individuals to serve as directors.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock will be [ ].
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CERTAIN TAX CONSIDERATIONS
CERTAIN U.S. FEDERAL TAX CONSIDERATIONS FOR NON-U.S. HOLDERS OF COMMON STOCK
The following is a general discussion of material U.S. federal income tax
consequences relating to the ownership and disposition of shares of common stock
by a beneficial owner thereof that is a non-U.S. holder. A non-U.S. holder is a
person or entity that, for U.S. federal income tax purposes, is a non-resident
alien individual, a foreign corporation, a foreign partnership, or other foreign
entity, or a foreign estate or trust.
This discussion is based on the Internal Revenue Code of 1986, as amended,
or the Code, and administrative interpretations as of the date hereof, all of
which are subject to change, including changes with retroactive effect. This
discussion does not address all aspects of U.S. federal income taxation that may
be relevant to non-U.S. holders in light of their particular circumstances. In
particular, this discussion does not address non-U.S. holders who are subject to
U.S. federal income tax on their worldwide income or whose shares of common
stock are effectively connected with the conduct of a U.S. trade or business. In
addition, this discussion does not address any tax consequences arising under
the laws of any state, local or foreign jurisdiction. Prospective holders should
consult their tax advisors with respect to the particular tax consequences to
them of owning and disposing of shares of common stock, including the
consequences under the laws of any state, local or foreign jurisdiction.
DIVIDENDS
Subject to the discussion below, dividends paid to a non-U.S. holder of
common stock generally will be subject to withholding tax at a 30% rate or such
lower rate as may be specified by an applicable income tax treaty. For purposes
of determining whether tax is to be withheld at a 30% rate or at a reduced rate
as specified by an income tax treaty, we ordinarily will presume that dividends
paid on or before December 31, 2000, to an address in a foreign country are paid
to a resident of such country absent knowledge that such presumption is not
warranted.
Under new United States Treasury Regulations applicable to dividends paid
after December 31, 2000, to obtain a reduced rate of withholding under a treaty,
a non-U.S. holder will generally be required to provide to us certification of
such non-U.S. holder's entitlement to benefits under a treaty. The new
regulations also provide special rules to determine whether, for purposes of
determining the applicability of a tax treaty, dividends paid to a non-U.S.
holder that is an entity should be treated as paid to the entity or those
holding an interest in that entity.
Generally, we must report to the U.S. Internal Revenue Service the amount
of dividends paid, the name and address of the recipient, and the amount, if
any, of tax withheld. A similar report is sent to the holder. Pursuant to tax
treaties or certain other agreements, the U.S. Internal Revenue Service may make
its reports available to tax authorities in the recipient's country of
residence.
Dividends paid to a non-U.S. holder at an address within the United States
may be subject to backup withholding imposed at a rate of 31% if the non-U.S.
holder fails to establish that it is entitled to an exemption or to provide a
correct taxpayer identification number and certain other information. Under
current United States federal income tax law, backup withholding (imposed at a
rate of 31%) generally will not apply to dividends paid on or before December
31, 2000, to a non-U.S. holder at an address outside the United States (unless
the payer has knowledge that the payee is a U.S. holder). Under new regulations
applicable to payments after December 31, 2000, however, a non-U.S. holder will
be subject to backup withholding if the non-U.S. holder does not provide the
certification required in order to receive treaty benefits described above.
GAIN ON DISPOSITION OF COMMON STOCK
A non-U.S. holder generally will not be subject to U.S. federal income tax
with respect to gain realized on a sale or other disposition of shares of common
stock.
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INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING ON DISPOSITION OF
COMMON STOCK
Under current United States federal income tax law, information reporting
and backup withholding imposed at a rate of 31% will apply to the proceeds of a
disposition of shares of common stock effected by or through a U.S. office of a
broker unless the disposing holder certifies as to its non-U.S. status or
otherwise establishes an exemption. Generally, U.S. information reporting and
backup withholding will not apply to a payment of disposition proceeds where the
transaction is effected outside the United States through a non-U.S. office of a
non-U.S. broker. However, U.S. information reporting requirements (but not
backup withholding) will apply to a payment of disposition proceeds where the
transaction is effected outside the United States by or through an office
outside the United States of a broker that is:
- a U.S. person,
- a foreign person which derives 50% or more of its gross income for
certain periods from the conduct of a trade or business in the United
States,
- a "controlled foreign corporation" for U.S. federal income tax purposes
or
- in the case of payments made after December 31, 2000, a foreign
partnership with certain connections to the United States, in each case
unless such broker has documentary evidence in its files of the holder's
non-U.S. status and has no actual knowledge to the contrary or unless the
holder establishes an exemption.
Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained, provided that the required information is furnished to the U.S.
Internal Revenue Service.
CERTAIN BELGIAN TAX CONSIDERATIONS FOR BELGIAN HOLDERS OF COMMON STOCK
The following generally summarizes the material Belgian income and stamp
tax consequences of the acquisition, direct ownership and disposition of our
common stock by Belgian residents and it is based on the opinion of Stibbe
Simont Monahan Duhot, Belgian legal counsel to deCODE. This discussion is based
on tax law applicable in Belgium as in effect on the date of this prospectus,
and is subject to changes to Belgian law, including changes that could have
retroactive effect. The following summary does not take into account or discuss
tax laws of any country other than Belgium nor does it take into account the
individual circumstances of each investor.
Prospective Belgian investors are advised to consult their own tax advisers
as to the tax consequences of the acquisition, ownership and disposition of our
common stock.
BELGIAN WITHHOLDING TAX
Dividends distributed on our common stock (gross of Belgian taxation but
net of any foreign withholding tax deducted) are subject to Belgian dividend
withholding tax at the rate of 25.0% when paid or attributed through an
intermediary in Belgium. However, no Belgian dividend withholding tax is due if
the Belgian resident is a company subject to Belgian corporation income tax,
provided certain formalities are met.
To the extent that dividends on our common stock are attributed or paid
outside Belgium, without the intervention of a paying agent or any other
financial intermediary in Belgium, no Belgian dividend withholding tax is due.
However, Belgian resident entities subject to Belgian legal entities tax (such
as pension funds) must pay the dividend withholding tax to the Belgian Treasury.
The withholding tax may be subject to exemptions or reductions provided by
Belgian law. For instance, in certain cases the above-mentioned 25% rate of
dividend withholding tax will be reduced to 15%. The reduced rate applies in
particular to:
- dividends distributed on shares publicly issued on or after January 1,
1994; and
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<PAGE> 69
- dividends distributed on shares that have been privately issued on or
after January 1, 1994 in exchange for cash contributions, provided the
shares are registered, or are bearer shares placed in open custody, to a
financial institution in Belgium as of the date of their issuance.
INCOME TAX FOR BELGIAN RESIDENT INDIVIDUALS
The Belgian dividend withholding tax is a final tax for Belgian resident
individuals holding our common stock as a private investment, and the dividends
need to be reported in such individuals' annual income tax returns. If no
withholding tax has been levied (for example where payment or attribution is
made outside Belgium), such individuals are required to report the dividends in
their tax returns, and will be taxed at the rate of either 25.0% or 15.0%, in
each case increased by a municipal surcharge (generally varying from 5% to 8% of
the tax due).
Belgian resident individuals whose holdings of our common stock are
connected with a business will be taxed on the dividends at the ordinary rates
for business income, varying from 25% to 55% and increased by the appropriate
municipal surcharge and a 3% crisis contribution. Any Belgian withholding tax is
creditable against the final income tax due, provided the holder of our common
stock has full ownership of that stock at the time of attribution or payment of
the dividends and the dividend distribution does not entail a reduction in value
or capital loss on the shares.
CORPORATE INCOME TAX FOR COMPANIES RESIDENT IN BELGIUM
Dividends received by companies resident in Belgium are, in principle,
subject to corporation income tax at the rate of 40.1%, i.e. the standard rate
of 39%, increased by the additional tax of 3% of the corporate income tax due.
Lower rates may be applicable to Belgian resident companies which, among other
conditions, are not 50% or more owned by another company and whose taxable
income is below certain thresholds fixed by law.
Belgian resident companies which satisfy the minimum holding requirement of
either a participation of at least 5% in deCODE or an acquisition value of at
least BEF50 million at the time of attribution or payment of dividends will be
taxed on only 5% of the dividends received (so-called dividends-received
deductions or DRD) unless deCODE falls within one of the categories expressly
excluded from the DRD. DRD entitlement is assessed on a case by case basis at
the time of attribution by reference to the origin of the issuer's revenue used
to distribute the dividend. If our revenues continue to be submitted to normal
taxation, it is highly unlikely that DRD would be denied.
INCOME TAX FOR BELGIAN RESIDENT ENTITIES SUBJECT TO BELGIAN LEGAL ENTITIES
TAX
The Belgian dividend withholding tax is a final tax for Belgian resident
entities subject to the Belgian legal entities tax.
BELGIAN CAPITAL GAINS TAXATION
Income Tax for Individuals Resident in Belgium. Individuals holding our
common stock as a private investment will not be subject to Belgian capital
gains taxation on the disposal of that stock. Individuals may, however, be
subject to a 33% tax (increased by the appropriate municipal surcharge and the
3% crisis contribution) if the capital gain is deemed to be "speculative" in
nature as defined by Belgian case law.
Corporate Income Tax for Companies Resident in Belgium. Capital gains
realized by companies resident in Belgium on the disposal of our common stock
are exempt from Belgian capital gains taxation if our dividends fully qualify
for the DRD. It is not necessary to satisfy the minimum holding requirement for
DRD to benefit from this exemption.
Capital losses are only tax-deductible on a liquidation and distribution of
all our assets and liabilities. In that event, capital losses are tax-deductible
to the extent that they represent fully paid-up capital.
Belgium Resident Entities Subject to the Belgian Legal Entities
Tax. Entities subject to the Belgian legal entities tax are not subject to
Belgian capital gains taxation on the disposal of our common stock.
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<PAGE> 70
BELGIAN INDIRECT TAXES
Stamp Tax on Securities Transactions. In principle, a Belgian stamp tax is
levied upon the subscription or purchase or sale of our common stock in Belgium
through a professional intermediary. The rate applicable to subscriptions for
new shares is 0.35% subject to an upper limit of BEF 10,000 or (Euro 248) per
transaction. The rate applicable to sales and purchases of existing shares in
Belgium through a professional intermediary is 0.17% subject to an upper limit
of BEF 10,000 or (Euro 248) per transaction.
An exemption is available to professional intermediaries (such as credit
institutions), insurance companies, pension funds and collective investment
vehicles acting for their own account. Non-Belgian resident holders of our
common stock acting for their own account will also be entitled to an exemption
from this stamp tax if they deliver to the issuer of the professional
intermediary in Belgium, as the case may be, an affidavit confirming non-
Belgian resident status.
Tax on Physical Delivery of Bearer Securities. A tax is levied upon the
physical delivery of our common stock pursuant to the subscription or
acquisition for consideration in Belgium. This tax is also due on the delivery
of our common stock pursuant to a withdrawal of such stock from "open custody"
in Belgium. An exemption is available if the acquisition for consideration does
not take place through a professional intermediary.
This tax is due, at the rate of 0.2% on the sums payable by the subscriber
or acquirer on a subscription of acquisition of the sales value of our common
stock, as estimated by the custodian, on a withdrawal from "open custody."
An exemption is available for deliveries to recognized professional
intermediaries (such as credit institutions) acting for their own account. An
exemption is also available for delivery to a non-resident of shares of our
common stock which are held in "open custody" with certain specified financial
intermediaries.
Since securities listed on EASDAQ are always in book entry form, the
Belgian tax on the physical delivery of bearer securities will not apply to
transactions in our common stock on EASDAQ.
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<PAGE> 71
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering there has been no public market for our common
stock. Some financial institutions have been making a market for
privately-negotiated transactions among non-U.S. persons in shares of our
outstanding Series B preferred stock. Our Series B preferred stock transfer
records indicate that approximately 10 million shares of Series B preferred
stock were transferred during 1999 in approximately 7,000 transactions and
approximately 1.1 million shares of Series B preferred stock were transferred
during January 2000 in approximately 2,700 transactions. The majority of these
transactions had an Icelandic financial institution as one of the
counterparties. Future sales of substantial amounts of our common stock, or even
the possibility of such sales, could reduce the prevailing market price. As
described below, only a limited number of shares of common stock currently held
by our stockholders will be available for sale shortly after this offering due
to certain contractual and legal restrictions on resale. Sales of substantial
amounts of common stock in the public market after the restrictions lapse could
adversely affect the prevailing market price and our ability to raise equity
capital in the future.
Upon closing of this offering, -- shares of our common stock will be
outstanding based on the number of shares of our preferred stock and common
stock outstanding as of December 31, 1999, and assuming no exercise of the
underwriters' over-allotment option. Of these shares, the -- shares of
common stock being sold in this offering will be freely tradable (unless
purchased by an "affiliate" of deCODE as such term is defined in the Securities
Act of 1933 without restriction or registration under the Securities Act. All
remaining shares of common stock were issued and sold in private transactions
and are "restricted securities" which are eligible for public sale only if
registered under the Securities Act or sold in accordance with Rule 144
promulgated under that Act. In addition, upon closing of this offering 2,125,037
shares of common stock will be issuable upon the exercise of warrants and
options.
Each of deCODE and the directors, executive officers and certain other
stockholders of deCODE (who will hold, in the aggregate, -- % of deCODE's
common stock after the offering) has agreed that, without the prior written
consent of Morgan Stanley & Co. Incorporated on behalf of the underwriters, it
will not sell its shares during the period ending 180 days after the date of
this prospectus.
Each of certain other stockholders of deCODE, (who will hold, in the
aggregate, -- % of deCODE's common stock after the offering), has signed an
agreement providing that, upon the request of deCODE or Morgan Stanley & Co.
Incorporated, it will not, during the period ending 180 days after the effective
date of the registration statement of which this prospectus is a part, sell or
otherwise transfer or dispose of any shares of common stock. We cannot be
certain that such agreements can be enforced against all transferees of the
initial purchasers of the shares.
As a result of lockups with the underwriters and the provisions of Rule
144, the -- shares which are restricted securities will be available
for sale in the U.S. public market as follows:
- -- shares of common stock will be immediately eligible for
resale upon expiration of the lockup period (subject to the volume
limitations of Rule 144 in the case of sales by affiliates)
- -- shares of common stock will be immediately eligible for
resale upon expiration of the lockup period (subject to the volume
limitations of Rule 144)
- -- shares of common stock will be eligible for resale from time
to time thereafter upon expiration of the applicable holding periods
under Rule 144 upon expiration of the lockup period (subject to the
volume limitations of Rule 144)
Rule 144. In general, under Rule 144 as currently in effect, beginning 90
days after the date of this prospectus a person or persons whose shares are
aggregated, who has beneficially owned restricted securities for at least one
year, including the holding period of any prior owner except an affiliate, will
be entitled to sell within any three-month period a number of shares that does
not exceed the greater of:
- 1% of the number of shares of our common stock then outstanding, which
will equal approximately -- shares immediately after this offering;
or
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<PAGE> 72
- the average weekly trading volume of our common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to the sale.
Sales under Rule 144 are also subject to manner of sale provisions and
notice requirements and to the availability of current public information about
deCODE.
Rule 144(k). Under Rule 144(k), a person who is not deemed to have been
one of our affiliates at any time during the three months preceding a sale, and
who has beneficially owned the shares proposed to be sold for at least two
years, including the holding period of any prior owner except an affiliate, is
entitled to sell these shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144.
Registration Rights. As described above, holders of -- shares of our
common stock which are restricted securities will be entitled to demand
registration of their shares under the Securities Act at any time after 180 days
after the effective date of the registration statement of which this prospectus
is a part. Registration of these shares under the Securities Act would result in
their becoming freely tradeable without restriction under the Securities Act,
except for shares purchased by affiliates, immediately upon the effectiveness of
the registration.
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<PAGE> 73
UNDERWRITERS
Under the terms and subject to the conditions contained in an underwriting
agreement dated the date of this prospectus the underwriters named below, for
whom Morgan Stanley & Co. Incorporated is acting as representative, have
severally agreed to purchase, and deCODE has agreed to sell to them, severally,
the number of shares indicated below.
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
- ---- ---------
<S> <C>
Morgan Stanley & Co. Incorporated...........................
Lehman Brothers Inc.........................................
---------
Total.......................................................
=========
</TABLE>
The underwriters are offering the shares of common stock subject to their
acceptance of the shares from deCODE and subject to prior sale. The underwriting
agreement provides that the obligations of the several underwriters to pay for
and accept delivery of the shares of common stock offered by this prospectus are
subject to the approval of certain legal matters by their counsel and to certain
other conditions. The underwriters are obligated to take and pay for all of the
shares of common stock offered by this prospectus if any such shares are taken.
However, the underwriters are not required to take or pay for the shares covered
by the underwriters' over-allotment option described below.
The underwriters initially propose to offer part of the shares of common
stock directly to the public at the public offering price listed on the cover
page of this prospectus and part to certain dealers at a price that represents a
concession not in excess of $ -- a share under the public offering price.
Any underwriter may allow, and such dealers may reallow, a concession not in
excess of $ -- a share to other underwriters or to certain dealers. After
the initial offering of the shares of common stock, the offering price and other
selling terms may from time to time be varied by the representative.
Morgan Stanley & Co. Incorporated expects to deliver the shares to
purchasers on -- , 2000.
deCODE has granted to the underwriters an option to purchase up to an
aggregate of -- additional shares of common stock exercisable for 30 days
from the date of this prospectus, at the public offering price listed on the
cover page of this prospectus, less underwriting discounts and commissions. The
underwriters may exercise this option solely for the purpose of covering
overallotments, if any, made in connection with the offering of the shares of
common stock offered by this prospectus. To the extent the option is exercised,
each underwriter will become obligated, subject to certain conditions, to
purchase approximately the same percentage of the additional shares of common
stock as the number listed next to the underwriter's name in the preceding table
bears to the total number of shares of common stock listed next to the names of
all underwriters in the preceding table. If the underwriters' option is
exercised in full, the total price to the public will be $ -- , the total
underwriters' discounts and commissions will be $ -- and total proceeds to
deCODE will be $ -- .
The underwriters have informed deCODE that they do not intend sales to
discretionary accounts to exceed five percent of the total number of shares of
common stock offered by them.
The common stock has been approved for quotation, subject to official
notice of issuance, on the Nasdaq National Market and on EASDAQ, in each case
under the symbol "DCGN."
Each of deCODE and the directors, executive officers and certain other
stockholders of deCODE (who will hold, in the aggregate, -- % of deCODE's
common stock after the offering) has agreed that, without the prior written
consent of Morgan Stanley & Co. Incorporated on behalf of the underwriters, it
will not during the period ending 180 days after the date of this prospectus:
- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend or otherwise transfer or dispose of
72
<PAGE> 74
directly or indirectly, any shares of common stock or any securities
convertible into or exercisable or exchangeable for common stock; or
- enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the
common stock,
whether any transaction described above is to be settled by delivery of common
stock or such other securities, in cash or otherwise.
The restrictions described in the paragraph above do not apply to:
- the sale of shares to the underwriters;
- the issuance by deCODE of shares of common stock upon the exercise of an
option or a warrant or the conversion of a security outstanding,
authorized or available for grant on the date of this prospectus of
which the underwriters have been advised in writing; or
- transactions by any person other than deCODE relating to shares of
common stock or other securities acquired in open market transactions
after the completion of the offering of the shares.
Each of certain other stockholders of deCODE, (who will hold, in the
aggregate, -- % of deCODE's common stock after the offering), signed an
agreement providing that, upon the request of deCODE or Morgan Stanley & Co.
Incorporated, it will not, during the period ending 180 days after the effective
date of the registration statement of which this prospectus is a part, sell or
otherwise transfer or dispose of any shares of common stock. deCODE made such
request on -- . We cannot be certain that such agreements can be enforced
against all transferees of the initial purchasers of the shares.
Any deCODE stockholder holding registration rights cannot require deCODE to
register its stock earlier than 180 days after the date of this prospectus.
These registration rights may not, therefore, be used as a reason to break-up
any lock-up arrangements described above.
In order to facilitate the offering of the common stock, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the common stock. Specifically, the underwriters may over-allot in
connection with the offering, creating a short position in the common stock for
their own account. In addition, to cover over-allotments or to stabilize the
price of the common stock, the underwriters may bid for, and purchase, shares of
the common stock in the open market. Finally, the underwriting syndicate may
reclaim selling concessions allowed to an underwriter or a dealer for
distributing the common stock in the offering, if the syndicate repurchases
previously distributed common stock in transactions to cover syndicate short
positions, in stabilization transactions or otherwise. Any of these activities
may stabilize or maintain the market price of the common stock above independent
market levels. The underwriters are not required to engage in these activities,
and may end any of these activities at any time.
deCODE and the underwriters have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act.
PRICING OF THE OFFERING
Prior to this offering, there has been no public market for the common
stock. Some Icelandic financial institutions have been making a market for
privately negotiated transactions among non-U.S. persons in shares of our
outstanding Series B preferred stock. The initial public offering price of the
common stock will be determined by negotiations between deCODE and the
representative. Among the factors to be considered in determining the initial
public offering price will be the future prospects of deCODE and its industry in
general, earning and certain other financial operating information of deCODE in
recent periods, and the price-earnings ratios, price-sales ratios, market prices
of securities and certain financial and operating information of companies
engaged in activities similar to those of deCODE. The estimated initial public
offering price range set forth on the cover page of this preliminary prospectus
is subject to change as a result of market conditions and other factors.
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<PAGE> 75
The following table summarizes the per share and total public offering
price of the shares of common stock in the offering, the underwriting
compensation to be paid to the underwriters by us and the proceeds of the
offering, before expenses, to us. The information presented assumes either no
exercise or full exercise by the underwriters of their over-allotment option.
<TABLE>
<CAPTION>
TOTAL
----------------------
WITHOUT WITH
PER OVER- OVER-
SHARE ALLOTMENT ALLOTMENT
------ --------- ---------
<S> <C> <C> <C>
Public offering price....................................... $ $ $
Underwriting discounts and commissions payable by us........
Proceeds, before expenses, to us............................
</TABLE>
The underwriting discount and commission per share is equal to the public
offering price per share of our common stock less the amount paid by the
underwriters to us per share of common stock.
We estimate total offering expenses payable by us, other than the
underwriting discounts and commissions referred to above, will be approximately
$ -- .
LEGAL MATTERS
The validity of the common stock offered and some of the legal matters
arising in connection with this offering will be passed upon for us by Smith,
Stratton, Wise, Heher & Brennan, Princeton, New Jersey. Other legal matters in
connection with this offering will be passed upon for the underwriters by Davis
Polk & Wardwell, New York, New York.
EXPERTS
The consolidated financial statements as of December 31, 1998 and 1999 and
for each of the three years in the period ended December 31, 1999, included in
this prospectus, have been included herein in reliance on the report of
PricewaterhouseCoopers ehf., independent accountants, given on the authority of
that firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission, Washington,
D.C., a registration statement on Form S-1 (together with required schedules and
exhibits) under the Securities Act with respect to the shares of common stock
offered. This prospectus, which constitutes a part of the registration
statement, does not contain all of the information provided in the registration
statement, certain terms of which are omitted in accordance with the rules and
regulations of the Securities and Exchange Commission. You can find additional
information with respect to deCODE and the common stock in the registration
statement, which may be inspected without charge, at the public reference
facilities maintained by the Securities and Exchange Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549; Seven World Trade Center,
13th Floor, New York, New York 10048; and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of these materials may be obtained from the
Public Reference Room of the Securities and Exchange Commission, 450 Fifth
Street, N.W., Washington, D.C., 20549, at prescribed rates. You may obtain
information on the operation of the Public Reference Room by calling the
Securities and Exchange Commission at 1-800-SEC-0330. The registration statement
is also publicly available through the Securities and Exchange Commission's web
site located at http://www.sec.gov.
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<PAGE> 76
EASDAQ INFORMATION
BELGIUM RESTRICTIONS
Prior to approval of the preliminary prospectus and/or the final prospectus
by the Belgian Banking and Finance Commission, the shares of common stock will
not, whether directly or indirectly, be offered, sold, transferred or delivered
in Belgium to any individual or entity other than institutional investors
referred to in Article 3.2. of the Belgian Royal Decree of July 7, 1999, on the
public character of financial transactions, acting on their own account.
APPROVAL BY THE BANKING AND FINANCE COMMISSION
On -- , The Banking and Financial Commission (Commission bancaire et
financiere/Commissie voor het Bank- en Financiewezen) approved this prospectus
in accordance with article 29 ter, (sec.) 1 of the Belgian Royal Decree 185 of
July 9, 1935 on the supervision of banks and the issue of securities as
supplemented by the law of March 9, 1989. This approval does not imply any
judgment as to the appropriateness or the quality of this initial public
offering and the admission to trading of our common stock on EASDAQ, nor of our
situation. The notice required by article 29 ter, (sec.) 1 of the -- Royal
Decree will be published in the press on the first day of trading on EASDAQ.
For this purpose, the prospectus approved by the Belgian Banking and
Finance Commission is considered to include the registration statement declared
effective by the United States Securities and Exchange Commission on -- as
well as the additional information contained herein.
RESPONSIBILITY FOR THE PROSPECTUS
deCODE, represented by Kari Stefansson, Chairman, Chief Executive Officer
and President, and Hannes Smarason, Executive Vice President and Chief Business
and Finance Officer, takes responsibility for the contents of this prospectus.
deCODE, having made all reasonable inquiries, accepts responsibility for,
and confirms that this prospectus contains, all information with regard to us
and our shares of common stock that is material in the context of the offering
and sale of our shares of common stock, that the information contained in this
prospectus is true and correct in all material respects and is not misleading,
that the opinions and our intentions expressed herein are honestly held and that
there are no other facts the omission of which makes this prospectus as a whole
or any of such information or the expression of any such opinions or intentions
misleading.
AVAILABILITY OF INFORMATION
Companies applying for admission to trading on EASDAQ are required to
publish relevant financial and other information regularly and to keep the
public informed of all events likely to affect the market price of their
securities. Price sensitive information will be made available to investors in
Europe through the EASDAQ -- Company Reporting System and other international
information vendors.
Copies of the Registration Statement will be available for review at the
office of Morgan Stanley Dean Witter, 25 Cabot Square, Canary Wharf, London,
E14B 4QA. Additional information about deCODE may be obtained from the sources
indicated under "Where You Can Find More Information" in this prospectus.
SETTLEMENT AND CLEARANCE
The following summarizes our understanding of the operation of the clearing
system which will be in place. Persons proposing to trade the common stock on
EASDAQ should inform themselves about the costs of such trading including any
taxes that might arise from such trade. See also "Certain Tax Considerations --
Certain Belgian Tax Considerations for Belgian Holders of Common Stock."
Transactions in the common stock executed in the United States generally
will be settled by book-entry through financial institutions that are
participants in DTC.
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<PAGE> 77
DTC is a limited-purpose trust company that was created to hold securities
for its participating organizations, collectively, DTC Participants, and to
facilitate the clearance settlements of transactions in such securities between
participants through electronic book-entry changes in accounts of DTC
Participants. DTC Participants include securities brokers and dealers, banks and
trust companies, clearing corporations and certain other organizations. Access
to DTC's system is also available to other entities such as banks, brokers,
dealers and trust companies, collectively, DTC Indirect Participants, that clear
through or maintain a custodial relationship with a DTC Participant, either
directly or indirectly. Persons which are DTC Participants may beneficially own
securities held by or on behalf of DTC only through DTC Participants or DTC
Indirect Participants.
Our shares of common stock are expected to be quoted on EASDAQ in U.S.
dollars. Transactions in the shares of common stock on EASDAQ will be settled in
U.S. dollars or any other Euroclear of Clearstream eligible currency through the
Euroclear or Clearstream systems. Investors in the common stock on EASDAQ must
have a securities account with a financial institution which directly or
indirectly has access to Euroclear or Clearstream. Euroclear and Clearstream are
DTC Indirect Participants.
Euroclear and Clearstream hold securities and book-entry interests in
securities for their direct participants, which include banks, securities
brokers and dealers, other professional intermediaries and foreign depositories
and facilitate the clearance and settlements of securities transactions between
their respective participants, and between their participants and participants
of certain other securities intermediaries, including DTC, through electronic
book-entry changes in accounts of such participants or other securities
intermediaries.
Euroclear and Clearstream provide their respective participants, among
other things, with safekeeping, administration, clearance and settlement,
securities lending and borrowing, and related services. Euroclear and
Clearstream have established an electronic bridge between their two systems,
across which their respective participants may settle trades with each other.
Euroclear and Clearstream participants are investment banks, securities brokers
and dealers, banks, central banks, supranationals, custodians, investment
managers, corporations, trust companies and certain their organizations and
include certain of the underwriters.
ADMISSION TO TRADING ON EASDAQ
We have applied for admission to listing of our common stock to EASDAQ.
Our common stock is expected to begin trading on EASDAQ on -- .
The EASDAQ trading symbol will be "DCGN."
TRANSFER OF OUR COMMON STOCK
Upon the issuance of the securities in the manner set forth in this
prospectus, our common stock will be freely transferable within the EU, and
fully paid and nonassessable.
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<PAGE> 78
DECODE GENETICS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-------
<S> <C>
Report of Independent Accountants........................... F-2
Consolidated Balance Sheets................................. F-3
Consolidated Statements of Operations....................... F-4
Consolidated Statements of Changes in Stockholders' Equity
(Deficit)................................................. F-5
Consolidated Statements of Cash Flows....................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 79
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and stockholders of deCODE genetics, Inc.:
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows present fairly, in all material respects, the consolidated
financial position of deCODE genetics, Inc. ("deCODE") at December 31, 1998 and
1999 and the consolidated results of its operations and its consolidated cash
flows for each of the three years in the period ended December 31, 1999, in
conformity with generally accepted accounting principles in the United States.
These financial statements are the responsibility of deCODE's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
PricewaterhouseCoopers ehf.
Reykjavik, Iceland
March 8, 2000
F-2
<PAGE> 80
DECODE GENETICS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
DECEMBER 31, EQUITY AT
--------------------------- DECEMBER 31,
1998 1999 1999
------------ ------------ --------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 25,075,844 $ 29,668,249
Receivable from share issuance............................ 0 33,143,836
Prepaid expenses and other current assets................. 979,998 2,552,124
------------ ------------
Total current assets.................................... 26,055,842 65,364,209
Investments................................................. 0 757,340
Property and equipment, net................................. 12,484,273 13,008,637
------------ ------------
Total assets............................................ $ 38,540,115 $ 79,130,186
============ ============
LIABILITIES, REDEEMABLE, CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses..................... $ 3,415,643 $ 4,146,894
Current portion of capital lease obligations.............. 2,087,186 2,218,726
Deferred research revenue................................. 1,155,000 2,238,333
Payable to preferred shareholders......................... 0 17,467,077
------------ ------------
Total current liabilities............................... 6,657,829 26,071,030
Capital lease obligations, net of current portion........... 6,772,472 4,549,809
Other long-term liabilities................................. 173,858 324,482
Redeemable, convertible preferred stock, $0.001 par value;
32,641,926 shares authorized:
Series A;
Designated: 11,041,926 shares
Issued and outstanding: 9,562,301 shares
(liquidation value $11,752,188) at December 31,
1999.................................................. 14,012,463 12,405,887 $ 0
Series B;
Designated: 10,000,000 shares
Issued and outstanding: 9,893,814 shares
(liquidation value $104,690,567) at December 31,
1999.................................................. 22,616,316 94,485,380 0
Series C;
Designated: 4,583,334 shares
Issued 3,611,111 shares and outstanding 3,511,111 shares
(liquidation value $9,068,624) at December 31, 1999... 5,415,740 9,318,328 0
------------ ------------ ------------
Total redeemable, convertible preferred stock............. 42,044,519 116,209,595 0
------------ ------------ ------------
Commitments and contingencies (Note G)
Stockholders' equity (deficit):
Common stock, $0.001 par value;
Authorized: 48,000,000 shares
Issued and outstanding: 9,381,500 shares and 9,604,012
shares at December 31, 1998 and 1999, respectively,
and 32,573,556 on an unaudited pro forma basis........ 9,382 9,604 32,574
Additional paid-in capital................................ 17,842,611 32,023,850 145,205,296
Notes receivable.......................................... (4,033,347) (9,597,830) (9,597,830)
Deferred compensation..................................... (8,549,906) (10,744,069) (10,744,069)
Dividends accreted on redeemable, convertible preferred
stock................................................... (2,102,068) (3,005,179) 0
Accumulated deficit....................................... (20,275,235) (76,713,517) (76,713,517)
Accumulated other comprehensive income.................... 0 2,411 2,411
------------ ------------ ------------
Total stockholders' equity (deficit).................... (17,108,563) (68,024,730) $ 48,184,865
------------ ------------ ============
Total liabilities, redeemable, convertible preferred
stock and
stockholders' equity (deficit)........................ $ 38,540,115 $ 79,130,186
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE> 81
DECODE GENETICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------
1997 1998 1999
----------- ------------ ------------
<S> <C> <C> <C>
REVENUE
Research collaborative contract................... $ 0 $ 12,705,000 $ 15,776,667
Other revenue..................................... 0 0 667,408
----------- ------------ ------------
Total revenue.................................. 0 12,705,000 16,444,075
OPERATING EXPENSES
Research and development.......................... 6,080,096 19,282,364 31,823,950
General and administrative........................ 1,967,684 4,893,202 7,863,299
----------- ------------ ------------
Total operating expenses....................... 8,047,780 24,175,566 39,687,249
----------- ------------ ------------
Operating loss...................................... (8,047,780) (11,470,566) (23,243,174)
Equity in net earnings (loss) of affiliate.......... 0 0 (1,484,081)
Interest income, net................................ (8,461) 562,336 1,549,481
Taxes............................................... 0 0 0
----------- ------------ ------------
Net loss............................................ (8,056,241) (10,908,230) (23,177,774)
Accumulated dividends and amortized discount on
preferred stock................................... (620,385) (2,571,523) (7,542,787)
Premium on repurchase of preferred stock............ 0 0 (30,887,044)
----------- ------------ ------------
Net loss available to common stockholders........... $(8,676,626) $(13,479,753) $(61,607,605)
=========== ============ ============
Basic and diluted net loss per share................ $ (3.85) $ (3.06) $ (9.56)
Shares used in computing basic and diluted net loss
per share......................................... 2,254,413 4,400,576 6,446,055
Unaudited pro forma basic and diluted net loss per
share............................................. $ (0.84)
Shares used in computing unaudited pro forma basic
and diluted net loss per share.................... 27,559,365
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE> 82
DECODE GENETICS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
DIVIDENDS
ACCRETED ON
ADDITIONAL CONVERTIBLE
COMMON PAID-IN NOTES DEFERRED REDEEMABLE, ACCUMULATED
STOCK PAR VALUE CAPITAL RECEIVABLE COMPENSATION PREFERRED STOCK DEFICIT
--------- --------- ----------- ----------- ------------ --------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31,
1996....................... 6,015,000 $6,015 $ 0 $ 0 $ 0 $ (181,852) $ (1,152,632)
Issuance of common stock in
exchange for settlement of
loan....................... 20,000 20 85,285
Deferred compensation
arising from stock option
grants..................... 55,250 (55,250)
Amortization of deferred
compensation............... 11,851
Accretion of dividends and
amortization of discount on
preferred stock............ (605,174) (15,211)
Comprehensive income (loss):
Net loss for the period.... (8,056,241)
Total comprehensive income
(loss).....................
--------- ------ ----------- ----------- ------------ ----------- ------------
BALANCE AT DECEMBER 31,
1997....................... 6,035,000 6,035 140,535 0 (43,399) (787,026) (9,224,084)
Issuance of common stock.... 200,000 200 340,768 (80,000)
Issuance of common stock
upon exercise of stock
options.................... 3,146,500 3,147 4,081,514 (3,953,347)
Deferred compensation
arising from stock option
grants..................... 13,279,794 (13,279,794)
Amortization of deferred
compensation............... 4,773,287
Accretion of dividends and
amortization of discount on
preferred stock............ (1,315,042) (142,921)
Comprehensive income (loss):
Net loss for the period.... (10,908,230)
Total comprehensive income
(loss).....................
--------- ------ ----------- ----------- ------------ ----------- ------------
BALANCE AT DECEMBER 31,
1998....................... 9,381,500 9,382 17,842,611 (4,033,347) (8,549,906) (2,102,068) (20,275,235)
Issuance of common stock.... 68,000 68 1,207,845
Forfeiture of unvested
Founder Stock and unvested
common stock issued upon
early exercise of stock
options.................... (359,655) 219,111 513,424
Exchange of common stock for
Series B preferred stock... (333,333)
Issuance of common stock
upon exercise of stock
options.................... 847,500 154 1,413,392 (5,895,594)
Deferred compensation
arising from stock
options.................... 10,106,684 (10,106,684)
Cancellation of stock
options previously giving
rise to deferred
compensation............... (87,602) 87,602
Amortization of deferred
compensation............... 7,311,495
Payments of notes
receivable................. 112,000
Premium on repurchase of
preferred stock............ 582,514 (31,469,558)
Beneficial conversion
feature of issuance of
Series C preferred stock... 1,540,920
Accretion of dividends and
amortization of discount on
preferred stock............ (1,485,625) (1,790,950)
Comprehensive income (loss):
Net loss for the period.... (23,177,774)
Other comprehensive income
(loss):
Foreign currency
translation..............
Total comprehensive income
(loss).....................
--------- ------ ----------- ----------- ------------ ----------- ------------
BALANCE AT DECEMBER 31,
1999....................... 9,604,012 $9,604 $32,023,850 $(9,597,830) $(10,744,069) $(3,005,179) $(76,713,517)
========= ====== =========== =========== ============ =========== ============
<CAPTION>
ACCUMULATED TOTAL
OTHER STOCKHOLDERS'
COMPREHENSIVE TREASURY EQUITY
INCOME STOCK (DEFICIT)
------------- ----------- -------------
<S> <C> <C> <C>
BALANCE AT DECEMBER 31,
1996....................... $ 0 $ 0 $ (1,328,469)
Issuance of common stock in
exchange for settlement of
loan....................... 85,305
Deferred compensation
arising from stock option
grants..................... 0
Amortization of deferred
compensation............... 11,851
Accretion of dividends and
amortization of discount on
preferred stock............ (620,385)
Comprehensive income (loss):
Net loss for the period.... (8,056,241)
Total comprehensive income
(loss)..................... (8,056,241)
------ ----------- ------------
BALANCE AT DECEMBER 31,
1997....................... 0 0 (9,907,939)
Issuance of common stock.... 260,968
Issuance of common stock
upon exercise of stock
options.................... 131,314
Deferred compensation
arising from stock option
grants..................... 0
Amortization of deferred
compensation............... 4,773,287
Accretion of dividends and
amortization of discount on
preferred stock............ (1,457,963)
Comprehensive income (loss):
Net loss for the period.... (10,908,230)
------------
Total comprehensive income
(loss)..................... (10,908,230)
------ ----------- ------------
BALANCE AT DECEMBER 31,
1998....................... 0 0 (17,108,563)
Issuance of common stock.... 1,207,913
Forfeiture of unvested
Founder Stock and unvested
common stock issued upon
early exercise of stock
options.................... (732,895) (360)
Exchange of common stock for
Series B preferred stock... (3,750,000) (3,750,000)
Issuance of common stock
upon exercise of stock
options.................... 4,482,895 847
Deferred compensation
arising from stock
options.................... 0
Cancellation of stock
options previously giving
rise to deferred
compensation............... 0
Amortization of deferred
compensation............... 7,311,495
Payments of notes
receivable................. 112,000
Premium on repurchase of
preferred stock............ (30,887,044)
Beneficial conversion
feature of issuance of
Series C preferred stock... 1,540,920
Accretion of dividends and
amortization of discount on
preferred stock............ (3,276,575)
Comprehensive income (loss):
Net loss for the period.... (23,177,774)
Other comprehensive income
(loss):
Foreign currency
translation.............. 2,411 2,411
------------
Total comprehensive income
(loss)..................... (23,175,363)
------ ----------- ------------
BALANCE AT DECEMBER 31,
1999....................... $2,411 $ 0 $(68,024,730)
====== =========== ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE> 83
DECODE GENETICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------
1997 1998 1999
----------- ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................................... $(8,056,241) $(10,908,230) $(23,177,774)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization............................. 513,055 1,470,959 2,767,521
Equity in net loss of affiliate........................... 0 0 1,484,081
Amortization of deferred stock compensation............... 11,851 4,773,287 7,311,495
Other stock-based remuneration............................ 0 446,355 732,500
Accrued interest on receivable from share issuance........ 0 0 (893,836)
Equipment received for services provided.................. 0 0 (414,000)
Other..................................................... 10,521 (45,389) 0
Changes in operating assets and liabilities:
Prepaid expenses and other current assets................. 76,436 (753,014) (1,572,126)
Accounts payable and accrued expenses..................... 1,370,458 1,802,896 881,251
Deferred research revenue................................. 0 1,155,000 1,083,333
Other long-term liabilities............................... 183,000 (9,142) 150,624
----------- ------------ ------------
Net cash used in operating activities................... (5,890,920) (2,067,278) (11,646,931)
----------- ------------ ------------
Cash flows from investing activities:
Purchases of property and equipment....................... (351,071) (5,084,441) (2,879,055)
Investment in affiliated company.......................... 0 0 (254,444)
Proceeds from sales of equipment.......................... 23,371 0 3,581
----------- ------------ ------------
Net cash used in investing activities................... (327,700) (5,084,441) (3,129,918)
----------- ------------ ------------
Cash flows from financing activities:
Proceeds from financing of facility....................... 0 2,437,254 0
Repurchase of preferred stock............................. 0 0 (20,310,555)
Forfeiture of common stock................................ 0 0 (360)
Issuance of preferred stock and warrants.................. 5,101,754 27,269,350 41,658,444
Issuance of common stock.................................. 0 26,927 848
Repayment of notes receivable for common stock............ 0 0 112,000
Cash on deposit........................................... (76,464) 1,595,769 0
Installment payments on capital lease obligations......... (408,153) (1,475,565) (2,091,123)
Proceeds from bridge loans................................ 706,074 0 0
Repayment of bridge loans................................. (365,677) (340,397) 0
----------- ------------ ------------
Net cash provided by financing activities............... 4,957,534 29,513,338 19,369,254
----------- ------------ ------------
Net increase (decrease) in cash............................. (1,261,086) 22,361,619 4,592,405
Cash and cash equivalents at beginning of period............ 3,975,311 2,714,225 25,075,844
----------- ------------ ------------
Cash and cash equivalents at end of period.................. $ 2,714,225 $ 25,075,844 $ 29,668,249
=========== ============ ============
Supplemental cash flow information:
Cash paid for interest.................................... $ 179,164 $ 551,576 $ 554,834
=========== ============ ============
Supplemental schedule of non-cash transactions:
Equipment acquired under capital leases................... $ 426,036 $ 8,420,123 $ 0
Common stock issued in settlement of loan................. 85,305 0 0
Series A preferred stock issued in settlement of current
liability............................................... 0 285,000 150,000
Series B preferred stock issued as a part of payment for
facility................................................ 0 347,216 0
Receivable from share issuance............................ 0 0 33,143,836
Payable to preferred shareholders......................... 0 0 17,467,077
Series B preferred stock issued in exchange for shares in
affiliate............................................... 0 0 779,064
Common stock issued in exchange for shares in affiliate... 0 0 1,207,913
Supplies received in exchange for services provided....... 0 0 239,600
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE> 84
DECODE GENETICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. DESCRIPTION OF BUSINESS:
deCODE genetics, Inc. ("deCODE") is a genomics and health informatics
company which applies and develops modern informatics to collect and analyze
data about the Icelandic population in order to develop products and services
for the healthcare industry. deCODE was founded in 1996 and its facilities are
located in Reykjavik, Iceland, where all of deCODE's operations take place.
In November 1996, deCODE acquired all of the then outstanding shares and
assumed the related liabilities of deCODE ehf. which was subsequently renamed
Islensk erfethagreining ehf. deCODE ehf. was founded in December 1995 by certain
of the same founding stockholders of deCODE. From inception to the date of
acquisition by deCODE, deCODE ehf. had been engaged in the early assessment of
the feasibility of utilizing genomics to aid in drug discovery.
Through February 1998, deCODE was a development stage enterprise as defined
by Statement of Financial Accounting Standards No. 7, "Accounting and Reporting
by Development Stage Enterprises." On February 1, 1998, deCODE entered into a
research and collaboration agreement with the Swiss pharmaceutical and
diagnostic company F.Hoffmann-La Roche ("Roche"), under which deCODE may receive
a total of more than $200 million in equity contributions, research funding and
milestone payments. This agreement covers research of up to twelve disease
categories over a period of up to five years. As a part of this relationship,
Roche has made capital investments in deCODE, provides funding for ongoing
research and has made cash payments upon the achievement of certain research
milestones.
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
These financial statements are reported in United States dollars, deCODE's
functional currency, and prepared in accordance with generally accepted
accounting principles in the United States.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts and operations
of deCODE and its wholly owned subsidiary. All significant intercompany accounts
and transactions are eliminated upon consolidation. The investment in affiliate
in which deCODE has significant influence, but does not control, is accounted
for using the equity method.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period. Actual results could differ from those estimates.
UNCERTAINTIES
deCODE is subject to risks common to companies in the biotechnology
industry including, but not limited to, development by deCODE or its competitors
of new technological innovations, ability to market products or services,
dependence on key personnel, dependence on key suppliers, protection of
proprietary technology, ability to obtain additional financing, ability to
negotiate collaborative arrangements and compliance with governmental and other
regulations.
F-7
<PAGE> 85
DECODE GENETICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONCENTRATION OF RISK
Financial instruments that potentially subject deCODE to concentrations of
credit risk consist principally of temporary cash investments. deCODE's cash is
deposited only with financial institutions in Iceland and the United States
having a high credit standing.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of short-term financial instruments, including cash and cash
equivalents, receivables, certain other current assets, trade accounts payable,
certain accrued liabilities, and other current liabilities approximates their
carrying amount in the financial statements mainly due to the short maturity of
such instruments.
The fair value of capital lease obligations and other long-term liabilities
approximate their carrying amounts based on deCODE's estimated current
incremental borrowing rate for similar obligations with similar terms.
CASH EQUIVALENTS
deCODE considers all highly liquid investments with a maturity of 90 days
or less at the date of purchase to be cash equivalents.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the related assets
of generally three years for computer equipment, five years for laboratory
equipment, furniture, fixtures and company cars, and fifty years for buildings.
Maintenance and repairs are expensed as incurred, while major betterments are
capitalized. When assets are retired or otherwise disposed of, the assets and
related accumulated depreciation or amortization are eliminated from the
accounts and any resulting gain or loss is reflected in the statement of
operations.
IMPAIRMENT OF LONG-LIVED ASSETS
As appropriate, management determines whether any property or equipment has
been impaired based on the criteria established by Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and Long-Lived Assets to be Disposed Of." deCODE has made no adjustments
to the carrying values of property and equipment during the years ended December
31, 1997, 1998 and 1999.
CAPITAL LEASES
Assets acquired under capital lease agreements are recorded at the present
value of the future minimum rental payments using interest rates appropriate at
the inception of the lease. Property and equipment subject to capital lease
agreements are amortized over the shorter of the life of the lease or the
estimated useful life of the asset, in accordance with deCODE's normal
depreciation policies, unless the lease transfers ownership or contains a
bargain purchase option, in which case the leased asset is amortized over the
estimated useful life of such asset.
REVENUE RECOGNITION AND DEFERRED REVENUE
On December 3, 1999, the staff of the Securities and Exchange Commission
issued Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements" (SAB 101), that summarizes the staff's views in applying generally
accepted accounting principles to revenue recognition in financial statements.
The accounting and disclosure requirements that are described in SAB 101 apply
to all registrants. deCODE has adopted the requirements of SAB 101 and has
restated prior years in accordance with the going public exemption under
Accounting Principles Board Opinion No. 20, "Accounting Changes."
F-8
<PAGE> 86
DECODE GENETICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
deCODE's revenues are currently derived primarily from research funding
under the research and collaboration agreement with Roche. Research funding
revenue is recognized on an accrual basis as services are provided and are
recorded with reference to contracted rates. Milestone payments are recorded
when acknowledgement of having achieved applicable performance requirements is
received from the joint steering committee and are recognized as revenue on a
retrospective straight-line basis over the contractual term of the agreement
with Roche. Accordingly, payments received in advance of being earned are
recorded as deferred revenue.
RESEARCH AND DEVELOPMENT
All research and development costs are expensed as incurred.
STOCK-BASED COMPENSATION
deCODE follows Statement of Financial Accounting Standards No. 123 (SFAS
No. 123), "Accounting for Stock-Based Compensation." The provisions of SFAS No.
123 allow companies to either expense the estimated fair value of stock options
granted or to follow the intrinsic value method set forth in Accounting
Principles Board Opinion No. 25 (APB No. 25), "Accounting for Stock Issued to
Employees," and disclose the pro forma effects on net loss and net loss per
share had the estimated fair value of the options been expensed. deCODE has
elected to follow the intrinsic value method in accounting for its stock option
incentive plans.
FOREIGN CURRENCY TRANSLATION
deCODE and its wholly-owned subsidiary use the U.S. dollar as the
functional currency. deCODE's wholly-owned subsidiary also consolidates its
subsidiaries, all of which use the local currency, the Icelandic krona, as the
functional currency. For these entities the assets and liabilities are
translated into U.S. dollars at exchange rates in effect at the balance sheet
date. Income and expense items are translated at the average exchange rates
prevailing during the period. Gains and losses from translation are included in
accumulated other comprehensive income (loss).
INCOME TAXES
deCODE accounts for income taxes using the liability method, which requires
the recognition of deferred tax assets or liabilities for the temporary
differences between the financial reporting and tax bases of deCODE's assets and
liabilities and for tax carryforwards at enacted statutory tax rates in effect
for the years in which the difference are expected to reverse. In addition,
valuation allowances are established when necessary to reduce deferred tax
assets to the amounts expected to be realized.
COMPUTATION OF NET LOSS PER COMMON SHARE
Net loss per share is computed under Statement of Financial Accounting
Standards No. 128, "Earnings Per Share." Basic net loss per share is computed
using net loss available to common stockholders and the weighted-average number
of common shares outstanding. The weighted-average number of common shares
outstanding during the period is the number of shares determined by relating the
portion of time within a reporting period that common shares have been
outstanding to the total time in that period.
F-9
<PAGE> 87
DECODE GENETICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Net loss available to common stockholders consisted of the following:
<TABLE>
<CAPTION>
1997 1998 1999
---------- ----------- -----------
<S> <C> <C> <C>
Net loss.............................................. $8,056,241 $10,908,230 $23,177,774
---------- ----------- -----------
Accumulated dividends:
Accreted dividends on Series A and Series C
preferred stock.................................. 605,174 1,315,042 1,485,625
Dividends on Series B preferred stock............... 0 1,113,560 4,266,212
---------- ----------- -----------
605,174 2,428,602 5,751,837
Amortized discount on Series A and Series C preferred
stock............................................... 15,211 142,921 1,790,950
---------- ----------- -----------
Accumulated dividends and amortized discount on
preferred stock..................................... 620,385 2,571,523 7,542,787
Premium on repurchase of preferred stock.............. 0 0 30,887,044
---------- ----------- -----------
Net loss available to common stockholders............. $8,676,626 $13,479,753 $61,607,605
========== =========== ===========
</TABLE>
The Series B preferred stock is not redeemable and events that would lead
to a constructive liquidation of deCODE, as defined, are remote. As such,
dividends are not accreted on the Series B preferred stock.
The premium on repurchase of preferred stock arises as a result of deCODE's
repurchase of Series A, Series B and Series C preferred stock in August 1999 and
represents the aggregate difference between the adjusted repurchase price and
the then carrying value of the Series A, Series B and Series C preferred stock.
Diluted net loss per share is computed using the weighted-average number of
common shares outstanding during the period, plus the dilutive effect of
potential common shares. Diluted net loss per share does not differ from basic
net loss per share since potential common shares from the conversion of
preferred stock, stock options and warrants are antidilutive for all periods
presented and are, therefore, excluded from the calculation. For the years ended
December 31, 1997, 1998, and 1999, preferred stock convertible into 11,790,375,
19,125,683 and 22,969,544 shares of common stock, respectively, options to
purchase 1,180,000, 47,000 and 45,000 shares of common stock, respectively, and
warrants to purchase 1,137,814, 1,998,926 and 2,110,037 shares of preferred
stock, respectively, were not included in the computation of diluted loss per
share since their inclusion would be antidilutive.
UNAUDITED PRO FORMA STOCKHOLDERS' EQUITY
Upon the closing of a qualified initial public offering, all of the
outstanding shares of Series A, Series B and Series C preferred stock, will
automatically convert into 22,969,544 shares of common stock. These conversions
have been reflected in unaudited pro forma stockholders' equity at December 31,
1999.
UNAUDITED PRO FORMA NET LOSS PER SHARE
Unaudited pro forma basic and diluted net loss per share have been
calculated assuming the conversion of all outstanding shares of preferred stock
into common stock, as if the preferred shares had converted immediately upon
their issuance. Accordingly, in the calculation of unaudited pro forma net loss
per share, net loss has not been increased for the accumulated dividends or
amortized discounts on preferred stock or for the premium on the repurchase of
preferred stock. The calculation of unaudited pro forma net loss per share is as
follows:
F-10
<PAGE> 88
DECODE GENETICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1999
-----------------
(UNAUDITED)
<S> <C>
Net loss available to common stockholders................... $(61,607,605)
Unaudited pro forma adjustments to reflect assumed
conversion of preferred stock:
Accumulated dividends and amortized discounts on preferred
stock.................................................. 7,542,787
Premium on repurchase of preferred stock.................. 30,887,044
------------
Net loss used in computing unaudited pro forma basic and
diluted net loss per share................................ $(23,177,774)
============
Shares used in computing basic and diluted net loss per
share..................................................... 6,446,055
Unaudited pro forma adjustment to reflect weighted effect of
assumed conversion of preferred stock..................... 21,113,310
------------
Shares used in computing unaudited pro forma basic and
diluted net loss per share................................ 27,559,365
============
Unaudited pro forma basic and diluted net loss per share.... $ (0.84)
</TABLE>
SEGMENT INFORMATION
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131 (SFAS No. 131), "Disclosures About
Segments of an Enterprise and Related Information." This statement requires
companies to report information about operating segments in interim and annual
financial statements. It also requires segment disclosures about products and
services, geographic areas and major customers. deCODE adopted SFAS No. 131
effective for its fiscal year ended December 31, 1998. deCODE has determined
that it did not have any separately reportable operating segments as of December
31, 1998 or 1999.
All of deCODE's revenues from inception through December 31, 1999 have been
generated in Iceland, and all of deCODE's long-lived assets are located in
Iceland. In 1998 and 1999, one customer, Roche, accounted for 100% and 96% of
revenues, respectively.
RECENT ACCOUNTING PRONOUNCEMENT
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (SFAS No. 133), "Accounting for
Derivative Instruments and Hedging Activities." This standard establishes a new
model for accounting for derivatives and hedging activities and supersedes and
amends a number of existing standards. Upon the standard's initial application,
all derivatives are required to be recognized in the balance sheet as either
assets or liabilities and measured at fair value. In addition, all hedging
relationships must be designated, reassessed and documented. Currently, the
standard is to be effective for fiscal years and quarters beginning after June
15, 2000. Considering deCODE's current activities, it is not anticipated that
the adoption of SFAS No. 133 will have a significant impact on its financial
position or results of operations.
C. INVESTMENTS:
In January and February 1999, deCODE acquired equity interests totalling
20% in Gagnalind hf. in exchange for $254,444 in cash and 70,824 shares of
Series B preferred stock. In November 1999, deCODE entered into an agreement to
acquire an approximate 20% equity interest in eMR ehf. in exchange for deCODE's
interest in Gagnalind hf. and $344,590 in cash. This transaction is expected to
be completed in early 2000. In connection with this agreement, deCODE issued
68,000 shares of common stock in exchange for additional shares in Gagnalind hf.
which temporarily increased deCODE's equity interest in Gagnalind hf. to 56% at
December 31, 1999. The carrying amount of deCODE's investment in Gagnalind hf.
approximates deCODE's underlying equity in the net assets of Gagnalind hf.
F-11
<PAGE> 89
DECODE GENETICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
deCODE's equity in net earnings (loss) of affiliate, Gagnalind hf., for the
year ended December 31, 1999 is comprised of deCODE's share of the earnings of
Gagnalind hf. and amortization of the difference between deCODE's cost and the
underlying equity in the net assets of Gagnalind hf. at acquisition.
D. PROPERTY AND EQUIPMENT:
Property and equipment, all located in Iceland, consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1998 1999
----------- -----------
<S> <C> <C>
Buildings................................................... $ 4,661,824 $ 5,339,200
Furniture and fixtures...................................... 562,096 708,682
Laboratory equipment........................................ 8,968,309 11,370,430
Other property and equipment................................ 336,466 384,360
----------- -----------
14,528,695 17,802,672
Less: accumulated depreciation and amortization............. (2,044,422) (4,794,035)
----------- -----------
Total.................................................. $12,484,273 $13,008,637
=========== ===========
</TABLE>
The total depreciation and amortization for the years ended December 31,
1997, 1998 and 1999 was, $513,055, $1,470,959 and $2,767,521, respectively.
Property and equipment includes amounts for certain fixed assets financed
under capital lease obligations. Total cost and accumulated amortization
relating to property and equipment subject to capital lease obligations was
$10,624,985 and $1,601,675, respectively, as of December 31, 1998, and
$10,624,985 and $3,336,034, respectively, as of December 31, 1999.
deCODE's capital lease obligations are collateralized by the assets to
which the obligations relate. deCODE has an option to purchase all of the leased
property and equipment for 3% of the original lease amount at lease end.
E. ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
Accounts payable and accrued expenses consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1998 1999
---------- ----------
<S> <C> <C>
Salaries and other employee benefits........................ $ 936,443 $1,461,763
Suppliers................................................... 2,433,763 2,423,849
Other....................................................... 45,437 261,282
---------- ----------
Total..................................................... $3,415,643 $4,146,894
========== ==========
</TABLE>
F. BRIDGE LOANS:
In September 1997, the Series A preferred stockholders provided deCODE with
bridge loans totaling $706,074 and bearing interest at the rate of 7% per annum.
deCODE repaid $365,677 in October 1997, using the proceeds from the second round
of Series A preferred stock and paid the remaining $340,397 in April 1998.
F-12
<PAGE> 90
DECODE GENETICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
G. COMMITMENTS AND CONTINGENCIES:
LEASE COMMITMENTS
deCODE leases certain property, laboratory equipment and other assets under
long-term capital leases which expire at varying dates through 2008. At December
31, 1999, future minimum lease payments for non-cancelable capital leases were
as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1999
------------
<S> <C>
2000........................................................ $ 2,606,983
2001........................................................ 2,002,142
2002........................................................ 1,189,722
2003........................................................ 383,608
2004-2008................................................... 1,721,940
-----------
Total minimum lease payments................................ 7,904,395
Less amount representing interest........................... (1,135,860)
-----------
Present value of future minimum lease payments.............. 6,768,535
Less current portion........................................ (2,218,726)
-----------
Long-term portion........................................... $ 4,549,809
===========
</TABLE>
At December 31, 1997, some of deCODE's capital lease obligations were
collateralized by an amount of cash on deposit with an Icelandic bank
($1,595,769 at December 31, 1997). The requirement for the deposited amount was
removed by the leasing company in 1998.
SETTLEMENT AGREEMENT
On December 31, 1997, deCODE entered into a settlement agreement in respect
of the past use of certain research facilities (the "Agreement"). As a part of
the Agreement, deCODE paid fees both in the form of cash and the issuance of
Series A preferred stock. In connection with the Agreement, on January 1, 1998,
deCODE issued 100,000 shares of Series A preferred stock. Further, on December
31, 1998 and 1999, deCODE issued 20,000 shares and 10,000 shares of Series A
preferred stock, respectively. The amounts paid and the value of the shares
issued have been expensed in the statement of operations.
Under the Agreement, deCODE is obligated to make certain payments upon the
achievement of established milestones leading to the discovery of defined
products. deCODE is also to pay royalties on certain royalty bearing products
which may result. Such royalties are to be paid for a period up to and
potentially exceeding 15 years.
COLLABORATIVE PARTIES
deCODE has established collaborations in Iceland in most of the disease
categories in which the company works. These collaborations generally extend for
periods of up to five years, with deCODE being committed to make various
payments in connection with research and other services provided as well as to
pay the collaborators a portion of sales of scientific results to a third party
or of commercial royalties and commercial payments received by deCODE.
Subject to satisfactory performance of a consulting arrangement, deCODE is
committed to grant stock options for 15,000 shares on December 1, 2000 at an
exercise price equal to the fair market value on the date of grant.
F-13
<PAGE> 91
DECODE GENETICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Certain of the collaborative agreements stipulate future payments in
respect of services provided to deCODE. These future payments are included in
current and long-term liabilities in the accompanying balance sheets.
LITIGATION
In January 2000, a lawsuit was filed against deCODE and another Icelandic
company alleging copyright infringement and claiming damages amounting to
approximately $9,000,000. deCODE believes the suit is without merit and intends
to defend this action vigorously; however, the ultimate resolution of this
matter cannot yet be determined.
In January and February 2000, two individuals advised deCODE that they
believe they are entitled to shares of deCODE's common stock. deCODE believes
these assertions are entirely without merit and intends to defend any actions
which these parties may commence vigorously; however, the ultimate resolution of
these matters cannot be determined.
In February 2000, an organization known as The Association of Icelanders
for Ethics in Science and Medicine, or Mannvernd, and a group of physicians and
other citizens issued a press release announcing their intention to file
lawsuits against the State of Iceland and any other relevant parties, including
deCODE, to test the constitutionality of the Act on a Health Sector Database no.
139/1998, or the Act. According to the press release, the intended lawsuit will
allege that the Act and the IHD license involve human rights violations and will
challenge the validity of provisions of the Act which allow the use of presumed
consent for the processing of health data into the IHD and the grant of a
license to operate a single database. deCODE believes that any such litigation
would be without merit and intends to defend vigorously any such action in which
it becomes a party. However, in the event that the Icelandic State by a final
judgment is found to be liable or subject to payment to any third party as a
result of the passage of legislation on the IHD and/or the issuance of the IHD
license, our agreement with the Ministry requires us to indemnify (see note M)
the State of Iceland against all damages and costs incurred in connection with
such litigation.
H. REDEEMABLE, CONVERTIBLE PREFERRED STOCK:
deCODE is authorized to issue 32,641,926 shares of preferred stock. The
preferred stock can be issued in one or more series. The outstanding shares of
preferred stock issued are convertible, at the option of the holder, into common
stock at any time, at the applicable conversion rate as adjusted from time to
time (one-to-one at the date of issuance). Upon such optional conversion, deCODE
shall pay any accumulated, unpaid dividends, whether or not declared by the
Board of Directors. The preferred stock automatically converts to common stock
upon closing of a qualified initial public offering, as defined by deCODE's
Amended and Restated Certificate of Incorporation. Upon such automatic
conversion, all accumulated, unpaid dividends will be cancelled. Common stock
that would be received upon an optional or automatic conversion would carry with
it certain registration rights. In addition, the preferred stock contains
constructive liquidation provisions whereby the occurrence of certain defined
events are deemed to be liquidations of deCODE. The liquidation value is the sum
of the original issue price plus any accumulated, unpaid dividends before any
distributions to the holders of common stock.
A description of the preferred stock outstanding on December 31, 1999 is as
follows:
SERIES A
As of December 31, 1999, deCODE has issued and outstanding 9,562,301 shares
of Series A preferred stock. Holders of Series A preferred stock are entitled to
receive, when and as declared by the Board of Directors, cash dividends at the
rate of 8% of the original issue price per annum. Series A preferred stock
dividends are cumulative and receive preference over dividends on any
outstanding shares of common stock. Upon liquidation, dissolution or winding-up
of deCODE, the holders of Series A preferred stock are entitled to receive the
sum of
F-14
<PAGE> 92
DECODE GENETICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the original issue price plus any accumulated, unpaid dividends before any
distributions to the holders of common stock. The Series A preferred stock is
redeemable upon the vote of 75% of the shareholders voting as a separate class,
beginning on the seventh anniversary of the earliest issue date and ending three
years later. The redemption value is the sum of the original issue price plus
any accumulated, unpaid dividends.
Accumulated, accreted dividends on Series A preferred stock amounted to
$1,738,233 and $2,069,888 at December 31, 1998 and 1999, respectively.
In connection with the sale of 5,090,376 shares of Series A preferred stock
in October 1997, deCODE issued 1,137,814 warrants to purchase Series A preferred
stock for $1.00 per share. The total consideration received under the issuance
was allocated between the preferred shares and the warrants based upon their
relative fair values at the date of issuance. The consideration allocated to the
warrants was $650,240, and the resulting discount on the preferred shares is
being amortized over seven years, the earliest redemption date of the Series A
preferred stock. These warrants expire on August 26, 2005.
SERIES B
As of December 31, 1999, deCODE has issued and outstanding 9,893,814 shares
of Series B preferred stock. Holders of Series B preferred stock are entitled to
receive, when and as declared by the Board of Directors, cash dividends at the
rate of 8% of the original issue price per annum. Series B preferred stock
dividends are cumulative and receive preference over dividends on any
outstanding shares of common stock. Upon liquidation, dissolution or winding-up
of deCODE, the holders of Series B preferred stock are entitled to receive the
sum of the original issue price plus any accumulated, unpaid dividends before
any distributions to the holders of common stock.
Cumulative, undeclared dividends on Series B preferred stock amounted to
$1,113,560 and $5,379,772 at December 31, 1998 and 1999, respectively. Such
dividends will not be recorded until declared.
SERIES C
As of December 31, 1999, deCODE has issued 3,611,000 shares of Series C
preferred stock and, of those, 3,511,111 shares are outstanding. Holders of
Series C preferred stock are entitled to receive, when and as declared by the
Board of Directors, cash dividends at the rate of 8% of the original issue price
per annum. Series C preferred stock dividends are cumulative and receive
preference over dividends on any outstanding shares of common stock. Upon
liquidation, dissolution or winding-up of deCODE, the holders of Series C
preferred stock are entitled to receive the sum of the original issue price plus
any accumulated, unpaid dividends before any distributions to the holders of
common stock. The Series C preferred stock is redeemable upon the vote of 75% of
the shareholders voting as a separate class, beginning on the seventh
anniversary of the earliest issue date and ending three years later. The
redemption value is the sum of the original issue price plus any accumulated,
unpaid dividends.
Accumulated, accreted dividends on Series C Preferred Stock amounted to
$363,835 and $935,291 at December 31, 1998 and 1999, respectively.
Pursuant to a stock and warrant purchase agreement signed in February 1998,
Roche purchased 2,500,000 shares of Series C preferred stock at $2.00 per share
in February 1998, purchased 555,555 additional shares of Series C preferred
stock at $3.00 per share in February 1999, and purchased another 555,556 shares
of Series C preferred stock at $3.00 per share in May 1999. In connection with
these share purchases, Roche also obtained options and warrants to purchase a
total of 972,223 shares of Series C preferred stock for a weighted-average
exercise price of $3.37 per share. The total consideration received under these
issuances was allocated between the preferred shares and the warrants based upon
their relative fair values at the dates of issuance.
F-15
<PAGE> 93
DECODE GENETICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The consideration allocated to the 861,112 options and warrants issued in
February 1998 was $400,250, and the resulting discount on the preferred shares
is being amortized over seven years, the earliest redemption date of the Series
C preferred stock. Options and warrants to purchase 611,112 shares expire on
February 1, 2001, and warrants to purchase 250,000 shares expire on February 2,
2007.
The consideration allocated to the 55,555 warrants issued in February 1999
was $41,668, and the resulting discount on the preferred shares is being
amortized over seven years, the earliest redemption date of the Series C
preferred stock. These warrants expire on February 5, 2008.
The consideration allocated to the 55,556 warrants issued in May 1999 was
$125,804 resulting in the shares being issued at a discount. As the preferred
shares issued with these warrants were issued with beneficial conversion
features, the remaining consideration to be allocated was recorded as additional
paid-in capital resulting in no consideration being allocated to the preferred
shares. This resulting discount on the preferred shares was amortized entirely
on the date of issuance, as the preferred shares are convertible upon issuance.
These warrants expire on May 20, 2009.
ISSUANCE OF SERIES B PREFERRED STOCK
On June 30, 1999, deCODE entered into a Stock Purchase Agreement (the
"Purchase Agreement") to sell five million shares of Series B preferred stock at
$7.50 per share (the "Purchase Price") to a Luxembourg-based financial buyer
(the "Buyer"). The sale closed on August 8, 1999.
Contemporaneously with the execution of the Purchase Agreement, deCODE and
the Buyer entered into an agreement pursuant to which the parties agreed upon
the following:
- Sales of Series B preferred stock in the Icelandic market shortly before
the date of the Purchase Agreement indicated that the market price was
approximately $15 per share;
- The Buyer would sell the Series B preferred stock to Icelandic investors
at the market price;
- The Purchase Price at which the Buyer would buy the Series B shares from
deCODE would be increased to $15.00 per share (the "Adjusted Purchase
Price") if (i) the Buyer was able to sell at least 50% of the Series B
shares at or above the Adjusted Purchase Price and (ii) the trading
price in the Icelandic market remained at or above the Adjusted Purchase
Price from the time of such resale through the end of 1999;
- In the event that deCODE received the incremental Adjusted Purchase
Price proceeds from the Buyer, deCODE would also receive interest on
such amount at a rate of 6% per annum from the closing date; and
- The Buyer would receive a commission of 7% of the proceeds from the sale
of the Series B preferred stock for the placement of deCODE's stock.
This commission would only become payable in the event that the Purchase
Price was subsequently increased to the Adjusted Purchase Price.
On August 8, 1999, the closing date, the Buyer advised deCODE that it had
arranged for the sale of at least 50% of the Series B shares at a price of
$15.00 per share.
EXCHANGE OF COMMON STOCK FOR SERIES B PREFERRED STOCK
On July 12, 1999, deCODE entered into an agreement whereby it exchanged
333,333 shares of common stock held by deCODE's chief executive officer, or CEO,
for 250,000 shares of newly issued Series B preferred stock. At this time, the
common shares were estimated to have a fair value equal to 75% of the fair value
of the Series B preferred shares. The 333,333 shares of common stock were held
in treasury and subsequently re-issued during 1999.
F-16
<PAGE> 94
DECODE GENETICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
REPURCHASE OF SERIES A, SERIES B AND SERIES C PREFERRED STOCK
On August 8, 1999, deCODE repurchased the 250,000 shares of Series B
preferred stock issued to its CEO pursuant to a Resolution adopted by the Board
of Directors. The 250,000 shares of Series B preferred stock were held in
treasury and subsequently re-issued during 1999.
On August 11, 1999, deCODE repurchased and retired 2,358,074 shares of
Series A preferred stock.
On August 24, 1999, deCODE repurchased and holds in treasury 100,000 shares
of Series C preferred stock.
Pursuant to the Series A and Series C preferred stock repurchase agreements
and the Board Resolution, the initial repurchase price deCODE paid for such
shares of Series A, Series B and Series C preferred stock was $7.50 per share
(the "Repurchase Price"). deCODE paid the Repurchase Price to the selling
shareholders in August 1999. However, pursuant to agreements between the
respective stockholders and deCODE on July 12, 1999, it was agreed that the
repurchase price paid for the Series A, Series B and Series C preferred stock
would be equal to the Purchase Price per share, net of any commission payable to
the Buyer, at which deCODE sold shares of its Series B preferred stock in the
August 8, 1999 offering.
ADJUSTMENT TO ISSUANCE AND REPURCHASE PRICES
On December 28, 1999, the conditions requiring an increase of the Purchase
Price were met, and deCODE and the Buyer agreed on an Adjusted Purchase Price of
$15.00 per share for the five million shares of Series B preferred stock sold to
the Buyer on August 8, 1999. It was also agreed that the Buyer would receive the
commission in the amount of $5,250,000, representing 7% of the total aggregate
Adjusted Purchase Price for the Series B shares.
As of December 31, 1999, deCODE has recorded a receivable from the Buyer in
the amount of $33,143,836 representing the incremental amount due from the Buyer
with respect to the Adjusted Purchase Price of $37,500,000, less commissions and
plus accrued interest. The receivable from the Buyer was paid in February 2000.
As a result of the Purchase Price being adjusted, on December 28, 1999,
deCODE and the Series A stockholders, deCODE's CEO and the Series C stockholder
agreed upon an adjusted repurchase price for the Series A, Series B and Series C
preferred stock of $13.95 per share, that being the Adjusted Purchase Price of
$15.00 per share less a commission of 7% of the Adjusted Purchase Price.
The incremental repurchase price per share of $6.45, or $17,467,077 in
aggregate, was paid to the respective sellers of Series A, Series B and Series C
preferred stock in February 2000, and accordingly, is reflected in the balance
sheet at December 31, 1999 as a current liability.
UNDESIGNATED PREFERRED STOCK
With respect to the 7,016,666 shares of preferred stock not currently
designated as an existing series, deCODE's Board of Directors is authorized,
except as otherwise limited by Delaware law, without further action by the
stockholders:
- to issue shares of preferred stock in one or more series;
- to fix or alter the dividend rights, dividend rates, conversion rights,
voting rights, terms of redemption (including sinking fund provisions),
redemption price or prices, and liquidation preferences of any wholly
unissued series of preferred stock;
- to designate the number of shares constituting, and the designation of,
any series of preferred stock; and
F-17
<PAGE> 95
DECODE GENETICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
- to increase or decrease the number of shares of a series subsequent to
the issue of shares of that series, but not below the number of shares
of that series then outstanding.
BALANCES OF THE SERIES A, SERIES B AND SERIES C PREFERRED STOCK
<TABLE>
<CAPTION>
NUMBER OF SHARES AMOUNT
---------------------------------- --------------------------------------
SERIES A SERIES B SERIES C SERIES A SERIES B SERIES C
PREFERRED PREFERRED PREFERRED PREFERRED PREFERRED PREFERRED
STOCK STOCK STOCK STOCK STOCK STOCK TOTAL
---------- --------- --------- ----------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of Series A preferred
stock............................ 6,699,999 0 0 $ 6,699,999 $ 0 $ 0 $ 6,699,999
Accretion of dividends on preferred
stock............................ 181,852 181,852
---------- --------- --------- ----------- ----------- ---------- ------------
BALANCE AT DECEMBER 31, 1996....... 6,699,999 0 0 6,881,851 0 0 6,881,851
Issuance of Series A preferred
stock and warrants............... 5,090,376 5,101,754 5,101,754
Accretion of dividends and
amortization of discount on
preferred stock.................. 620,385 620,385
---------- --------- --------- ----------- ----------- ---------- ------------
BALANCE AT DECEMBER 31, 1997....... 11,790,375 0 0 12,603,990 0 0 12,603,990
Issuance of Series A preferred
stock............................ 120,000 366,000 366,000
Issuance of Series B preferred
stock............................ 4,712,990 22,616,316 22,616,316
Issuance of Series C preferred
stock, warrants and options...... 2,500,000 5,000,250 5,000,250
Accretion of dividends and
amortization of discount on
preferred stock.................. 1,042,473 415,490 1,457,963
---------- --------- --------- ----------- ----------- ---------- ------------
BALANCE AT DECEMBER 31, 1998....... 11,910,375 4,712,990 2,500,000 14,012,463 22,616,316 5,415,740 42,044,519
Repurchase and retirement of Series
A preferred stock................ (2,358,074) (2,916,259) (2,916,259)
Exchange of common stock for Series
B
preferred stock.................. 250,000 3,750,000 3,750,000
Repurchase of Series B preferred
stock............................ (250,000) (3,750,000) (3,750,000)
Repurchase of Series C preferred
stock and held in treasury....... (100,000) (224,329) (224,329)
Issuance of Series A preferred
stock............................ 10,000 367,500 367,500
Issuance of Series B preferred
stock............................ 5,180,824 71,869,064 71,869,064
Issuance of Series C preferred
stock and warrants............... 1,111,111 1,792,525 1,792,525
Accretion of dividends and
amortization of discount on
preferred stock.................. 942,183 2,334,392 3,276,575
---------- --------- --------- ----------- ----------- ---------- ------------
BALANCE AT DECEMBER 31, 1999....... 9,562,301 9,893,814 3,511,111 $12,405,887 $94,485,380 $9,318,328 $116,209,595
========== ========= ========= =========== =========== ========== ============
</TABLE>
I. STOCKHOLDERS' EQUITY:
COMMON STOCK
The total authorized shares of common stock, par value $0.001, of deCODE is
48,000,000 shares. Holders of shares of common stock are entitled to one vote at
all meetings of stockholders for each share held by them. The common stock has
no preemptive rights or other rights to subscribe for additional shares, no
conversion right and no right of redemption. Subject to the rights and
preferences of the holders of any preferred stock, the holders of the common
stock are entitled to receive such dividends as, when and if declared by the
Board of Directors out of funds legally available therefor for that purpose.
Notes receivable for the purchase of common stock are collateralized only
by the shares to which they relate, are payable after a fixed period of
generally four years and bear a fixed interest rate of generally six percent per
annum.
F-18
<PAGE> 96
DECODE GENETICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Of the 6,015,000 shares of common stock that were issued and paid at the
inception of deCODE, 5,789,438 were issued to the founders of deCODE subject to
certain vesting provisions ("Founder Stock"). The unvested shares of Founder
Stock are subject to repurchase by deCODE at the original issue price in the
event that a founder does not continue in employment, according to individual
terms. At December 31, 1999, 503,341 shares of the Founder Stock remained
subject to repurchase.
Of the Founder Stock, 3,606,492 shares of common stock are entitled to
piggyback registration rights with respect to the registration of such shares
under the Securities Act. Should deCODE propose to register any shares of common
stock under the Securities Act either for deCODE's own account or for the
account of other security holders, the holders of shares having piggyback rights
are entitled to receive notice of the registration and are entitled, with some
limitation, to include their shares in the registration.
Forfeited unvested Founder Stock and unvested common stock issued upon
early exercise of stock options totalling 359,655 shares were held in treasury
and subsequently re-issued during 1999. At December 31, 1999, 1,954,623 shares
of common stock that were issued upon early-exercise of stock options remained
unvested.
Upon the closing of a public offering, all outstanding shares of preferred
stock will automatically convert into shares of common stock. As of December 31,
1999, the number of shares of common stock issuable upon conversion are as
follows:
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
------------
<S> <C>
Series A preferred stock.................................... 9,562,301
Series B preferred stock.................................... 9,896,132
Series C preferred stock.................................... 3,511,111
----------
22,969,544
==========
</TABLE>
Also upon the closing of a public offering, warrants to purchase shares of
Series A and Series C preferred stock will automatically convert into warrants
to purchase the same number of shares of common stock. As of December 31, 1999,
warrants to purchase 1,137,814 shares of Series A preferred stock and warrants
to purchase 972,223 shares of Series C preferred stock were outstanding. Such
stock and warrants will have the right to require deCODE to file a registration
statement under the Securities Act covering the registration of their shares at
any time after 180 days from the effective date of an initial registration
statement if the holders of 50% of such shares demand registration and the
number of shares to be registered has an aggregate public offering price of at
least $5,000,000. Such registration rights are subject to conditions and
limitations, including the right of the underwriters of an offering to limit the
number of shares of common stock which security holders may include in a
registration. Further, deCODE may defer a registration for a period of 90 days
if deCODE furnishes to the holders requesting registration a certificate signed
by the chairman of the board stating that in the good faith judgment of the
Board of Directors it would be seriously detrimental to deCODE and its
stockholders for the requested registration to be effected at that time. deCODE
is generally required to bear all of the expenses of such registrations, except
underwriting discounts and selling commissions. Registration of any of the
shares of common stock held by security holders with registration rights would
result in such shares becoming freely tradable without restriction under the
Securities Act immediately upon effectiveness of such registration.
STOCK OPTION PLAN
In August 1996, deCODE adopted the deCODE genetics, Inc. 1996 Equity
Incentive Plan (the "Plan"). A total of 5,000,000 options are reserved to be
granted under the terms of the Plan. The Plan provides for grants of stock
options to employees, members of the Board of Directors, consultants and other
advisors who are not
F-19
<PAGE> 97
DECODE GENETICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
employees. Options granted to date generally vest over a period of four years,
generally have a maximum term of 10 years, contain early-exercise provisions and
allow for company-provided financing of the exercise price. As of December 31,
1999, 1,041,000 shares were available for grant under the 1996 Plan.
Options transactions pursuant to the Plan are summarized as follows:
<TABLE>
<CAPTION>
EXERCISE PRICE EXERCISE PRICE EXERCISE PRICE
GREATER THAN GRANT EQUALS GRANT LESS THAN GRANT
DATE STOCK FAIR VALUE DATE STOCK FAIR VALUE DATE STOCK FAIR VALUE TOTAL
-------------------------- -------------------------- --------------------------- ----------
WEIGHTED- WEIGHTED- WEIGHTED-
NUMBER AVERAGE NUMBER AVERAGE NUMBER AVERAGE NUMBER
OF SHARES EXERCISE PRICE OF SHARES EXERCISE PRICE OF SHARES EXERCISE PRICE OF SHARES
--------- -------------- --------- -------------- ---------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Outstanding at December
31, 1996............... 0 $ 0.00 0 $ 0.00 0 $ 0.00 0
Granted.................. 0 0.00 0 0.00 1,180,000 0.20 1,180,000
-------- ------ ------ ------ ---------- ------ ----------
Outstanding at December
31, 1997............... 0 0.00 0 0.00 1,180,000 0.20 1,180,000
Granted.................. 540,000 4.00 15,000 4.00 1,378,500 0.64 1,933,500
Exercised................ (523,000) 4.00 0 0.00 (2,543,500) 0.42 (3,066,500)
-------- ------ ------ ------ ---------- ------ ----------
Outstanding at December
31, 1998............... 17,000 4.00 15,000 4.00 15,000 0.20 47,000
Granted.................. 0 0.00 15,000 18.29 840,500 5.62 855,500
Exercised................ (7,000) 4.00 0 0.00 (840,500) 5.62 (847,500)
Cancelled................ (10,000) 4.00 0 0.00 0 0.00 (10,000)
-------- ------ ------ ------ ---------- ------ ----------
Outstanding at December
31, 1999............... 0 $ 0.00 30,000 $11.15 15,000 $ 0.20 45,000
======== ====== ====== ====== ========== ====== ==========
<CAPTION>
TOTAL
--------------
WEIGHTED-
AVERAGE
EXERCISE PRICE
--------------
<S> <C>
Outstanding at December
31, 1996............... $ 0.00
Granted.................. 0.20
------
Outstanding at December
31, 1997............... 0.20
Granted.................. 1.58
Exercised................ 1.03
------
Outstanding at December
31, 1998............... 2.79
Granted.................. 5.85
Exercised................ 5.61
Cancelled................ 4.00
------
Outstanding at December
31, 1999............... $ 7.50
======
</TABLE>
The following table summarizes information about stock options outstanding
at December 31, 1999:
<TABLE>
<CAPTION>
OUTSTANDING VESTED AND EXERCISABLE
------------------------ ---------------------------
WEIGHTED-
AVERAGE
REMAINING
CONTRACTUAL WEIGHTED-
NUMBER LIFE NUMBER AVERAGE
EXERCISE PRICE OF SHARES (IN YEARS) OF SHARES EXERCISE PRICE
-------------- --------- ----------- --------- --------------
<S> <C> <C> <C> <C>
$0.20.......................................... 15,000 7.92 15,000 $ 0.20
$4.00.......................................... 15,000 8.92 15,000 4.00
$18.29......................................... 15,000 9.92 1,250 18.29
------ ----- ------ ------
$0.20-18.29.................................... 45,000 8.92 31,250 $ 2.75
====== ===== ====== ======
</TABLE>
deCODE records deferred compensation for options granted with exercise
prices below the estimated fair value of common stock at the date on which both
the number of shares to be issued and the exercise price are fixed and
determinable. Deferred compensation is amortized and recorded as compensation
expense ratably over the vesting period of the options. Stock-based compensation
expense of $11,851, $4,773,287, and $7,311,495 was recognized in the statements
of operations during the years ended December 31, 1997, 1998 and 1999.
Each employee option grant generally vests twenty-five percent on the first
anniversary date of an employee's commencement of employment and 1/48 of the
original grant each month thereafter for the following three years.
All options granted to date have contained a provision for early-exercise
according to the terms of the Plan with company-provided financing of the
exercise price made available. In almost all cases, employees have taken
advantage of their right to early-exercise and to fund such exercise with a
company-provided loan. The company-provided loans are due after a fixed term of
generally four years and bear a fixed interest rate of six percent per
F-20
<PAGE> 98
DECODE GENETICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
annum. In March 1999, deCODE amended certain previously granted options, thus
resulting in a new measurement date for such options.
OTHER STOCK OPTION ARRANGEMENTS
In February 1998, deCODE granted a stock option to a collaborator which was
not granted under the provisions of the Plan. This option was for 80,000 shares
of common stock at an exercise price of $0.40 per share. The option had no
vesting provisions and was immediately exercised using company-provided
financing that was subsequently paid in 1999.
PRO FORMA NET LOSS PER COMMON SHARE
deCODE applies Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," in accounting for options granted to employees and
has adopted the disclosure-only provisions of Statement of Financial Accounting
Standards No. 123 (SFAS No. 123), "Accounting for Stock-Based Compensation".
Accordingly, no compensation expense as calculated under SFAS No. 123 has been
recognized in the statements of operations for stock options granted to
employees.
deCODE applies SFAS No. 123 in accounting for options granted to
non-employees and has recognized the grant date fair value of options granted to
non-employees in the statements of operations.
Had compensation cost for all stock options been determined based on the
fair value at the grant date for awards in 1997, 1998 and 1999, consistent with
the provisions of SFAS No. 123, deCODE's net loss and basic and diluted net loss
per share would have been changed to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1997 1998 1999
----------- ------------ ------------
<S> <C> <C> <C>
Net loss attributable to common stockholders -- as
reported............................................ $(8,676,626) $(13,479,753) $(61,607,605)
Net loss attributable to common stockholders -- pro
forma............................................... $(8,694,626) $(10,399,753) $(58,197,605)
Basic and diluted net loss per share -- as reported... $ (3.85) $ (3.06) $ (9.56)
Basic and diluted net loss per share -- pro forma..... $ (3.86) $ (2.36) $ (9.03)
</TABLE>
The effects of applying the provisions of SFAS No. 123 on net loss and net
loss per share as stated above is not necessarily representative of the effects
on reported income or loss for future years due to, among other things, the
vesting period of the stock options and the fair value of additional stock
options that may be granted in future years.
The weighted-average grant-date fair values using the Black-Scholes option
pricing model were:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1997 1998 1999
----- ----- ------
<S> <C> <C> <C>
Exercise price greater than grant date stock fair value..... $2.31
Exercise price equals grant date stock fair value........... $1.88 $11.60
Exercise price less than grant date stock fair value........ $0.10 $1.72 $11.02
</TABLE>
The fair values of the options granted during 1997, 1998 and 1999 are
estimated on the date of grant using the Black-Scholes option-pricing model with
the following weighted-average assumptions: no dividends, expected volatility of
50%, 50% and 60%, respectively; expected terms of 3.1 years, 3.8 years and 3.9
years, respectively; and risk-free interest rates of 5.82%, 5.44% and 5.74%,
respectively.
J. STOCK-BASED COMPENSATION AND REMUNERATION:
Stock-based compensation and remuneration are included in the statements of
operations in the following captions:
F-21
<PAGE> 99
DECODE GENETICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1997 1998 1999
------- ----------- -----------
<S> <C> <C> <C>
General and administrative expense................... $ 3,675 $ 1,757,639 $ 3,121,509
Research and development expense..................... 8,176 3,462,003 4,922,486
------- ----------- -----------
Total................................................ $11,851 $ 5,219,642 $ 8,043,995
======= =========== ===========
</TABLE>
K. DEFINED CONTRIBUTION BENEFITS:
deCODE contributes to relevant pension organizations for personnel in
Iceland in accordance with Icelandic law. Certain other discretionary
contributions may be made. Contributions are based on employee salaries and
deCODE has no further liability in connection with these plans. Total
contributions were $101,064, $381,138 and $747,939 for the years ended December
31, 1997, 1998 and 1999, respectively.
L. INCOME TAXES:
deCODE accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109 (SFAS No. 109), "Accounting for Income Taxes." Due
to deCODE incurring net losses since inception, there is no provision for income
taxes for the years ended December 31, 1997, 1998 and 1999. deCODE has not paid
income taxes in the United States, Iceland or elsewhere since inception.
The tax effects of temporary differences that give rise to deferred tax
assets and deferred tax liabilities were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1998 1999
----------- -----------
<S> <C> <C>
DEFERRED TAX ASSETS (LIABILITIES):
Loss carryforwards.......................................... $ 4,591,389 $ 5,662,000
Capitalization of research and development costs............ 0 3,308,000
Other deferred tax assets................................... 0 121,000
Tax depreciation in excess of book depreciation............. (185,699) (428,000)
----------- -----------
Net deferred tax asset...................................... 4,405,690 8,663,000
Valuation allowance......................................... (4,405,690) (8,663,000)
----------- -----------
$ 0 $ 0
=========== ===========
</TABLE>
At December 31, 1999, deCODE has available a net operating loss
carryforward for federal income tax purposes of approximately $38,000 to offset
future federal taxable income in the United States which expires in 2018. deCODE
also has approximately $18,829,000 of foreign net operating loss carryforwards
available to offset future taxable income in Iceland which expires in varying
amounts beginning in 2004. As required by SFAS No. 109, the management of deCODE
has evaluated the positive and negative evidence bearing upon the realizability
of its deferred tax assets and has established a full valuation allowance for
such assets, which are comprised principally of net operating loss carryforwards
and capitalization of research and development costs. Management reevaluates the
positive and negative evidence periodically. The net operating loss
carryforwards could be limited in the future if there is a significant change in
ownership.
M. SUBSEQUENT EVENTS:
On January 22, 2000, the Ministry of Health and Social Security granted
deCODE's Icelandic subsidiary, Islensk erfethagreining ehf., an operating
license to create and run the Icelandic Health Sector Database, or IHD. The
license, which has a term of twelve years, allows deCODE to collect data from
medical records of Icelandic healthcare institutions and self-employed
healthcare professionals and to transfer such data in encrypted form into
F-22
<PAGE> 100
DECODE GENETICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
a centralized database. As required by the license and concurrently with the
issuance of the license, our Icelandic subsidiary entered into an agreement with
the Ministry. This agreement provides that deCODE must pay the Icelandic
government a fixed annual fee of 70 million Icelandic kronas (approximately
$1,000,000 at December 31, 1999) and an additional annual fee of 6% of its net
profit, up to a maximum of 70 million Icelandic kronas per year. The agreement
also provides that deCODE's rights to the IHD will be transferred to the
Ministry on the expiration or termination of the license.
deCODE's preparation of the IHD is subject to technical requirements
imposed by the Icelandic Data Protection Commission in areas such as data
encryption and privacy protection. These requirements are subject to change from
time to time and may require greater technical capabilities than deCODE
currently has. Compliance with these requirements can be expensive and
time-consuming and may delay the development of the IHD and the DCDP or make
such development more expensive than anticipated. In addition, deCODE's
compliance is subject to evaluation by the agencies imposing these requirements.
deCODE cannot control the time required for this evaluation, and accordingly,
the evaluation process may lead to delay in the development of the IHD and the
DCDP.
deCODE is subject to a very extensive indemnity clause in the agreement
with the Ministry, pursuant to which it has:
- agreed not to make any claim against the government if the Act or the
license are amended as a result of the Act or rules relating to the IHD
being found to be inconsistent with the rules of the European Economic
Area or other international rules and agreements to which Iceland is or
becomes a party;
- agreed that if the Icelandic state by a final judgment is found to be
liable or subject to payment to any third party as a result of the
passage of legislation on the IHD and/or issuance of the IHD license,
deCODE will indemnify it against all damages and costs in connection
with the litigation; and
- agreed to compensate any third parties with whom the Icelandic
government negotiates a settlement of liability claims arising from the
legislation on the IHD and/or the issue of the IHD license, provided
that the Icelandic government demonstrates that it was justified in
agreeing to make payments pursuant to the settlement.
The license and the agreement under which deCODE received the license also
require it to:
- pay the costs incurred by the health institutions (including the costs
of medical record software) in connection with the entering of data from
medical records before transfer to the IHD;
- financially segregate the operation of the IHD from its other activities
by maintaining a separate operating unit, and separate accounts for the
IHD;
- pay the costs of the governmental agencies which monitor deCODE's IHD
activities;
- indemnify and agree not to sue the Icelandic government for any
liability resulting from the passage of the legislation on the IHD and
its operation and/or the issuance of the IHD; and
- observe international science ethics rules.
The license prohibits deCODE from, among other things:
- abusing its position by charging unreasonable fees, refusing business to
our competitors or discriminating among customers by imposing
discriminatory or other onerous business terms on our customers; or
- assigning or pledging our rights in the license.
The IHD license will expire in January 2012, unless an extension is
granted.
F-23
<PAGE> 101
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table lists the costs and expenses, other than underwriting
discounts and commissions, which we expect to incur in connection with the
issuance and distribution of the securities being registered. Except for the SEC
registration fee, the NASD filing fee, the Nasdaq National Market fee and the
EASDAQ filing fee, the amounts listed below are estimates:
<TABLE>
<S> <C>
SEC Registration Fee........................................ $
NASD filing fee............................................. $
Nasdaq National Market Listing application fee.............. $
EASDAQ Listing application fee.............................. $
Legal fees and expenses..................................... $
Blue Sky fees and expenses.................................. $
Accounting fees and expenses................................ $
Printing and engraving expenses............................. $
Transfer Agent and Registrar fees........................... $
Miscellaneous expenses...................................... $
------------
Total.................................................. $
============
</TABLE>
All expenses of registration incurred in connection herewith are being
borne by us.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 102(b)(7) of the Delaware General Corporation Law ("DGCL") enables
a corporation in its certificate of incorporation to limit the personal
liability of its directors for violations of their fiduciary duty of care.
Accordingly, Section 4.7 of our certificate of incorporation states that a
director will not be personally liable to us or to our stockholders for monetary
damages resulting from any breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to us or to our
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the DGCL, or (iv) for any transaction from which the director derived an
improper personal benefit. If the DGCL is amended, then the liability of a
director will be eliminated or limited to the fullest extent permitted by the
amended DGCL.
Subsection (a) of Section 145 of the DGCL empowers a corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with the
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee, or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of that action or
suit if he acted in good faith and in a manner he reasonably believed to be in,
or not opposed to, the best
II-1
<PAGE> 102
interests of the corporation. No indemnification will be made, however, in
respect to any claim, issue or matter as to which that person is adjudged to be
liable to the corporation, unless and only to the extent that the Court of
Chancery or the court in which that action or suit was brought will determine
upon application that, despite the adjudication of liability but in view of all
of the circumstances of the case, that person is fairly and reasonably entitled
to indemnity for the expenses which the Court of Chancery or such other court
deems proper.
Section 145 further provides that to the extent a present or former
director or officer of a corporation has been successful in the defense of any
action, suit or proceeding referred to in subsections (a) and (b) of Section
145, or in defense of any claim, issue or matter therein, that person will be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him; that the indemnification provided by Section 145 will not be
deemed exclusive of any other rights to which the indemnified party may be
entitled; and that the scope of indemnification extends to directors, officers,
employees, or agents of a constituent corporation absorbed in a consolidation or
merger and persons serving in that capacity at the request of the constituent
corporation for another. The determination of whether indemnification is proper
under the circumstances, unless made by a court, is determined by (a) a majority
of the disinterested members of the Board of Directors or board committee; (b)
independent legal counsel (if a quorum of the disinterested members of the Board
of Directors or board committee is not available or if the disinterested members
of the Board of Directors or a board committee so direct); or (c) the
stockholders.
Section 145 also empowers us to purchase and maintain insurance on behalf
of our directors or officers against any liability asserted against them or
incurred by them in any such capacity or arising out of their status as our
directors or officers whether or not we would have the power to indemnify them
against the liabilities under Section 145. We currently carry liability
insurance for the benefit of our directors and officers that provides coverage
for any damages (excluding punitive or exemplary damages, fines or penalties),
settlements, and reasonable and necessary legal fees and expenses incurred by
any of the officers or directors resulting from any judicial or administrative
proceeding initiated during the policy period against any of the officers or
directors in which they may be subjected to a binding adjudication of liability
for damages or other relief, including any appeal therefrom, for any actual or
alleged error, omission, misstatement, misleading statement, neglect, breach of
duty or negligent act by any officer or director, while acting solely in his
capacity as a director or officer of the company (or any subsidiary of the
company). Among other exclusions, our current policy specifically excludes
coverage for any claim: by or at the behest of any person or entity that at the
time the claim is first made owns or controls 20% or more of the outstanding
securities representing the present right to vote for the election of directors
of the company (and/or its subsidiaries); involving an accounting of profits
made in fact from the purchase and/or sale by the officers and directors of the
securities of the company; based upon actual or alleged pollution or
contamination; for violations of the Employee Retirement Income Security Act of
1974; by, on behalf of, or at the direction of, the company or other officers or
directors; brought about by any dishonest, fraudulent or criminal act or
omission or any personal profit or advantage gained by any director or officer
to which he was not legally entitled; based upon or arising out of a wrongful
act actually or allegedly committed subsequent to a corporate takeover; based
upon or arising out of their services as directors, officers or employees of any
entity other than the company (or a subsidiary of the company); for actual or
alleged libel, slander, defamation, bodily injury, sickness, disease, death,
false arrest, false imprisonment, assault, battery, mental anguish, emotional
distress, invasion of privacy or damage to or destruction of tangible property;
based on allegations that computer software or hardware failed to function
properly because of a Year 2000 problem; and/or based upon any future public or
private offering of securities. We expect that the exclusion for securities
offerings will be removed before the effective date of this registration
statement.
Section 42 of our bylaws requires that we indemnify each director and
executive officer to the fullest extent allowable under the DGCL, and empowers
us to indemnify our other officers, employees and other agents. Section 42
further provides, however, that we may limit the extent of our indemnification
by individual contracts with our directors and executive officers, and further,
that we will not be required to indemnify any director or executive officer in
connection with any proceeding (or part of a proceeding) initiated by that
person or any proceeding by that person against us or our directors, officers,
employees or other agents unless (a) indemnification is expressly required to be
made by law, (b) the proceeding was authorized by our Board of Directors or (c)
indemnification is provided by us, in our sole discretion, pursuant to the
powers vested in us
II-2
<PAGE> 103
under the DGCL. This provision is a contract with each director and executive
officer who serves in that capacity at any time while the provision and the
relevant provisions of the DGCL are in effect.
Any repeal or modification of Section 42 of our bylaws will only be
prospective, and will not affect any rights in effect at the time of the alleged
occurrence of any action or omission to act that is the cause of any proceeding
against any of our agents. Further, the rights conferred on any person by
Section 42 will continue as to a person who has ceased to be a director,
officer, employee or other agent and will inure to the benefit of the heirs,
executors and administrators of such person.
We have, in addition, entered into an indemnity agreement with one of our
directors, Sir John Vane. The agreement requires us, subject to certain
exceptions, to hold harmless and indemnify Sir John to the fullest extent
authorized or permitted by the provisions of the bylaws and the DGCL, as each
may be amended from time to time (but, only to the extent that an amendment
permits us to provide broader indemnification rights than the bylaws or the DGCL
permitted prior to adoption of that amendment). Subject to certain exclusions,
we further agreed to hold harmless and indemnify Sir John against any and all
expenses (including attorneys' fees), witness fees, damages, judgments, fines
and amounts paid in settlement and any other amounts that he becomes legally
obligated to pay because of any claim or claims made against or by him in
connection with any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, arbitrational, administrative or investigative
(including an action by or in the right of us) to which he is, was, or at any
time becomes, a party, or is threatened to be made a party, by reason of the
fact that he is, was, or at any time becomes, our director, officer, employee or
other agent, or is or was serving, or at any time serves, at our request, as a
director, officer, employee or other agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise; and otherwise
to the fullest extent as may be provided to him by us under our bylaws and the
DGCL.
Our agreement with, and obligations to, Sir John under his indemnity
agreement will continue during the period that he serves as our director,
officer, employee or other agent (or is or was serving at our request as a
director, officer, employee or other agent of another company, partnership,
joint venture, trust, employee benefit plan or other enterprise) and will
continue thereafter so long as he will be subject to any possible claim or
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, arbitrational, administrative or investigative, by reason of the fact
that the director was serving in the capacity referred to herein.
Further, the Underwriting Agreement, a proposed form of which is filed as
Exhibit 1.1 hereto, contains provisions for indemnification of our underwriters
and their officers, directors and certain other persons, against certain civil
liabilities, including certain liabilities under the Securities Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
In the three years preceding the filing of this registration statement, we
sold the following securities that were not registered under the Securities Act.
(1) In July 1997, we issued 20,000 shares of our common stock to the
Icelandic Industrial Development Fund upon the conversion of a $85,305 debt.
(2) In October 1997, we issued 5,090,376 shares of Series A preferred stock
and warrants to purchase 1,137,814 shares of Series A preferred stock to a group
of accredited investors for aggregate cash proceeds of $5,101,754.
(3) In February 1998, we issued 200,000 shares of our common stock to the
Icelandic Heart Association for aggregate cash proceeds of $80,000.
(4) In December of 1997, we granted stock options to employees, directors
and consultants covering an aggregate of 1,165,000 shares of our common stock
which were exercised in January 1998 for an aggregate exercise price of
$233,000. In February of 1998, we granted stock options to employees, directors
and consultants covering an aggregate of 1,020,000 shares of our common stock
which were immediately exercised for an aggregate exercise price of $408,000. In
March and November of 1998, we granted stock options to employees, directors and
consultants covering an aggregate of 408,500 and 570,000 shares of our common
stock, respectively, of which 408,500 and 553,000 of these options were
immediately exercised for an aggregate
II-3
<PAGE> 104
exercise price of $408,500 and $2,164,000. In August of 1999, we granted stock
options to employees, directors and consultants covering an aggregate of 840,500
shares of our common stock which were immediately exercised for an aggregate
exercise price of $4,726,188. Also in 1999, 7,000 options, which were granted in
November 1998, were exercised for an aggregate exercise price of $28,000.
In December of 1997, 1998 and 1999, we granted stock options to a director
covering an aggregate of 15,000, 15,000 and 15,000 shares of our common stock,
respectively, at exercise prices of $0.20, $4.00 and $18.29 per share,
respectively. The first two of such option grants were exercised in February
2000.
(5) On January 1, 1998, December 31, 1998 and December 31, 1999, we issued
100,000, 20,000 and 10,000 shares of Series A preferred stock, respectively, to
one accredited investor, The Beth Israel Deaconess Medical Center, pursuant to a
settlement agreement.
(6) On February 2, 1998, we sold 2,500,000 shares of Series C preferred
stock and options and warrants to purchase 861,112 shares of Series C preferred
stock to one accredited investor, Roche Finance Ltd, for aggregate cash proceeds
of $5,000,250 pursuant to a Series C Preferred Stock and Warrant Purchase
Agreement.
(7) On February 27, 1998, we issued an aggregate of 74,670 shares of Series
B preferred stock to several non-U.S. persons in connection with the purchase of
property.
(8) In March of 1998, we sold an aggregate of 3,290,000 shares of Series B
preferred stock to several non-U.S. persons for aggregate cash proceeds of
$12,580,000.
(9) In August, September and October of 1998, we sold an aggregate of
1,248,320 shares of Series B preferred stock to several non-U.S. persons for
aggregate cash proceeds of $9,277,400.
(10) On November 27, 1998 we sold 100,000 shares of Series B preferred
stock to Buretharas hf., a non-U.S. person, for aggregate cash proceeds of
$750,000.
(11) In January 1999, we issued 70,824 shares of Series B preferred stock
to several non-U.S. persons in exchange for securities of Gagnalind hf.
(12) On February 16 and March 30 of 1999, we sold 80,000 and 30,000 shares
of Series B preferred stock, respectively, to several non-U.S. persons for
aggregate cash proceeds of $825,000.
(13) On February 2, 1999, we sold 555,555 shares of Series C preferred
stock, and warrants to purchase 55,555 shares of Series C preferred stock to one
accredited investor, Roche Finance Ltd, for aggregate cash proceeds of
$1,666,721 pursuant to a Series C Preferred Stock and Warrant Purchase
Agreement.
(14) On May 20, 1999, we sold 555,556 shares of Series C preferred stock,
and warrants to purchase 55,556 shares of Series C preferred stock to one
investor, Roche Finance Ltd, for aggregate cash proceeds of $1,666,724 pursuant
to a Series C Preferred Stock and Warrant Purchase Agreement.
(15) On August 8,1999, we issued 250,000 shares of Series B preferred stock
to Kari Stefansson in exchange for 333,333 shares of common stock held by him.
(16) On August 8, 1999, we sold 5,000,000 shares of Series B preferred
stock to Biotek Invest, S.A., a non-U.S. person, for aggregate cash proceeds of
$37,500,000, subject to subsequent adjustment, with final net cash proceeds of
$69,750,000.
(17) In November 1999, we issued an aggregate of 68,000 shares of common
stock to Thornrounarfelag Islands hf. and Skyrr hf., two Icelandic companies, in
exchange for securities of Gagnalind hf.
The sale and issuance of securities in the transactions described above
were deemed to be exempt from registration under the Securities Act by virtue of
Section 4(2) and/or Regulation D as transactions not involving any public
offering or Regulation S as offers and sales that occurred outside the United
States. Where appropriate, the purchasers represented their intention to acquire
the securities for investment only and not with a view to the distribution
thereof or that they were non-U.S. persons. Appropriate legends are affixed to
the stock certificates issued in those transactions. All recipients either
received adequate information about us or had access, through employment or
other relationships, to adequate information.
II-4
<PAGE> 105
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
1.1* Underwriting Agreement
3.1* Amended and Restated Certificate of Incorporation
3.2 Bylaws
4.1* Specimen Common Stock Certificate
4.2 Form of Warrant to Purchase Series A Preferred Stock
4.3 Form of Warrant to Purchase Series C Preferred Stock
5.1* Opinion of Smith, Stratton, Wise, Heher & Brennan
8.1* Opinion of Stibbe Simont Monahan Duhot regarding Belgian
taxation
10.1 Form of License from The Icelandic Data Protection
Commission to Islensk erfethagreining ehf. and its Clinical
Collaborators to Use and Access Patient Records and Other
Clinical Data Relating to Individuals
10.2 1996 Equity Incentive Plan, as amended
10.3 Form of Non-Statutory Stock Option Agreement, including
Early Exercise Stock Purchase Agreement and all exhibits
thereto, as executed by employees and officers of deCODE
genetics, Inc. who received and exercised non-statutory
stock options
10.4 Form of Employee Proprietary Information and Inventions
Agreement
10.5 Agreement on the Collaboration of Friethrik Skulason (FS)
and Islensk erfethagreining ehf. (IE) on the Creation of a
Database of Icelandic Genealogy, dated April 15th, 1997
10.6** Research Agreement between deCODE genetics, Inc., and
Islensk erfethagreining ehf. and Rannsokna- og
Fraeethslusjoethurinn ehf., dated October 24, 1997, as
extended
10.7 Consultancy Contract between deCODE genetics, Inc. and Vane
Associates, dated December 1, 1997, together with
Nondisclosure Agreement executed by Vane Associates as of
December 1, 1997, as amended
10.8 Indemnity Agreement between deCODE genetics, Inc. and Sir
John Vane, dated December 1, 1997
10.9** Settlement Agreement between The Beth Israel Deaconess
Medical Center and deCODE genetics, Inc., dated as of
December 31, 1997
10.10 Amended and Restated Non-Recourse Promissory Note between
deCODE genetics, Inc. and Hannes Smarason, dated March 24,
1999,
10.11** Research Collaboration and Cross-license Agreement among
F.Hoffmann-La Roche Ltd, Hoffmann-La Roche Inc. and deCODE
genetics, Inc., dated as of February 1, 1998
10.12 Amended and Restated Investor Rights Agreement of deCODE
genetics, Inc., dated as of February 2, 1998, as further
amended and restated
10.13** Collaboration Agreement between The Icelandic Heart
Association (Hjartavernd) and Islensk erfethagreining ehf.,
dated February 13, 1998
10.14** Collaboration Agreement between Dr. Helgi Jonsson,
Thornorvaldur Ingvarsson and Islensk erfethagreining ehf.,
dated March 31, 1998
10.15** Collaboration Agreement between The Research Group on
Arterial Hypertension and Islensk erfethagreining ehf.,
dated June 3, 1998
10.16 Contract on Sale and Leaseback between Islensk
erfethagreining ehf. and The Icelandic Investment Bank,
dated June 8, 1998
</TABLE>
II-5
<PAGE> 106
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
10.17 Contract on Financial Leasing between Islensk
erfethagreining ehf. and Lysing hf., dated June 19, 1998
10.18 Employment Agreement between Islensk erfethagreining ehf.
and Axel Nielsen, dated July 1, 1998
10.19** Collaboration Agreement between a Collaboration Group on
Alzheimer's Disease and Related Disorders and Islensk
erfethagreining ehf., dated July 19, 1998
10.20** Collaboration Agreement between The Research Group on
Osteoporosis and Islensk erfethagreining ehf., dated July
19, 1998
10.21 Employment Agreement between Islensk erfethagreining ehf.
and Kristjan Erlendsson, dated September 4, 1998
10.22 Co-operation Agreement between Reykjavik Hospital and
Islensk erfethagreining ehf., dated November 4, 1998
10.23 Amended and Restated Non-Recourse Promissory Note between
deCODE genetics, Inc. and Sigurethur I. Bjornsson, dated
March 24, 1999
10.24 Co-operation Agreement between the Iceland State Hospital
and Islensk erfethagreining ehf., dated December 15, 1998
10.25 Employment Contract between Islensk erfethagreining ehf. and
Sigurethur I. Bjornsson, dated January 15, 1999
10.26 Lease between Friethar sf. and Islensk erfethagreining ehf.,
dated February 18, 1999
10.27** Research Contract on the Co-operation of a Research Team for
Age-Related Macular Degeneration and Islensk erfethagreining
ehf., dated April 27, 1999
10.28** Research Contract on the Co-operation of a Research Team for
Peripheral Artery Occlusive Disease and Islensk
erfethagreining ehf., dated May 28, 1999
10.29** Research Contract on the Co-operation of a Research Team for
Allergy and Asthma and Islensk erfethagreining ehf., dated
July 1, 1999
10.30 Series A Preferred Stock Repurchase Agreement between deCODE
genetics, Inc. and certain holders of Series A Preferred
Stock, dated as of July 12, 1999, with attached Addendum
10.31 Series C Preferred Stock Repurchase Agreement between deCODE
genetics, Inc. and Roche Finance Ltd, dated as of July 12,
1999, with attached Addendum
10.32 Common Stock Repurchase Agreement between deCODE genetics,
Inc. and Kari Stefansson, dated as of July 12, 1999
10.33 Stock Purchase Agreement between deCODE genetics, Inc. and
Biotek Invest, S.A., dated as of June 30, 1999, with
attached Addendum
10.34 Co-operation Agreement between Akureyri Central Hospital and
Islensk erfethagreining ehf., dated October 26, 1999, with
attached Declaration
10.35 Non-Recourse Promissory Note between deCODE genetics, Inc.
and Hannes Smarason, dated September 15, 1999
10.36** Research Contract on the Co-Operation of a Research Team for
Cerebral Haemorrhage and Islensk erfethagreining ehf., dated
November 3, 1999
10.37 Lease between the Computer Centre of the Icelandic Savings
Banks and Islensk erfethagreining ehf., dated November 24,
1999
10.38 Research Collaboration Agreement by and between Islenskar
hveraorverur ehf. and Islensk erfethagreining ehf., dated
December 28, 1999
10.39 Agreement between The Minister for Health and Social
Security and Islensk erfethagreining ehf. relating to the
Issue of an Operating Licence for the Creation and Operation
of a Health Sector Database, dated January 21, 2000
</TABLE>
II-6
<PAGE> 107
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
10.40 Operating Licence issued to Islensk erfethagreining ehf.,
State Reg. No. 691295-3549 Lynghals 1 Reykjavik for the
Creation and Operation of a Health Sector Database, dated
January 22, 2000
10.41 Series B Preferred Stock Agreement between deCODE genetics,
Inc. and Kari Stefansson, dated as of March 1, 2000
10.42 Agreement between The University of Iceland, Islensk
erfethagreining ehf., and the City of Reykjavik, dated
February 15, 2000
10.43* Lease between Islensk erfethagreining ehf. and Faghus ehf.,
dated as of March 1, 2000
10.44 Form of Employee Confidentiality, Invention Assignment and
Non-Compete Agreement executed by certain officers
21.1 Subsidiaries of deCODE genetics, Inc.
23.1 Consent of PricewaterhouseCoopers ehf., independent public
accountants
23.2* Consent of Smith, Stratton, Wise, Heher & Brennan (contained
in Exhibit 5.1)
23.3* Consent of Stibbe Simont Monahan Duhot (contained in Exhibit
8.1)
24.1 Power of Attorney (see "Power of Attorney" below)
27.1 Financial Data Schedule
</TABLE>
- ---------------
* To be filed by amendment.
** Confidential treatment has been requested with respect to a portion of this
Exhibit.
FINANCIAL STATEMENT SCHEDULES
No schedules are required because the information is either not applicable
or is presented elsewhere herein.
ITEM 17. UNDERTAKINGS.
We hereby undertake to provide to the underwriter at the closing specified
in the underwriting agreement certificates in such denominations and registered
in such names as required by the underwriter to permit prompt delivery to each
purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of deCODE
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by us of expenses incurred or paid by a
director, officer or controlling person of deCODE in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, we will,
unless in the opinion of our counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by us is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
We hereby undertake that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by us pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act will be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus will
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time will be
deemed to be the initial bona fide offering thereof.
II-7
<PAGE> 108
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, we have duly
caused this registration statement to be signed on our behalf by the
undersigned, thereunto duly authorized, in the city of Reykjavik, Iceland, on
March 8, 2000.
deCODE genetics, Inc.
/s/ DR. KARI STEFANSSON
By:
--------------------------------------
Dr. Kari Stefansson,
President and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Dr. Kari Stefansson, Hannes Thorn.
Smarason and Axel Nielsen, and each or any one of them, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including Rule 462(b) or other post-effective amendments) to
this registration statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitutes or substitute, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ DR. KARI STEFANSSON President, Chief Executive Officer March 8, 2000
- --------------------------------------------- (principal executive officer) and
Dr. Kari Stefansson Director
/s/ AXEL NIELSEN Chief Financial Officer and March 8, 2000
- --------------------------------------------- Treasurer (principal financial
Axel Nielsen officer and principal accounting
officer)
/s/ JEAN-FRANCOIS FORMELA Director March 8, 2000
- ---------------------------------------------
Jean-Francois Formela
/s/ ANDRE LAMOTTE Director March 8, 2000
- ---------------------------------------------
Andre Lamotte
/s/ TERRANCE MCGUIRE Director March 8, 2000
- ---------------------------------------------
Terrance McGuire
/s/ GUY NOHRA Director March 8, 2000
- ---------------------------------------------
Guy Nohra
/s/ SIR JOHN VANE Director March 8, 2000
- ---------------------------------------------
Sir John Vane
</TABLE>
II-8
<PAGE> 109
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
1.1* Underwriting Agreement
3.1* Amended and Restated Certificate of Incorporation
3.2 Bylaws
4.1* Specimen Common Stock Certificate
4.2 Form of Warrant to Purchase Series A Preferred Stock
4.3 Form of Warrant to Purchase Series C Preferred Stock
5.1* Opinion of Smith, Stratton, Wise, Heher & Brennan
8.1* Opinion of Stibbe Simont Monahan Duhot regarding Belgian
taxation
10.1 Form of License from The Icelandic Data Protection
Commission to Islensk erfethagreining ehf. and its Clinical
Collaborators to Use and Access Patient Records and Other
Clinical Data Relating to Individuals
10.2 1996 Equity Incentive Plan, as amended
10.3 Form of Non-Statutory Stock Option Agreement, including
Early Exercise Stock Purchase Agreement and all exhibits
thereto, as executed by employees and officers of deCODE
genetics, Inc. who received and exercised non-statutory
stock options
10.4 Form of Employee Proprietary Information and Inventions
Agreement
10.5 Agreement on the Collaboration of Friethrik Skulason (FS)
and Islensk erfethagreining ehf. (IE) on the Creation of a
Database of Icelandic Genealogy, dated April 15th, 1997
10.6** Research Agreement between deCODE genetics, Inc., and
Islensk erfethagreining ehf. and Rannsokna- og
Fraeethslusjoethurinn ehf., dated October 24, 1997, as
extended
10.7 Consultancy Contract between deCODE genetics, Inc. and Vane
Associates, dated December 1, 1997, together with
Nondisclosure Agreement executed by Vane Associates as of
December 1, 1997, as amended
10.8 Indemnity Agreement between deCODE genetics, Inc. and Sir
John Vane, dated December 1, 1997
10.9** Settlement Agreement between The Beth Israel Deaconess
Medical Center and deCODE genetics, Inc., dated as of
December 31, 1997
10.10 Amended and Restated Non-Recourse Promissory Note between
deCODE genetics, Inc. and Hannes Smarason, dated March 24,
1999,
10.11** Research Collaboration and Cross-license Agreement among F
Hoffmann-La Roche Ltd, Hoffmann-La Roche Inc. and deCODE
genetics, Inc., dated as of February 1, 1998
10.12 Amended and Restated Investor Rights Agreement of deCODE
genetics, Inc., dated as of February 2, 1998, as further
amended and restated
10.13** Collaboration Agreement between The Icelandic Heart
Association (Hjartavernd) and Islensk erfethagreining ehf.,
dated February 13, 1998
10.14** Collaboration Agreement between Dr. Helgi Jonsson,
Thornorvaldur Ingvarsson and Islensk erfethagreining ehf.,
dated March 31, 1998
10.15** Collaboration Agreement between The Research Group on
Arterial Hypertension and Islensk erfethagreining ehf.,
dated June 3, 1998
10.16 Contract on Sale and Leaseback between Islensk
erfethagreining ehf. and The Icelandic Investment Bank,
dated June 8, 1998
</TABLE>
II-9
<PAGE> 110
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
10.17 Contract on Financial Leasing between Islensk
erfethagreining ehf. and Lysing hf., dated June 19, 1998
10.18 Employment Agreement between Islensk erfethagreining ehf.
and Axel Nielsen, dated July 1, 1998
10.19** Collaboration Agreement between a Collaboration Group on
Alzheimer's Disease and Related Disorders and Islensk
erfethagreining ehf., dated July 19, 1998
10.20** Collaboration Agreement between The Research Group on
Osteoporosis and Islensk erfethagreining ehf., dated July
19, 1998
10.21 Employment Agreement between Islensk erfethagreining ehf.
and Kristjan Erlendsson, dated September 4, 1998
10.22 Co-operation Agreement between Reykjavik Hospital and
Islensk erfethagreining ehf., dated November 4, 1998
10.23 Amended and Restated Non-Recourse Promissory Note between
deCODE genetics, Inc. and Sigurethur I. Bjornsson, dated
March 24, 1999
10.24 Co-operation Agreement between the Iceland State Hospital
and Islensk erfethagreining ehf., dated December 15, 1998
10.25 Employment Contract between Islensk erfethagreining ehf. and
Sigurethur I. Bjornsson, dated January 15, 1999
10.26 Lease between Friethar sf. and Islensk erfethagreining ehf.,
dated February 18, 1999
10.27** Research Contract on the Co-operation of a Research Team for
Age-Related Macular Degeneration and Islensk erfethagreining
ehf., dated April 27, 1999
10.28** Research Contract on the Co-operation of a Research Team for
Peripheral Artery Occlusive Disease and Islensk
erfethagreining ehf., dated May 28, 1999
10.29** Research Contract on the Co-operation of a Research Team for
Allergy and Asthma and Islensk erfethagreining ehf., dated
July 1, 1999
10.30 Series A Preferred Stock Repurchase Agreement between deCODE
genetics, Inc. and certain holders of Series A Preferred
Stock, dated as of July 12, 1999, with attached Addendum
10.31 Series C Preferred Stock Repurchase Agreement between deCODE
genetics, Inc. and Roche Finance Ltd, dated as of July 12,
1999, with attached Addendum
10.32 Common Stock Repurchase Agreement between deCODE genetics,
Inc. and Kari Stefansson, dated as of July 12, 1999
10.33 Stock Purchase Agreement between deCODE genetics, Inc. and
Biotek Invest, S.A., dated as of June 30, 1999, with
attached Addendum
10.34 Co-operation Agreement between Akureyri Central Hospital and
Islensk erfethagreining ehf., dated October 26, 1999, with
attached Declaration
10.35 Non-Recourse Promissory Note between deCODE genetics, Inc.
and Hannes Smarason, dated September 15, 1999
10.36** Research Contract on the Co-Operation of a Research Team for
Cerebral Haemorrhage and Islensk erfethagreining ehf., dated
November 3, 1999
10.37 Lease between the Computer Centre of the Icelandic Savings
Banks and Islensk erfethagreining ehf., dated November 24,
1999
10.38 Research Collaboration Agreement by and between Islenskar
hveraorverur ehf. and Islensk erfethagreining ehf., dated
December 28, 1999
10.39 Agreement between The Minister for Health and Social
Security and Islensk erfethagreining ehf. relating to the
Issue of an Operating Licence for the Creation and Operation
of a Health Sector Database, dated January 21, 2000
</TABLE>
II-10
<PAGE> 111
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
10.40 Operating Licence issued to Islensk erfethagreining ehf.,
State Reg. No. 691295-3549 Lynghals 1 Reykjavik for the
Creation and Operation of a Health Sector Database, dated
January 22, 2000
10.41 Series B Preferred Stock Agreement between deCODE genetics,
Inc. and Kari Stefansson, dated as of March 1, 2000
10.42 Agreement between The University of Iceland, Islensk
erfethagreining ehf., and the City of Reykjavik, dated
February 15, 2000
10.43* Lease between Islensk erfethagreining ehf. and Faghus ehf.,
dated as of March 1, 2000
10.44 Form of Employee Confidentiality, Invention Assignment and
Non-Compete Agreement executed by certain officers
21.1 Subsidiaries of deCODE genetics, Inc.
23.1 Consent of PricewaterhouseCoopers ehf., independent public
accountants
23.2* Consent of Smith, Stratton, Wise, Heher & Brennan (contained
in Exhibit 5.1)
23.3* Consent of Stibbe Simont Monahan Duhot (contained in Exhibit
8.1)
24.1 Power of Attorney (see "Power of Attorney" below)
27.1 Financial Data Schedule
</TABLE>
- ---------------
* To be filed by amendment.
** Confidential treatment has been requested with respect to a portion of this
Exhibit.
II-11
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
DECODE GENETICS, INC.
(A DELAWARE CORPORATION)
(AS AMENDED THROUGH DECEMBER 31, 1999)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I - OFFICES......................................................................................1
Section 1. Registered Office....................................................................1
Section 2. Other Offices........................................................................1
ARTICLE II - CORPORATE SEAL..............................................................................1
Section 3. Corporate Seal.......................................................................1
ARTICLE III - STOCKHOLDERS MEETINGS......................................................................1
Section 4. Place of Meetings....................................................................1
Section 5. Annual Meeting.......................................................................1
Section 6. Special Meetings.....................................................................3
Section 7. Notice of Meetings...................................................................4
Section 8. Quorum...............................................................................4
Section 9. Adjournment and Notice of Adjourned Meetings.........................................4
Section 10. Voting Rights........................................................................4
Section 11. Beneficial Owners of Stock...........................................................5
Section 12. List of Stockholders.................................................................5
Section 13. Action without Meeting...............................................................5
Section 14. Organization.........................................................................6
ARTICLE IV - DIRECTORS...................................................................................7
Section 15. Number and Term of Office............................................................7
Section 16. Powers...............................................................................7
Section 17 Vacancies............................................................................7
Section 18. Registration.........................................................................7
Section 19. Removal..............................................................................8
Section 20. Meetings.............................................................................8
(a) Annual Meeting................................................................8
(b) Regular Meetings..............................................................8
(c) Special Meetings..............................................................8
(d) Telephone Meetings............................................................8
(e) Notice of Meetings............................................................8
(f) Waiver of Notice..............................................................8
Section 21. Quorum and Voting....................................................................9
Section 22. Action Without Meeting...............................................................9
Section 23. Fees and Compensation................................................................9
Section 24. Committees...........................................................................9
(a) Executive Committee...........................................................9
(b) Other Committees.............................................................10
(c) Term.........................................................................10
(d) Meetings.....................................................................10
Section 25. Organization........................................................................11
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE V - OFFICERS..................................................................................11
Section 26. Officers Designated................................................................11
Section 27. Tenure and Duties of Officers......................................................11
(a) General......................................................................11
(b) Duties of Chairman of the Board of Directors.................................11
(c) Duties of President..........................................................11
(d) Duties of Vice President.....................................................12
(e) Duties of Secretary..........................................................12
(f) Duties of Chief Financial Officer or Treasurer...............................12
Section 28. Delegation of Authority............................................................12
Section 29. Resignations.......................................................................12
Section 30. Removal............................................................................13
ARTICLE VI - EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES OWNED BY THE CORPORATION.....13
Section 31. Execution of Corporate Instruments.................................................13
Section 32. Voting of Securities Owned by the Corporation......................................13
ARTICLE VII - SHARES OF STOCK.........................................................................14
Section 33. Form and Execution of Certificates.................................................14
Section 34. Lost Certificates..................................................................14
Section 35. Transfers..........................................................................14
Section 36. Fixing Record Dates................................................................14
Section 37. Registered Stockholders............................................................15
ARTICLE VIII - OTHER SECURITIES OF THE CORPORATION....................................................16
Section 38. Execution of Other Securities......................................................16
ARTICLE IX - DIVIDENDS................................................................................16
Section 39. Declaration of Dividends...........................................................16
Section 40. Dividend Reserve...................................................................16
ARTICLE X - FISCAL YEAR..............................................................................17
Section 41. Fiscal Year........................................................................17
ARTICLE XI - INDEMNIFICATION..........................................................................17
Section 42. Indemnification of Directors, Officers, Employees and Other Agents.....................17
(a) Directors and Executive Officers.............................................17
(b) Other Officers, Employees and Other Agents...................................17
(c) Good Faith...................................................................17
(d) Expenses.....................................................................18
(e) Enforcement..................................................................18
(f) Non-Exclusivity of Rights....................................................19
(g) Survival of Rights...........................................................19
(h) Insurance....................................................................19
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
(i) Amendments...................................................................19
(j) Saving Clause................................................................19
(k) Certain Definitions..........................................................19
ARTICLE XII - NOTICES.................................................................................20
Section 43. Notices................................................................................20
(a) Notice to Stockholders......................................................20
(b) Notice to Directors..........................................................21
(c) Address Unknown..............................................................21
(d) Affidavit of Mailing.........................................................21
(e) Time Notices Deemed given....................................................21
(f) Methods of Ntoice............................................................21
(g) Failure to Receive Notice....................................................21
(h) Notice to Person with Whom Communication Is Unlawful.........................21
(i) Notice to Person with Undeliverable Address..................................22
ARTICLE XIII - AMENDMENTS.............................................................................22
Section 44. Amendments.........................................................................22
ARTICLE XIV - RIGHT OF FIRST REFUSAL..................................................................22
Section 45. Right of First Refusal.............................................................22
ARTICLE XV - LOANS TO OFFICERS........................................................................25
Section 38. Loans to Officers..................................................................25
</TABLE>
<PAGE> 5
BYLAWS
OF
DECODE GENETICS, INC.
(A DELAWARE CORPORATION)
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the corporation
in the State of Delaware shall be in the City of Wilmington, County of New
Castle.
SECTION 2. OTHER OFFICES. The corporation shall also have and maintain
an office or principal place of business at such place(s), both within and
without the State of Delaware, as the Board of Directors may from time to time
determine or the business of the corporation may require.
ARTICLE II
CORPORATE SEAL
SECTION 3. CORPORATE SEAL. The Corporate seal shall consist of a die
bearing the name of the corporation and the inscription, "Corporate
Seal-Delaware." Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE III
STOCKHOLDERS' MEETINGS
SECTION 4. PLACE OF MEETINGS. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or
if not so designated then at the office of the corporation required to be
maintained pursuant to Section 2 hereof.
SECTION 5. ANNUAL MEETING.
(A) The annual meeting of the stockholders of the corporation, for the
purpose of election of Directors and for such other business as may lawfully
come before it, shall be held on such date and at such time as may be designated
from time to time by the Board of Directors.
1
<PAGE> 6
(B) At an annual meeting of the stockholders, only such business shall
be conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be: (A) specified in
the notice of meeting (or any supplement thereto) given by or at the direction
of the Board of Directors, (B) otherwise properly brought before the meeting by
or at the direction of the Board of Directors, or (C) otherwise properly brought
before the meeting by a stockholder. For business to be properly brought before
an annual meeting by a stockholder, the stockholder must have given timely
notice thereof in writing to the Secretary of the corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the corporation not less than one hundred twenty
(120) calendar days in advance of the date of the corporation's proxy statement
released to stockholders in connection with the previous year's annual meeting
of the stockholders; provided, however, that in the event that no annual meeting
was held in the previous year or the date of the annual meeting has been changed
by more than thirty (30) days from the date contemplated at the time of the
previous year's proxy statement, notice by the stockholder to be timely must be
so received a reasonable time before the solicitation is made. A stockholder's
notice to the Secretary shall set forth as to each matter the stockholder
proposes to bring before the annual meeting: (i) a brief description of the
business desired to be brought before the annual meeting and the reasons for
conducting such business at the annual meeting, (ii) the name and address, as
they appear on the corporation's books, of the stockholder proposing such
business, (iii) the class and number of shares of the corporation which are
beneficially owned by the stockholder, (iv) any material interest of the
stockholder in such business and (v) any other information that is required to
be provided by the stockholder pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended, in his capacity as a proponent to a
stockholder proposal. Notwithstanding the foregoing, in order to include in
formation with respect to a stockholder proposal in the proxy statement and form
of proxy for a stockholder's meeting, stockholders must provide notice as
required by the regulations promulgated under the Securities and Exchange Act of
1934, as amended. Notwithstanding anything in these Bylaws to the contrary, no
business shall be conducted at any annual meeting except in accordance with the
procedures set forth in this paragraph (b). The chairman of the annual meeting
shall, if the facts warrant, determine and declare at the meeting that business
was not properly brought before the meeting and in accordance with the
provisions of this paragraph (b), and, if he should so determine, he shall so
declare at the meeting that any such business not properly brought before the
meeting shall not be transacted.
(C) Only persons who are nominated in accordance with the procedures
set forth in this (c) shall be eligible for election as Directors. Nominations
of persons for election to the Board of Directors of the corporation may be made
at a meeting of stockholders by or at the direction of the Board of Directors or
by any stockholder of the corporation entitled to vote in the election of
Directors at the meeting who complies with the notice set forth in this
paragraph (c). Such nominations, other than those made by or at the direction of
the Board of Directors, shall be made pursuant to timely notice in writing to
the Secretary of the corporation in accordance with the provisions of paragraph
(b) of this Section 5. Such stockholder's notice shall set forth (i) as to each
person, if any, whom the stockholder proposes to nominate for election or
re-election as a Director: (A) the name, age, business address and residence
address of such person, (B) the principal occupation or employment of such
person, (C) the class and number of shares of the
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corporation which are beneficially owned by such person, (D) a description of
all arrangements or understandings between the stockholder and each nominee and
any other person or persons (naming such person or persons) pursuant to which
the nominations are to be made by the stockholder, and (E) any other information
relating to such person that is required to be disclosed in solicitations of
proxies for election of Directors, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(including without limitation such person's written consent to being named in
the proxy statement, if any, as a nominee and to serving as a Director if
elected); and (ii) as to such stockholder giving notice, the information
required to be provided pursuant to paragraph (b) of this Section 5. At the
request of the Board of Directors, any person nominated by a stockholder for
election as a Director shall furnish to the Secretary of the corporation that
information required to be set forth in the stockholder's notice of nomination
which pertains to the nominee. No person shall be eligible for election as a
Director of the corporation unless nominated in accordance with the procedures
set forth in this paragraph (c). The chairman of the meeting shall, if the facts
warrant, determine and declare at the meeting that a nomination was not made in
accordance with the procedures prescribed by these Bylaws, and if he should so
determine, he shall so declare at the meeting and the defective nomination shall
be disregarded.
SECTION 6. SPECIAL MEETINGS.
(A) Special meeting of the stockholders of the corporation may be
called, for any purpose or purposes, by (i) the Chairman of the Board, (ii) the
President, or (iii) the Board of Directors pursuant to a resolution adopted by a
majority of the total number of authorized directors (whether or not there exist
any vacancies in previously authorized directorships at the time any such
resolution is presented to the Board for adoption), and shall be held at such
place, on such date, and at such time as they or he shall fix; provided,
however, that following registration of any of the classes of equity securities
of the corporation pursuant to the provisions of the Securities Exchange Act of
1934, as amended, special meetings of the stockholders may only be called by the
Board of Directors pursuant to a resolution adopted by a majority of the total
number of authorized Directors.
(B) If a special meeting is called by any person or persons other than
the Board of Directors, the request shall be in writing, specifying the time of
such meeting and the general nature of the business proposed to be transacted,
and shall be delivered personally or sent by registered mail or by telegraphic
or other facsimile transmission to the Chairman of the Board, the President, any
Vice President, or the Secretary of the corporation. No business may be
transacted at such special meeting otherwise than specified in such notice. The
officer receiving the request, shall cause notice to be promptly given to the
stockholders entitled to vote, in accordance with the provisions of Section 7 of
these Bylaws, that a meeting will be held not less than thirty-five (35) nor
more than sixty (60) days after the receipt of the request. If the notice is not
given within twenty (20) days after the receipt of the request, the person or
persons requesting the meeting may give the notice. Nothing contained in this
paragraphs (b) shall be construed as limiting, fixing, or affecting the time
when a meeting of stockholders called by action of the Board of Directors may be
held.
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SECTION 7. NOTICE OF MEETINGS. Except as otherwise provided by law or
the Certificate of Incorporation, written notice of each meeting of stockholders
shall be given not less than ten (10)(nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting, such
notice to specify the place, date and hour and purpose or purposes of the
meeting. Notice of the time, place and purpose of any meeting of stockholders
may be waived in writing, signed by the person entitled to notice thereof,
either before or after such meeting, and will be waived by any stockholder by
his attendance thereat or in person or by proxy, except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Any stockholder so waiving notice of such meeting shall be
bound by the proceedings of any such meeting in all respects as if due notice
thereof had been given.
SECTION 8. QUORUM. At all meetings of stockholders, except where
otherwise provided by statute or by the Certificate of Incorporation, or by
these Bylaws, the presence, in person or by proxy duly authorized, of the
holders of a majority of the outstanding shares of stock entitled to vote shall
constitute a quorum for the transaction of business. Any shares, the voting of
which at said meeting has been enjoined, or which for any reason cannot be
lawfully voted at such meeting, shall not be counted to determine a quorum at
such meeting. In the absence of a quorum any meeting of stockholders may be
adjourned, from time to time, either by the chairman of the meeting or by vote
of the holders of a majority of the shares represented thereat, but not other
business shall be transacted at such meeting. The stockholders present at a duly
called or convened meeting, at which a quorum is present, may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum. Except as otherwise provided by law,
the Certificate of Incorporation or these Bylaws, all action taken by the
holders of a majority of the voting power represented at any meeting at which a
quorum is present shall be valid and binding upon the corporation; provided,
however, that Directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote on the election of Directors) of shares of such class or classes present in
person or represented by proxy at the meeting shall be the act of such class.
SECTION 9. ADJOURNMENT AND NOTICE OF ADJOURNED MEETINGS. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
represented thereat. When a meeting is adjourned to another time or place,
notice need not be given of the adjourned meeting if the time and place thereof
are announced at the meeting at which the adjournment is taken. At the adjourned
meeting the corporation may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than thirty
(30) days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
SECTION 10. VOTING RIGHTS. For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the stock
records of the corporation on the record date, as provided in Section 12 of
these Bylaws, shall be entitled to vote at any meeting of
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stockholders. Except as may be otherwise provided in the Certificate of
Incorporation or these Bylaws, each stockholder shall be entitled to one vote
for each share of capital stock held by such stockholder. Every person entitled
to vote or execute consents shall have the right to do so either in person or by
an agent or agents authorized by a written proxy executed by such person or his
duly authorized agent, which proxy shall be filed with the Secretary at or
before the meeting at which it is to be used. An agent so appointed need not be
a stockholder. No proxy shall be voted after three (3) years from its date of
creation unless the proxy provides for a longer period. All elections of
Directors shall be by written ballot, unless otherwise provided in the
Certificate of Incorporation.
SECTION 11. BENEFICIAL OWNERS OF STOCK.
(A) If shares or other securities having voting power stand of record
in the names of two (2) or more persons, whether fiduciaries, members of a
partnership, joint tenants, tenants in common, tenants by the entirety, or
otherwise, or if two (2) or more persons have the same fiduciary relationship
respecting the same shares, unless the Secretary is given written notice to the
contrary and is furnished with a copy of the instrument or order appointing them
or creating the relationship wherein it is so provided, their acts with respect
to voting shall have the following effect: (a) if only one (1) votes, his act
binds all; (b) if more than one (1) votes, the act of the majority so voting
binds all; (c) if more than one (1) votes, but the vote is evenly split on any
particular matter, each faction may vote the securities in question
proportionally, or may apply to the Delaware Court of Chancery for relief as
provided in the General Corporation Law of Delaware, Section 217(b). If the
instrument filed with the Secretary shows that any such tenancy is held in
unequal interests, a majority or even-split for the purpose of this subsection
(c) shall be a majority or even-split in interest.
(B) Persons holding stock in a fiduciary capacity shall be entitled to
vote the shares so held. Persons whose stock is pledged shall be entitled to
vote, unless in the transfer by the pledgor on the books of the corporation he
has expressly empowered the pledgee to vote thereon, in which case only the
pledgee, or his proxy, may represent such stock and vote thereon.
SECTION 12. LIST OF STOCKHOLDERS. The Secretary shall prepare and make,
at least ten (10) days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at said meeting, arranged in alphabetical
order, showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not
specified, at the place where the meeting is to be held. The list shall be
produced and kept at the time and place of meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
SECTION 13. ACTION WITHOUT MEETING.
(A) Any action required by statute to be taken at any annual or special
meeting of the stockholders, or any action which may be taken at any annual or
special meeting of the
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stockholders, may be taken without a meeting, without prior notice and without a
vote, if a consent or consents in writing, setting forth the action so taken,
are signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
(B) Every written consent shall bear the date of signature of each
stockholder who signs the consent, and no written consent shall be effective to
take the corporate action referred to therein unless, within sixty (60) days of
the earliest dated consent delivered to the Corporation in the manner herein
required, written consents signed by a sufficient number of stockholders to take
action are delivered to the corporation by delivery to its registered office in
the State of Delaware, its principal place of business or an officer or agent of
the corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to a corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
(C) Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those stock-
holders who have not consented in writing. If the action which is consented to
is such as would have required the filing of a certificate under any section of
the General Corporation Law of Delaware if such action had been voted on by
stockholders at a meeting thereof, then the certificate filed under such section
shall state, in lieu of any statement required by such section concerning any
vote of stockholders, that written notice and written consent have been given as
provided in Section 228 of the General Corporation Law of Delaware.
SECTION 14. ORGANIZATION
(A) At every meeting of stockholders, the Chairman of the Board of
Directors, or, if a Chairman has not been appointed or is absent, the President,
or, if the President is absent, the most senior Vice President present, or in
the absence of any such officer, a chairman of the meeting chosen by a majority
in interest of the stockholders entitled to vote, present in person or by proxy,
shall act as chairman. The Secretary, or, in his absence, an Assistant Secretary
directed to do so by the President, shall act as secretary of the meeting.
(B) The Board of Directors of the corporation shall be entitled to make
such rules and regulations for the conduct of meetings of stockholders as it
shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business for the meeting,
rules and procedures for maintaining order at the meeting and the safety of
those present, limitations on participation in such meeting to stockholders of
record of the corporation and their duly authorized and constituted proxies, and
such other persons as the chairman shall permit, restrictions on entry to the
meeting after the time fixed for the commencement thereof, limitations on the
time allotted to questions or comments by participants and regulation of the
opening and closing of the polls for
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balloting on matters which are to be voted on by ballot. Unless, and to the
extent determined by the Board of Directors or the chairman of the meeting,
meetings of stockholders shall not be required to be held in accordance with
rules of parliamentary procedure.
ARTICLE IV
DIRECTORS
SECTION 15. NUMBER AND TERM OF OFFICE. The Board of Directors shall
consist of one or more members, the number thereof to be determined from time to
time by resolution of the Board of Directors. The number of authorized Directors
may be modified from time to time by amendment of this Section 15 in accordance
with the provisions of Section 44 hereof. Except as provided in Section 17, the
Directors shall be elected by the stockholders at their annual meeting in each
year and shall hold office until the next annual meeting and until their
successors shall be duly elected and qualified. Directors need not be
stockholders unless so required by the Certificate of Incorporation. If for any
cause, the Directors shall not have been elected at an annual meeting, they may
be elected as soon thereafter as convenient at a special meeting of the
stockholders called for that purpose in the manner provided in these Bylaws. No
reduction of the authorized number of Directors shall have the effect of
removing any Director before the Director's term of office expires, unless such
removal is made pursuant to the provisions of Section 19 hereof.
SECTION 16. POWERS. The powers of the corporation shall be exercised,
its business conducted and its property controlled by the Board of Directors,
except as may be otherwise provided by statute or by the Certificate of
Incorporation.
SECTION 17. VACANCIES. Unless otherwise provided in the Certificate of
Incorporation, vacancies and newly created directorships resulting from any
increase in the authorized number of Directors may be filled by a majority of
the Directors then in office, although less than a quorum, or by a sole
remaining Director, and each Director so elected shall hold office for the
unexpired portion of the term of the Director whose place shall be vacant and
until his successor shall have been duly elected and qualified. A vacancy in the
Board of Directors shall be deemed to exist under this Section 17 in the case of
the death, removal or resignation of any Director, or if the stockholders fail
at any meeting of stockholders at which Directors are to be elected (including
any meeting referred to in Section 19 below) to elect the number of Directors
then constituting the whole Board of Directors.
SECTION 18. RESIGNATION. Any Director may resign at any time by
delivering his written resignation to the Secretary, such resignation to specify
whether it will be effective at a particular time, upon receipt by the Secretary
or at the pleasure of the Board of Directors. If no such specification is made,
it shall be deemed effective at the pleasure of the Board of Directors. When one
or more Directors shall resign from the Board of Directors, effective at a
future date, a majority of the Directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each Director so chosen shall hold office for the
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unexpired portion of the term of the Director whose place shall be vacated and
until his successor shall have been duly elected and qualified.
SECTION 19. REMOVAL. At a special meeting of stockholders called for
the purpose in the manner hereinabove provided, subject to any limitations
imposed by law or the Certificate of Incorporation, the Board of Directors, or
any individual Director, may be removed from office, with or without cause, and
a new Director or Directors elected by a vote of stockholders holding a majority
of the outstanding shares entitled to vote at an election of Directors.
SECTION 20. MEETINGS.
(A) ANNUAL MEETINGS. The annual meeting of the Board of Directors shall be
held immediately after the annual meeting of stockholders and at the place where
such meeting is held. No notice of an annual meeting of the Board of Directors
shall be necessary and such meeting shall be held for the purpose of electing
officers and transacting such other business as may lawfully come before it.
(B) REGULAR MEETINGS. Except as hereinafter otherwise provided, regular
meetings of the Board of Directors shall be held in the office of the
corporation required to be maintained pursuant to Section 2 hereof. Unless
otherwise restricted by the Certificate of Incorporation, regular meetings of
the Board of Directors may also be held at any place within or without the State
of Delaware which has been determined by the Board of Directors.
(C) SPECIAL MEETINGS. Unless otherwise restricted by the Certificate of
Incorporation, special meetings of the Board of Directors may be held at any
time and place with or without the State of Delaware whenever called by the
President or a majority of the Directors.
(D) TELEPHONE MEETINGS. Any member of the Board of Directors, or of any
committee thereof, may participate in a meeting by means of conference telephone
or similar communications equipment by means of which all persons participating
in the meeting can hear each other, and participation in a meeting by such means
shall constitute presence in person at such meeting.
(E) NOTICE OF MEETINGS. Written notice of the time and place of all special
meetings of the Board of Directors shall be given at least one (1) day before
the date of the meeting. Notice of any meeting may be waived in writing at any
time before or after the meeting and will be waived by any Director by
attendance thereat, except when the Director attends the meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened.
(F) WAIVER OF NOTICE. The transaction of all business at any meeting of the
Board of Directors, or any committee thereof, however called or noticed, or
wherever held, shall be as valid as though had at a meeting duly held after
regular call and notice, if a quorum be present and if, either before or after
the meeting, each of the Directors not present shall sign a written waiver of
notice, or a consent to holding such meeting, or an approval of the minutes
thereof. Neither the business to be transacted at, nor the purpose of, any
regular or special
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meeting of the Board of Directors need be specified in any written waiver of
notice or consent unless so required by the Certificate of Incorporation or
these Bylaws. All such waivers, consents or approvals shall be filed with the
corporate records or made a part of the minutes of the meeting.
SECTION 21. QUORUM AND VOTING.
(A) Unless the Certificate of Incorporation requires a greater number
and except with respect to indemnification questions arising under Section 42
hereof, for which a quorum shall be one-third of the exact number of Directors
fixed from time to time in accordance with Section 15 hereof, but not less than
one (1), a quorum of the Board of Directors shall consist of a majority of the
exact number of Directors fixed from time to time in accordance with Section 15
of these Bylaws, but not less than one (1); provided, however, at any meeting
whether a quorum be present or otherwise, a majority of the Directors present
may adjourn from time to time until the time fixed for the next regular meeting
of the Board of Directors, without notice other than by announcement at the
meeting.
(B) At each meeting of the Board of Directors at which a quorum is
present all questions and business shall be determined by a vote of a majority
of the Directors present, unless a different vote be required by law, the
Certificate of Incorporation or these Bylaws.
SECTION 22. ACTION WITHOUT MEETING. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
SECTION 23. FEES AND COMPENSATION. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and at any meeting of a committee of the Board
of Directors. Nothing herein contained shall be construed to preclude any
Director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise and receiving compensation therefor.
SECTION 24. COMMITTEES.
(A) EXECUTIVE COMMITTEE. The Board of Directors may by resolution passed
by a majority of the whole Board of Directors, appoint an Executive Committee to
consist of one (1) or more members of the Board of Directors. The Executive
Committee, to the extent permitted by law and specifically granted by the Board
of Directors, shall have and may exercise when the Board of Directors is not in
session all powers of the Board of Directors in the management of the business
and affairs of the corporation, including, without limitation, the power and
authority to declare a dividend or to authorize the issuance of stock, except
such committee shall not have the power or authority to amend the Certificate of
Incorporation, to
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adopt an agreement of merger or consolidation, to recommend to the stockholders
the sale, lease or exchange of all or substantially all of the corporation's
property and assets, to recommend to the stockholders of the corporation a
dissolution of the corporation or a revocation of a dissolution or to amend
these Bylaws.
(B) OTHER COMMITTEES. The Board of Directors may, by resolution passed
by a majority of the whole Board of Directors, from time to time appoint such
other committees as may be permitted by law. Such other committees appointed by
the Board of Directors shall consist of one (1) or more members of the Board of
Directors, and shall have such powers and perform such duties as may be
prescribed by the resolution or resolutions creating such committees, but in no
event shall such committee have the powers denied to the Executive Committee in
these Bylaws.
(C) TERM. The members of all committees of the Board of Directors shall
serve a term coexistent with that of the Board of Directors which shall have
appointed such committee. The Board of Directors, subject to the provisions of
subsections (a) or (b) of this Section 24, may at any time increase or decrease
the number of members of a committee or terminate the existence of a committee.
The membership of a committee member shall terminate on the date of his death or
voluntary resignation from the committee or from the Board of Directors. The
Board of Directors may at any time for any reason remove any individual
committee member and the Board of Directors may fill any committee vacancy
created by death, resignation, removal or increase in the number of members of
the committee. The Board of Directors may designate one or more Directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee, and, in addition, in the absence or
disqualification of any member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member.
(D) MEETINGS. Unless the Board of Directors shall otherwise provide,
regular meetings of the Executive Committee or any other committee appointed
pursuant to this Section 24 shall be held at such times and places as are
determined by the Board of Directors, or by any such committee, and when notice
thereof has been given to each member of such committee, no further notice of
such regular meetings need be given thereafter. Special meetings of any such
committee may be held at any place which has been determined from time to time
by such committee, and may be called by any Director who is a member of such
committee, upon written notice to the members of such committee of the time and
place of such special meeting given in the manner provided for the giving of
written notice to members of the Board of Directors of the time and place of
special meetings of the Board of Directors. Notice of any special meeting of any
committee may be waived in writing at any time before or after the meeting and
will be waived by any Director by attendance thereat, except when the Director
attends such special meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. A majority of the authorized number of
members of any such committee shall constitute a quorum for the transaction of
business, and the act of a majority of those present at any meeting at which a
quorum is present shall be the act of such committee.
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SECTION 25. ORGANIZATION. At every meeting of the Directors, the
Chairman of the Board of Directors, or, if a Chairman has not been appointed or
is absent, the President, or if the President is absent, the most senior Vice
President, or, in the absence of any such officer, a chairman of the meeting
chosen by a majority of the Directors present, shall preside over the meeting.
The Secretary, or in his absence, an Assistant Secretary directed to do so by
the President, shall act as secretary of the meeting.
ARTICLE V
OFFICERS
SECTION 26. OFFICERS DESIGNATED. The officers of the corporation shall
be the President, one or more Vice Presidents, the Secretary, the Chief
Financial Officer and the Treasurer, all of whom shall be elected at the annual
organizational meeting of the Board of Directors. The order of the seniority of
the Vice Presidents shall be in the order of their nomination, unless otherwise
determined by the Board of Directors. The Board of Directors may also appoint a
Chairman of the Board of Directors, one or more Assistant Secretaries, Assistant
Treasurers, and such other officers and agents with such powers and duties as it
shall deem necessary. The Board of Directors may assign such additional titles
to one or more of the officers as it shall deem appropriate. Any one person may
hold any number of offices of the corporation at any one time unless
specifically prohibited therefrom by law. The salaries and other compensation of
the officers of the corporation shall be fixed by or in the manner designated by
the Board of Directors.
SECTION 27. TENURE AND DUTIES OF OFFICERS.
(A) GENERAL. All officers shall hold office at the pleasure of the Board
of Directors and until their successors shall have been duly elected and
qualified, unless sooner removed. Any officer elected or appointed by the Board
of Directors may be removed at any time by the Board of Directors. If the office
of any officer becomes vacant for any reason, the vacancy may be filled by the
Board of Directors.
(B) DUTIES OF CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the
Board of Directors, when present, shall preside at all meetings of the
stockholders and the Board of Directors. The Chairman of the Board of Directors
shall perform other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time. If there is no President, then the Chairman
of the Board of Directors shall also serve as the Chief Executive Officer of the
corporation and shall have the powers and duties prescribed in paragraph (c) of
this Section 27.
(C) DUTIES OF PRESIDENT. The President shall preside at all meetings of
the stockholders and at all meetings of the Board of Directors, unless the
Chairman of the Board of Directors has been appointed and is present. The
President shall be the Chief Executive Officer of the corporation and shall,
subject to the control of the Board of Directors, have general supervision,
direction and control of the business and officers of the corporation. The
President
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shall perform other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time.
(D) DUTIES OF VICE PRESIDENT. The Vice President, in the order of their
seniority, may assume and perform the duties of the President in the absence or
disability of the President or whenever the office of President is vacant. The
Vice President shall perform other duties commonly incident to their office and
shall also perform such other duties and have such other powers as the Board of
Directors or the President shall designate from time to time.
(E) DUTIES OF SECRETARY. The Secretary shall attend all meetings of the
stockholders and the Board of Directors, and shall record all acts and
proceedings thereof in the minute book of the corporation. The Secretary shall
give notice in conformity with these Bylaws of all meetings of the stockholders,
and of all meetings of the Board of Directors and any committee thereof
requiring notice. The Secretary shall perform all other duties given him in
these Bylaws and other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time. The President may direct any Assistant
Secretary to assume and perform the duties of the Secretary in the absence or
disability of the Secretary, and each Assistant Secretary shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time.
(F) DUTIES OF CHIEF FINANCIAL OFFICER OR TREASURER. The Chief Financial
Officer or Treasurer shall keep or cause to be kept the books of account of the
corporation a thorough and proper manner, and shall render statements of the
financial affairs of the corporation in such form and as often as required by
the Board of Directors or the President. The Chief Financial Officer or
Treasurer, subject to the order of the Board of Directors, shall have the
custody of all funds and securities of the corporation. The Chief Financial
Officer or Treasurer shall perform other duties commonly incident to his office
and shall also perform such other duties and have such other powers as the Board
of Directors or the President shall designate from time to time. The President
may direct any Assistant Treasurer to assume and perform the duties of the Chief
Financial Officer or Treasurer in the absence or disability of the Chief
Financial Officer or Treasurer, and each Assistant Treasurer shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time.
SECTION 28. DELEGATION OF AUTHORITY. The Board of Directors may from
time to time delegate the powers or duties of any officer to any other officer
or agent, notwithstanding any provision hereof.
SECTION 29. RESIGNATIONS. Any officers may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer.
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SECTION 30. REMOVAL. Any officer may be removed from office at any time,
either with or without cause, by the vote or written consent of a majority of
the Directors in office at the time, or by any committee or superior officers
upon whom such power of removal may have been conferred by the Board of
Directors.
ARTICLE VI
EXECUTION OF CORPORATE INSTRUMENTS AND
VOTING OF SECURITIES OWNED BY THE CORPORATION
SECTION 31. EXECUTION OF CORPORATE INSTRUMENTS. The Board of Directors
may, in its discretion, determine the method and designate the signatory officer
or officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into contracts on behalf of
the corporation, except where otherwise provided by law or these Bylaws, and
such execution or signature shall be binding upon the corporation.
Unless otherwise specifically determined by the Board of Directors or
otherwise required by law, promissory notes, deeds of trust, mortgages and other
evidences of indebtedness of the corporation, and other corporate instruments or
documents requiring the corporate seal, and certificates of shares of stock
owned by the corporation, shall be executed, signed or endorsed by the Chairman
of the Board of Directors, or the President or any Vice President, and by the
Secretary or Chief Financial Officer or Treasurer or any Assistant Secretary or
Assistant Treasurer. All other instruments and documents requiring the corporate
signature, but not requiring the corporate seal, may be executed as aforesaid or
in such other manner as may be directed by the Board of Directors.
All checks and drafts drawn on banks or other depositaries on funds to
the credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.
Unless authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall have any power
or authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount.
SECTION 32. VOTING OF SECURITIES OWNED BY THE CORPORATION. All stock and
other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such authorization,
by the Chairman of the Board of Directors, the President, or any Vice President.
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ARTICLE VII
SHARES OF STOCK
SECTION 33. FORM AND EXECUTION OF CERTIFICATES. Certificates for the
shares of stock of the corporation shall be in such form as is consistent with
the Certificate of Incorporation and applicable law. Every holder of stock in
the corporation shall be entitled to have a certificate signed by or in the name
of the corporation by the Chairman of the Board of Directors, or the President
or any Vice President and by the Treasurer or Assistant Treasurer or the
Secretary or Assistant Secretary, certifying the number of shares owned by him
in the corporation. Any or all signatures on the certificate may be a facsimile.
In case any officer, transfer agent, or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent, or registrar before such certificate is issued, it
may be issued with the same effect as if he were such officer, transfer agent,
or registrar at the date of issue.
SECTION 34. LOST CERTIFICATES. A new certificate or certificates shall
be issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. The corporation may require, as a condition
precedent to the issuance of a new certificate or certificates, the owner of
such lost, stolen, or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require or to
give the corporation a surety bond in such form and amount as it may direct as
indemnity against any claim that may be made against the corporation with
respect to the certificate alleged to have been lost, stolen, or destroyed.
SECTION 35. TRANSFERS.
(A) Transfers of record of shares of stock of the corporation shall be
made only upon its books by the holders thereof, in person or by attorney duly
authorized and upon the surrender of a properly endorsed certificate or
certificates for a like number of shares.
(B) The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the corporation to restrict the transfer of shares of stock of the corporation
of any one or more classes owned by such stockholders in any manner not
prohibited by the General Corporation Law of Delaware.
SECTION 36. FIXING RECORD DATES.
(A) In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix, in advance, a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors, and which record date
shall not be more than sixty (60) nor less than ten (10) days before the date of
such meeting. If no record date is fixed by the Board of Directors, the record
date for determining stockholders entitled to notice of or to vote at a meeting
of stockholders shall be at the close of
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business on the day next preceding the day on which notice is given, or if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting: provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting.
(B) In order that the Corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the Board
of Directors may fix, in advance, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which date shall not be more than ten (10) days after the date
upon which the resolution fixing the record date is adopted by the Board of
Directors. If no record date has been fixed by the Board of Directors, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting, when no prior action by the Board of Directors is
required by law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
Corporation by delivery to its registered office in the State of Delaware, its
principal place of business or an officer or agent of the Corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to a Corporation's registered office shall be by hand or
by certified or registered mail, return receipt requested. If no record date has
been fixed by the Board of Directors and prior action by the Board of Directors
is required by law, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting shall be at the close
of business on the day on which the Board of Directors adopts the resolution
taking such prior action.
(C) In order that the corporation may determine the stockholders
entitled to receive payment of any dividend or distribution or allotment of any
rights or the stockholders entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted, and which record date shall be not more than sixty (60) days prior
to such action. If no record date is fixed, the record date for determining
stockholders for any such purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto.
SECTION 37. REGISTERED STOCKHOLDERS. The corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and shall not
be bound to recognize any equitable or other claim to or interest in such share
or shares on the part of any other person whether or not it shall have express
or other notice thereof, except as otherwise provided by the laws of Delaware.
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ARTICLE VIII
OTHER SECURITIES OF THE CORPORATION
SECTION 38. EXECUTION OF OTHER SECURITIES. All bonds, debentures and
other corporate securities of the corporation, other than stock certificates
(covered in Section 33), may be signed by the Chairman of the Board of
Directors, the President or any Vice President, or such other person as may be
authorized by the Board of Directors, and the corporate seal impressed thereon
or a facsimile of such seal imprinted thereon and attested by the signature of
the Secretary or an Assistant Secretary, or the Chief Financial Officer or
Treasurer or an Assistant Treasurer; provided, however, that where any such
bond, debenture or other corporate security shall be authenticated by the manual
signature of a trustee under an indenture pursuant to which such bond, debenture
or other corporate security shall be issued, the signatures of the persons
signing and attesting the corporate seal on such bond, debenture or other
corporate security may be the imprinted facsimile of the signatures of such
persons. Interest coupons appertaining to any such bond, debenture or other
corporate security, authenticated by a trustee as aforesaid, shall be signed by
the Treasurer or an Assistant Treasurer of the corporation or such other person
as may be authorized by the Board of Directors, or bear imprinted thereon the
facsimile signature of such person. In case any officer who shall have signed or
attested any bond, debenture or other corporate security, or whose facsimile
signature shall appear thereon or on any such interest coupon, shall have ceased
to be such officer before the bond, debenture or other corporate security so
signed or attested shall have been delivered, such bond, debenture or other
corporate security nevertheless may be adopted by the corporation and issued and
delivered as though the person who signed the same or whose facsimile signature
shall have been used thereon had not ceased to be such officer of the
corporation.
ARTICLE IX
DIVIDENDS
SECTION 39. DECLARATION OF DIVIDENDS. Dividends upon the capital stock
of the corporation, subject to the provisions of the Certificate of
Incorporation, if any, may be declared by the Board of Directors pursuant to law
at any regular or special meeting. Dividends may be paid in cash, in property,
or in shares of the capital stock, subject to the provisions of the Certificate
of Incorporation.
SECTION 40. DIVIDEND RESERVE. Before payment of any dividend, there may
be set aside out of any funds of the corporation available for dividends such
sum or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Board of Directors shall think
conducive to the interests of the corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
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ARTICLE X
FISCAL YEAR
SECTION 41. FISCAL YEAR. The fiscal year of the corporation shall be
fixed by resolution of the Board of Directors.
ARTICLE XI
INDEMNIFICATION
SECTION 42. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER
AGENTS.
(A) DIRECTORS AND EXECUTIVE OFFICERS. The corporation shall indemnify its
Directors and executive officers to the fullest extent not prohibited by the
Delaware General Corporation Law; provided, however, that the corporation may
limit the extent of such indemnification by individual contracts with its
Directors and executive officers; and, provided, further, that the corporation
shall not be required to indemnify any Director or executive officer in
connection with any proceeding (or part thereof) initiated by such person or any
proceeding by such person against the corporation or its Directors, officers,
employees or other agents unless (i) such indemnification is expressly required
to be made by law, (ii) the proceeding was authorized by the Board of Directors
of the corporation or (iii) such indemnification is provided by the corporation,
in its sole discretion, pursuant to the powers vested in the corporation under
the Delaware General Corporation Law.
(B) OTHER OFFICERS, EMPLOYEES AND OTHER AGENTS. The corporation shall have
power to indemnify its other officers, employees and other agents as set forth
in the Delaware General Corporation Law.
(C) GOOD FAITH.
(1) For purpose of any determination under this Bylaw, a Director or
executive officer shall be deemed to have acted in good faith and
in a manner he reasonably believed to be in or not opposed to best
interests of the corporation, and, with respect to any criminal
action or proceeding, to have had no reasonable cause to believe
that his conduct was unlawful, if his action is based on
information, opinions, reports and statements, including financial
statements and other financial data, in each case prepared or
presented by:
(I) One or more officers or employees of the corporation whom the
Director or executive officer believed to be reliable and
competent in the matters presented;
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(II) Counsel, independent accountants or other persons as to
matters which the Director or executive officer believed to
be within such person's professional competence; and
(III) With respect to a Director, a committee of the Board upon
which such Director does not serve, as to matters within such
Committee's designated authority, which committee the
Director believes to merit confidence; so long as, in each
case, the Director or executive officer acts without
knowledge that would cause such reliance to be unwarranted.
(2) The termination of any proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent
shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to
be in or not opposed to the best interests of the corporation, and,
with respect to any criminal proceeding, that he had reasonable
cause to believe that his conduct was unlawful.
(3) The provisions of this paragraph (c) shall not be deemed to be
exclusive or to limit in any way the circumstances in which a
person may be deemed to have met the applicable standard of conduct
set forth by the Delaware General Corporation Law.
(D) EXPENSES. The corporation shall advance, prior to the final disposition
of any proceeding, promptly following request therefor, all expenses incurred by
any Director or executive officer in connection with such proceeding upon
receipt of an undertaking by or on behalf of such person to repay said amounts
if it should be determined ultimately that such person is not entitled to be
indemnified under this Bylaw or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to
paragraph (e) of this Bylaw, no advance shall be made by the corporation if a
determination is reasonably and promptly made (1) by the Board of Directors by a
majority vote of a quorum consisting of Directors who were not parties to the
proceeding, or (2) if such quorum is not obtainable, or, even if obtainable, a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, that the facts known to the decision making party at the time
such determination is made demonstrate clearly and convincingly that such person
acted in bad faith or in a manner that such person did not believe to be in or
not opposed to the best interests of the corporation.
(E) ENFORCEMENT. Without the necessity of entering into an express
contract, all rights to indemnification and advances to Directors and executive
officers under this Bylaw shall be deemed to be contractual rights and be
effective to the same extent and as if provided for in a contract between the
corporation and the Director or executive officer. Any right to indemnification
or advances granted by this Bylaw to a Director or executive officer shall be
enforceable by or on behalf of the person holding such right in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. The claimant in such enforcement action,
if successful in whole or in part, shall be entitled to be paid also the
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expense of prosecuting his claim. The corporation shall be entitled to raise as
a defense to any such action that the claimant has not met the standards of
conduct that make it permissible under the Delaware General Corporation Law for
the corporation (including its Board of Directors), independent legal counsel or
its stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he has met the applicable standard of conduct set forth in the Delaware
General Corporation Law, nor an actual determination by the corporation
(including its Board of Directors, independent legal counsel or its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that claimant has not
met the applicable standard of conduct.
(F) NON-EXCLUSIVITY OF RIGHTS. The rights conferred to any person by this
Bylaw shall not be exclusive of any other right which such person may have or
hereafter acquire under any statute, provision of the Certificate of
Incorporation, Bylaws, agreement, vote of stockholders or disinterested
Directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office. The corporation is specifically
authorized to enter into individual contracts with any or all of its Directors,
officers, employees or agents respecting indemnification and advances, to the
fullest extent not prohibited by the Delaware General Corporation Law.
(G) SURVIVAL OF RIGHTS. The rights conferred to any person by this Bylaw
shall continue as to a person who has ceased to be a Director, officer, employee
or other agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
(H) INSURANCE. To the fullest extent permitted by the Delaware General
Corporation Law, the corporation, upon approval by the Board of Directors, may
purchase insurance on behalf of any person required or permitted to be
indemnified pursuant to this Bylaw.
(I) AMENDMENTS. Any repeal or modification of this Bylaw shall only be
prospective and shall not affect the rights under this Bylaw in effect at the
time of the alleged occurrence of any action or omission to act that is the
cause of any proceeding against any agent of the corporation.
(J) SAVING CLAUSE. If this Bylaw or any portion hereof shall be invalidated
on any ground by any court of competent jurisdiction, then the corporation shall
nevertheless indemnify each Director and executive officer to the full extent
not prohibited by any applicable portion of this Bylaw that shall not have been
invalidated, or by any other applicable law.
(K) CERTAIN DEFINITIONS. For the purposes of this Bylaw, the following
definitions shall apply:
(1) The term "PROCEEDING" shall be broadly construed and shall
include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of testimony
in, any threatened, pending or
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completed action, suit or proceeding, whether civil, criminal, administrative
or investigative.
(2) The term "EXPENSES" shall be broadly construed and shall include,
without limitation, court costs, attorneys' fees, witness fees, fines,
amounts paid in settlement or judgment and any other costs and expenses of
any nature or kind incurred in connection with any proceeding.
(3) The term the "CORPORATION" shall include, in addition to the
resulting corporation, any constituent corporation (including any constituent
of a constituent) absorbed in a consolidation or merger which, if its
separate existence had continued, would have had power and authority to
indemnify its directors, officers, and employees or agents, so that any
person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership joint venture, trust or other enterprise, shall
stand in the same position under the provisions of this Bylaw with respect to
the resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued.
(4) Reference to a "director," "officer," "employee," or "agent" of the
corporation shall include, without limitation, situations where such person
is serving at the request of the corporation as a director, officer,
employee, trustee or agent of another corporation, partnership, joint
venture, trust or other enterprise.
(5) Reference to "other enterprises" shall include employee benefit
plans; reference to "fines" shall include any excise taxes assessed on a
person with respect to an employee benefit plan; and references to "serving
at the request of the corporation" shall include any service as a director,
officer, employee or agent of the corporation which imposes duties on, or
involves services by, such director, officer, employee, or agent with respect
to an employee benefit plan, its participants, or beneficiaries; and a person
who acted in good faith and in a manner he reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best interests
of the corporation" as referred to in this Bylaw.
ARTICLE XII
NOTICES
SECTION 43. NOTICES.
(A) NOTICE TO STOCKHOLDERS. Whenever, under any provisions of these Bylaws,
notice is required to be given to any stockholder, it shall be given in writing,
timely and duly deposited in the United States mail, postage prepaid, and
addressed to his last known post office address as shown by the stock record of
the corporation or its transfer agent.
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(B) NOTICE TO DIRECTORS. Any notice required to be given to any
Director may be given by the method stated in subsection (a), or by facsimile,
telex or telegram, except that such notice other than one which is delivered
personally shall be sent to such address as such Director shall have filed in
writing with the Secretary, or, in the absence of such filing, to the last known
post office address of such Director.
(C) ADDRESS UNKNOWN. If no address of a stockholder or Director be
known, notice may be sent to the office of the corporation required to be
maintained pursuant to Section 2 hereof.
(D) AFFIDAVIT OF MAILING. An affidavit of mailing, executed by a duly
authorized and competent employee of the corporation or its transfer agent
appointed with respect to the class of stock affected, specifying the name and
address or the names and addresses of the stockholder or stockholders, or
Director or Directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall be conclusive evidence of the
statements therein contained.
(E) TIME NOTICES DEEMED GIVEN. All notices given by mail, as above
provided, shall be deemed to have been given as at the time of mailing and all
notices given by facsimile, telex or telegram shall be deemed to have been given
as of the sending time recorded at time of transmission.
(F) METHODS OF NOTICE. It shall not be necessary that the same method
of giving notice be employed in respect to all Directors, but one permissible
method may be employed in respect to any one or more, and any other permissible
method or methods may be employed in respect of any other or others.
(G) FAILURE TO RECEIVE NOTICE. The period or limitation of time within
which any stockholder may exercise any option or rights, or enjoy any privilege
or benefit, or be required to act, or within which any Director may exercise any
power or right, or enjoy any privilege, pursuant to any notice sent him in the
manner above provided, shall not be affected or extended in any manner by the
failure of such stockholder or such Director to receive such notice.
(H) NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL. Whenever
notice is required to be given, under any provision of law or of the Certificate
of Incorporation or Bylaws of the corporation, to any person with whom
communication is unlawful, the giving of such notice to such person shall not be
required and there shall be no duty to apply to any governmental authority or
agency for a license or permit to give such notice to such person. Any action or
meeting which shall be taken or held without notice to any such person with whom
communication is unlawful shall have the same force and effect as if such notice
had been duly given. In the event that the action taken by the corporation is
such as to require the filing of a certificate under any provision of the
Delaware General Corporation Law, the certificate shall state, if such is the
fact and if notice is required, that notice was given to all persons entitled to
receive notice except such persons with whom communication is unlawful.
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(I) NOTICE TO PERSON WITH UNDELIVERABLE ADDRESS. Whenever notice is
required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of the
taking of action by written consent without a meeting to such person during the
period between such two consecutive annual meetings, or (ii) all, and at least
two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve month period, have been mailed addressed to such
person at his address as shown on the records of the Corporation and have been
returned undeliverable, the giving of such notice to such person all not be
required. Any action or meeting which shall be taken or held without notice to
such person shall have the same force and effect as if such notice had been duly
given. If any such person shall deliver to the corporation a written notice
setting forth his then current address, the requirement that notice be given to
such person shall be reinstated. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the Delaware General Corporation Law, the certificate need not
state that notice was not given to persons to whom notice was not required to be
given pursuant to this paragraph.
ARTICLE XIII
AMENDMENTS
SECTION 44. AMENDMENTS. Except as otherwise set forth in paragraph (i)
of Section 42 of these Bylaws, these Bylaws may be amended or repealed and new
Bylaws adopted by the stockholders entitled to vote. The Board of Directors
shall also have the power, if such power is conferred upon the Board of
Directors by the Certificate of Incorporation, to adopt, amend or repeal Bylaws
(including, without limitation, the amendment of any Bylaw setting forth the
number of Directors who shall constitute the whole Board of Directors).
ARTICLE XIV
RIGHT OF FIRST REFUSAL
SECTION 45. RIGHT OF FIRST REFUSAL. No holder of the corporation's
common stock shall sell, assign, pledge, or in any manner transfer any of the
shares of common stock of the corporation or any right or interest therein,
whether voluntarily or by operation of law, or by gift or otherwise, except by a
transfer which meets the requirements hereinafter set forth in this Bylaw:
(A) If the stockholder receives from anyone a bona fide offer
acceptable to the stockholder to purchase any of his shares of stock, then the
stockholder shall first give written notice thereof to the corporation. The
notice shall name the proposed transferee and state the number of shares to be
transferred, the price per share and all other terms and conditions of the
offer.
(B) For fifteen (15) days following receipt of such notice, the
corporation shall have the option to purchase all or any lesser part of the
shares specified in the notice at the price and upon the terms set forth in such
bona fide offer. In the event the corporation elects to
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purchase all the shares, it shall give written notice to the selling stockholder
of its election and settlement for said shares be made as provided below in
paragraph (c).
(C) In the event the corporation elects to acquire any of the shares of
the selling stockholder as specified in said selling stockholder's notice, the
Secretary of the corporation shall so notify the selling stockholder and
settlement thereof shall be made in cash within thirty (30) days after the
Secretary of the corporation receives said selling stockholder's notice;
provided that if the terms of payment set forth in said selling stockholder's
notice were other than cash against delivery, the corporation and/or its other
stockholders shall pay for said shares on the same terms and conditions set
forth in said selling stockholder's notice.
(D) In the event the corporation does not elect to acquire all of the
shares specified in the selling stockholder's notice, said selling stockholder
may, within the sixty-day period following the expiration of the option rights
granted to the corporation and other stockholders herein, sell elsewhere the
shares specified in said selling stockholder's notice which were not acquired by
the corporation and/or its other stockholders, in accordance with the provisions
of paragraph (d) of this bylaw, provided that said sale shall not be on terms
and conditions more favorable to the purchaser than those contained in the bona
fide offer set forth in said selling stockholder's notice. All shares so sold by
said selling stockholder shall continue to be subject to the provisions of this
Bylaw in the same manner as before said transfer.
(E) Anything to the contrary contained herein notwithstanding, the
following transactions shall be exempt from the provisions of this Bylaw:
(1) A stockholder's transfer of any or all shares held either
during such stockholder's lifetime or on death by will or
intestacy to such stockholder's immediate family.
"Immediate family" as used herein shall mean spouse,
lineal descendant, father, mother, brother, or sister of
the stockholder making such transfer and shall include any
trust established primarily for the benefit of the
stockholder or his immediate family.
(2) A stockholder's bona fide pledge or mortgage of any shares
with a commercial lending institution, provided that any
subsequent transfer of said shares by said institution
shall be conducted in the manner set forth in this Section
45.
(3) A stockholder's transfer of any or all of such
stockholder's shares to the corporation or to any other
stockholder of the corporation.
(4) A stockholder's transfer of any or all of such
stockholder's shares to a person who, at the time of such
transfer, is an officer or director of the corporation.
(5) A corporate stockholder's transfer of any or all of its
shares pursuant to and in accordance with the terms of any
merger, consolidation, reclassification of shares or
capital reorganization of the corporate stockholder, or
pursuant to a sale of all or substantially all of the
stock or assets of a corporate stockholder.
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(6) A corporate stockholder's transfer of any or all of its shares to
any or all of its stockholders.
(7) A transfer by a stockholder which is a limited or general
partnership to any or all of its partners.
In any such case, the transferee, assignee, or other recipient
shall receive and hold such stock to the provisions of this Bylaw,
and there shall be no further transfer of such stock except in
accordance with this Bylaw.
(F) The provisions of this Section 45 may be waived with respect to any
transfer either by the corporation, upon duly authorized action of its Board of
Directors, or by the stockholders, upon the express written consent of the
owners of a majority of the voting power of the corporation (excluding the votes
represented by those shares to be sold by the selling stockholder). This Section
45 may be amended or repealed either by a duly authorized action of the Board of
Directors or by the stockholders, upon the express vote or written consent of
the owners of a majority of the voting power of the corporation.
(G) Any sale or transfer, or purported sale or transfer, of securities of
the corporation shall be null and void unless the terms, conditions, and
provisions of this Bylaw are strictly observed and followed.
(H) The foregoing right of first refusal shall terminate on either of the
following dates, whichever shall first occur:
(1) On August 31, 2006; or
(2) Upon the date securities of the corporation are first offered to
the public pursuant to a registration statement filed with, and
declared effective by, the United States Securities and Exchange
Commission under the Securities act of 1933, as amended.
(I) The certificates representing shares of common stock of the corporation
shall bear on their face the following legend so long as the foregoing right of
first refusal remains in effect:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT
OF FIRST REFUSAL OPTION IN FAVOR OF THE CORPORATION, AS PROVIDED IN
THE BYLAWS OF THE CORPORATION."
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ARTICLE XV
LOANS TO OFFICERS
SECTION 46. LOANS TO OFFICERS. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a Director of the corporation or its subsidiaries, whenever, is the judgment
of the Board of Directors, such loan, guarantee or assistance may be with or
without interest and may be unsecured, or secured in such manner as the Board of
Directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this Section 46 shall be deemed to deny,
limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
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<PAGE> 1
EXHIBIT 4.2
NO. PAW-____
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
WARRANT TO PURCHASE ___________ SHARES
OF SERIES A PREFERRED STOCK OF
DECODE GENETICS, INC.
(VOID AFTER ___________)
This certifies that _________________________ or its assigns (the
"Holder"), for value received, is entitled to purchase from deCODE genetics,
Inc., a Delaware corporation (the "Company"), a maximum of __________ fully paid
and nonassessable shares of the Company's Series A Preferred Stock ("Preferred
Stock") for cash at a price of $_________ per share (the "Stock Purchase Price")
at any time or from time to time up to and including 5:00 p.m. (Pacific time) on
____________________ (the "Expiration Date"), upon surrender to the Company at
its principal office (or at such other location as the Company may advise the
Holder in writing) of this Warrant properly endorsed with the Form of
Subscription attached hereto duly filled in and signed and, if applicable, upon
payment in cash or by check of the aggregate Stock Purchase Price for the number
of shares for which this Warrant is being exercised determined in accordance
with the provisions hereof. The Company shall deliver notice of the Initial
Public Offering to the Holder at least 30 days prior to the closing thereof. The
Stock Purchase Price and the number of shares purchasable hereunder are subject
to adjustment as provided in Section 3 of this Warrant.
This Warrant is subject to the following terms and conditions:
1. EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
1.1 GENERAL. This Warrant is exercisable at the option of the
holder of record hereof, at any time or from time to time, up to the Expiration
Date for all or any part of the shares of Preferred Stock (but not for a
fraction of a share) which may be purchased hereunder. The Company agrees that
the shares of Preferred Stock purchased under this Warrant shall be and are
deemed to be issued to the Holder hereof as the record owner of such shares as
of the close of business on the date on which this Warrant shall have been
surrendered, properly endorsed, the completed, executed Form of Subscription
delivered and payment made for such shares. Certificates for the shares of
Preferred Stock so purchased, together with any other securities or property to
which the Holder hereof is entitled upon such exercise. shall be delivered to
the Holder hereof by the Company at the Company's expense within a reasonable
time after the rights represented by this Warrant have been so exercised. In
case of a purchase of less than all the shares which may be purchased under this
Warrant, the Company shall cancel this Warrant and execute and deliver a new
Warrant or Warrants of like tenor for the balance of the shares purchasable
under the Warrant surrendered upon such purchase to the Holder hereof within a
reasonable time. Each stock certificate so delivered shall be in such
denominations of Preferred Stock as may be requested by the Holder hereof and
shall be registered in the name of such Holder.
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<PAGE> 2
1.2 NET ISSUE EXERCISE. Notwithstanding any provisions herein
to the contrary, if the fair market value of one share of the Company's
Preferred Stock is greater than the Stock Purchase Price (at the date of
calculation as set forth below), in lieu of exercising this Warrant for cash,
the Holder may elect to receive shares equal to the value (as determined below)
of this Warrant (or the portion thereof being canceled) by surrender of this
Warrant at the principal office of the Company together with the properly
endorsed Form of Subscription and notice of such election in which event the
Company shall issue to the Holder a number of shares of Preferred Stock computed
using the following formula:
X = Y (A-B)
-----------
A
Where X = the number of shares of Preferred Stock to be
issued to the Holder
Y = the number of shares of Preferred Stock
purchasable under the Warrant or, if only a
portion of the Warrant is being exercised,
the portion of the Warrant being canceled
(at the date of such calculation)
A = the fair market value of one share of the Company's
Preferred Stock (at the date of such calculation)
B = Stock Purchase Price (as adjusted to the date of
such calculation)
For purposes of the above calculation, fair market value of one share of
Preferred Stock shall be determined by the Company's Board of Directors in good
faith; provided, however, that in the event the Company makes an initial public
offering of its Common Stock the fair market value at such time per share shall
be the product of (i) the per share offering price to the public of the
Company's initial public offering, and (ii) the number of shares of Common Stock
into which each share of Preferred Stock is convertible at the time of such
exercise.
2. SHARES TO BE FULLY PAID; RESERVATION OF SHARES. The Company
covenants and agrees that all shares of Preferred Stock which may be issued upon
the exercise of the rights represented by this Warrant will, upon issuance, be
duly authorized, validly issued, fully paid and nonassessable and free from all
preemptive rights of any shareholder and free of all taxes, liens and charges
with respect to the issue thereof. The Company further covenants and agrees
that, during the period within which the rights represented by this Warrant may
be exercised, the Company will at all times have authorized and reserved, for
the purpose of issue or transfer upon exercise of the subscription rights
evidenced by this Warrant, a sufficient number of shares of authorized but
unissued Preferred Stock, or other securities and property, when and as required
to provide for the exercise of the rights represented by this Warrant. The
Company will take all such action as may be necessary to assure that such shares
of Preferred Stock may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of any domestic securities
exchange upon which the Preferred Stock may be listed; provided, however, that
the Company shall not be required to effect a registration under Federal or
State securities laws with respect to such exercise. The Company will not take
any action which would result in any adjustment of the Stock Purchase Price (as
set forth in Section 3 hereof) (i) if the total number of shares of Preferred
Stock issuable after such action upon exercise of all outstanding warrants,
together with all shares of Preferred Stock then outstanding and all shares of
Preferred Stock then issuable upon exercise of all options and upon the
conversion of all convertible securities then outstanding, would exceed the
total number of shares of Preferred Stock then authorized by the Company's
Restated Certificate of Incorporation, or (ii) if the total number of shares of
Common Stock issuable after such action upon the conversion of all such shares
of Preferred Stock, together
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<PAGE> 3
with all shares of Common Stock then issuable upon exercise of all options and
upon the conversion of all such shares of Preferred Stock, together with all
shares of Common Stock then outstanding and all shares of Common Stock then
issuable upon exercise of all options and upon the conversion of all convertible
securities then outstanding would exceed the total number of shares of Common
Stock then authorized by the Company's Amended and Restated Articles of
Incorporation.
3. ADJUSTMENT OF STOCK PURCHASE PRICE AND NUMBER OF SHARES. The Stock
Purchase Price and the number of shares purchasable upon the exercise of this
Warrant shall be subject to adjustment from time to time upon the occurrence of
certain events described in this Section 3. Upon each adjustment of the Stock
Purchase Price, the Holder of this Warrant shall thereafter be entitled to
purchase, at the Stock Purchase Price resulting from such adjustment, the number
of shares obtained by multiplying the Stock Purchase Price in effect immediately
prior to such adjustment by the number of shares purchasable pursuant hereto
immediately prior to such adjustment, and dividing the product thereof by the
Stock Purchase Price resulting from such adjustment.
3.1 SUBDIVISION OR COMBINATION OF STOCK. In case the Company
shall at any time subdivide its outstanding shares of Preferred Stock into a
greater number of shares, the Stock Purchase Price in effect immediately prior
to such subdivision shall be proportionately reduced, and conversely, in case
the outstanding shares of Preferred Stock of the Company shall be combined into
a smaller number of shares, the Stock Purchase Price in effect immediately prior
to such combination shall be proportionately increased.
3.2 DIVIDENDS IN PREFERRED STOCK, OTHER STOCK, PROPERTY,
RECLASSIFICATION. If at any time or from time to time the Holders of Preferred
Stock (or any shares of stock or other securities at the time receivable upon
the exercise of this Warrant) shall have received or become entitled to receive,
without payment therefor,
(A) Preferred Stock or any shares of stock or other
securities which are at any time directly or
indirectly convertible into or exchangeable for
Preferred Stock, or any rights or options to
subscribe for, purchase or otherwise acquire any
of the foregoing by way of dividend or other
distribution,
(B) any cash paid or payable otherwise than as a cash
dividend, or
(C) Preferred Stock or additional stock or other
securities or property (including cash) by way of
spinoff, split-up, reclassification, combination
of shares or similar corporate rearrangement,
(other than shares of Preferred Stock issued as a
stock split or adjustments in respect of which
shall be covered by the terms of Section 3.1
above), then and in each such case, the Holder
hereof shall, upon the exercise of this Warrant,
be entitled to receive, in addition to the number
of shares of Preferred Stock receivable
thereupon. and without payment of any additional
consideration therefor, the amount of stock and
other securities and property (including cash in
the cases referred to in clause (b) above and
this clause (c)) which such Holder would hold on
the date of such exercise had he been the holder
of record of such Preferred Stock as of the date
on which holders of Preferred Stock received or
became entitled to receive such shares or all
other additional stock and other securities and
property.
3.3 REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR
SALE. If any recapitalization, reclassification or reorganization of the capital
stock of the Company (including any automatic conversion of outstanding shares
of the Preferred Stock), or any consolidation or merger of the Company with
another corporation, or the sale of all or substantially all of its assets or
other transaction shall be effected in such a way that holders of Preferred
Stock shall be entitled to receive stock, securities, or other assets or
property (an "Organic Change"), then, as a condition of such Organic Change,
lawful and adequate
3
<PAGE> 4
provisions shall be made by the Company whereby the Holder hereof shall
thereafter have the right to purchase and receive (in lieu of the shares of the
Preferred Stock of the Company immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby) such shares of
stock, securities or other assets or property as may be issued or payable with
respect to or in exchange for a number of outstanding shares of such Preferred
Stock equal to the number of shares of such stock immediately theretofore
purchasable and receivable upon the exercise of the rights represented hereby;
provided, however, that in the event the value of the stock, securities or other
assets or property (determined in good faith by the Board of Directors of the
Company) issuable or payable with respect to one share of the Preferred Stock of
the Company immediately theretofore purchasable and receivable upon the exercise
of the rights represented hereby is in excess of the Stock Purchase Price hereof
effective at the time of a merger and securities received in such
reorganization, if any, are publicly traded, then this Warrant shall expire
unless exercised prior to such Organic Change. In the event of any Organic
Change, appropriate provision shall be made by the Company with respect to the
rights and interests of the Holder of this Warrant to the end that the
provisions hereof (including, without limitation, provisions for adjustments of
the Stock Purchase Price and of the number of shares purchasable and receivable
upon the exercise of this Warrant) shall thereafter be applicable, in relation
to any shares of stock, securities or assets thereafter deliverable upon the
exercise hereof. The Company will not effect any such consolidation, merger or
sale unless, prior to the consummation thereof, the successor corporation (if
other than the Company) resulting from such consolidation or the corporation
purchasing such assets shall assume by written instrument reasonably
satisfactory in form and substance to the Holders of a majority of the warrants
to purchase Series A Preferred Stock then outstanding, executed and mailed or
delivered to the registered Holder hereof at the last address of such Holder
appearing on the books of the Company, the obligation to deliver to such Holder
such shares of stock, securities or assets as, in accordance with the foregoing
provisions, such Holder may be entitled to purchase.
3.4 CERTAIN EVENTS. If any change in the outstanding Preferred
Stock of the Company or any other event occurs as to which the other provisions
of this Section 3 are not strictly applicable or if strictly applicable would
not fairly protect the purchase rights of the Holder of the Warrant in
accordance with such provisions, then the Board of Directors of the Company
shall make an adjustment in the number and class of shares available under the
Warrant, the Stock Purchase Price or the application of such provisions, so as
to protect such purchase rights as aforesaid. The adjustment shall be such as
will give the Holder of the Warrant upon exercise for the same aggregate Stock
Purchase Price the total number, class and kind of shares as he would have owned
had the Warrant been exercised prior to the event and had he continued to hold
such shares until after the event requiring adjustment.
3.5 NOTICES OF CHANGE.
(A) Immediately upon any adjustment in the
number or class or shares subject to this Warrant and of the Stock Purchase
Price, the Company shall give written notice thereof to the Holder, setting
forth in reasonable detail and certifying the calculation of such adjustment.
(B) The Company shall give written notice to the
Holder at least 10 business days prior to the date on which the Company closes
its books or takes a record for determining rights to receive any dividends or
distributions.
(C) The Company shall also give written notice
to the Holder at least 30 business days prior to the date on which an Organic
Change shall take place.
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<PAGE> 5
4. ISSUE TAX. The issuance of certificates for shares of Preferred
Stock upon the exercise of the Warrant shall be made without charge to the
Holder of the Warrant for any issue tax (other than any applicable income taxes)
in respect thereof, provided, however, that the Company shall not be required to
pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than that of the then
Holder of the Warrant being exercised.
5. CLOSING OF BOOKS. The Company will at no time close its transfer
books against the transfer of any warrant or of any shares of Preferred Stock
issued or issuable upon the exercise of any warrant in any manner which
interferes with the timely exercise of this Warrant.
6. NO VOTING OR DIVIDEND RIGHTS; LIMITATION OF LIABILITY. Nothing
contained in this Warrant shall be construed as conferring upon the Holder
hereof the right to vote or to consent or to receive notice as a shareholder of
the Company or any other matters or any rights whatsoever as a shareholder of
the Company. No dividends or interest shall be payable or accrued in respect of
this Warrant or the interest represented hereby or the shares purchasable
hereunder until, and only to the extent that, this Warrant shall have been
exercised. No provisions hereof, in the absence of affirmative action by the
holder to purchase shares of Preferred Stock, and no mere enumeration herein of
the rights or privileges of the holder hereof, shall give rise to any liability
of such Holder for the Stock Purchase Price or as a shareholder of the Company,
whether such liability is asserted by the Company or by its creditors.
7. WARRANTS TRANSFERABLE. Subject to compliance with applicable federal
and state securities laws, this Warrant and all rights hereunder are
transferable, in whole or in part, without charge to the holder hereof (except
for transfer taxes), upon surrender of this Warrant properly endorsed. Each
taker and holder of this Warrant, by taking or holding the same, consents and
agrees that this Warrant, when endorsed in blank, shall be deemed negotiable,
and that the holder hereof, when this Warrant shall have been so endorsed, may
be treated by the Company, at the Company's option, and all other persons
dealing with this Warrant as the absolute owner hereof for any purpose and as
the person entitled to exercise the rights represented by this Warrant, or to
the transfer hereof on the books of the Company any notice to the contrary
notwithstanding; but until such transfer on such books, the Company may treat
the registered owner hereof as the owner for all purposes.
8. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT. The rights and
obligations of the Company, of the holder of this Warrant and of the holder of
shares of Preferred Stock issued upon exercise of this Warrant, referred to in
Section 7 shall survive the exercise of this Warrant.
9. MODIFICATION AND WAIVER. This Warrant and any provision hereof may
be changed, discharged or terminated only by an instrument in writing signed by
the party against which enforcement of the same is sought.
10. NOTICES. Any notice, request or other document required or
permitted to be given or delivered to the holder hereof or the Company shall be
delivered or shall be sent by certified mail, postage prepaid, to each such
holder at its address as shown on the books of the Company or to the Company at
the address indicated therefore in the first paragraph of this Warrant or such
other address as either may from time to time provide to the other.
11. BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding upon
any corporation succeeding the Company by merger, consolidation or acquisition
of all or substantially all of the Company's assets. All of the obligations of
the Company relating to the Preferred Stock issuable upon the exercise of
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<PAGE> 6
this Warrant shall survive the exercise and termination of this Warrant. All of
the covenants and agreements of the Company shall inure to the benefit of the
successors and assigns of the holder hereof.
12. DESCRIPTIVE HEADINGS AND GOVERNING LAW. The description headings of
the several sections and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant. This Warrant shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the laws of the State of California.
13. LOST WARRANTS. The Company represents and warrants to the Holder
hereof that upon receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction, or mutilation of this Warrant and, in the case of
any such loss, theft or destruction, upon receipt of an indemnity reasonably
satisfactory to the Company, or in the case of any such mutilation upon
surrender and cancellation of such Warrant, the Company, at its expense, will
make and deliver a new Warrant, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Warrant.
14. FRACTIONAL SHARES. No fractional shares shall be issued upon
exercise of this Warrant. The Company shall, in lieu of issuing any fractional
share, pay the holder entitled to such fraction a sum in cash equal to such
fraction multiplied by the then effective Stock Purchase Price.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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<PAGE> 7
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its officer, thereunto duly authorized this ____ day of __________,
DECODE GENETICS, INC.
a Delaware corporation
By:
Kari Stefansson
President and Secretary
7
<PAGE> 8
EXHIBIT A
SUBSCRIPTION FORM
Date:
deCODE genetics, Inc.
Attn: President
Ladies and Gentlemen:
: The undersigned hereby elects to exercise the warrant issued to it by
deCODE genetics, Inc. (the "Company") and dated ______________, Warrant
No. PAW-9, (the "Warrant") and to purchase thereunder ___________
shares of the Series A Preferred Stock of the Company (the "Shares") at
a purchase price of ______________ per Share or an aggregate purchase
price of $________________ (the "Purchase Price").
: The undersigned hereby elects to convert percent ( %) of the value of
the Warrant pursuant to the provisions of Section 1.2 of the Warrant.
Pursuant to the terms of the Warrant the undersigned has delivered the
Purchase Price herewith in full in cash or by certified check or wire transfer.
The undersigned also makes the representations set forth on the attached Exhibit
B of the Warrant.
Very truly yours,
By:
Title:
1
<PAGE> 9
EXHIBIT B
INVESTMENT REPRESENTATION
THIS AGREEMENT MUST BE COMPLETED, SIGNED AND RETURNED TO DECODE GENETICS, INC.
ALONG WITH THE SUBSCRIPTION FORM BEFORE THE PREFERRED STOCK ISSUABLE UPON
EXERCISE OF THE WARRANT DATED _______________, WILL BE ISSUED.
Date:
deCODE genetics, Inc.
Attn: President
Ladies and Gentlemen:
The undersigned, __________________________ ("Purchaser"), intends to
acquire up to shares of the Series A Preferred Stock (the "Preferred Stock") of
deCODE genetics, Inc. (the "Company") from the Company pursuant to the exercise
or conversion of certain Warrants to purchase Preferred Stock held by Purchaser.
The Preferred Stock will be issued to Purchaser in a transaction not involving a
public offering and pursuant to an exemption from registration under the
Securities Act of 1933, as amended (the "1933 Act") and applicable state
securities laws. In connection with such purchase and in order to comply with
the exemptions from registration relied upon by the Company, Purchaser
represents, warrants and agrees as follows:
Purchaser is acquiring the Preferred Stock for its own account, to hold
for investment, and Purchaser shall not make any sale, transfer or other
disposition of the Preferred Stock in violation of the 1933 Act or the General
Rules and Regulations promulgated thereunder by the Securities and Exchange
Commission (the "SEC") or in violation of any applicable state securities law.
Purchaser has been advised that the Preferred Stock has not been
registered under the 1933 Act or state securities laws on the ground that this
transaction is exempt from registration, and that reliance by the Company on
such exemptions is predicated in part on Purchaser's representations set forth
in this letter.
Purchaser has been informed that under the 1933 Act, the Preferred
Stock must be held indefinitely unless it is subsequently registered under the
1933 Act or unless an exemption from such registration (such as Rule 144) is
available with respect to any proposed transfer or disposition by Purchaser of
the Preferred Stock. Purchaser further agrees that the Company may refuse to
permit Purchaser to sell, transfer or dispose of the Preferred Stock (except as
permitted under Rule 144) unless there is in effect a registration statement
under the 1933 Act and any applicable state securities laws covering such
transfer, or unless Purchaser furnishes an opinion of counsel reasonably
satisfactory to counsel for the Company, to the effect that such registration is
not required.
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<PAGE> 10
Purchaser also understands and agrees that there will be placed on the
certificate(s) for the Preferred Stock, or any substitutions therefor, a legend
stating in substance:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Securities Act"), or
any state securities laws. These shares have been acquired for
investment and may not be sold or otherwise transferred in the absence
of an effective registration statement for these shares under the
Securities Act and applicable state securities laws, or an opinion of
counsel satisfactory to the Company that registration is not required
and that an applicable exemption is available."
Purchaser has carefully read this letter and has discussed its
requirements and other applicable limitations upon Purchaser's resale of the
Preferred Stock with Purchaser's counsel.
Very truly yours,
By:
Title:
<PAGE> 1
EXHIBIT 4.3
No. PCW-_____
THE SECURITIES REPRESENTED HEREBY, AND THE SECURITIES TO BE ISSUED UPON THE
EXERCISE OF THE SECURITIES REPRESENTED HEREBY, HAVE NOT BEEN REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS
NOT REQUIRED.
THE SECURITIES REPRESENTED HEREBY, AND THE SECURITIES TO BE ISSUED UPON THE
EXERCISE OF THE SECURITIES REPRESENTED HEREBY, MAY NOT BE OFFERED, SOLD OR
TRANSFERRED IN THE UNITED STATES OR TO U.S. PERSONS UNTIL REGISTERED UNDER THE
ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
TRANSFER OF THE SECURITIES REPRESENTED HEREBY, OR OF THE SECURITIES TO BE ISSUED
UPON THE EXERCISE OF THE SECURITIES REPRESENTED HEREBY, IS PROHIBITED EXCEPT IN
ACCORDANCE WITH THE PROVISIONS OF REGULATION S PROMULGATED PURSUANT TO THE ACT.
THE SECURITIES REPRESENTED HEREBY MAY NOT BE EXERCISED BY OR ON BEHALF OF ANY
U.S. PERSON UNTIL REGISTERED UNDER THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED.
THE EXERCISE OF THIS WARRANT, AND THE DELIVERY OF SECURITIES THEREUPON, ARE
SUBJECT TO FURTHER CONDITIONS IMPOSED BY UNITED STATES SECURITIES LAWS. SEE
SECTION 14.
Warrant to Purchase __________ Shares
of Series C Preferred Stock of
deCODE genetics, Inc.
(Void after __________)
This certifies that Roche Finance Ltd, a Swiss company having a place
of business at 124 Grenzacherstrasse CH-4070, Basel, Switzerland, or its
assigns, (the "Holder"), for value received, is entitled to purchase from deCODE
genetics Inc., a Delaware, USA corporation (the "Company"), having a place of
business at Lynghalsi 1, IS-110 Reykjavik, Iceland, a maximum of __________
fully paid and nonassessable shares of the Series C Preferred Stock of the
Company ("Series C Preferred Stock") for cash at a price of $_____ per share
(the "Preferred Stock Purchase Price") at any time or from time to time up to
and including 5:00 p.m. (New York time) on _________ [the date that is nine (9)
years from after the issue date of the Warrant] (the "Expiration Date"), upon
surrender to the Company at its principal office (or at such other location as
the Company may advise the Holder in writing) of this Warrant properly endorsed
with the Form of Subscription attached hereto duly filled
-1-
<PAGE> 2
in and signed and, if applicable, upon payment in cash or by check of the
aggregate Preferred Stock Purchase Price for the number of shares for which this
Warrant is being exercised, determined in accordance with the provisions hereof.
The Preferred Stock Purchase Price and the number and class of shares
purchasable hereunder are subject to adjustment as provided in Section 3 of this
Warrant.
This Warrant is subject to the following terms and conditions:
1. EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
1.1 General. This Warrant is exercisable at the option of the Holder of
record hereof, at any time or from time to time, up to the Expiration Date for
all or any part of the shares of Series C Preferred Stock (but not for a
fraction of a share) which may be purchased hereunder. The Company agrees that
the shares of Series C Preferred Stock purchased under this Warrant shall be
deemed to be issued to the Holder hereof as the record owner of such shares as
of the close of business on the date on which this Warrant shall have been
surrendered, properly endorsed, the completed, executed Form of Subscription
delivered and payment made for such shares. Certificates for the shares of
Series C Preferred Stock so purchased, together with any other securities or
property to which the Holder hereof is entitled upon such exercise, shall be
delivered to the Holder hereof by the Company at the Company's expense within a
reasonable time after the rights represented by this Warrant have been so
exercised. In case of a purchase of less than all the shares which may be
purchased under this Warrant, the Company shall cancel this Warrant and execute
and deliver a new Warrant or Warrants of like tenor for the balance of the
shares purchasable under this Warrant surrendered upon such purchase to the
Holder hereof within a reasonable time. Each stock certificate so delivered
shall be in such denominations of Series C Preferred Stock as may be requested
by the Holder hereof and shall be registered in the name of such Holder.
1.2 Net Issue Exercise. Notwithstanding any provision herein to be
contrary, if the fair market value of one share of the Series C Preferred Stock
is greater than the Preferred Stock Purchase Price (at the date of calculation
as set forth below), then in lieu of exercising this Warrant for cash, the
Holder may elect to receive shares of Series C Preferred Stock equal to the
value (as determined below) of this Warrant (or the portion thereof being
canceled) by surrender of this Warrant at the principal office of the Company
(or at such other location as the Company may advise the Holder in writing)
together with the properly endorsed Form of Subscription and notice of such
election, in which event the Company shall issue to the Holder a number of
shares of Series C Preferred Stock computed using the following formula:
-2-
<PAGE> 3
Y (A - B)
X = -----------
A
Where:
X = the number of shares of Series C Preferred Stock to be issued
to the Holder
Y = the number of shares of Series C Preferred Stock purchasable
under this Warrant or, if only a portion of this Warrant is
being exercised, the portion of this Warrant being canceled
(at the date of such calculation)
A = the fair market value of one share of the Company's Series C
Preferred Stock (at the date of such calculation)
B = Preferred Stock Purchase Price (as adjusted to the date of
such calculation)
For purposes of the above calculation, fair market value of one share of Series
C Preferred Stock shall be determined by the Company's Board of Directors in
good faith; provided, however, that in the event the Common Stock of the
Company, par value $0.001 per share (the "Common Stock") is publicly traded, the
fair market value per share on the date of exercise shall be the product of (i)
the average of the closing sales prices of the Common Stock (or the closing bid,
if no sales were reported) as quoted on the Nasdaq National Market, or if the
Common Stock is not then quoted on Nasdaq, on such other established exchange or
national system on which the Common Stock is listed, over the twenty (20)
business days preceding the date of exercise, and (ii) the number of shares of
Common Stock into which each share of Series C Preferred Stock is convertible at
the time of such exercise.
2. SHARES TO BE FULLY PAID; RESERVATION OF SHARES.
-3-
<PAGE> 4
The Company covenants and agrees that all shares of Series C Preferred
Stock which may be issued upon the exercise of the rights represented by this
Warrant will, upon issuance, be duly authorized, validly issued, fully paid and
nonassessable and free from all preemptive rights of any stockholder and free of
all taxes, liens and charges with respect to the issue thereof. The Company
further covenants and agrees that, during the period within which the rights
represented by this Warrant may be exercised, the Company will at all times have
authorized and reserved, for the purpose of issue or transfer upon exercise of
the subscription rights evidenced by this Warrant, a sufficient number of shares
of authorized but unissued Series C Preferred Stock, or other securities and
property, when and as required to provide for the exercise of the rights
represented by this Warrant. The Company will take all such action as may be
necessary to assure that such shares of Series C Preferred Stock may be issued
as provided herein without violation of any applicable United States federal or
state law or regulation, or of any requirements of any domestic stock exchange
upon which the Series C Preferred Stock may be listed; provided, however, that
the Company shall not be required to effect a registration under United States
federal or state securities laws with respect to such exercise. The Company will
not take any action which would result in any adjustment of the Preferred Stock
Purchase Price under Section 3 if: (i) the total number of shares of Series C
Preferred Stock issuable after such action upon exercise of all outstanding
warrants, together with all shares of Series C Preferred Stock then outstanding
and all shares of Series C Preferred Stock then issuable upon exercise of all
options and upon the conversion of all convertible securities then outstanding,
would exceed the total number of shares of Series C Preferred Stock then
authorized by the Company's Certificate of Incorporation as in effect from time
to time (the "Certificate of Incorporation"), or (ii) the total number of shares
of Common Stock issuable after such action upon the conversion of all such
shares of Series C Preferred Stock, together with all shares of Common Stock
then issuable upon exercise of all options and upon the conversion of all such
shares of Series C Preferred Stock, together with all shares of Common Stock
then outstanding and all shares of Common Stock then issuable upon exercise of
all options and upon the conversion of all convertible securities then
outstanding would exceed the total number of shares of Common Stock then
authorized by the Certificate of Incorporation.
-4-
<PAGE> 5
3. ADJUSTMENT OF WARRANT RIGHTS.
3.1 Upon Conversion of Series C Preferred Stock.
(a) Warrant Exercisable for Common Stock. In the event that
all of the outstanding Series C Preferred Stock is, at any time prior to the
Expiration Date, converted in accordance with the Certificate of Incorporation
into shares of Common Stock, then this Warrant shall immediately become
exercisable for that number of shares of Common Stock equal to the number of
shares of Common Stock that would have been received if this Warrant had been
exercised in full and the shares of Series C Preferred Stock received thereupon
had been simultaneously converted into Common Stock immediately prior to such
event. In such event, the Common Stock purchase price (the "Common Stock
Purchase Price") per share shall equal the quotient obtained by dividing (i) the
aggregate Preferred Stock Purchase Price of the number of shares of Series C
Preferred for which this Warrant was exercisable immediately prior to such event
by (ii) the number of shares of Common Stock for which this Warrant is
exercisable immediately after such event.
(b) Adjustments to Common Stock. If, at any time following the
conversion of all of the Series C Preferred Stock and prior to the Expiration
Date, there is any change in the Common Stock by reason of stock dividends,
splits, subdivisions, combinations or the like the number of shares of Common
Stock subject to this Warrant pursuant to Section 3.1(a) shall be appropriately
adjusted in proportion to such increase or decrease in outstanding shares of
Common Stock, and the Common Stock Purchase Price per share shall be
appropriately adjusted so that the total Common Stock Purchase Price payable
upon exercise of this Warrant in full shall remain unchanged.
3.2 Prior to Conversion of Series C Preferred. The Preferred Stock
Purchase Price and the number of shares purchasable upon the exercise of this
Warrant prior to the conversion of all of the outstanding Series C Preferred
shall be subject to adjustment from time to time upon the occurrence of certain
events described in this Section 3.2. Upon each adjustment of the Preferred
Stock Purchase Price, the Holder of this Warrant shall thereafter be entitled to
purchase, at the Preferred Stock Purchase Price resulting from such adjustment,
the number of shares owned by multiplying the Preferred Stock Purchase Price in
effect immediately prior to such adjustment by the number of shares purchasable
pursuant hereto immediately prior to such adjustment, and dividing the product
thereof by the Preferred Stock Purchase Price resulting from such adjustment.
(a) Subdivision or Combination of Stock. In case the Company
shall at any time subdivide its outstanding shares of Series C Preferred Stock
into a greater number of shares, the
-5-
<PAGE> 6
Preferred Stock Purchase Price in effect prior to such subdivision shall be
proportionately reduced, and conversely, in case the outstanding shares of
Series C Preferred Stock of the Company shall be combined into a smaller number
of shares, the Preferred Stock Purchase Price in effect immediately prior to
such combination shall be proportionately increased.
(b) Dividends in Preferred Stock, Property, Reclassification.
If at any time or from time to time the Holders of Series C Preferred Stock (or
any shares of stock or other securities at the time receivable upon the exercise
of this Warrant) shall have received or become entitled to receive, without
payment therefor:
(i) Series C Preferred Stock or any shares of
stock or other securities which are at any time directly or indirectly
convertible into or exchangeable for Series C Preferred Stock, or any rights or
options to subscribe for, purchase or otherwise acquire any of the foregoing by
way of dividend or other distribution,
(ii) Any cash paid or payable otherwise than as
a cash dividend, or
(iii) Series C Preferred Stock or additional
stock or other securities or property (including cash) by way of spinoff,
split-up, reclassification combination of shares or similar corporate
rearrangement (other than shares of Preferred Stock issued as a stock split or
adjustments in respect of which shall be covered by the terms of Section
3.2(a)),
then and in each such case, the Holder hereof shall upon the exercise of this
Warrant be entitled to receive, in addition to the number of shares of Series C
Preferred Stock receivable thereupon, and without payment of any additional
consideration therefor, the amount of stock and other securities and property
(including cash in the cases referred to in clauses (ii) and (iii) above) which
such Holder would hold on the date of such exercise had such Holder been the
holder of record of such Series C Preferred Stock as of the date on which
Holders of Series C Preferred Stock received or became entitled to receive such
shares or all other additional stock and other securities and property.
(c) Reorganization, Reclassification, Consolidation, Merger or
Sale. If any recapitalization, reclassification or reorganization of the capital
stock of the Company (including any automatic conversion of outstanding shares
of the Series C Preferred Stock), or all consolidation or merger of the Company
with another corporation, or the sale of all or substantially all of its assets
or other transaction shall be effected in such a way that Holders of Series C
Preferred Stock shall be entitled to receive stock, securities, or other assets
or property (an "Organic
-6-
<PAGE> 7
Change"), then, as a condition of such Organic Change, lawful and adequate
provisions shall be made by the Company whereby the Holder hereof shall
thereafter have the right to purchase and receive (in lieu of the shares of the
Series C Preferred Stock of the Company immediately purchasable and receivable
upon the exercise of the rights represented by this Warrants) such shares of
stock, securities or other assets or property as may be issued or payable with
respect to or in exchange for a number of outstanding shares of such Series C
Preferred Stock equal to the number of shares of such stock immediately
theretofore purchasable and receivable upon the exercise of rights represented
hereby; provided, however, that in the event the value of the stock, securities
or other assets or property (determined in good faith by the Board of Directors
of the Company) issuable or payable with respect to one share of the Series C
Preferred Stock of the Company immediately purchasable and receivable upon the
exercise of the rights represented by this Warrant is in excess of the Preferred
Stock Purchase Price effective at the time of a merger and securities received
in such reorganization, if any, are publicly traded, then this Warrant shall
expire unless exercised prior to such Organic Change. In the event of any
Organic Change, appropriate provision shall be made by the Company with respect
to the rights and interests of the Holder of this Warrant to the end that the
provisions hereof (including, without limitation, provisions for adjustments of
the Preferred Stock Purchase Price and of the number of shares purchasable and
receivable upon the exercise of this Warrant) shall thereafter be applicable, in
relation to any shares of stock, securities or assets thereafter deliverable
upon the exercise hereof. The Company will not effect any such consolidation,
merger or sale unless, prior to the consummation thereof, the successor
corporation (if other than the Company) resulting from such consolidation or the
corporation purchasing such assets shall assume by written instrument reasonable
satisfactory in form and substance to the Holders of a majority of the warrants
to purchase Series C Preferred Stock then outstanding, executed and mailed or
delivered to the registered Holder hereof at the last address of such Holder
appearing on the books of the Company, the obligation to deliver to such Holder
such shares of stock, securities or assets as, in accordance with the foregoing
provisions, such Holder may be entitled to purchase.
(d) Certain Events. If any change in the outstanding Series C
Preferred Stock of the Company or any other event occurs as to which the other
provisions of this Section 3.2 are not strictly applicable or if strictly
applicable would not fairly protect the purchase rights of the Holder of this
Warrant in accordance with such provisions, then the Board of Directors of the
Company shall make an adjustment in the number and class of shares available
under this Warrant, the Preferred Stock Purchase Price or the application of
such provisions, so as to protect such purchase rights. The adjustment shall be
such as will give the Holder of this Warrant upon exercise for the same
aggregate Preferred Stock
-7-
<PAGE> 8
Purchase Price the total number, class and kind of shares as such Holder would
have owned had this Warrant been exercised prior to the event and had he
continued to hold such shares until after the event requiring adjustment.
(e) Notices of Change.
(i) Immediately upon any adjustment under this
Section 3.2 in the number of shares subject to this Warrant and of the Preferred
Stock Purchase Price, the Company shall have written notice thereof to the
Holder, setting forth in reasonable detail and certifying the calculation of
such adjustment.
(ii) The Company shall give written notice to
the Holder at least ten (10) business days prior to the date on which the
Company closes its books or takes a record for determining rights to receive any
dividends or distributions.
(iii) The Company shall also give written notice
to the Holder at least thirty (30) business days prior to the date an which on
which an Organic Change shall take place.
4. ISSUE TAX.
The issuance of certificates for shares of Series C Preferred Stock or
Common Stock, as the case may be, upon the exercise of this Warrant shall be
made without charge to the Holder of this Warrant for any issue tax (other than
any applicable income taxes) in respect thereof; provided, however, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any certificate in a name
other than that of the then Holder of this Warrant being exercised.
5. CLOSING OF BOOKS.
The Company will at no time close its transfer books against the
transfer of any warrant or any shares of Series C Preferred Stock or Common
Stock, as the case may be, issued or issuable upon the exercise of any warrant
in any manner which interferes with the timely exercise of this Warrant.
-8-
<PAGE> 9
6. NO VOTING OR DIVIDEND RIGHTS; LIMITATION OF LIABILITY.
Nothing contained in this Warrant shall be construed as conferring upon
the Holder hereof the right to vote or to consent or to receive notice as a
stockholder of the Company or any other matters or any rights whatsoever as a
stockholder of the Company. No dividends or interest shall be payable or accrued
in respect of this Warrant or the interest represented hereby or the shares
purchasable hereunder until, and only to the extent that, this Warrant shall
have been exercised. No provisions hereof, in the absence of affirmative action
by the Holder to purchase shares of Series C Preferred Stock or Common Stock, as
the case may be, and no mere enumeration herein of the rights or privileges of
the Holder hereof, shall give rise to any liability of such Holder for the
Preferred Stock Purchase Price or the Common Stock Purchase Price or as a
stockholder of the Company, whether such liability is asserted by the Company or
by its creditors.
7. WARRANTS TRANSFERABLE.
7.1 Transfer. Subject to compliance with applicable United States
federal and state securities laws, this Warrant and all rights hereunder shall
be transferable, in whole or in part, without charge to the Holder (except for
transfer taxes), upon surrender of this Warrant properly endorsed. Each taker
and holder of this Warrant, by taking or holding same, consents and agrees that
this Warrant, when endorsed in blank, shall be deemed negotiable, and that the
Holder, when this Warrant shall have been so endorsed, may be treated by the
Company, at the Company's option, and all other persons dealing with this
Warrant as the absolute owner hereof for any purpose and as the person entitled
to exercise the rights represented by this Warrant, or to the transfer hereof on
the books of the Company, any notice to the contrary notwithstanding; but until
such transfer on such books, the Company may treat the registered owner hereof
as the Holder for all purposes.
7.2 Survival. The rights and obligations of the Company, of the Holder
and of the holder of the Series C Preferred Stock or Common Stock, as the case
may be, issuable upon the exercise of this Warrant referred to in Section 7.1
shall survive the exercise of this Warrant.
8. MODIFICATION AND WAIVER.
This Warrant and any provision hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of the same is sought.
-9-
<PAGE> 10
9. NOTICES.
Any notice or request required or permitted to be given under or in
connection with this Warrant shall be deemed to have been sufficiently given if
in writing and personally delivered or sent by certified mail (return receipt
requested), facsimile transmission (receipt verified), or overnight express
courier service (signature required), prepaid, to the party for which such
notice is intended, at the address set forth for such party below:
(a) In the case of the Purchaser, to:
Roche Finance Ltd
124 Grenzacherstrasse CH-4070
Basel
SWITZERLAND
Attention: CFDV Building 21 Room 292
Facsimile No.: 41-61-688-4169
With a copy to:
Hoffmann-La Roche Inc.
340 Kingsland Street
Nutley, NJ 07110
Attention: General Counsel
Facsimile No.: (973) 235-3500
(b) In the case of the Company, to:
deCODE genetics, Inc.
Lynghalsi 1
SI-110 Reykjavik
ICELAND
Attention: President
Facsimile No.: 354-570-1901
or to such other address for such party as it shall have specified by like
notice to the other party, provided that notices of a change of address shall be
effective only upon receipt thereof. If delivered personally or by facsimile
transmission, the date of delivery shall be deemed to be the date on which such
notice or request was given. If sent by overnight express courier service, the
date of delivery shall be deemed to be the next business day after such notice
or request was deposited with such service. If sent by certified mail, the date
of delivery shall be deemed to be the third business day after such notice or
request was deposited with the U.S. Postal Service, or the foreign equivalent
thereto.
-10-
<PAGE> 11
10. BINDING EFFECT ON SUCCESSORS.
This Warrant shall be binding upon any corporation succeeding the
Company by merger, consolidation or acquisition of all or substantially all of
the Company's assets. All of the obligations of the Company relating to the
Series C Preferred Stock or Common Stock, as the case may be, issuable upon the
exercise of this Warrant shall survive the exercise and termination of this
Warrant. All of the covenants and agreements of the Company shall inure to the
benefit of the successors and assigns of the Holder hereof.
11. DESCRIPTIVE HEADINGS AND GOVERNING LAW.
The description headings of the several sections and paragraphs of this
Warrant are inserted for convenience only and do not constitute a part of this
Warrant. This Warrant shall be construed and enforced in accordance with, and
the rights of the parties shall be governed by, the laws of the State of
Delaware, USA.
12. LOST WARRANTS.
The Company covenants to the Holder hereof that upon receipt of
evidence reasonably satisfactory to the Company of the loss theft, destruction,
or mutilation of this Warrant and, in the case of any such loss, theft or
destruction, upon receipt of an indemnity reasonably satisfactory to the
Company, or in the case of any such mutilation upon surrender and cancellation
of such Warrant, the Company, at its expense, will make and deliver a new
Warrant, of like tenor, in lieu of the lost, stolen, destroyed or mutilated
Warrant.
13. FRACTIONAL SHARES.
No fractional shares shall be issued upon exercise of this Warrant. The
Company shall, in lieu of issuing any fractional share, pay the holder entitled
to such fraction a sum in cash equal to such fraction multiplied by the then
effective Preferred Stock Purchase Price or Common Stock Purchase Price, as
applicable.
-11-
<PAGE> 12
14. ADDITIONAL RESTRICTIONS ON EXERCISE.
In addition to the restrictions set forth in the legends at the head of
this Warrant, this Warrant shall not be exercised within the United States, and
the Warrant Shares to be issued upon the exercise of this Warrant shall not be
delivered within the United States, other than in offerings deemed to meet the
definition of "offshore transaction" (as such term is defined in Regulation S
promulgated under the United States Securities Act of 1933, as amended), unless
this Warrant or the Warrant Shares, as the case may be, are registered under
such Act or an exemption from such registration is available.
* * *
-12-
<PAGE> 13
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its duly authorized officer as of __________.
deCODE genetics, Inc.
By:___________________________
Kari Stefansson
President
<PAGE> 14
FORM OF SUBSCRIPTION
(to be executed upon exercise of Warrant)
deCODE genetics, Inc.:
The undersigned hereby irrevocably elects to exercise the
right of purchase represented by the within warrant certificate (the "Warrant
Certificate") for, and to purchase thereunder:
[ ] __________ shares of Series C Preferred Stock; or
[ ] pursuant to Section 3.1 thereof, __________ shares
of Common Stock
, as provided for therein, and
[ ] tenders herewith payment of the purchase price
in full in the form of cash or a certified or
official bank check in the amount of US$__________;
or
[ ] pursuant to Section 1.2 of the Warrant, elects to
purchase the number of shares of Series C Preferred
Stock indicated above by surrendering the Warrant to
the extent of __________ Warrant Shares, inasmuch as,
as of the date hereof, the fair market value of one
share of Series C Preferred Stock (as determined in
accordance with the terms of the Warrant) is US$_____
and the Preferred Stock Purchase Price is $_____.
The undersigned hereby certifies that the undersigned is not a
U.S. Person and the Warrant is not being exercised on behalf of a U.S. person,
as such term is defined in Regulation S promulgated under the United States
Securities Act of 1933, as amended.
Please issue a certificate or certificates for such Warrant
Shares or shares of Common Stock, as the case may be, in the name of, and pay
cash for any fractional share, to:
Name
Address
---------------------------------
Social Security No.
or Federal ID No.
<PAGE> 15
(continued ...)
If the number of Warrant Shares or shares of Common Stock, as
the case may be, to be issued in connection herewith shall not be all of the
Warrant Shares or shares of Common Stock purchasable under the Warrant, a new
Warrant Certificate shall be issued in the name of the undersigned for the
balance remaining of the shares purchasable thereunder, rounded up to the next
higher number of such shares.
ROCHE FINANCE LTD.
By:___________________________
Name:_________________________
Title:________________________
By:___________________________
Name:_________________________
Title:________________________
<PAGE> 1
EXHIBIT 10.1
OFFICER'S CERTIFICATE
I, the undersigned, do hereby certify and represent that:
1. I am the duly elected Senior Vice President and Chief Business
Officer of deCODE genetics, Inc., a Delaware Corporation.
2. Pursuant to Rule 306(a) of Regulation S-T, the following exhibit
10.1 to deCODE genetics, Inc.'s Registration Statement on Form S-1 is a fair and
accurate English translation of a document prepared in the Icelandic language.
IN WITNESS WHEREOF, I have signed this Officer's Certificate in my
capacity as Senior Vice President and Chief Business Officer of deCODE genetics,
Inc. on this 7th day of March, 2000.
By: /s/ Hannes T. Smarason
--------------------------
Name: Hannes T. Smarason
Title: Senior Vice President and Chief Business Officer
<PAGE> 2
Date Ref.
------------- -------------
Dr. __________, physician
______________ Hospital
I.
PERMIT PURSUANT TO PARAGRAPH 3 OF ARTICLE 4, PARAGRAPH 2 OF ARTICLE 5 AND
PARAGRAPH 3 OF ARTICLE 6 OF ACT NO. 121/1989 ON THE REGISTRATION AND HANDLING OF
PERSONAL DATA
The Data Protection Commission has at its meeting today resolved to issue to you
a Permit to use personal data for research into the ______________________. The
Permit is subject to the terms described in Chapter II below.
II.
TERMS
It is revealed that you intend to assign a considerable part of the processing
of the personal data to Islensk erfdagreining ehf., particularly the part
involving work with genetic material. The transfer of personal data between you
(Permit Holder/Responsible Party) and IE (Processing Party) shall take place in
accordance with the work procedures described in Chapter III below. The Data
Protection Commission will, pursuant to an agreement between the Commission and
IE, appoint a person to supervise that the work is performed in accordance with
such terms, the expense of such supervision to be paid by IE.
The Data Protection Commission points out that the general principle is that the
same cipher should be used in all genetic research carried out in co-operation
with Islensk erfdagreining ehf. Accordingly, the same cipher will be used for
the encryption of data in this research, unless you request otherwise - however,
it should be emphasised that you are responsible for the anonymity of all data.
The objective of the conditions established by the Data Protection Commission is
to ensure the anonymity of participants in genetic research, by use of the
following guidelines:
1. That research data will be preserved as clinical data in accordance with
the current Act on Patients' Rights, the Physicians' Act and regulations on
clinical records.
2. That all research data at Islensk erfdagreining ehf. will be encrypted so
that neither blood samples nor other personal data identified with names,
identity numbers or other comparable personal identifiers are transferred
to Islensk erfdagreining ehf.
3. That linking between personal data on the premises of the Responsible Party
and Processing Party takes place only with the use of a cipher.
<PAGE> 3
DATA PROTECTION COMMISSION
________________________________________________________________________________
4. That the use of the cipher is restricted to the supervisors of the Data
Protection Commission and in accordance with the terms described below.
5. That the cipher is kept secure.
6. That the cipher will never be used for the encryption/decryption of fewer
identity numbers than twenty at each time.
7. That data from the research of one disease, including biosamples, will not
be used in the research of another disease, without the express written
approval of the person recorded or a special authorisation from the Data
Protection Commission.
III.
WORK PROCEDURES
All processing of personal data in relation to genetic research shall be
performed in accordance with the following work procedures:
1. The Supervisor of the Data Protection Commission shall produce A CIPHER,
which replaces the identity number with a Personal Number (PN), i.e. a
code. Three copies may be preserved of the cipher, one by the Data
Protection Commission, another by the Supervisor of the Data Protection
Commission and the third in a safety deposit box at Islensk erfdagreining
ehf. (IE). The copies to be kept by the Data Protection Commission and in
the deposit box of IE shall be sealed by a public notary. The safety
deposit box of IE shall be locked with two keys, one of which shall be
delivered to the Data Protection Commission for custody. An inspection may
be carried out at any time to ascertain whether any seals have been broken.
2. Supervisors shall ENCRYPT THE GENEALOGICAL DATABASE (the Book of
Icelanders) using the cipher. The database may be encrypted as soon as new
updates of the Book of Icelanders are ready. An encrypted Book of
Icelanders may neither be housed in the same computer nor on the same
computer network as an unencrypted Book of Icelanders, except under the
supervision of the Supervisor of the Data Protection Commission. In order
to reduce the possibility of breaching the anonymity by comparing encrypted
genealogical tables with genealogical tables containing identity numbers,
IE shall classify individuals according to their age so that if there are
few individuals registered as born in certain years, the registered year of
birth is altered so that the minimum number of individuals within any age
group is twenty.
3. The Supervisor shall receive:
a. Reykjavik Municipal Hospital's register of patients diagnosed with
__________________.
b. The National Hospital's register of patients diagnosed with
__________________.
c. The Akureyri District Hospital's register of patients diagnosed with
__________________.
d. The University of Iceland Institute of Pathology's register of received
_______ samples; diagnosis: ________________________________.
e. The State Social Security Institute's register of patients who have been
prescribed medication against ________________________.
2
<PAGE> 4
DATA PROTECTION COMMISSION
________________________________________________________________________________
As it is important that outside parties do not obtain information on the names
of patients, except with the express consent of the patient, the assumption is
made in this Permit that the individuals in question will be contacted and that
the willingness of each individual to participate in the research ascertained
before work with data on such patients begins. It is proposed that this will be
done by the same physician who has treated the person in question, or in the
name of an institution and with the approval of a senior physician in the event
that the patient's physician is deceased or for any other reason unavailable.
The Supervisor encrypts THESE NAME LISTS with the above cipher and delivers the
lists in encrypted form to IE. The Supervisor may, if he so chooses and the
Permit Holders agree, perform such encryption in co-operation with the Genetic
Research Service Centre (GRSC), a foundation domiciled at Noatun 17, Reykjavik.
No copies shall remain in the possession of the Supervisor.
4. IE performs the LINKING OF THE ENCRYPTED LIST OF PATIENTS AND THE ENCRYPTED
GENEALOGICAL DATABASE. Thus, an ENCRYPTED LIST OF PARTICIPANTS is created,
i.e. a list of patients and relatives, and an encrypted genealogical table.
5. The Supervisor receives from IE the encrypted list of participants,
DECRYPTS it and prepares a list of the identity numbers and names of the
participants. Then he decrypts the genealogical table in the same manner.
The Supervisor may, if he so chooses and the Permit Holders agree, perform
this decryption in co-operation with the Genetic Research Service Centre
(GRSC), a foundation domiciled at Noatun 17, Reykjavik. The Supervisor
delivers to you the list of identity numbers and the decrypted genealogical
table. No copies may remain in the possession of the Supervisor.
6. IE prints out and delivers to the Permit Holders STICK-ON LABELS for the
labelling of blood samples, connection sheets and forms to be filled out
for health information. Each label contains:
- a three-letter code which is the set identifier
- a number specifying the number of labels in the set
- a label number (bar code)
- the term of validity (month/year in numerals and as a bar code) The term
of validity of labels shall be three months from the date of issue. There
shall be no connection between label numbers and set labels. IE may,
until three months have passed from the date of issue of the label
number, preserve information on issued label numbers (label number
register), the date of issue, the number of labels in each set and sample
numbers, cf. Sub-Section 9.
7. Participants are selected for a priority list for calling in (from families
with two or more individuals who have been diagnosed with _________________
___________). You shall PRESENT THE RESEARCH PROJECT to potential
participants and explain, among other things, issues regarding the handling
and security of personal data, and ascertain their willingness to
participate. The patient himself/herself shall, to the extent possible, be
charged with the task of contacting his/her relatives. Those who are
willing to participate shall sign a declaration of their informed consent.
Such declarations of consent shall be in a form requiring the specific
approval of the Data Protection Commission and the Science Ethics
Committee.
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<PAGE> 5
DATA PROTECTION COMMISSION
________________________________________________________________________________
You shall preserve all declarations of consent in a single file and treat
them in accordance with current rules on the handling of clinical records.
Measures shall be taken to ensure that patients have a copy of the granted
declaration of consent. When this has been done, YOU SHALL COLLECT
BIOSAMPLES AND CLINICAL DATA on the participants as follows:
a. On the arrival of the participant, a so-called CONNECTION SHEET is
filled out. The sheet states the identity number and name of the
participant, the date of arrival and the identifier of the research,
i.e. the name of the disorder and the names of the Permit Holders. One
label from a set is attached to the connection sheet.
b. Then BLOOD IS DRAWN from the participant, and tubes with blood samples
labelled with labels from the same set of labels used to label the
connection sheet. Other biosamples shall be labelled in the same
manner.
c. When this has been done, THE PERMIT HOLDERS RECORD CLINICAL DATA
regarding the participant on special forms. Other information than
specified by the Permit Holder as necessary for his purposes in the
research plan/declaration of consent may not be collected. The above
forms shall be devoid of any personal identifiers, and identified
using labels from the same set of labels as used in labelling the
connection sheet and the blood sample.
The Permit Holder may assign the work described in this Sub-Section to the
Genetic Research Service Centre or individual employees working on the
responsibility of the Centre, cf. Sub-Section 10.
All collection of health data from other sources, e.g. from clinical
records, is subject to the permission of the registered person if he/she is
alive. Otherwise, the authorisation of the senior physician in question
shall be obtained.
8. The Supervisors shall supervise the transfer of DATA FROM CONNECTING SHEETS
(INFORMATION ON IDENTITY NUMBERS AND LABEL NUMBERS) TO A SPECIAL REGISTER,
encrypt identity numbers in the register and then deliver them to IE in a
sealed envelope. When this transfer has been completed, the Supervisors
shall keep the connection sheets for one month and then destroy them. No
copies may remain with the Permit Holder or the Supervisor.
9. Blood samples and forms with health data are sent to IE. On receipt of the
data, IE RE-LABELS them and replaces label numbers with sample numbers. As
soon as all labels of the label set in question have been received, or on
expiry of the label number, the record in question shall be deleted from
the Register of Label Numbers. IE shall recycle the label number as soon as
possible. The Supervisor of the Data Protection Commission shall supervise
the deletion of records from the Register of Label Numbers in accordance
with the above instructions.
IV.
You are RESPONSIBLE for ensuring the treatment of all personal data as clinical
records, pursuant to the current Act on Patients' Rights, the Physicians' Act
and government regulations on clinical records, that such data are not
transferred out of the country
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<PAGE> 6
DATA PROTECTION COMMISSION
________________________________________________________________________________
and that all handling of genetic research data is in accordance with the above
work procedures.
The validity of the said Permit is subject to the condition that the required
authorisation of the Science Ethics Committee has been granted for the research
in question.
The Data Protection Commission reserves the right to revoke this Permit or amend
certain terms at any time, if this is required in the interest of personal
protection, especially if it is discovered that the Responsible Parties include
staff of the Processing Party (IE), or if there are other such reasons which may
be regarded as invalidating the premises of the Permit. Concurrently with the
issue of this Permit, older permits of the Data Protection Commission relating
to the same project are cancelled.
On behalf of the Data Protection Commission
----------------------------
Managing Director
Copies:
Svana Helen Bjornsdottir
Kolbeinsmyri 14
170 Seltjarnarnes
Islensk erfdagreining ehf.
Kari Stefansson
Lynghals 1
110 Reykjavik
5
<PAGE> 1
EXHIBIT 10.2
DECODE GENETICS, INC.
1996 EQUITY INCENTIVE PLAN
ADOPTED AUGUST 21, 1996
APPROVED BY STOCKHOLDERS AUGUST 21, 1996
AS AMENDED THROUGH JULY 12, 1999
1. PURPOSES.
(A) The purpose of the Plan is to provide a means by which selected
Employees and Directors of and Consultants to the Company, and its Affiliates,
may be given an opportunity to benefit from increases in value of the stock of
the Company through the granting of (i) Incentive Stock Options, (ii)
Nonstatutory Stock Options, (iii) stock bonuses, and (iv) rights to purchase
restricted stock, all as defined below.
(B) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Director of or Consultants to the Company or
its Affiliates, to secure and retain the services of new Employees, Directors
and Consultants, and to provide incentives for such persons to exert maximum
efforts for the success of the Company and its Affiliates.
(C) The Company intends that the Stock Awards issued under the Plan
shall, in the discretion of the Board or any Committee to which responsibility
for administration of the Plan has been delegated pursuant to subsection 3(c),
to be either (i) Options granted pursuant to Section 6 hereof, including
Incentive Stock Options and Nonstatutory Stock Options, or (ii) stock bonuses or
rights to purchase restricted stock granted pursuant to Section 7 hereof. All
Options shall be separately designated Incentive Stock Options or Nonstatutory
Stock Options at the time of grant, and in such form as issued pursuant to
Section 6, and a separate certificate or certificates will be issued for shares
purchased on exercise of each type of Option.
2. DEFINITIONS.
(A) "AFFILIATE" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f), respectively, of the Code.
(B) "BOARD" means the Board of Directors of the Company.
(C) "CAUSE" means (a) gross or habitual failure to perform the assigned
duties of the employee's job, that is, performance failure not corrected within
thirty (30) days after written notice to the employee thereof or (b) misconduct,
including, but not limited to: (i) conviction of a crime, or entry of a plea of
nolo contendere with regard to a crime, involving moral turpitude or dishonesty,
(ii) illegal drug use or alcohol abuse on Company premises or at a Company
sponsored event, (iii)
<PAGE> 2
conduct by the employee which in the good faith and reasonable determination of
the Board demonstrates gross unfitness to serve, (iv) participation in a fraud
or act of dishonesty against the Company, or (v) intentional, material violation
by the employee of any contract between the employee and the Company or of any
statutory duty of the employee to the Company. Mental or physical disability
shall not constitute "Cause."
(D) "CODE" means the Internal Revenue Code of 1986, as amended.
(E) "COMMITTEE" means a Committee appointed by the Board in
accordance with subsection 3(c) of the Plan.
(F) "COMPANY" means deCODE genetics, Inc., a Delaware corporation.
(G) "CONSULTANT" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated for
such services, provided that the term "Consultant" shall not include Directors
who are paid only a director's fee by the Company or who are not compensated by
the Company for their services as Directors.
(H) "CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT" means
the person's service with the Company, whether as an Employee, Director or
Consultant, is not interrupted or terminated. The Board or the chief executive
officer of the Company may determine, in that party's sole discretion, whether
Continuous Status as an Employee, Director or Consultant shall be considered
interrupted in the case of: (i) any leave of absence approved by the Board or
the chief executive officer of the Company, including sick leave, military
leave, or any other personal leave; or (ii) transfers between the Company,
Affiliates or their successors.
(I) "COVERED EMPLOYEE" means the chief executive officer and the four
(4) other highest compensated officers of the Company for whom total
compensation is required to be reported to stockholders under the Exchange Act,
as determined for purposes of Section 162(m) of the Code.
(J) "DIRECTOR" means a member of the Board.
(K) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
(L) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(M) "FAIR MARKET VALUE" means the value of the common stock as
determined in good faith by the Board.
(N) "INCENTIVE STOCK OPTION" means an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code and
the regulations promulgated thereunder.
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<PAGE> 3
(O) "LISTING DATE" means the first date upon which any security of the
Company is listed (or approved for listing) upon notice of issuance on any
securities exchange, or designated (or approved for designation) upon notice of
issuance as a national market security on an interdealer quotation system if
such securities exchange or interdealer quotation system has been certified in
accordance with the provisions of Section 25100(o) of the California Corporate
Securities Law of 1968.
(P) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act
of 1933 ("Regulation S-K")), does not possess an interest in any other
transaction as to which disclosure would be required under Item 404 (a) of
Regulation S-K, and is not engaged in a business relationship as to which
disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is
otherwise considered a "non-employee director" for purposes of Rule 16b-3.
(Q) "NONSTATUTORY STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option.
(R) "OFFICER" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(S) "OPTION" means a stock option granted pursuant to the Plan.
(T) "OPTION AGREEMENT" means a written agreement between the
Company and an Optionee evidencing the terms and conditions of an individual
Option grant. Each Option Agreement shall be subject to the terms and conditions
of the Plan.
(U) "OPTIONEE" means a person to whom an Option is granted
pursuant to the Plan or, if applicable, such other person who holds an
outstanding Option.
(V) "OUTSIDE DIRECTOR" means a Director who either (i) is not a
current employee of the Company or an "affiliated corporation" (within the
meaning of the Treasury regulations promulgated under Section 162(m) of the
Code), is not a former employee of the Company or an "affiliated corporation"
receiving compensation for prior services (other than benefits under a tax
qualified pension plan), was not an officer of the Company or an "affiliated
corporation" at any time, and is not currently receiving direct or indirect
remuneration from the Company or an "affiliated corporation" for services in any
capacity other than as a Director, or (ii) is otherwise considered an "outside
director" for purposes of Section 162(m) of the Code.
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<PAGE> 4
(W) "PLAN" means this 1996 Equity Incentive Plan.
(X) "RULE 16B-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect with respect to the Company at the time
discretion is being exercised regarding the Plan.
(Y) "STOCK AWARD" means any right granted under the Plan,
including any Option, any stock bonus, and any right to purchase restricted
stock.
(Z) "STOCK AWARD AGREEMENT" means a written agreement between the
Company and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.
3. ADMINISTRATION.
(A) The Plan shall be administered by the Board unless and until
the Board delegates administration to a Committee, as provided in subsection
3(c).
(B) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(1) To determine from time to time which of the persons
eligible under the Plan shall be granted Stock Awards; when and how each Stock
Award shall be granted; whether a Stock Award will be an Incentive Stock Option,
a Nonstatutory Stock Option, a stock bonus, a right to purchase restricted
stock, or a combination of the foregoing; the provisions of each Stock Award
granted (which need not be identical), including the time or times when a person
shall be permitted to receive stock pursuant to a Stock Award; and the number of
shares with respect to which a Stock Award shall be granted to each such person.
(2) To construe and interpret the Plan and Stock Awards
granted under it, and to establish, amend and revoke rules and regulations for
its administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.
(3) To amend the Plan or a Stock Award as provided in
Section 13.
(4) Generally, to exercise such powers and to perform such
acts as the Board deems necessary or expedient to promote the best interests of
the Company which are not in conflict with the provisions of the Plan.
(C) The Board may delegate administration of the Plan to a
committee of the Board composed of not fewer than two (2) members (the
"Committee"), all of the members of which Committee may be, in the discretion of
the Board, Non-Employee Directors and/or Outside
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<PAGE> 5
Directors. If administration is delegated to a Committee, the Committee shall
have, in connection with the administration of the Plan, the powers theretofore
possessed by the Board, including the power to delegate to a subcommittee of two
(2) or more Outside Directors any of the administrative powers the Committee is
authorized to exercise (and references in this Plan to the Board shall
thereafter be to the Committee or such a subcommittee), subject, however, to
such resolutions, not inconsistent with the provisions of the Plan, as may be
adopted from time to time by the Board. The Board may abolish the Committee at
any time and revest in the Board the administration of the Plan. Additionally,
prior to the Listing Date, and notwithstanding anything to the contrary
contained herein, the Board may delegate administration of the Plan to a
committee of one or more members of the Board and the term "Committee" shall
apply to any person or persons to whom such authority has been delegated.
Notwithstanding anything in this Section 3 to the contrary, the Board or the
Committee may delegate to a committee of one or more members of the Board the
authority to grant Stock Awards to eligible persons who (1) are not then subject
to Section 16 of the Exchange Act and/or (2) are either (i) not then Covered
Employees and are not expected to be Covered Employees at the time of
recognition of income resulting from such Stock Award, or (ii) not persons with
respect to whom the Company wishes to comply with Section 162(m) of the Code.
4. SHARES SUBJECT TO THE PLAN.
(A) Subject to the provisions of Section 12 relating to
adjustments upon changes in stock, the stock that may be issued pursuant to
Stock Awards shall not exceed in the aggregate Five Million (5,000,000) shares
of the Company's common stock. If any Stock Award shall for any reason expire or
otherwise terminate, in whole or in part, without having been exercised in full,
the stock not acquired under such Stock Award shall revert to and again become
available for issuance under the Plan.
(B) The stock subject to the Plan may be unissued shares or
reacquired shares, bought on the market or otherwise.
5. ELIGIBILITY.
(A) Incentive Stock Options may be granted only to Employees.
Stock Awards other than Incentive Stock Options may be granted only to
Employees, Directors or Consultants.
(B) No person shall be eligible for the grant of an Incentive
Stock Option if, at the time of grant, such person owns (or is deemed to own
pursuant to Section 424(d) of the Code) stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or of any of its Affiliates unless the exercise price of such Option is at least
one hundred ten percent (110%) of the Fair Market Value of such stock at the
date of grant and the Option is not exercisable after the expiration of five (5)
years from the date of grant.
(C) Subject to the provisions of Section 12 relating to
adjustments upon changes in stock, no person shall be eligible to be granted
Options covering more than one million (1,000,000) shares
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<PAGE> 6
of the Company's common stock in any calendar year. This subsection 5(c) shall
not apply prior to the Listing Date, and, following the Listing Date, shall not
apply until (i) the earliest of: (A) the first material modification of the Plan
(including any increase to the number of shares reserved for issuance under the
Plan in accordance with Section 4); (B) the issuance of all of the shares of
common stock reserved for issuance under the Plan; (C) the expiration of the
Plan; or (D) the first meeting of stockholders at which directors are to be
elected that occurs after the close of the third calendar year following the
calendar year in which occurred the first registration of an equity security
under section 12 of the Exchange Act; or (ii) such other date required by
Section 162(m) of the Code and the rules and regulations promulgated thereunder.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(A) TERM. No Option shall be exercisable after the expiration of
ten (10) years from the date it was granted.
(B) PRICE. The exercise price of each Incentive Stock Option
shall be not less than one hundred percent (100%) of the Fair Market Value of
the stock subject to the Option on the date the Option was granted. The exercise
price of each Nonstatutory Stock Option shall be determined by the Board.
Notwithstanding the foregoing, an Option (whether an Incentive Stock Option or a
Nonstatutory Stock Option) may be granted with an exercise price lower than that
set forth in the preceding sentence if such Option is granted pursuant to an
assumption or substitution for another option in a manner satisfying the
provisions of Section 424(a) of the Code.
(C) CONSIDERATION. The purchase price of stock acquired pursuant
to an Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii) at
the discretion of the Board or the Committee, at the time of the grant of the
Option, (A) by delivery to the Company of other common stock of the Company, (B)
according to a deferred payment arrangement, except that payment of the common
stock's "par value" (as defined in the Delaware General Corporation Law) shall
not be made by deferred payment, or other arrangement (which may include,
without limiting the generality of the foregoing, the use of other common stock
of the Company) with the person to whom the Option is granted or to whom the
Option is transferred pursuant to subsection 6(d), or (C) in any other form of
legal consideration that may be acceptable to the Board.
In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.
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<PAGE> 7
(D) TRANSFERABILITY. An Incentive Stock Option shall not be
transferable except by will or by the laws of descent and distribution, and
shall be exercisable during the lifetime of the person to whom the Incentive
Stock Option is granted only by such person. A Nonstatutory Stock Option shall
only be transferable by the Optionee upon such terms and conditions as are set
forth in the Option Agreement for such Nonstatutory Stock Option, as the Board
of the Committee shall determine in its discretion, except that each
Nonstatutory Stock Option may be transferred to the spouse, children, lineal
ancestors and lineal descendants of the Optionee (or to a trust created solely
for the benefit of the Optionee and the foregoing persons) or to an organization
except from taxation pursuant to Section 501(c)(3) of the Code or to which tax
deductible charitable contributions may be made under Section 170 of the Code
(excluding such organizations classified as private foundations under applicable
regulations and rulings). The person to whom the Option is granted may, by
delivering written notice to the Company, in a form satisfactory to the Company,
designate a third party who, in the event of the death of the Optionee, shall
thereafter be entitled to exercise the Option.
(E) VESTING. The total number of shares of stock subject to an Option
may, but need not, be allotted in periodic installments (which may, but need
not, be equal). The Option Agreement may provide that from time to time during
each of such installment periods, the Option may become exercisable ("vest")
with respect to tome or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate. The provisions of this
subsection 6(e) are subject to any Option provisions governing the minimum
number of shares as to which an Option may be exercised.
(F) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. In the event an Optionee's Continuous Status as an Employee,
Director or Consultant terminates (other than upon the Optionee's death or
disability), the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it as of the date of termination) but only
within such period of time ending on the earliest of (i) the date three
(3) months after the termination of the Optionee's Continuous Status as an
Employee, Director or Consultant or such longer or shorter period specified in
the Option Agreement), (ii) the time of such termination if such termination is
for "Cause" or if after such termination the Optionee provides services for or
acquires an ownership interest in any business which competes with the Company,
or (iii) the expiration of the term of the Option as set forth in the Option
Agreement. If, at the date of termination, the Optionee is not entitled to
exercise his or her entire Option, the shares covered by the unexercisable
portion of the Option shall revert to and again become available for issuance
under the Plan. If, after termination, the Optionee does not exercise his or her
Option within the time specified in the Option Agreement, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
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<PAGE> 8
An Optionee's Option Agreement may also provide that if the exercise of
the Option following the termination of the Optionee's Continuous Status as an
Employee, Director or Consultant (other than upon the Optionee's death or
disability) would result in liability under Section 16(b) of the Exchange Act,
then the Option shall terminate on the earlier of (i) the expiration of the term
of the Option set forth in the Option Agreement, or (ii) the tenth (10th) day
after the last date on which such exercise would result in such liability under
Section 16(b) of the Exchange Act. Finally, an Optionee's Option Agreement may
also provide that if the exercise of the Option following the termination of the
Optionee's Continuous Status as an Employee, Director or Consultant (other than
upon the Optionee's death or disability) would be prohibited at any time solely
because the issuance of shares would violate the registration requirements under
the Securities Act of 1933, as amended (the "Act"), then the Option shall
terminate on the earlier of (i) the expiration of the term of the Option set
forth in the first paragraph of this subsection 6(f), or (ii) the expiration of
a period of three (3) months following the termination of the Optionee's
Continuous Status as an Employee, Director or Consultant during which the
exercise of the Option would not be in violation of such registration
requirements.
(G) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous
Status as an Employee, Director or Consultant terminates as a result of the
Optionee's disability, the Optionee may exercise his or her Option (to the
extent that the Optionee was entitled to exercise it as of the date of
termination), but only within such period of time ending on the earlier of
(i) the date twelve (12) months following such termination (or such longer or
shorter period specified in the Option Agreement), or (ii) the expiration of the
term of the Option as set forth in the Option Agreement. If, at the date of
termination, the Optionee is not entitled to exercise his or her entire Option,
the shares covered by the unexercisable portion of the Option shall revert to
and again become available for issuance under the Plan. If, after termination,
the Optionee does not exercise his or her Option within the time specified
herein, the Option shall terminate, and the shares covered by such Option shall
revert to and again become available for issuance under the Plan.
(H) DEATH OF OPTIONEE. In the event of the death of an Optionee during,
or within a period specified in the Option Agreement after the termination of,
the Optionee's Continuous Status as an Employee, Director or Consultant, the
Option may be exercise (to the extent the Optionee was entitled to exercise the
Option as of the date of death) by the Optionee's estate, by a person who
acquired the right to exercise the Option by bequest or inheritance or by a
person designated to exercise the option upon the Optionee's death pursuant to
subsection 6(d), but only within the period ending on the earlier of (i) the
date eighteen (18) months following the date of death (or such longer or shorter
period specified in the Option Agreement ), or (ii) the expiration of the term
of such Option as set forth in the Option Agreement. If, at the time of death,
the Optionee was not entitled to exercise his or her entire Option, the shares
covered by the unexercisable portion of the Option shall revert to and again
become available for issuance under the Plan. If, after death, the Option is not
exercised within the time specified herein, the Option shall terminate, and the
shares covered by such Option shall revert to and again become available for
issuance under the Plan.
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<PAGE> 9
(I) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject to
the Option prior to the full vesting of the Option. Any unvested shares so
purchased may be subject to a repurchase right in favor of the Company or to any
other restriction the Board determines to be appropriate.
(J) RIGHT OF FIRST REFUSAL. The Option may, but need not, include a
provision whereby the Company may elect, prior to the Listing Date, to exercise
a right of first refusal following receipt of notice from the Optionee of the
intent to transfer all or any part of the shares exercised pursuant to the
Option. Except as expressly provided in this Subsection (j), such right of first
refusal shall otherwise comply with the provisions of the Bylaws of the Company.
(K) RE-LOAD OPTIONS. Without in any way limiting the authority of the
Board or Committee to make or not to make grants of Options hereunder, the Board
or Committee shall have the authority (but not an obligation) to include as part
of any Option Agreement a provision entitling the Optionee to a further Option
(a "Re-Load Option") in the event the Optionee exercises the Option evidenced by
the Option Agreement, in whole or in part, by surrendering other shares of
Common Stock in accordance with this Plan and the terms and conditions of the
Option Agreement. Any such Re-Load Option (i) shall be for a number of shares
equal to the number of shares surrendered as part or all of the exercise price
of such Option; (ii) shall have an expiration date which is the same as the
expiration date of the Option the exercise of which gave rise to such Re-Load
Option; and (iii) shall have an exercise price which is equal to one hundred
percent (100%) of the Fair Market Value of the Common Stock subject to the
Re-Load Option on the date of exercise of the original Option. Notwithstanding
the foregoing, a Re-Load Option which is an Incentive Stock Option and which is
grated to a 10% stockholder (as described in subsection 5(b)), shall have an
exercise price which is equal to one hundred ten percent (110%) of the Fair
Market Value of the stock subject to the Re-Load Option on the date of exercise
of the original Option and shall have a term which is no longer than five
(5) years.
Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board or Committee may designate at the time
of the grant of the original Option; provided, however, that the designation of
any Re-Load Option as an Incentive Stock Option shall be subject to the one
hundred thousand dollar ($100.000) annual limitation on exercisability of
Incentive Stock Options described in subsection 11(e) of the Plan and in
Section 422(d) of the Code. There shall be no Re-Load Options on a Re-Load
Option. Any such Re-Load Option shall be subject to the availability of
sufficient shares under subsection 4(a) and the limits on the grants of Options
under subsection 5(c) and shall be subject to such other terms and conditions as
the Board or Committee may determine which are not inconsistent with the express
provisions of the Plan regarding the terms of Options.
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<PAGE> 10
7. TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.
Each stock bonus or restricted stock purchase agreement shall be in
such form and shall contain such terms and conditions as the Board or the
Committee shall deem appropriate. The terms and conditions of stock bonus or
restricted stock purchase agreements may change from time to time, and the terms
and conditions of separate agreements need not be identical, but each stock
bonus or restricted stock purchase agreement shall include (through
incorporation of provisions hereof by reference in the agreement or otherwise)
the substance of each of the following provisions as appropriate:
(A) PURCHASE PRICE. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board or Committee shall
determine and designate in such Stock Award Agreement. Notwithstanding the
foregoing, the Board or the Committee may determine that eligible participants
in the Plan may be awarded stock pursuant to a stock bonus agreement in
consideration for past services actually rendered to the Company or for its
benefit.
(B) TRANSFERABILITY. Rights under a stock bonus or restricted stock
purchase agreement shall be transferable by the grantee only upon such terms and
conditions as are set forth in the applicable Stock Award Agreement, as the
Board or the Committee shall determine in its discretion, so long as stock
awarded under such Stock Award Agreement remains a subject to the terms of the
agreement.
(C) CONSIDERATION. The purchase price of stock acquired pursuant to a
stock purchase agreement shall be paid either: (i) in cash at the time of
purchase; (ii) at the discretion of the Board or the Committee, according to a
deferred payment arrangement, except that payment of the common stock's "par
value" (as defined in the Delaware General Corporation Law) shall not be made by
deferred payment, or other arrangement with the person to whom the stock is
sold; or (iii) in any other form of legal consideration that may be acceptable
to the Board or the Committee in its discretion. Notwithstanding the foregoing,
the Board or the Committee to which administration of the Plan has been
delegated may award stock pursuant to a stock bonus agreement in consideration
for past services actually rendered to the Company or for its benefit.
(D) VESTING. Shares of stock sold or awarded under the Plan may, but
need not, be subject to a repurchase option in favor of the Company in
accordance with a vesting schedule to be determined by the Board or the
Committee.
(E) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. In the event a Participant's Continuous Status as an Employee,
Director or Consultant terminates, the Company may repurchase or otherwise
reacquire any or all of the shares of stock held by that person which have not
vested as of the date of termination under the terms of the stock bonus or
restricted stock purchase agreement between the Company and such person.
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<PAGE> 11
8. CANCELLATION AND RE-GRANT OF OPTIONS.
(A) The Board or the Committee shall have the authority to effect, at
any time and from time to time, (i) the repricing of any outstanding Options
under the Plan and/or (ii) with the consent of the affected holders of Options,
the cancellation of any outstanding Options under the Plan and the grant in
substitution therefor of new Options under the Plan covering the same or
different numbers of shares of stock, but having an exercise price per share not
less than one hundred percent (100%) of the Fair Market Value in the case of an
Incentive Stock Option or, in the case of a 10% stockholder (as described in
subsection 5(b)) receiving a new grant of any Incentive Stock Option, not less
than one hundred ten percent (110%) of the Fair Market Value per share of stock
on the new grant date. Notwithstanding the foregoing, the Board or the Committee
may grant an Option with an exercise price lower than that set forth above if
such Option is granted as part of a transaction to which section 424(a) of the
Code applies.
(B) Shares subject to an Option canceled under this Section 8 shall
continue to be counted against the maximum award of Options permitted to be
granted pursuant to subsection 5(c) of the Plan. The repricing of an Option
under this Section 8, resulting in a reduction of the exercise price, shall be
deemed to be a cancellation of the original Option and the grant of a substitute
Option; in the event of such repricing, both the original and the substituted
Options shall be counted against the maximum awards of Options permitted to be
granted pursuant to subsection 5(c) of the Plan. The provisions of this
subsection 8(b) shall be applicable only to the extent required by Section
162(m) of the Code.
9. COVENANTS OF THE COMPANY.
(A) During the terms of the Stock Awards, the Company shall keep
available at all times the number of shares of stock required to satisfy such
Stock Awards.
(B) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the Stock Award; provided,
however, that this undertaking shall not require the Company to register under
the act, either the Plan, any Stock Award or any stock issued or issuable
pursuant to any such Stock Award. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of stock under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such Stock Awards unless and
until such authority is obtained.
10. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Stock Awards shall
constitute general funds of the Company.
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<PAGE> 12
11. MISCELLANEOUS.
(A) The Board shall have the power to accelerate the time at which a
Stock Award may first be exercised or the time during which a Stock Award or any
part thereof will vest pursuant to subsection 6(e) or 7(d), notwithstanding the
provisions in the Stock Award stating the time at which it may first be
exercised or the time during which it will best.
(B) Neither an Employee, Director or Consultant nor any person to whom
a Stock Award is transferred under subsection 6(d) shall be deemed to be the
holder of, or to have any of the rights of a holder with respect to, any shares
subject to such Stock Award unless and until such person has satisfied all
requirements for exercise of the Stock Award pursuant to its terms.
(C) Nothing in the Plan or any instrument executed or Stock Award
granted pursuant thereto shall confer upon any Employee, Director, Consultant or
other holder of Stock Awards any right to continue in the employ of the Company
or any Affiliate (or to continue acting as a Director or Consultant) or shall
affect the right of the Company or any Affiliate to terminate the employment of
any Employee with or without cause the right of the Company's Board of Directors
and/or the Company's stockholders to remove any Director as provided in the
Company's By-Laws and the provisions of the Delaware General Corporation Law, or
the right to terminate the relationship of any Consultant subject to the terms
of such Consultant's agreement with the Company or Affiliate.
(D) To the extent that the aggregate Fair Market Value (determined at
the time of grant) of stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year under
all plans of the Company and its Affiliates exceeds one hundred thousand dollars
($100,000), the Options or portions thereof which exceed such limit (according
to the order in which they were granted) shall be treated as Nonstatutory Stock
Options.
(E) The Company may require any person to whom a Stock Award is
granted, or any person to whom a Stock Award is transferred pursuant to
subsection 6(d) or 7(b), as a condition of exercising or acquiring stock under
any Stock Award, (1) to give written assurances satisfactory to the Company as
to such person's knowledge and experience in financial and business matters
and/or to employ a purchaser representative reasonably satisfactory to the
Company who is knowledgeable and experienced in financial and business matters,
and that he or she is capable of evaluating, alone or together with the
purchaser representative, the merits and risks of exercising the Stock Award;
and (2) to give written assurances satisfactory to the Company stating that such
person is acquiring the stock subject to the Stock Award for such person's own
account and not with any present intention of selling or otherwise distributing
the stock. The foregoing requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the shares upon the
exercise or acquisition of stock under the Stock Award has been registered under
a then currently effective registration statement under the Securities Act, or
(ii) as to any particular requirement, a determination is made by counsel for
the Company that such requirement need not be met in the circumstances under the
then applicable securities laws. The Company may, upon advice of counsel to the
Company, place legends on stock certificates issued under the Plan as such
counsel deems
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<PAGE> 13
necessary or appropriate in order to comply with applicable securities laws,
including, but not limited to, legends restricting the transfer of the stock.
(F) To the extent provided by the terms of a Stock Award Agreement, the
person to whom a Stock Award is granted may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of stock
under a Stock Award by any of the following means or by a combination of such
means: (1) tendering a cash payment; (2) authorizing the Company to withhold
shares from the shares of the common stock otherwise issuable to the participant
as result of the exercise or acquisition of stock under the Stock Award; or (3)
delivering to the Company owned and unencumbered shares of the common stock of
the Company.
12. ADJUSTMENTS UPON CHANGES IN STOCK.
(A) If any change is made in the stock subject to the Plan, or subject
to any Stock Award (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan will be appropriately
adjusted in the type(s) and maximum number of securities subject to award to any
person during any calendar year pursuant to subsection 5(c), and the outstanding
Stock Awards will be appropriately adjusted in the type(s) and number of
securities and price per share of stock subject to such outstanding Stock
Awards. Such adjustments shall be made by the Board or the Committee, the
determination of which shall be final, binding and conclusive. (The conversion
of any convertible securities of the Company shall not be treated as a
"transaction not involving the receipt of consideration by the Company.")
(B) In the event of: (1) a dissolution, liquidation or sale of all or
substantially all of the assets of the Company; (2) a merger or consolidation in
which the Company is not the surviving corporation; or (3) a reverse merger in
which the Company is the surviving corporation but the shares of the Company's
common stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise; then: (i) any surviving corporation or acquiring corporation
shall assume any Stock Awards outstanding under the Plan or shall substitute
similar stock awards (including an award to acquire the same consideration paid
to the stockholders in the transaction described in this subsection 12(b)) for
those outstanding under the Plan, or (ii) in the event any surviving corporation
or acquiring corporation refuses to assume such Stock Awards or to substitute
similar stock awards for those outstanding under the Plan, (A) with respect to
Stock Awards held by persons then performing services as Employees, Directors or
Consultants the vesting of such Stock Awards (and, if applicable, the time
during which such Stock Awards may be exercised) shall be accelerated prior to
such event and the Stock Awards terminated if not exercised (if applicable)
after such acceleration and at or prior to such event, and (B) with respect to
any other Stock Awards outstanding under the Plan, such Stock Awards shall be
terminated if not exercised (if applicable) prior to such event.
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<PAGE> 14
13. AMENDMENT OF THE PLAN AND STOCK AWARDS.
(A) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 12 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
(I) Increase the number of shares reserved for Stock
Awards under the Plan;
(II) Modify the requirements as to eligibility for
participation in the Plan (to the extent such modification requires stockholder
approval in order for the Plan to satisfy the requirements of Section 422 of the
Code); or
(III) Modify the Plan in any other way if such
modification requires stockholder approval in order for the Plan to satisfy the
requirements of Section 422 of the Code or to comply with the requirements of
Rule 16b-3.
(B) The Board may in its sole discretion submit any other amendment to
the Plan for stockholder approval, including, but not limited to, amendments to
the Plan intended to satisfy the requirements of Section 162(m) of the Code and
the regulations promulgated thereunder regarding the exclusion of
performance-based compensation from the limit on corporate deductibility of
compensation paid to certain executive officers.
(C) It is expressly contemplated that the Board may amend the Plan in
any respect the Board deems necessary or advisable to provide eligible Employees
with the maximum benefits provided or to be provided under the provisions of the
Code and the regulations promulgated thereunder relating to Incentive Stock
Options and/or to bring the Plan and/or Incentive Stock Options granted under it
into compliance therewith.
(D) Rights and obligations under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the person to whom the Stock Award was
granted and (ii) such person consents in writing.
(E) The Board at any time, and from time to time, may amend the terms
of any one or more Stock Award; provided, however, that the rights and
obligations under any Stock Award shall not be impaired by any such amendment
unless (i) the Company requests the consent of the person to whom the Stock
Award was granted and (ii) such person consents in writing.
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<PAGE> 15
14. TERMINATION OR SUSPENSION OF THE PLAN.
(A) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on August 15, 2006, which shall be
within ten (10) years from the date the Plan is adopted by the Board or approved
by the stockholders of the Company, whichever is earlier. No Stock Awards may be
granted under the Plan while the Plan is suspended or after it is terminated.
(B) Rights and obligations under any Stock Award granted while the Plan
is in effect shall not be impaired by suspension or termination of the Plan,
except with the written consent of the person to whom the Stock Award was
granted.
15. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no
Stock Awards granted under the Plan shall be exercised unless and until the Plan
has been approved by the stockholders of the Company, which approval shall be
within twelve (12) months before or after the date the Plan is adopted by the
Board, and, if required, an appropriate permit has been issued by the
Commissioner of Corporations of the State of California.
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<PAGE> 1
EXHIBIT 10.3
NON-STATUTORY STOCK OPTION
_________________________, Optionee:
deCODE genetics, Inc., a Delaware corporation (the "Company"), has
granted to you, the optionee named above, an option to purchase shares of the
common stock of the Company ("Common Stock"). This option is not intended to
qualify as an "incentive stock option" within the meaning of Section 422 of the
United States Internal Revenue Code of 1986, as amended (the "Code"). The grant
hereunder is intended to comply with the provisions of Regulation S promulgated
by the United States Securities and Exchange Commission under the United States
Securities Act of 1933, as amended (the "Act").
The details of your option are as follows:
1. DEFINITIONS.
(A) "AFFILIATE" means any parent corporation or subsidiary
corporation, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.
(B) "BOARD" means the Board of Directors of the Company.
(C) "CAUSE" means (a) gross or habitual failure to perform the
person's assigned duties, that is, performance failure not corrected within
thirty (30) days after written notice to the person thereof or (b) misconduct,
including, but not limited to: (i) conviction of a crime, or entry of a plea of
nolo contendere with regard to a crime, involving moral turpitude or dishonesty,
(ii) illegal drug use or alcohol abuse on Company premises or at a Company
sponsored event, (iii) conduct by the person which in the good faith and
reasonable determination of the Board demonstrates gross unfitness to serve,
(iv) participation in a fraud or act of dishonesty against the Company, or (v)
intentional, material violation by the person of any contract between the person
and the Company or of any statutory duty of the person to the Company. Neither
mental nor physical disability shall constitute "Cause".
(D) "CONSULTANT" means any person, including an advisor,
engaged by the Company or an Affiliate to render consulting services and who is
compensated for such services, provided that the term "Consultant" shall not
include Directors who are paid only a director's fee by the Company or who are
not compensated by the Company for their services as Directors.
(E) "CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT"
means the person's service with the Company, whether as an Employee, Director or
Consultant, is not interrupted or terminated. The Board or the chief executive
officer of the Company may determine, in that party's sole discretion, whether
Continuous Status as an Employee, Director or Consultant shall be considered
interrupted in the case of: (i) any leave of absence approved by the Board or
the chief executive officer of the Company, including sick leave, military
leave, or any other personal leave; or (ii) transfers between the Company,
Affiliates or their successors.
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<PAGE> 2
(F) "DIRECTOR" means a member of the Board.
(G) "EMPLOYEE" means any person, including Officers and
Directors, employed by the Company or any Affiliate of the Company. Neither
service as a Director nor payment of a director's fee by the Company shall be
sufficient to constitute "employment" by the Company.
(H) "OFFICER" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
2. TOTAL NUMBER OF SHARES SUBJECT TO THIS OPTION. The total
number of shares of Common Stock subject to this option is ______________
(__________).
3. VESTING. Subject to the limitations contained herein, twenty-
five percent (25%) of the shares will vest (become exercisable) on ____________,
and 1/48th of the shares will then vest on the last day of each month thereafter
until either: (i) you cease to provide services to the Company for any reason;
or (ii) this option becomes fully vested. Additionally, vesting will be
suspended for the duration of any leave of absence that does not constitute a
termination of your Continuous Status as an Employee, Director or Consultant.
4. EXERCISE PRICE AND METHOD OF PAYMENT.
(A) EXERCISE PRICE. The exercise price of this option
is $_______ per share.
(B) METHOD OF PAYMENT. Payment of the exercise price per
share is due in full upon exercise of all or any part of this option. You may
elect, to the extent permitted by applicable statutes and regulations, to make
payment of the exercise price under one of the following alternatives:
(i) Payment of the exercise price per share in
cash (including check) at the time of exercise;
(ii) Payment according to a deferred payment
arrangement acceptable to the Board (including payment by promissory note),
except that payment of the common stock's "par value" (as defined in the
Delaware General Corporation Law) shall be made in cash (including check) at the
time of exercise;
(iii) Payment pursuant to a program developed
under Regulation T as promulgated by the United States Federal Reserve Board
which, prior to the issuance of Common Stock, results in either the receipt of
cash (or check) by the Company or the receipt of irrevocable instructions to pay
the aggregate exercise price to the Company from the sales proceeds;
(iv) Provided that at the time of exercise the
Common Stock is publicly traded and quoted regularly in The Wall Street Journal,
payment by delivery of already-owned shares of Common Stock, held for the period
required to avoid a charge to the Company's reported earnings, and owned free
and clear of any liens, claims, encumbrances or security interests, which Common
Stock shall be valued at its fair market value on the date of exercise; or
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<PAGE> 3
(v) Payment by a combination of the methods of payment permitted
by subparagraph 4(b)(i) through 4(b)(iv) above.
5. EXERCISE PRIOR TO VESTING PERMITTED.
(A) CONDITIONS OF EARLY EXERCISE. Subject to the provisions of this option,
you may elect at any time during your Continuous Status as an Employee, Director
or Consultant with the Company or an Affiliate of the Company, to exercise the
option as to any part or all of the shares subject to this option at any time
during the term hereof, including without limitation, a time prior to the date
of earliest exercise ("vesting") stated in Paragraph 3; provided, however, that:
(i) a partial exercise of this option shall be deemed to cover
first vested shares and then the earliest vesting installment of unvested
shares;
(ii) any shares so purchased from installments which have not
vested as of the date of exercise shall be subject to the purchase option
in favor of the Company as described in the Early Exercise Stock Purchase
Agreement attached hereto; and
(iii) you shall enter into the Early Exercise Stock Purchase
Agreement attached hereto with a vesting schedule that will result in the
same vesting as if no early exercise had occurred.
(B) EXPIRATION OF EARLY EXERCISE ELECTION. The election provided in this
Paragraph 5 to purchase shares upon the exercise of this option prior to the
vesting dates (the "Early Exercise Election") shall cease upon termination of
your Continuous Status as an Employee, Director or Consultant with the Company
or an Affiliate of the Company and may not be exercised after the date thereof.
6. WHOLE SHARES. This option may not be exercised for any
number of shares which would require the issuance of anything other than
whole shares.
7. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the
contrary contained herein, this option may not be exercised unless the shares
issuable upon exercise of this option are then registered under the Act or,
if such shares are not then so registered, the Company has determined that
such exercise and issuance would be exempt from the registration requirements
of the Act.
8. TERM. The term of this option commences on _________________,
the date of grant, and expires on ____________________ (the "Expiration
Date," which date shall be no more than ten (10) years from date this option
is granted), unless this option expires sooner as set forth herein. In no
event may this option be exercised on or after the Expiration Date. This
option shall expire on the date of your termination of Continuing Status as
an Employee, Director or Consultant if: (a) such termination is for Cause; or
(b) after such termination you provide services for or acquire an ownership
interest in any business which competes with the Company. However, this
option may be exercised following termination of Continuous Status as an
Employee, Director or Consultant only as to that number of shares as to which
it was exercisable on the date of termination of Continuous Status as an
Employee, Director or Consultant under the provisions of Paragraph 3.
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<PAGE> 4
9. EXERCISE UPON OR SUBSEQUENT TO VESTING.
(A) In lieu of making the Early Exercise Election,
Optionee may exercise this option, to the extent specified above, by delivering
a stock purchase agreement (in a then form designated by the Company) together
with the exercise price to the Secretary of the Company, or to such other person
as the Company may designate, during regular business hours, together with such
additional documents as the Company may then require for purposes of compliance
with any applicable law, rule or regulation.
(B) By exercising this option, you agree that:
(i) as a precondition to the completion of
any exercise of this option, the Company may require you to enter an arrangement
providing for the payment by you to the Company of any tax withholding
obligation of the Company arising by reason of: (A) the exercise of this option;
(B) the lapse of any substantial risk of forfeiture to which the shares are
subject at the time of exercise; or (C) the disposition of shares acquired upon
such exercise;
(ii) the Company (or a representative of the
underwriters) may, in connection with the first underwritten registration of the
offering of any securities of the Company under the Act, require that you not
sell or otherwise transfer or dispose of any shares of Common Stock or other
securities of the Company during such period (not to exceed one hundred eighty
(180) days) following the effective date (the "Effective Date") of the
registration statement of the Company filed under the Act as may be requested by
the Company or the representative of the underwriters. You further agree that
the Company may impose stop-transfer instructions with respect to securities
subject to the foregoing restrictions until the end of such period; and
(iii) at the request of the Company, you will
execute and become a party to any voting agreement then in effect between the
Company and any of its common stockholders.
10. TRANSFERABILITY This option is not transferable, except
(i) by will or by the laws of descent and distribution, (ii) to your spouse,
children, lineal ancestors and lineal descendants (or to a trust created solely
for your benefit and that of the foregoing persons), (iii) to an organization
exempt from taxation pursuant to Section 501(c)(3) of the Code or to which tax
deductible contributions may be made under Section 170 of the Code (excluding
such organizations classified as private foundations under applicable
regulations and rulings), or (iv) to your Affiliate. Notwithstanding the
foregoing, by delivering written notice to the Company, in a form satisfactory
to the Company, you may designate a third party who, in the event of your death,
shall thereafter be entitled to exercise this option.
11. OPTION NOT A SERVICE NOR EMPLOYMENT CONTRACT. This option is
neither a service nor an employment contract. Nothing in this option shall be
deemed to: (i) create in any way whatsoever any obligation on your part to
continue in the employ of the Company, or of the Company to continue your
employment with the Company; or (ii) obligate the Company or any Affiliate of
the Company, or their respective stockholders, Board of Directors, officers or
employees to continue any relationship which you might have as a Director or
Consultant for the Company or Affiliate of the Company.
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12. NOTICES. Any notices provided for in this option shall be
given in writing and shall be deemed effectively given upon receipt or, in the
case of notices delivered by the Company to you, five (5) days after deposit in
the mail, postage prepaid, addressed to you at the address specified below or at
such other address as you hereafter designate by written notice to the Company.
13. GENDER. Whenever the context requires, words denoting gender
in this option shall include the masculine, feminine and neuter.
Dated: ________________ Very truly yours,
deCODE genetics, Inc.
By:__________________________________
Kari Stefansson, President
ATTACHMENTS:
Early Exercise Stock Purchase Agreement
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The undersigned:
(a) Acknowledges receipt of the foregoing option and the
attachments referenced therein and understands that all rights and liabilities
with respect to this option are set forth in the option; and
(b) Acknowledges that as of the date of grant of this option,
it sets forth the entire understanding between the undersigned optionee and the
Company and its Affiliates regarding the acquisition of stock in the Company and
supersedes all prior oral and written agreements on that subject with the
exception of (i) the options previously granted and delivered to the undersigned
under stock option plans of the Company, and (ii) the following agreements only:
NONE _____________
(Initial)
OTHER _____________________________________
_____________________________________
_____________________________________
_____________________________________
(signature)
_____________________________________
(print name)
Address: _____________________________________
_____________________________________
_____________________________________
_____________________________________
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<PAGE> 7
EARLY EXERCISE STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made by and between deCODE genetics, Inc., a Delaware
corporation (the "Company"), and ______________________________("Purchaser").
WITNESSETH:
WHEREAS, Purchaser holds a stock option to purchase shares of common
stock of the Company which Purchaser desires to exercise; and
WHEREAS, Purchaser wishes to take advantage of the early exercise
provision of its option and therefore to enter into this Agreement;
NOW, THEREFORE, IT IS AGREED between the parties as follows:
1. Purchaser hereby agrees to purchase from the Company, and the
Company hereby agrees to sell to Purchaser, an aggregate of ____________ shares
of the common stock (the "Stock") of the Company, for an aggregate exercise
price of $_______________ ($____ per share) payable as follows:
Cash at Closing $______________
Nonrecourse Promissory Note in
the form of Exhibit A (the "Note") $______________
Total Exercise Price $______________
The closing hereunder shall occur at the offices of the Company on the
date of this Agreement or at such other time and place as the parties may
mutually agree upon in writing.
At the closing, Purchaser shall deliver to the Company: (i) the total
exercise price (accounted for by cash at closing and the executed Note if a
portion of the total exercise price is to be paid by a promissory note) and an
executed pledge agreement in the form attached hereto as Exhibit B (the "Pledge
Agreement") under which all shares of the Stock acquired by Note shall be
pledged as collateral security for the payment of the indebtedness represented
by the Note; (ii) three (3) Stock Powers, in the form attached as Exhibit C,
duly endorsed (with date and number of shares left blank); and (iii) the voting
agreement between the Company and the holders of its Common Stock in the form
attached hereto as Exhibit D, duly executed by Purchaser. The certificates for
all of the Stock that is subject to the Pledge Agreement, together with the
Stock Powers, shall be retained by the Company as security pursuant to the
Pledge Agreement.
At the closing or as soon thereafter as practicable, the Company shall
deliver to the Escrow Agent (as defined in Paragraph 8) share certificates for
all of the Stock that is to be
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subject to the Forfeiture Option (as defined in Paragraph 2), and shall deliver
share certificates to Purchaser for all of the Stock, if any, that is not to be
subject to the Forfeiture Option or the Pledge Agreement. The certificates for
all of the Stock that is subject to the Pledge Agreement but not the Forfeiture
Option shall be retained by the Company as security pursuant to the Pledge
Agreement.
2. The Stock to be purchased by Purchaser pursuant to this
Agreement shall be subject to the following option ("Forfeiture Option"):
(a) In the event that Purchaser shall cease to be an employee
of the Company for any reason (including his death), or no reason, with or
without cause, the Forfeiture Option may be exercised. The Company shall have
the right, at any time within the ninety (90) day period after Purchaser's
termination of service with the Company and all affiliates of the Company or
such longer period as may be agreed to by the Company and Purchaser, to require
Purchaser or its personal representative, as the case may be, to forfeit to the
Company up to but not exceeding the number of shares of the Stock set forth on
Exhibit E attached hereto. Upon such forfeiture, the Company shall return to
Purchaser for each share of Stock forfeited the price per share paid by
Purchaser pursuant to this Agreement (including accrued but unpaid interest on
the principal portion of any note given by Purchaser in payment of such price
which relates to the purchase price of the forfeited shares of Stock )
("Forfeiture Price")
(b) In addition, and without limiting the foregoing Forfeiture
Option, if at any time during the term of the Forfeiture Option, there occurs:
(i) a dissolution or liquidation of the Company; (ii) a merger or consolidation
involving the Company in which the Company is not the surviving corporation;
(iii) a reverse merger in which the Company is the surviving corporation but the
shares of the Company's common stock outstanding immediately preceding the
merger are converted by virtue of the merger into other property, whether in the
form of other securities, cash or otherwise; or (iv) any other capital
reorganization in which more that fifty percent (50%) of the shares of the
Company entitled to vote are exchanged, then: (1) if there is no successor to
the Company, the Company shall have the right to exercise its Forfeiture Option
as to all or any portion of the Stock then subject to the Forfeiture Option set
forth above to the same extent as if Purchaser's employment by the Company had
ceased on the date preceding the date of consummation of said event or
transaction; or (2) the Forfeiture Option may be assigned to any successor of
the Company, and the Forfeiture Option shall apply if Purchaser shall cease for
any reason to be an employee of such successor on the same basis as set forth
above. In that case, references herein to the "Company" shall be deemed to refer
to such successor.
(c) As used herein, employment with the Company shall include
Employment with an affiliate of the Company.
(d) This Agreement is not an employment contract and nothing
in this Agreement shall be deemed to create in any way whatsoever any obligation
on the part of Purchaser to continue in the employ to this Company, or of the
Company to continue
-8-
<PAGE> 9
Purchaser in the employ of the Company.
3. The Forfeiture Option may be exercised by giving written notice of
exercise delivered or mailed as provided in Paragraph 15. Upon providing of such
notice and payment or tender of the purchase price, the Company shall become the
legal and beneficial owner of the Stock being purchased and all rights and
interests therein or related thereto.
4. If from time to time during the term of the Forfeiture Option there
is any stock dividend or liquidating dividend or distribution of cash and/or
property, stock split or other change in the character or amount of any of the
outstanding securities of the Company, then, in such event, any and all new,
substituted or additional securities or other property to which Purchaser is
entitled by reason of his ownership of Stock will be immediately subject to the
Forfeiture Option and be included in the word "Stock" for all purposes of the
Forfeiture Option with the same force and effect as the shares of Stock then
subject to the Forfeiture Option. While the total Option Price shall remain the
same after each such event, the Option Price per share of Stock upon exercise of
the Forfeiture Option shall be appropriately adjusted.
5. All certificates representing any shares of Stock of the Company
subject to the provisions of this Agreement shall have endorsed thereon legends
in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN
OPTION SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE
REGISTERED HOLDER, OR HIS PREDECESSOR IN INTEREST, A COPY OF
WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THIS COMPANY. ANY
TRANSFER OR ATTEMPTED TRANSFER OF ANY SHARES SUBJECT TO SUCH
OPTION IS VOID WITHOUT THE PRIOR EXPRESS WRITTEN CONSENT OF
THE ISSUER OF THESE SHARES.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES
UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
A RIGHT OF FIRST REFUSAL OPTION IN FAVOR OF THE COMPANY AND/OR
ITS ASSIGNEE(S) AS PROVIDED IN THE BYLAWS OF THE CORPORATION.
-9-
<PAGE> 10
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
THE TERMS OF A VOTING AGREEMENT BY AND AMONG THE COMPANY AND
CERTAIN OF ITS STOCKHOLDERS, DATED AS OF FEBRUARY 2, 1998, AS
SUCH AGREEMENT MAY BE AMENDED FROM TIME TO TIME, A COPY OF
WHICH IS ON FILE IN THE OFFICE OF THE SECRETARY OF THE
COMPANY.
6. Purchaser acknowledges that it is aware that the Stock to be
issued to it by the Company pursuant to this Agreement has not been registered
under the United States Securities Act of 1933, as amended (the "Act"), on the
basis that no distribution or public offering of the Stock in the United States
is to be effected, and in this connection acknowledges that the Company is
relying on the following representations. In this connection, Purchaser warrants
and represents to the Company that it is acquiring the Stock for investment and
not with a view to or for sale in connection with any distribution of the Stock
or with any present intention of distributing or selling the Stock and he/she
does not presently have reason to anticipate any change in circumstances or any
particular occasion or event which would cause it to sell the Stock. Purchaser
recognizes that the Stock must be held indefinitely unless it is subsequently
registered under the Act or an exemption from such registration is available
and, further, recognizes that the Company is under no obligation to register the
Stock or to comply with any exemption from such registration.
7. Purchaser is aware that the Stock may not be sold pursuant to
Rule 144 adopted under the Act unless certain conditions are met. Among the
conditions for use of Rule 144 is the availability of specified current public
information about the Company. Purchaser recognizes that the Company presently
has no plans to make such information available to the public.
Whether or not the Forfeiture Option is exercised or has lapsed,
Purchaser further agrees not to make any disposition of any of the Stock in the
United States in any event unless and until:
(a) There is then in effect a registration statement under the
Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
(b) Purchaser: (i) shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition; and (ii)
shall have given the Company an opinion of counsel, which opinion and counsel
shall be satisfactory to the Company, to the effect that such disposition will
not require registration of the Stock under the Act.
8. As security for its faithful performance of the terms of
this Agreement and to insure the availability for delivery of Purchaser's Stock
upon exercise of the Forfeiture
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<PAGE> 11
Option herein provided for, Purchaser agrees, at the closing hereunder (or as
soon thereafter as practicable), to deliver (or have the Company deliver on the
Purchaser's behalf) to and deposit with the Secretary of the Company ("Escrow
Agent"), as Escrow Agent in this transaction, three (3) Stock Powers duly
endorsed (with date and number of shares left blank), together with a
certificate or certificates evidencing all of the Stock subject to the
Forfeiture Option; said documents are to be held by the Escrow Agent and
delivered by said Escrow Agent pursuant to the Joint Escrow Instructions of the
Company and Purchaser set forth in Exhibit F, which instructions shall also be
delivered to the Escrow Agent at the closing hereunder (or as soon thereafter as
practicable). If a portion of the total purchase price is paid by a promissory
note, the Stock is also subject to the Pledge Agreement, and possession of the
certificates and stock assignments by the Escrow Agent shall also constitute
possession by the Company of such instruments pursuant to the Pledge Agreement.
9. Purchaser shall not sell or transfer any of the Stock subject
to the Forfeiture Option or any interest therein so long as such Stock is
subject to the Forfeiture Option or the Pledge Agreement.
10. The Company shall not be required: (i) to transfer on its
books any shares of Stock of the Company which shall have been sold or
transferred in violation of any of the provisions set forth in this Agreement;
or (ii) to treat as owner of such shares or to accord the right to vote as such
owner or to pay dividends to any transferee to whom such shares shall have been
so transferred.
11. Subject to the provisions of Paragraphs 9 and 10, Purchaser
(but not any unapproved transferee) shall, during the term of this Agreement,
exercise all rights and privileges of a stockholder of the Company with respect
to the Stock.
12. The parties agree to execute such further instruments and to
take such further action as reasonably may be necessary to carry out the intent
of this Agreement.
13. Purchaser hereby authorizes the Company, upon any event of
default pursuant to the terms of the Note, to date any stock powers, and to fill
in the appropriate number of shares necessary to transfer to the Company the
number of shares having a fair market value equal to the then outstanding
principal amount of the Note on the date of such default. If the fair market
value of the shares on such date is lower than the then outstanding principal
amount of the Note, then transfer of all the shares of the Purchaser to the
Company will constitute full and final settlement and complete discharge of the
Purchaser from any liability to the Company or any third parties
14. Purchaser agrees that, if required by the Company (or a
representative of the underwriters) in connection with the first underwritten
registration of the offering of any securities of the Company under the Act, it
will not sell or otherwise transfer or dispose of any shares of Common Stock or
other securities of the Company during such period (not to exceed one hundred
eighty (180) days) following the effective date of the registration
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<PAGE> 12
statement of the Company filed under the Act (the "Effective Date") as may be
requested by the Company or the representative of the underwriters. Purchaser
further agrees that the Company may impose stop-transfer instructions with
respect to securities subject to the foregoing restrictions until the end of
such period
15. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in any mail box, by registered or certified mail with postage and fees
prepaid, addressed to the other party hereto at such party's address hereinafter
shown below such party's signature or at such other address as such party may
designate by ten (10) days' advance written notice to the other party hereto.
16. This Agreement shall bind and inure to the benefit of the
successors and assigns of the Company and, subject to the restrictions on
transfer herein set forth, inure to the benefit of and be binding upon
Purchaser, its heirs, executors, administrators, successors, and assigns.
Without limiting the generality of the foregoing, the Forfeiture Option of the
Company hereunder shall be assignable by the Company at any time or from time to
time, in whole or in part.
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<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the _____ day of ____________________, 19___.
deCODE genetics, Inc.
By:_____________________________________
Kari Stefansson, President
Address: Lynghalsi 1
IS-110 Reykjavik, Iceland
________________________________________
(signature)
________________________________________
(print name)
Address: ________________________________________
________________________________________
________________________________________
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<PAGE> 14
ATTACHMENTS:
Exhibit A Nonrecourse Promissory Note
Exhibit B Pledge Agreement
Exhibit C Stock Powers
Exhibit D Voting Agreement
Exhibit E Vesting Schedule
Exhibit F Joint Escrow Instructions
-14-
<PAGE> 15
EXHIBIT A
NONRECOURSE PROMISSORY NOTE
Reykjavik, Iceland
$_______________ ____________,__________
FOR VALUE RECEIVED, the undersigned hereby unconditionally promises to
pay to the order of deCODE genetics, Inc., a Delaware corporation (the
"Company"), at the Company's principal office or at such other place as the
holder hereof may designate in writing, on __________________________, in lawful
money of the United States of America and in immediately available funds, the
total price of __________________________ Dollars ($______________), together
with interest, compounded annually, from the date hereof on the unpaid principal
at the rate of 6% per annum.
This Note may not be prepaid.
The full amount of this Note is secured by a pledge of shares of Common
Stock of the Company, and is subject to all of the terms and provisions of the
Early Exercise Stock Purchase Agreement and the Pledge Agreement, each of even
date herewith between the undersigned and the Company. The Company's recovery
against the undersigned for failure to pay any amount owing hereunder when due
shall be limited solely to the shares of Common Stock or other collateral of the
undersigned pledged to the Company in the Pledge Agreement. The undersigned
shall not be liable or have any personal liability in any other respect for the
payment of any amount due under this Note.
The undersigned hereby represents and agrees that the amounts due under
this Note are not consumer debt, and are not incurred primarily for personal,
family or household purposes, but are for business and commercial purposes only.
The undersigned hereby waives presentment, protest and notice of
protest, demand for payment, notice of dishonor and all other notices or demands
in connection with the delivery, acceptance, performance, default or endorsement
of this Note.
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<PAGE> 16
This Note shall be governed by, and construed, enforced and interpreted
in accordance with, the laws of the State of Delaware, excluding conflict of
laws principles that would cause the application of laws of any other
jurisdiction.
____________________________________
(signature)
____________________________________
(print name)
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<PAGE> 17
EXHIBIT B
PLEDGE AGREEMENT
1. As collateral security for the payment of that certain
$___________ Nonrecourse Promissory Note issued this date to deCODE genetics,
Inc. ("Pledgee") by the undersigned (hereinafter called "indebtedness"), the
undersigned hereby assigns, transfers to and pledges with the Pledgee the
securities listed on Schedule 1 hereto which were this day delivered to be
deposited with Pledgee, together with any stock rights, rights to subscribe,
dividends paid in cash or other property in connection with the complete or
partial liquidation of Pledgee, stock dividends, dividends paid in stock, new
securities or other property to which the undersigned is or may hereafter become
entitled to receive on account of such property, and in the event that the
undersigned receives any such, the undersigned will immediately deliver it to
Pledgee to be held by Pledgee hereunder in the same manner as the property
originally pledged hereunder. All property assigned, transferred to and pledged
with Pledgee under this paragraph or any other provision of this Pledge
Agreement is hereinafter called "collateral."
2. At any time, without notice, and at the expense of the
undersigned, Pledgee in its name or in the name of its nominee or of the
undersigned may, but shall not be obligated to: (1) collect by legal proceedings
or otherwise all dividends, interest, principal payments and other sums now or
hereafter payable upon or on account of said collateral; (2) enter into any
extension, reorganization, deposit, merger, or consolidation agreement, or any
agreement in any way relating to or affecting the collateral, and in connection
therewith may deposit or surrender control of such collateral thereunder, accept
other property in exchange for such collateral and do and perform such acts and
things as it may deem proper, and any money or property received in exchange for
such collateral shall be applied to the indebtedness or thereafter held by it
pursuant to the provisions hereof; (3) insure, process and preserve the
collateral; (4) cause the collateral to be transferred to its name or to the
name of its nominee; (5) exercise as to such collateral all the rights, powers,
and remedies of an owner, except that so long as the indebtedness is not in
default the undersigned shall retain all voting rights as to the collateral.
3. The undersigned agrees to pay prior to delinquency all taxes,
charges, liens and assessments against the collateral, and upon the failure of
the undersigned to do so Pledgee at its option may pay any of them and shall be
the sole judge of the legality or validity thereof and the amount necessary to
discharge the same.
4. All advances, charges, costs and expenses, including
reasonable attorneys' fees, incurred or paid by Pledgee in exercising any right,
power or remedy conferred by this Pledge Agreement, or in the enforcement
thereof, shall become a part of the indebtedness secured hereunder and Pledgee
shall have recourse solely against the collateral for payment of same.
5. The happening of any of the following events shall
constitute an event of default under this Pledge Agreement: (1) failure to keep
or perform any of the terms or
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<PAGE> 18
provisions of this Pledge Agreement; (2) default in the payment of principal or
interest related to the indebtedness when due; (3) the levy of any attachment,
execution or other process against the collateral; or (4) the insolvency,
commission of an act of bankruptcy, general assignment for the benefit of
creditors, or filing of any petition in bankruptcy or for relief under the
provisions of any applicable law relating to insolvency or bankruptcy, of, by,
or against the undersigned.
6. Upon the happening of any of the events of default specified
in the last preceding paragraph, Pledgee may then, or at any time thereafter, at
its election, apply, set off, collect or sell in one or more sales, or take such
steps as may be necessary to liquidate and reduce to cash in the hands of
Pledgee in whole or in part, with or without any previous demands or demand of
performance or notice or advertisement, the whole or any part of the collateral
in such order as Pledgee may elect, and any such sale may be made either at
public or private sale at its place of business or elsewhere, or at any broker's
board or securities exchange, either for cash or upon credit or for future
delivery; provided, however, that if such disposition is at private sale, then
the purchase price of the collateral shall be equal to the public market price
then in effect, or, if at the time of sale no public market for the collateral
exists, then, Pledgee and the undersigned hereby agree that such private sale
shall be at a purchase price mutually agreed to by Pledgee and the undersigned
or, if the parties cannot agree upon a purchase price, then at a purchase price
established by a majority of three independent appraisers knowledgeable of the
value of such collateral, one named by the undersigned within 10 days after
written request by the Pledgee to do so, one named by Pledgee within such 10 day
period, and the third named by the two appraisers so selected, with the
appraisal to be rendered by such body within 30 days of the appointment of the
third appraiser. The cost of such appraisal, including all appraiser's fees,
shall be charged against the proceeds of sale as an expense of such sale.
Pledgee may be the purchaser of any or all collateral so sold and hold the same
thereafter in its own right free from any claim of the undersigned or right of
redemption. Demands of performance, notices of sale, advertisements and presence
of property at sale are hereby waived, and Pledgee is hereby authorized to sell
hereunder any evidence of debt pledged to it. Any sale hereunder may be
conducted by any officer or agent of Pledgee.
7. The proceeds of the sale of any of the collateral and all sums
received or collected by Pledgee from or on account of such collateral shall be
applied by Pledgee to the payment of expenses incurred or paid by Pledgee in
connection with any sale, transfer or delivery of the collateral, to the payment
of any other costs, charges, attorneys' fees or expenses mentioned herein, and
to the payment of the indebtedness or any part thereof, all in such order and
manner as Pledgee in its discretion may determine. For purposes of this Pledge
Agreement, collateral in the form of cash shall be treated as if it were the
proceeds of the sale of collateral.) The Pledgee's receipt of such proceeds
shall be considered a complete payment of the Note and the undersigned shall
thereafter be discharged from any further liability thereunder. Pledgee shall
pay any balance to the undersigned.
8. Pledgee shall be under no duty or obligation whatsoever
to make or give any presentments, demands for performance, notices of
non-performance, protests, notices of protest or notices of dishonor in
connection with any obligations or evidences of
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<PAGE> 19
indebtedness held by Pledgee as collateral, or in connection with any
obligations or evidences of indebtedness which constitute in whole or in part
the indebtedness secured hereunder.
9. Pledgee may at any time deliver the collateral or any part
thereof to the undersigned and the receipt of the undersigned shall be a
complete and full acquittance for the collateral so delivered, and Pledgee shall
thereafter be discharged from any liability or responsibility therefor.
10. Upon the transfer of all or any part of the indebtedness
Pledgee may transfer all or any part of the collateral and shall be fully
discharged thereafter from all liability and responsibility with respect to such
collateral so transferred, and the transferee shall be vested with all the
rights and powers of Pledgee hereunder with respect to such collateral so
transferred; but with respect to any collateral not so transferred Pledgee shall
retain all rights and powers hereby given.
11. Until all indebtedness shall have been paid in full the power
of sale and all other rights, powers and remedies granted to Pledgee hereunder
shall continue to exist and may be exercised by Pledgee at any time and from
time to time irrespective of the fact that the indebtedness or any part thereof
may have become barred by any statute of limitations, or that the personal
liability of the undersigned may have ceased. The undersigned will be deemed to
have repaid the indebtedness in full as provided in Section 7.
12. Pledgee agrees that so long as the indebtedness is not in
default, the collateral held hereunder shall be released from pledge as the
indebtedness is paid or if substitute collateral acceptable to the Pledgee is
deposited with the Pledgee. The amount of the collateral to be released shall be
determined by the Pledgee in light of the amount of collateral which it
determines to be necessary to secure the outstanding indebtedness. Release from
this pledge, however, shall not result in release from the provisions of those
certain Joint Escrow Instructions, if any, of even date herewith among the
parties to this Pledge Agreement and the Escrow Agent named therein, or from the
Purchase Option granted by the undersigned set forth in the Early Exercise Stock
Purchase Agreement, if any, between the parties to this Pledge Agreement.
13. The rights, powers and remedies given to Pledgee by this
Pledge Agreement shall be Pledgee's sole rights, powers and remedies for the
undersigned's failure to pay any indebtedness secured by this agreement. Pledgee
may exercise its lien or right of setoff with respect to the indebtedness in the
same manner as if the indebtedness were unsecured. Any forbearance or failure or
delay by Pledgee in exercising any right, power or remedy hereunder shall not be
deemed to be a waiver of such right, power or remedy, and any single or partial
exercise of any right, power or remedy hereunder shall not preclude the further
exercise thereof; and every right, power and remedy of Pledgee shall continue in
full force and effect until such right, power or remedy is specifically waived
by an instrument in writing executed by Pledgee. The undersigned will be deemed
to have repaid the indebtedness in full as provided in Section 7.
-19-
<PAGE> 20
Dated: ____________________
deCODE genetics, Inc. ____________________________________
(signature)
By:_________________________________ ____________________________________
Kari Stefansson, President (print name)
-20-
<PAGE> 21
SCHEDULE 1
TO
PLEDGE AGREEMENT
____________________________ shares of common stock of deCODE genetics, Inc., a
Delaware corporation, represented by share certificate number, dated
_______________, 19___.
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<PAGE> 22
EXHIBIT C
STOCK POWER
FOR VALUE RECEIVED, ________________________________________ hereby sells,
assigns and transfers unto __________________________________
________________________ Shares of the common stock of deCODE genetics, Inc.
standing in my name on the books of said Corporation represented by
Certificates(s) No(s)___________________________________________ and does hereby
irrevocably constitute and appoint ____________________________________ attorney
to transfer the said stock on the books of said Corporation with full power of
substitution in the premises.
Dated______________________
____________________________________________
(This signature must be identical to the
name as written on the face of the
certificate)
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<PAGE> 23
EXHIBIT D
VOTING AGREEMENT
THIS VOTING AGREEMENT (this "Agreement"), dated as of February 2, 1998,
by and among Kari Stefansson and Jeffrey Gulcher (collectively, the "Investor
Founders"), deCODE genetics, Inc., a Delaware, USA corporation (the "Company"),
and the holders of shares of Common Stock, par value $0.001 per share ("Common
Stock"), of the Company with respect only to such shares of Common Stock held by
them as of the date of this Agreement or shares hereafter acquired by them other
than by conversion of Preferred Stock of the Company into Common Stock (such
holders, the "Common Stockholders"). The Investor Founders and the Common
Shareholders are collectively referred to as the "Investors" and each
individually as an "Investor."
PRELIMINARY STATEMENTS
A. Pursuant to the certain Series C Preferred Stock and Warrant
Purchase Agreement, dated as of February 1, 1998 (the "Stock Purchase
Agreement"), Roche Finance Ltd ("Roche") has agreed to purchase a certain number
of shares of the Series C Preferred Stock of the Company, as well as Warrants to
purchase shares of Series C Preferred Stock of the Company.
B. A condition to the execution of the Stock Purchase Agreement
by Roche is the execution and delivery by the Investor Founders and the Common
Stockholders of this Agreement relating to, among other things, the election of
members to the Company's Board of Directors (the "Board of Directors").
NOW, THEREFORE, in consideration of the foregoing statements and the
mutual covenants and agreements of the parties contained in this Agreement, the
parties hereto agree as follows:
1. ALL VOTING OF COMMON STOCKHOLDERS.
1.1 General. At any time at which the holders of Common Stock will
have the right to vote on any matter pursuant to the Certificate of
Incorporation or the Bylaws of the Company, as in effect from time to time, or
applicable law, including without limitation, with respect to the election of
directors of the Company, each of the Common Stockholders will vote all shares
of Common Stock owned or hereafter acquired by such Common Stockholder, as
follows:
(a) In favor of any action in favor of which the holders
of a majority of the shares owned by the Investor Founders (the "Founders
Shares") have voted,
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<PAGE> 24
and against any action against which the holders of a majority of the Founders
Shares have voted;
(b) Specifically with respect to the election of
directors:
(i) at each annual or special meeting of
Stockholders (or by written consent in lieu of a meeting of Stockholders), to
cause and maintain the election to the Board of Directors of the individuals
nominated by the holders of a majority of the Founders Shares;
(ii) in favor of removal of a director elected
by the holders of the Common Stock only if the holders of a majority of the
Founders Shares vote the majority of such shares in favor of such removal, and
in such case, in favor of such removal;
(iii) for filling any vacancy in the office
of a director to be elected by the holders of the Common Stock with another
individual nominated by the holders of a majority of the Founders Shares.
1.2 Termination of Voting Agreement. The voting obligations
imposed by this Voting Agreement shall terminate upon the effective date of a
registration statement pertaining to the initial public offering of the Common
Stock.
2. FUTURE ISSUANCE OF COMMON STOCK.
2.1 The company shall require any person to whom or which any
shares of Common Stock are to be issued after the date hereof, other than upon
conversion of Preferred Stock of the Company into Common Stock, as a condition
to the issuance of such shares, to agree to become a party to this Agreement as
a "Common Stockholder" with respect to such shares of Common Stock.
3. MISCELLANEOUS.
3.1 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Delaware, USA as applied to agreements
among Delaware, USA residents entered into and to be performed entirely within
Delaware, USA.
3.2 Severability. In case any provision of the Agreement shall be
invalid, illegal, or unenforceable, the validity, legality, and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
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<PAGE> 25
3.3 Amendment and Waiver. Except as otherwise expressly provided,
neither this Agreement nor any provision herein may be amended or waived except
by the written consent of the Company, holders of a majority of the Founders
Shares, and holders of a majority of the Common Stockholders.
3.4 Titles and Subtitles. The titles of the sections and
subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
3.5 Counterparts. This Agreement may be executed in any number of
counterparts each of which shall be an original, but all of which together shall
constitute one instrument.
* * *
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<PAGE> 26
IN WITNESS WHEREOF, the parties hereto have executed this Voting
Agreement, or have caused this Voting Agreement to be executed by its duly
authorized officer, as of the date first above written.
deCODE genetics, Inc.
By:__________________________________
Name: Kari Stefansson
Title: President
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<PAGE> 27
Dated:_____________________ ____________________________________
(signature)
____________________________________
(print name)
Address:
____________________________________
____________________________________
____________________________________
____________________________________
<PAGE> 28
EXHIBIT E
VESTING SCHEDULE
The Forfeiture Option shall be in effect with respect to all of the
shares of Stock on the date of the Purchaser's execution of the Early Exercise
Stock Purchase Agreement and shall expire:
(a) As to 25% of the shares of Stock, on ____________________; and
(b) thereafter, as to 1/48 of such shares on the last day of each
month.
<PAGE> 29
EXHIBIT F
JOINT ESCROW INSTRUCTIONS
Secretary
deCODE genetics, Inc.
Lynghalsi 1
IS-110 Reykjavik, Iceland
Dear Sir/Madam:
As Escrow Agent for both deCODE genetics, Inc., a Delaware corporation
(the "Company"), and the undersigned purchaser of stock of the Company
("Purchaser"), you are hereby authorized and directed to hold the documents
delivered to you pursuant to the terms of that certain Early Exercise Stock
Purchase Agreement (the "Agreement"), of even date herewith, to which a copy of
these Joint Escrow Instructions is attached as Exhibit F, in accordance with the
following instructions:
1. In the event the Company or an assignee shall elect to
exercise the Forfeiture Option set forth in the Agreement, the Company or its
assignee will give to Purchaser and you a written notice specifying the number
of shares of stock to be forfeited, the amount to be returned to Purchaser by
the Company (the "Forfeture Price"), and the time for a closing hereunder at the
principal office of the Company. Purchaser and the Company hereby irrevocably
authorize and direct you to close the transaction contemplated by such notice in
accordance with the terms of said notice.
2. At the closing you are directed: (a) to date any stock powers
necessary for the transfer in question; (b) to fill in the number of shares
being transferred; and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company against the
simultaneous delivery to you of the Forfeiture Price of the number of shares of
stock being purchased pursuant to the exercise of the Forfeiture Option.
3. Purchaser irrevocably authorizes the Company to deposit with
you any certificates evidencing shares of stock to be held by you hereunder and
any additions and substitutions to said shares as specified in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as his/her
attorney-in-fact and agent for the term of this escrow to execute with respect
to such securities and other property all documents of assignment and/or
transfer and all stock certificates necessary or appropriate to make all
securities negotiable and complete any transaction herein contemplated.
4. This escrow shall terminate upon expiration or exercise in
full of the Forfeiture Option, whichever occurs first.
<PAGE> 30
5. If at the time of termination of this escrow you should have
in your possession any documents, securities, or other property belonging to
Purchaser, you shall deliver all of same to Purchaser and shall be discharged of
all further obligations hereunder; provided, however, that if at the time of
termination of this escrow you are advised by the Company that the property
subject to this escrow is the subject of a pledge or other security agreement,
you shall deliver all such property to the pledgeholder or other person
designated by the Company.
6. Except as otherwise provided in these Joint Escrow
Instructions, your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties
as are specifically set forth herein and may rely and shall be protected in
relying or refraining from acting on any instrument reasonably believed by you
to be genuine and to have been signed or presented by the proper party or
parties or their assignees. You shall not be personally liable for any act you
may do or omit to do hereunder as Escrow Agent or as attorney-in-fact for
Purchaser while acting in good faith and any act done or omitted by you pursuant
to the advice of your own attorneys shall be conclusive evidence of such good
faith.
8. You are hereby expressly authorized to disregard any and all
warnings given by any of the parties hereto or by any other person or Company,
excepting only orders or process of courts of law, and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court. In
case you obey or comply with any such order, judgment or decree of any court,
you shall not be liable to any of the parties hereto or to any other person,
firm or Company by reason of such compliance, notwithstanding any such order,
judgment or decree being subsequently reversed, modified, annulled, set aside,
vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the
identity, authority or rights of the parties executing or delivering or
purporting to execute or deliver the Agreement or any documents or papers
deposited or called for hereunder.
10. You shall not be liable for the outlawing of any rights under
any statute of limitations with respect to these Joint Escrow Instructions or
any documents deposited with you.
11. Your responsibilities as Escrow Agent hereunder shall
terminate if you shall cease to be Secretary of the Company or if you shall
resign by written notice to each party. In the event of any such termination,
the Company may appoint any officer or assistant officer of the Company as
successor Escrow Agent and Purchaser hereby confirms the appointment of such
successor or successors as his attorney-in-fact and agent to the full extent of
your appointment.
12. If you reasonably require other or further instruments in
connection with these Joint Escrow Instructions or obligations in respect
hereto, the necessary parties hereto shall join in furnishing such instruments.
13. It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the
securities, you are authorized and directed to retain in your possession without
liability to anyone all or any part of said securities until such dispute shall
<PAGE> 31
have been settled either by mutual written agreement of the parties concerned or
by a final order, decree or judgment of a court of competent jurisdiction after
the time for appeal has expired and no appeal has been perfected, but you shall
be under no duty whatsoever to institute or defend any such proceedings.
14. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery, including
delivery by express courier or five days after deposit in any mail box, by
registered or certified mail with postage and fees prepaid, addressed to each of
the other parties hereunto entitled at the following addresses, or at such other
addresses as a party may designate by ten days' advance written notice to each
of the other parties hereto:
Company: deCODE genetics, Inc.
Lynghalsi 1
IS-110 Reykjavik, Iceland
Purchaser: ___________________________
___________________________
___________________________
___________________________
Escrow Agent: Secretary
deCODE genetics, Inc.
Lynghalsi 1
IS-110 Reykjavik, Iceland
15. By signing these Joint Escrow Instructions you become a party
hereto only for the purpose of said Joint Escrow Instructions; you do not become
a party to the Agreement.
16. You shall be entitled to employ such legal counsel and other
experts as you may deem necessary properly to advise you in connection with your
obligations hereunder. You may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor. The Company shall be responsible
for all fees generated by such legal counsel in connection with your obligations
hereunder.
17. This instrument shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and permitted assigns. It
is understood and agreed that references to "you" or "your" herein refer to the
original Escrow Agent and to any and all successor Escrow Agents. It is
understood and agreed that the Company may at any time or from time to time
assign its rights under the Agreement and these Joint Escrow Instructions in
whole or in part.
18. This Agreement shall be governed by and interpreted and
determined in accordance with the laws of the State of Delaware as such laws are
applied by Delaware courts to contracts made and to be performed entirely in
Delaware by residents of that state.
<PAGE> 32
Very truly yours,
deCODE genetics, Inc.
By___________________________
Kari Stefansson
President
Purchaser:
___________________________
(signature)
___________________________
(print name)
Escrow Agent:
_______________________________________
Kari Stefansson
Secretary
<PAGE> 1
EXHIBIT 10.4
OFFICER'S CERTIFICATE
I, the undersigned, do hereby certify and represent that:
1. I am the duly elected Senior Vice President and Chief Business
Officer of deCODE genetics, Inc., a Delaware Corporation.
2. Pursuant to Rule 306(a) of Regulation S-T, the following exhibit
10.4 to deCODE genetics, Inc.'s Registration Statement on Form S-1 is a fair and
accurate English translation of a document prepared in the Icelandic language.
IN WITNESS WHEREOF, I have signed this Officer's Certificate in my
capacity as Senior Vice President and Chief Business Officer of deCODE genetics,
Inc. on this 7th day of March, 2000.
By: /s/ Hannes T. Smarason
--------------------------
Name: Hannes T. Smarason
Title: Senior Vice President and Chief Business Officer
<PAGE> 2
[DECODE GENETICS LOGO]
EMPLOYEE PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
DeCODE Genetics ehf. (Islensk erfdagreining ehf.), State Registration No.
691295-3549, of Lynghals 10, Reykjavik ("the company"), on the one hand, and
- ------------------------------------------ ------------------------
(employee name) (identification number)
whose address is ______________________________________ ("the employee"), on the
other hand, having agreed on a contract whereby the Employee is employed by the
company, hereby conclude the following Agreement which is a premise and part of
the employment contract between the parties.
1. CONFIDENTIALITY
1.1 NONDISCLOSURE OF PROPRIETARY INFORMATION. COMPANY RIGHTS
The Employee undertakes to hold in the strictest confidentiality the
Proprietary Information of the Company as further defined under Section
1.2 below, both during the term of his/her employment with the Company
and following such term as further specified under 9.3 below. The
Employee shall not disclose the Proprietary Information of the Company,
use it, lecture on it or publish it except as such disclosure use or
publication is required in connection with the work of the Employee for
the Company or unless an officer of the Company expressly so authorises
in writing. The Employee shall obtain written permission from the
Company before publishing or submitting for publication any material
(written, verbal or otherwise) relating to his/her work with the
Company or incorporating any Proprietary Information. The Employee
hereby assigns to the Company any rights he/she might otherwise possess
in such Proprietary Information. All such Proprietary Information shall
be the sole property of the Company or its assignees.
<PAGE> 3
1.2 PROPRIETARY INFORMATION
The term "Proprietary Information" in this Agreement refers to tangible
and intangible information relating to antibodies and other biological
materials, cloned cells, samples of assay components, media and/or
cloned cells and methods and descriptions of procedures of producing
various types of assay components or prepare media and/or clones cells,
plans, descriptions, products, processes, know-how, designs, models,
formulas, methods, developmental or experimental work, clinical data,
improvements, discoveries, plans for research, new products, marketing
and selling, business plans, budgets and unpublished financial
statements, licenses, information on prices and costs, suppliers and
customers and other information regarding the employment and business
affairs of the Company and information regarding the skills and
compensation of other employees of the Company.
1.3 THIRD PARTY INFORMATION
The Employee understands that the Company has received and will in the
future receive from third parties confidential or proprietary
information ("THIRD PARTY INFORMATION") subject to a duty on the
Company's part to maintain the confidentiality of such information and
to use it only for certain limited purposes. The Employee shall, during
and after the term of his/her employment with the Company, hold Third
Party Information in the strictest confidence and will not disclose to
anyone (other than the Company personnel who need to know such
information in connection with their work for the Company) or use,
except in connection with my work for the Company, Third Party
Information unless expressly authorised by an officer of the Company in
writing.
1.4 INFORMATION FROM PREVIOUS EMPLOYERS AND OTHERS
The Employee undertakes not to use improperly or disclose any
confidential information or trade secrets, if any, of any former
employer or any other party to whom he/she has an obligation of
confidentiality, and undertakes furthermore not to bring unto the
premises of the Company any unpublished documents or any property
belonging to any former employee or any other party to whom he/she has
an obligation of confidentiality unless consented to in writing by such
employer in party. In the performance of his/her duty for the Company,
the Employee shall use only information which is generally known and
used by persons with training and experience comparable with his/her
own, which is common knowledge in the industry or otherwise legally in
the public domain or which is otherwise provided or developed by the
Company.
<PAGE> 4
2. PROPRIETARY RIGHTS TO INVENTIONS
2.1 PROPRIETARY RIGHTS
The term "Proprietary Rights" shall mean all trade secrets, patents,
licences, copyrights, trade marks and other intellectual property
rights throughout the world.
2.2 PRIOR INVENTIONS
Inventions, patented or unpatented, wich the Employee may have made
prior to his/her employment with the Company are excluded from the
scope of this Agreement. To preclude any possible uncertainty in this
respect, the Employee has set forth in Exhibit A, attached hereto, a
complete list of all invention that he/she has, alone or jointly with
others, conceived, developed or reduced to practice or caused to be
conceived, developed or reduced to practice prior to the commencement
of his/her employment with the Company, which the Employee considers to
be his/her property or the property of third parties and that he/she
wishes to have excluded from the scope of this Agreement (collectively
referred to as "PRIOR INVENTIONS"). The Employee understands that if
he/she were to violate any prior confidentiality agreement by
disclosing any such prior invention in Exhibit A, he/she shall not
disclose the invention but disclose only a cursory name for each such
invention along with the party to whom it belongs together with an
explanation to the effect that full disclosure as to such invention has
not been made for that reason. A space is provided in Exhibit A for
such purposes. The Employee further represents that there are no
further Prior Inventions beyond those listed in Exhibit A. The Employee
represents, furthermore, that if, in the course of his/her employment
with the Company, he/she incorporates a Prior Invention into a Company
product, process or machine, the Company is hereby granted and shall
have a royalty-free, irrevocable, and perpetual world-wide license
(with rights to sublicense, with multiple tiers of sublicensees) to
make, have made, modify, use and sell such Prior Invention.
Notwithstanding the foregoing, the Employee undertakes not to
incorporate or permit to incorporate Prior Inventions in any Company
Inventions without the company's prior written consent.
2.3 PROPERTY RIGHTS TO INVENTIONS
The Company shall, without special payment, fee or compensation, become
the owner of all inventions and all rights, titles and interests in
respect of all inventions (and all proprietary rights with respect
thereto), whether or not patentable or registrable under patent
statutes, copyright statutes, trade mark statutes or any other statutes
on proprietary rights, made or conceived,developed or reduced to
practice or discovered by the Employee alone or jointly with others
during the period of his/her employment with the company. All such
inventions
<PAGE> 5
and proprietary rights thereto shall be regarded and referred to as
Company Inventions. The company shall have full and unrestricted rights
to use or let others us Company Inventions at its own discretion,
including to modify them or develop them further.
2.4 INVENTIONS EXEMPT FROM COMPANY PROPRIETARY RIGHTS
Notwithstanding the provisions of Section 2.3 above, the Company shall
not become the owner of inventions developed by the Employee entirely
on his/her own time without using the Company's instruments or
equipment, supplies, facilities or trade secrets and neither related to
the Company's business, research or development nor resulting from work
performed by the Employee for the Company.
2.5 OBLIGATION TO KEEP COMPANY INFORMED
During the period of his/her employment with the Company and for six
(6) months after termination of his/her employment with the Company,
the Employee will promptly disclose to the Company fully and in writing
all inventions authored, conceived or reduced to practice by him/her
either alone or jointly with others. In addition, the Employee will
promptly disclose to the Company any patent applications filed by
him/her or on his/her behalf within one year after termination of
employment. At the time of each such disclosure, the Employee shall
furthermore advise the Company in writing if he/she believes that such
Inventions are exempt from the proprietary rights of the Company under
the provisions of Section 2.3 and at the same time provide to the
Company in writing all evidence necessary to substantiate that belief.
The Company will keep in confidence and not use for any purpose or
disclose to third parties any confidential information regarding
Inventions which are exempt from the Proprietary Rights of the Company
and which are disclosed to the Company in writing pursuant to this
Agreement. The Employee will preserve the confidentiality of any
invention which is not exempt from the Proprietary Rights of the
Company.
2.6 ASSIGNMENT TO THIRD PARTIES
The Company has an unrestricted right to assign to any third party,
without limitations, any rights, title and interests with respect to
any Invention to which the Employee has contributed and which the
Company possesses or comes into possession of under this Agreement.
2.7 ENFORCEMENT OF PROPRIETARY RIGHTS
The Employee undertakes to assist the Company in every way and in any
country to obtain, and from time to time enforce Proprietary Rights
under Icelandic or foreign law relating to Company Inventions. To this
end, the Employee
<PAGE> 6
undertakes to execute, verify and deliver such documents and perform
such acts (including appearances as a witness) as the Company may
reasonably require of an Employee and as may be of use to the Company
in applying for, obtaining, perfecting, evidencing, sustaining and
enforcing such Proprietary Rights and the assignment thereof. The
obligation of the Employee to assist the Company in this respect shall
continue for six years beyond the termination of his/her employment,
but the Company shall pay for his/her expenses and compensate him/her
at a reasonable rate for the time spent by him/her at the Company's
request on such assistance after termination of his/her employment.
3. RECORDS
The Employee undertakes to keep and maintain adequate records (in the
form of notes, sketches, drawings and in any other form that may be
required by the Company) of all Proprietary Information which the
Employee may collect or develop and on all Inventions that the Employee
may make during the period of his/her employment at the Company, which
records shall be available to and remain the sole property of the
Company at all times.
4. NO CONFLICTING OBLIGATION
The Employee represents that his/her performance of all the terms of
this Agreement and of his duties as an Employee of the Company does not
and will not breach any agreement to keep in confidence information
acquired by me in confidence or in trust prior to his/her employment by
the Company. The Employee further represents that he/she has not
entered into and will not enter into any agreement, either written or
oral in conflict herewith.
5. RETURN OF COMPANY DOCUMENTS
When the Employee leaves the employ of the Company, he/she will deliver
to the Company any and all drawings, plans, notes, memoranda,
specifications, instructions, models, formulas and other data, together
with all copies thereof, and any other material containing or
disclosing any Company Invention, Third Party Information or
Proprietary Information of the Company. The Employee further agrees
that any property situated on the Company's premises and owned by the
Company, including computer disks and other storage media, filing
cabinets or other working areas, is subject to inspection by Company
personnel at any time with or without notice. Prior to leaving his/her
employment, the Employee will co-operate with the Company in completing
and signing the Company's termination statement.
6. LEGAL AND OTHER REMEDIES
The company shall have the right to enforce this Agreement and any of
its provisions by injunction, specific performance or other remedies
which will
<PAGE> 7
terminate any situation which is incompatible with the provisions of
this Agreement. The exercise of such right shall not in any way
prejudice any other rights or remedies that the Company may have for a
breach of this Agreement.
7. NOTICES
Any notices required or permitted hereunder shall be deemed given upon
personal delivery to the recipient or, if sent by certified or
registered mail, three (3) days after the date of mailing.
8. NOTIFICATION OF NEW EMPLOYER
In the event of the Employee leaving the employ of the Company, he/she
consents that the Company notify any new employer of the Employee's
rights and obligations under this Agreement.
9. GENERAL PROVISIONS
9.1 DISPUTES
Any dispute arising in respect of this Agreement shall be subject to
the jurisdiction of the District Court of Reykjavik.
9.2 SUCCESSORS AND ASSIGNS
This Agreement will be binding upon the Employee's heirs, executors,
and other parties deriving their rights from the Employee and will be
for the benefit of the Company, its successors or assigns.
9.3 SURVIVAL
The provisions of this Agreement shall survive by six years the
termination of the Employee's employment at the Company. Furthermore,
the provisions of the Agreement shall remain in effect in the event
that the Company assigns the Agreement to any other party which thereby
succeeds to the rights or interest of the Company.
9.4 EMPLOYMENT AT THE COMPANY
The Employee agrees and understands that nothing in this Agreement
shall confer any right with respect to continuation of employment by
the Company, nor shall it interfere in any way with the Employee's or
Company's rights under the employment contract to terminate his/her
employment at the Company whether the reasons for the termination are
specified or not.
<PAGE> 8
9.5 WAIVER
No waiver by the Company of any breach of this Agreement shall be a
waiver of any preceding or succeeding breach. No waiver by the Company
of any right under this Agreement shall be construed as a waiver of any
other right. The company shall not be required to give notice of any
intention to enforce the terms of this Agreement.
9.6 ENTIRE AGREEMENT
The obligations pursuant to Sections 1 and 2 of this Agreement shall
apply to any time during which the Employee may have been previously
employed or is in the future employed, by the Company as a consultant
if no other agreement governs nondisclosure and assignment of
inventions during such period. This Agreement is the final, complete
and exclusive agreement of the parties with respect to the subject
matter hereof and supersedes and merges all prior discussions of the
parties to the Agreement on its subject. No modification or amendment
to this Agreement, nor waiver of any rights under this Agreement shall
be effective unless in writing and signed by both parties. Any
subsequent changes in the work, field, duties, salary or compensation
of the Employee will not affect the validity or scope of this
Agreement.
This Agreement shall be effective as of the first day of employment to the
Employee and remain in effect as specified in its provisions.
Reykjavik, year
Employee On behalf of DECODE GENETICS, INC.
---------------------------- ------------------------------------
<PAGE> 1
EXHIBIT 10.5
OFFICER'S CERTIFICATE
I, the undersigned, do hereby certify and represent that:
1. I am the duly elected Senior Vice President and Chief Business
Officer of deCODE genetics, Inc., a Delaware Corporation.
2. Pursuant to Rule 306(a) of Regulation S-T, the following exhibit
10.5 to deCODE genetics, Inc.'s Registration Statement on Form S-1 is a fair and
accurate English translation of a document prepared in the Icelandic language.
IN WITNESS WHEREOF, I have signed this Officer's Certificate in my
capacity as Senior Vice President and Chief Business Officer of deCODE genetics,
Inc. on this 7th day of March, 2000.
By: /s/ Hannes T. Smarason
--------------------------
Name: Hannes T. Smarason
Title: Senior Vice President and Chief
Business Officer
<PAGE> 2
AGREEMENT ON THE COLLABORATION OF FRIDRIK SKULASON (FS) AND ISLENSK
ERFDAGREINING (IE) ON THE CREATION OF A DATABASE OF ICELANDIC GENEALOGY
1. A new multi-user program will be created to work with the database. IE will
supply all programming work and pay all the cost of such work. IE and FS
will both have full rights to the source code and authorisation to make use
of it at their discretion.
2. IE will pay all wage costs relating to entering data in the database. FS
and IE will both have full rights to utilise the database for their own
purposes.
3. IE will supply and pay for all equipment and work facilities.
4. FS will permit access to his library and computer data and provide brief
consultation at the beginning of the work to the programmers/system
designers.
5. FS has full rights to the issue of a CD-ROM with a single-user version of
the search program. IE will not issue a CD-ROM with this data. Profits from
the issue of the CD-ROM will be divided equally among the parties.
6. The database on the CD-ROM will be protected so that it cannot be used by
competitors. The parties will agree on a protection method.
7. IE has full rights to provide scientists and enterprises engaged in genetic
research with services regarding the database. IE shall not provide
services regarding the database to parties who might be engaged in
competition with FS in the publication of genealogical data.
8. FS has full rights to sell services regarding the database to individuals
and genealogical societies. FS shall not provide services regarding the
database to parties engaged in competition with IE regarding research.
9. FS and IE will collaborate on the employment of staff for entering data.
Both parties must be satisfied with whoever is employed.
10. A separate agreement will be made regarding when the entry of data has
proceeded far enough to foresee an end to the project. This second
agreement shall provide for the continued entry of data in the database.
11. In the event that IE ceases to operate, the database will be entirely the
property of FS. This does not apply, however, if IE merges with another
company of if its activities are transferred to another company. If either
party enters into bankruptcy, the other party shall retain all rights
regarding the database unless otherwise provided for by law.
REYKJAVIK, 15 APRIL 1997
For Fridrik Skulason For Islensk Erfdagreining
Fridrik Skulason [sign.] Kari Stefansson [sign.]
Bjorg Olafsdottir [sign.] Gudmundur Sverrisson [sign.]
<PAGE> 1
EXHIBIT 10.6
OFFICER'S CERTIFICATE
I, the undersigned, do hereby certify and represent that:
1. I am the duly elected Senior Vice President and Chief Business
Officer of deCODE genetics, Inc., a Delaware Corporation.
2. Pursuant to Rule 306(a) of Regulation S-T, the following exhibit
10.6 to deCODE genetics, Inc.'s Registration Statement on Form S-1 is a fair and
accurate English translation of a document prepared in the Icelandic language.
IN WITNESS WHEREOF, I have signed this Officer's Certificate in my
capacity as Senior Vice President and Chief Business Officer of deCODE genetics,
Inc. on this 7th day of March, 2000.
By: /s/ Hannes T. Smarason
--------------------------
Name: Hannes T. Smarason
Title: Senior Vice President and
Chief Business Officer
<PAGE> 2
[NOTE: CERTAIN PORTIONS OF THIS DOCUMENT HAVE BEEN MARKED TO INDICATE THAT
CONFIDENTIALITY HAS BEEN REQUESTED FOR THIS CONFIDENTIAL INFORMATION. THE
CONFIDENTIAL PORTIONS HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.]
RESEARCH AGREEMENT
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE 1 DEFINITIONS..............................................................................1
1.1 "Data protection commission".............................................................1
1.2 "Diseases"...............................................................................1
1.3 "Intellectual property"..................................................................1
1.4 "Invention"..............................................................................1
1.5 "Original Data"..........................................................................1
1.6 "Research"...............................................................................1
1.7 "Research Data"..........................................................................2
1.8 "Results"................................................................................2
1.9 "Steering-Committee" or "SC".............................................................2
ARTICLE 2 OBJECTIVES AND CONDUCT OF THE RESEARCH...................................................2
2.1 Research Objectives......................................................................2
2.2 Steering Committee.......................................................................2
2.3 Research Location........................................................................2
2.4 Use of Data..............................................................................2
2.5 Exclusivity of Research Relationship.....................................................3
2.6 Transfer of Materials....................................................................3
2.7 Results of the Research..................................................................3
ARTICLE 3 PAYMENTS.................................................................................3
3.1 Payments.................................................................................3
3.2 Other Sources of Funding.................................................................4
ARTICLE 4 PROPRIETARY RIGHTS.......................................................................5
4.1 Proprietary Rights.......................................................................5
4.2 Infringement of Intellectual Property Rights.............................................5
4.3 Survival.................................................................................5
ARTICLE 5 CONFIDENTIALITY .........................................................................5
5.1 Confidential Information.................................................................5
5.2 Disclosure to Employees..................................................................5
5.3 Survival.................................................................................5
ARTICLE 6 PUBLICATIONS.............................................................................5
6.1 Publications.............................................................................5
6.2 No Use of Names..........................................................................6
ARTICLE 7 OTHER DISEASES...........................................................................6
7.1 Other Diseases...........................................................................6
7.2 [CONFIDENTIAL TREATMENT REQUESTED].......................................................6
ARTICLE 8 CONFLICT RESOLUTION......................................................................6
</TABLE>
i
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
8.1 Conflict Resolution......................................................................6
ARTICLE 9 TERM, EXTENSION AND TERMINATION..........................................................6
9.1 Term.....................................................................................6
9.2 Extension Option.........................................................................7
9.3 Breach...................................................................................7
ARTICLE 10 INDEMNIFICATION..........................................................................7
10.1 Indemnification by deCODE................................................................7
10.2 Indemnification by RF....................................................................7
10.3 Survival.................................................................................7
ARTICLE 11 MISCELLANEOUS............................................................................7
11.1 Force Majeure............................................................................7
11.2 No License...............................................................................7
11.3 Independent Contractors..................................................................8
11.4 Changes to Agreement.....................................................................8
11.5 Governing Law............................................................................8
</TABLE>
ii
<PAGE> 5
RESEARCH AGREEMENT
THIS RESEARCH AGREEMENT (the "Agreement") is made as of October 24,
1997 (the "Effective Date") by and between RANNSOKNA-OG FREDSLUEJODURINN EHF,
("RF") a private limited liability company, incorporated in Iceland and
controlled by Hannes Petursson ("HP"), a Psychiatrist, holding positions at
Reykjavik Hospital and the University of Iceland and DECODE GENETICS, INC., a
corporation organized and existing under the laws of the state of Delaware and
its wholly owned subsidiary "Islensk erfdagreining hf", a company incorporated
in Iceland which operates a research facility in Iceland (collectively,
"deCODE").
WHEREAS, RF has certain rights to materials and data collected in
connection with research of schizophrenia and bipolar disease; and
WHEREAS, deCODE wishes to obtain such materials and data in connection
with its research and development regarding the diagnosis and treatment of
schizophrenia and bipolar disease; and
WHEREAS, RF wishes to provide deCODE with such previously collected
materials and data and any materials and data generated in the course of this
Agreement pursuant to the terms set forth below.
NOW, THEREFORE, in consideration of the premises and mutual covenants
below, and for good and valuable consideration, the receipt and sufficiency of
which is acknowledged, the parties, hereto intending to be legally bound, agree
as follows:
ARTICLE 1
DEFINITIONS
1.1 "DATA PROTECTION COMMISSION" is the Icelandic committee governing
the use of personal information for research purposes.
1.2 "DISEASES" shall mean schizophrenia and bipolar disease as such
diseases are defined in Appendix A.
1.3 "INTELLECTUAL PROPERTY" shall have the meaning set forth in
Section 2.7.
1.4 "INVENTION" shall have the meaning set forth in Section 4.1.
1.5 "ORIGINAL DATA" shall mean any information, including but not
limited to trio data, and any samples, including but not limited to blood
samples and DNA extracts, which have been collected and are in the possession of
RF prior to the Effective Date and which are related to the Research.
1.6 "RESEARCH" shall mean the program of research undertaken by the
parties pursuant to this Agreement which is directed towards the swift discovery
of genes causing schizophrenia and bipolar disease as set forth in Appendix A as
amended from time to time by the Steering Committee.
<PAGE> 6
1.7 "RESEARCH DATA" shall mean any information resulting from the
Research, including but not limited to trio data, and any patient samples,
including but not limited to blood samples and DNA extracts, which are collected
in the course of conducting the Research.
1.8 "RESULTS" shall have the meaning set forth in Section 2.7.
1.9 "STEERING-COMMITTEE" or "SC" shall mean the research steering
committee described in Section 2.2.
ARTICLE 2
OBJECTIVE AND CONDUCT OF THE RESEARCH
2.1 RESEARCH OBJECTIVES. The objective of the Research is to conduct
research directed towards the swift discovery of genes causing schizophrenia and
genes causing bipolar disease pursuant to the plan of research set forth in
Appendix A and amended from time to time by the SC.
2.2 STEERING COMMITTEE.
(A) CREATION OF THE STEERING COMMITTEE ("SC"). The parties hereby
create a steering committee which shall consist of three (3) members, one (1) of
which shall be appointed by RF and two (2) of which shall be appointed by
deCODE. deCODE shall designate one of its representative's as its senior
representative. Each party may substitute or change its designated
representative. The SC shall produce mutually agreed minutes of planned work and
resources.
(B) REGULAR MEETINGS. The SC shall meet every three (3) months during
the term of the Agreement, at such times and places as the members of the SC
agree. The parties shall, however, have the right to request a meeting of the SC
be held within one week of such request.
(C) RESPONSIBILITIES OF THE SC. The SC shall act as the primary
governing body for conducting the Research and shall have the responsibility for
(i) creating, reviewing, approving and amending annual research plans and
budgets for each project, (ii) reviewing disclosure of inventions, (iii)
identifying promising genes, and (iv) monitoring the progress of the Research.
(D) DECISIONS OF THE SC. Decisions of the SC shall require the
agreement of the representative of each party present at the SC meeting. Any
disputes, will be referred to the senior deCODE representative and the RF
appointee for resolution for a period of thirty (30) days. If, after the parties
are unable to resolve such dispute, it shall be referred to arbitration pursuant
to Article 8, except those referred to in 6.1.
2.3 RESEARCH LOCATION. The Research shall be conducted in Iceland and
the primary location of the Research shall be the facilities of deCODE.
2.4 USE OF DATA. RF hereby grants to deCODE the exclusive and
unrestricted right to (i) use all Original Data and Research Data for any
purpose related to the Research
2
<PAGE> 7
and (ii) commercialize all products that result from the Research. For a period
of five (5) years following the expiration or termination of this Agreement,
deCODE shall have access to the Original Data and Research Data for verification
of results generated during the course of the Research, subject to approval by
the Icelandic Data Protection Commission. All Original Data and Research Data
provided to deCODE by RF shall remain the property of RF and shall be returned
to RF upon the termination or expiration of this Agreement. These obligations of
this Section shall survive the termination or expiration of this Agreement for
any reason.
2.5 EXCLUSIVITY OF RESEARCH RELATIONSHIP. RF shall not (i) provide the
Original Data or Research Data to any third party and (ii) enter into any other
commercial collaborative agreements or collaborations that otherwise restrict
deCODE's ability commercially exploit the Results of the Research during the
term of this Agreement and for a period of 3 years thereafter. deCODE shall not
enter into other collaborations for the purpose of conducting the Research,
unless the SC deems it necessary to advance the Research or commercially exploit
the Results of the Research during the term of this Agreement. The obligations
set forth in this Section shall survive any termination or expiration of this
Agreement for any reason.
2.6 TRANSFER OF MATERIALS. Within four (4) weeks of execution of this
Agreement RF shall deliver to deCODE all Original Data, including but not
limited to blood samples and DNA extracts in such quantities as the SC deems
necessary to conduct the Research. RF shall deliver Research Data when it
becomes available. Upon the first anniversary of the Effective Date, RF shall
have delivered to deCODE [CONFIDENTIAL TREATMENT REQUESTED].
2.7 RESULTS AND RESEARCH. Each party shall keep complete and accurate
records of the Research conducted hereunder. The parties will promptly and fully
disclose to each other any and all information and results obtained from
conducting the Research (the "Results"). deCODE shall own all right, title and
interest in and to the Results and all Intellectual Property related thereto. As
used in this Agreement, "Intellectual Property" means all patents, trade secrets
and other proprietary rights, together with all related rights, applications,
filings, registrations and the like. The obligations set forth in this Section
shall survive any termination or expiration of this Agreement for any reason.
ARTICLE 3
PAYMENTS
3.1 PAYMENTS. deCODE shall pay the following amounts to RF as full
payment and compensation for RF's performance under this Agreement, and as cost
of RF's participation in the Research:
(A) RESEARCH FUNDING. deCODE shall provide up to a total of
[CONFIDENTIAL TREATMENT REQUESTED] to RF to pay the cost of its end of the
Research over the three (3) year term of this Agreement. The use of these funds
will be determined by the SC and will be used solely for purposes of the
Research. A [CONFIDENTIAL TREATMENT REQUESTED] will be paid to RF
3
<PAGE> 8
upon the Effective Date and the same amount in quarterly installments from
thereon, subject to a review by the SC. Such amounts shall be full payment of
all costs for RF's performance of the Research, including any and all costs for
full-time equivalent research personnel, equipment, travel, applicable fees,
overhead, and other reasonable expenses as determined by the SC.
(B) MILESTONE PAYMENTS. deCODE agrees to pay RF the following milestone
payments on the occurrence of each of the following events:
[CONFIDENTIAL TREATMENT REQUESTED]
The above milestone payments can be used by RF to advance it objectives, solely
at its discretion.
3.2 OTHER SOURCES OF FUNDING. RF is free to seek other sources of
funding for the Research, PROVIDED THAT such funding sources do not in any way
affect deCODE's ownership of Results or Inventions derived from the Research, or
restrict or diminish deCODE's ability to commercialize the results of the
Research. All grant proposals and subsequent research progress reports will be
immediately submitted to the SC for review prior to submission. If any outside
grants or funding are received by RF, RF shall be permitted to spend an amount
equal to such outside grants that are received from the funds that are provided
by deCODE pursuant to Section 3.1 (a) on other research efforts solely at RF's
discretion.
4
<PAGE> 9
ARTICLE 4
PROPRIETARY RIGHTS
4.1 PROPRIETARY RIGHTS. deCODE shall acquire all proprietary rights of
any kind whatsoever resulting from the Research. Any invention or other know-how
conceived or first reduced to practice in the performance of the Research,
together with all Intellectual Property related thereto (collectively
"Inventions") shall be at all times the sole and exclusive property of deCODE.
RF shall perform, or ensure that all agents and clinical personnel shall perform
any and all acts necessary to assist deCODE in perfecting its right to any and
all such Inventions, including using its best efforts to ensure the prompt
disclosure of same to deCODE by any agent, employee or other individual involved
in the Research and the development of the Inventions.
4.2 INFRINGEMENT OF INTELLECTUAL PROPERTY RIGHTS. If the activities of
either party in connection with the Research or as a result of any commercial
exploitation thereof, result in a claim of patent infringement or other
violation of the intellectual property rights of any third party, deCODE shall
defend against such claims. RF shall cooperate in such defense and shall have
the right to be represented by counsel of its own choice.
4.3 SURVIVAL. The obligations of this Article shall survive termination
or expiration of this Agreement for any reason.
ARTICLE 5
CONFIDENTIALITY
5.1 CONFIDENTIAL INFORMATION. Each party shall, for the term of this
Agreement and for five years after its conclusion, keep completely confidential
and not disclose to any third party, any information designated as confidential
furnished to it by the other party pursuant to this Agreement except as provided
in Article 6 as required by law. The SC will determine what information will be
designated confidential along with the method of designation.
5.2 DISCLOSURE TO EMPLOYEES. Each party shall obtain a written
agreement of each of its employees, agents and consultant who work on the
Research obliging such person to corresponding obligations of confidentiality.
5.3 SURVIVAL. The obligations of this Article shall survive the
termination or expiration of this Agreement for any reason.
ARTICLE 6
PUBLICATIONS
6.1 PUBLICATIONS. Each party to this Agreement recognizes that the
publication of papers, oral presentations and abstracts, regarding the Research,
subject to reasonable controls to protect confidential information, will be
beneficial to both parties. Accordingly, deCODE shall have the right to review
for a period of thirty (30) days and approve any paper
5
<PAGE> 10
for publication, the same to apply to oral presentations and abstracts, which
utilizes data generated from the Research. RF agrees to delete references to
deCODE's Confidential Information in any such paper and agrees to withhold
publication of same for an additional thirty (30) days in order to permit deCODE
to obtain patent protection, if deCODE deems it necessary. Authorship on papers
will also be determined by the SC and is subject to customary scientific
practices. In the event of a dispute, RF has the right to nominate the first and
the last author on the paper(s) in question.
6.2 NO USE OF NAMES. Neither party shall use the other party's name in
its promotional activities without the prior written consent of such other
party, save for disclosures required by law or government regulations.
Notwithstanding the foregoing, RF hereby allows deCODE to include RF's name in a
list of deCODE's collaborators to be use in corporate background information and
presentations.
ARTICLE 7
OTHER DISEASES
7.1 OTHER DISEASES. deCODE and RF agree to discuss widening the
collaborative efforts set forth in the Agreement to include the genetics of
other psychiatric diseases in Iceland, e.g., Alcoholism. The terms of such
agreements will have to be negotiated separately.
7.2 [CONFIDENTIAL TREATMENT REQUESTED]
ARTICLE 8
CONFLICT RESOLUTION
8.1 CONFLICT RESOLUTION. In the event of a dispute between the parties
regarding the subject matter contained herein, such disputes shall be resolved
exclusively through arbitration. The parties will enter into an arbitration
agreement, cf. the Act on Mutually Agreed Arbitration, no. 53/1989. Each party
shall nominate one arbiter and a third arbiter, who will act as a chief arbiter,
shall be nominated by Reykjavik District Court. The obligations of this Section
shall survive the termination or expiration of this Agreement for any reason.
ARTICLE 9
TERM, EXTENSION AND TERMINATION
9.1 TERM. Unless terminated earlier pursuant to Sections 9.3 the term
of this Agreement shall be three (3) years from the Effective Date.
6
<PAGE> 11
9.2 EXTENSION OPTION. On the second anniversary of the Effective Date,
either party has the option to extend the terms of this Agreement for one or
both of the Diseases for an additional two (2) years. In the event the Research
is extended beyond the three (3) year term of this Agreement, the parties will,
in good faith, negotiate a new funding scheme based on the resource commitments
deemed necessary by RF and the principles set forth in this Agreement. RF shall
have the right to conduct due diligence on the resources committed by deCODE to
the Research. If RF finds the resource commitment to be inadequate, RF shall
have the right to end the Research after the term of three years.
9.3 BREACH. If either party breaches this Agreement and the breaching
party has not (i) cured the breach or (ii) initiated good faith efforts to cure
such breach within sixty (60) days of written notice from the non-breaching
party, the non-breaching party may terminate this Agreement upon the expiration
of such sixty (60) day period. The Research described in this Agreement is
subject to approval by the Icelandic Data Protection Commission and failure on
its behalf to allow the Research to proceed does not constitute a breach of this
Agreement.
ARTICLE 10
INDEMNIFICATION
10.1 INDEMNIFICATION BY DECODE. deCODE shall defend, indemnify and hold
harmless RF and its directors and officers from and against any and all
liability, damage or loss arising out of third party claims or suits related to
the Research except to the extent that such claims arise out of negligence,
recklessness or willful misconduct by RF and its directors and officers.
10.2 INDEMNIFICATION BY RF. RF shall defend, indemnify and hold
harmless deCODE and its directors and officers from and against any and all
liability, damage or loss arising out of third party claims or suites related to
the Research except to the extent that such claims arise out of negligence,
recklessness or willful misconduct of deCODE and its directors and officers.
10.3 SURVIVAL. The obligations set forth in this Article shall survive
termination and expiration of this Agreement for any reason.
ARTICLE 11
MISCELLANEOUS
11.1 FORCE MAJEURE. Neither party will be responsible for delays
resulting from acts beyond the control of such party, including but not limited
to acts of God, governmental restrictions, fire, flood, explosion, civil
disorder, provided that the nonperforming party uses commercially reasonable
efforts to avoid or remove such causes of nonperformance and continue
performance hereunder with reasonable dispatch whenever such causes are removed.
11.2 NO LICENSE. Except as expressly provided herein, nothing in this
Agreement
7
<PAGE> 12
shall be construed as conferring on either party an express or implied right or
license or option to license any disclosed confidential information, Invention
or Intellectual Property owned by the other party.
11.3 INDEPENDENT CONTRACTORS. The parties shall perform their
obligations under this Agreement as independent contractors and nothing
contained in this Agreement shall be construed to be inconsistent with such
relationship or status. This Agreement shall not constitute, create or in any
way be interpreted as a joint venture or partnership of any kind.
11.4 CHANGES TO AGREEMENT. No subsequent alteration, amendment, change
or addition to this Agreement shall be binding upon the parties hereto unless
reduced to writing and signed by the respective authorized officers of the
parties hereto.
11.5 GOVERNING LAW. This Agreement shall be governed by the laws of
Iceland.
IN WITNESS WHEREOF, the parties have by duly authorized persons,
executed this Agreement, as of the date first above written.
Reykjavik October 24, 1997
deCODE genetics, Inc. Rannsokna-og fredsluejodurinn ehf.
By: /s/ Kari Stefansson By: /s/ Hannes Petursson
-------------------- ---------------------
Date: 24/10/97 Date: 24/10/97
--------- -----------------
Witnessed by: Gunnar Jonsson 0712603219
---------------------------
Hannes Smarason 251167-3389
---------------------------
8
<PAGE> 13
SIDE LETTER TO AN AGREEMENT ENTERED INTO BY AND BETWEEN DECODE GENETICS, INC.,
AND ISLENSK ERFDGREINING HF ON THE ONE HAND ) ("DECODE") AND RANNSOKNA-OG
FRAEDSLUSJODURINN EHF (RF) ON THE OTHER HAND, DATED OCTOBER 24, 1997 (THE
"AGREEMENT")
Definitions given in the aforesaid Agreement apply to this side letter.
The parties to the Agreement hereby declare it to be their mutual understanding
that
o any and all rights, including rights to Original Data Research Data Hannes
Petursson (HP) obtained through his previous research of the genetics of
schizophrenia and bipolar disease have been assigned to RF, which is
controlled by HP, thus any obligations in the Agreement shall be those of
RF. RF holds all right, title and interest in the Original Data;
o HP represents and warrants that HP's obligations hereunder and RF;s
obligations under the Agreement do not violate any agreements to which HP
or RF are a party;
o HP and RF represent and warrant that the Original Data has been and the
Research Data will be collected with all valid consents required for use in
the Research;
o during the term of the Agreement HP will actively participate in the
Research and not participate in any research tat may be conflict with
deCODE's interest of the Research;
o no agent or employee of RF or HP will participate in any other research
that may be in conflict of the Agreement;
o the obligations assumed under the Agreement by RF under Section 2.5 and
Articles 4, 5, 6, and 7 shall be assumed by HP as well, an extension of the
Agreement pursuant to Section 9.2 shall serve as an extension of the
obligations assumed under this side letter;
[CONFIDENTIAL TREATMENT REQUESTED]
9
<PAGE> 14
EXTENSION AGREEMENT
A refrence is amde to a RESEARCH AGREEMENT entered into 24 October 1997 (the
Agreement) by and between DECODE GENETICS, IN. On the one hand and RANNSOKNA-OG
FREDSLUEJODURINN EHF on the other hand. Terms used herein shall bear the same
meaning as in the Agreement.
Article 9.2 of the Agreement provides for an extension option under which either
party has the option to extend the Agreement for one or both of the Diseases for
an additional two years, i.e. till 24 October 2002.
The Parties hereby mutually agree to extend the Agreement for an additional two
years. As provided for in Article 9.2 of the Agreement, the Parties will enter
into good faith negotiations regarding a funding scheme for the extension of the
Research.
Reykjavik, January 24, 2000
deCODE genetics, Inc. Rannsokna-og Fredsluejodurinn ehf
By: /s/ Kari Stefansson By: /s/ Hannes Petursson
Witnessed by:
/s/ Johann Hjartarson
/s/ Gunnar Jonsson 0712603219
10
<PAGE> 1
EXHIBIT 10.7
THIS CONSULTANCY CONTRACT is made on the 1 day of December, 1997
BETWEEN
(1) deCODE genetics, Inc., a Delaware
Corporation with its principal place of business at
Lynghals, 1
110 Reykjavik
Iceland ("Company")
(2) Vane Associates, a partnership,
"White Angles"
7 Beech Dell
Keston Park
Keston
Kent BR2 6EP
Great Britain ("Consultant")
IT IS AGREED:
ENGAGEMENT OF SERVICES
Consultant shall procure that Professor Sir John Vane ("Sir John Vane")
acts as directors and will serve as a member of the Company's Board of
Directors (the "Board") and perform the duties of a director, in
accordance with the Company's Amended and Restated Articles of
Incorporation, Bylaws, and the general Corporation Law of Delaware (the
"Services"). The Services will take place from time to time as
reasonably requested by the Company at times mutually acceptable to
Consultant and the Company at meetings in either Reykjavik or,
occasionally, in Boston, Massachusetts and by reviewing and, if thought
fit, executing written consents that may be submitted to members of the
Board from time to time. Sir John Vane may participate in such meetings
by teleconference. It is anticipated that the Board will meet
approximately five times per year and have approximately five written
consents to review and sign, if thought fit, and that Sir John's time
commitment per year to the Company shall not materially exceed that
number of days.
<PAGE> 2
2. COMMENCEMENT
This Agreement shall be deemed to commence with effect from 27 October
1997 and shall continue until the close of business on the third
anniversary of the date of this Agreement and thereafter until
terminated by either party upon 90 days written notice to the other.
3. COMPENSATION
3.1 In consideration of the Consultant's Services and subject to approval
by the Company's Board of Directors, which shall pay to Vane Associates
$2,000 per day for each Board Meeting that Sir John Vane attends and
shall issue (being each 12 monthly period this Agreement subsists) each
year at monthly intervals to Vane Associates nonstatutory stock options
(the "Options") to purchase up to 15,000 shares of common stock of the
Company in each year at a price equal to its fair market value on the
date of grant pursuant to the terms of the Company's 1996 Equity
Incentive Plan for each of the next four years, provided that Sir John
Vane continues to serve as a director of the Company at the time the
Options are to be issued. The Options will vest monthly during each
year or part year of this Agreement.
3.2 The Company will also reimburse Vane Associates for reasonable travel
lodging food and other incidental expenses incurred by Consultant in
performing the Services under this Agreement (including travelling to
and from Board Meetings). Consultant agrees to provide the Company with
appropriate receipts or other relevant documentation for all such costs
as part of any submission for reimbursement.
4. FEES
4.1 The Consultant will be entitled to receive the fee referred to above
per meeting or teleconference or agreed day's services of the Company
attended by Sir John Vane payable to its account at
Midland Bank Plc
31 Holborn
London EC1N 2HR, Great Britain
Sort Code: 40-03-28
Account No: 41187805
payable in full without deduction for bank transfer changes within 28
days of each meeting;
<PAGE> 3
5. EXPENSES
5.1 Company will reimburse the Consultant's first class travel and
out-of-pocket disbursements on behalf of Sir John Vane for travel,
accommodation and incidental expenses made on behalf of or for the
benefit of Company including travelling to and from Company meetings
which shall be billed to Company at cost as incurred and shall be
supported by appropriate receipts and other relevant documentation.
5.2 Company agrees to reimburse the Consultant all its legal expenses in
reviewing, negotiating and amending this Agreement and the associated
Indemnity Agreement.
6. COPYRIGHT
6.1 All copyrights and/or design rights in any work created in the course
of or under this Agreement shall belong to Company save for papers the
Consultant and/or Sir John Vane publishes and lectures or delivers
where the copyright and right to copyright become a moral right and a
right to use, deliver and exploit which shall belong to the Consultant
and /or Sir John Vane.
6.2 For the avoidance of doubt Company, acquires no rights to any
copyright, design rights, moral right, patents or similar intellectual
property rights arising in the course of the Consultant's or Sir John
Vane's work under any other consultancies or appointments held from
time to time.
6.3 Sir John Vance and consultant shall execute Non-Disclosure Agreements
in favour of Company in the form attached hereto as Exhibit A.
7. ACKNOWLEDGEMENT AND ASSIGNMENT
7.1 It is agreed that this Agreement shall enure for the benefit of and be
enforceable by the Consultant and its successors in title.
7.2 This Agreement is not assignable by either party without the prior
written approval of the other.
8. AMENDMENTS
Changes, amendments and supplements to this Agreement must be made in
writing and signed by the parties.
9. GOVERNING LAW
9.1 This Agreement shall be governed by the laws of England.
<PAGE> 4
9.2 By their execution of this agreement, the parties hereby irrevocably
agree to submit to the exclusive jurisdiction of the English Courts.
10. TERMINATION
10.1 This Agreement may be terminated by either party without liability to
the other on 90 days written notice to expire no earlier than the close
of business on the third anniversary of this Agreement.
10.2 If either party is in breach of any provision of this Agreement, the
non-breaching party may in writing give the allegedly breaching party
written notice to cure or remedy such breach within 28 days of receipt
of such written notice. If the allegedly breaching party has not cured
or remedied the alleged breach within that period, then this Agreement
may be terminated forthwith upon further written notice.
10.3 The Company shall ensure that the Consultant is reimbursed for the
consultants fees and expenses down to the date of termination howsoever
arising without set-off or deduction.
11. PRE-EXISTING AGREEMENTS
This Agreement is subject to the understanding that the consultant
and/or Sir John Vane are contracted to and affiliated with various
organizations and other companies and may from time to time become
contracted to and affiliated with other similar organizations and other
companies, including but without limitation on an equity investment
basis (collectively, the "Affiliated Entities"). It is particularly
understood that the Consultant and/or Sir John Vane are required to
fulfil certain obligations to the Affiliated Entities pursuant to the
guidelines or the policies if any, adopted by the Affiliated Entities
or pursuant to a contract entered into with such Affiliated Entities.
12. INDEMNITY AGREEMENT
In connection with this Agreement, Sir John Vane and the Company have
executed that certain Indemnity Agreement, dated as 1997.
13. NOTICES
Any notice required or permitted to be given under this Agreement shall
be in writing and shall be deemed effectively served upon personal
delivery or upon delivery by courier or 7 days after posting by
certified mail if sent from the USA or by registered post if sent from
England, in either case sent by express pre-paid air, addressed to the
other party at its address as shown above or to such other address as
such party may designate in writing for the purpose of this Agreement
from time to time.
<PAGE> 5
/s/ Kari Stefansson /s/ Sir John Vane
--------------------- ---------------------
Company Consultant
<PAGE> 6
DECODE GENETICS, INC.
(A DELAWARE CORPORATION)
NONDISCLOSURE AGREEMENT FOR MEMBERS OF THE BOARD OF DIRECTORS
In connection with your review of certain confidential information of
DECODE GENETICS, INC. (the "Company") as a member of the Company's Board of
Directors, we ask that you read and accept the following conditions concerning
the Company's disclosure of such information to you:
"Proprietary Information" shall mean all information obtained by you
from or disclosed to you by the Company (I) which relates to the Company's past,
present or future research, development or business activities or the results
of such activities or (ii) which the Company has received from others and is
obligated to treat as confidential or proprietary. Proprietary Information shall
not include information previously known to you or publicly disclosed without
breach of an obligation of confidentiality, either prior or subsequent to your
receipt of such information. You agree that you shall hold all Proprietary
Information in confidence and shall not use any Proprietary Information except
as may be authorized by the Company in writing. You shall not disclose any such
Proprietary Information to any person by publication or otherwise. You further
agree that at any time upon request of the Company, you shall return to the
Company any and all written or descriptive matter including, but not limited to,
financial information, descriptions or other papers or documents that contain
any such Proprietary Information, together with all copies thereof. You
acknowledge the receipt of consideration.
If the foregoing reflects your understanding, please sign this
Agreement in the space provided below.
Accepted and Agreed to:
1 December 1997 /s/ John Vane
------------------------------
[Date] [Signature]
Sir John Vane
------------------------------
[Print Name]
White Angles 7 Beech Dell
------------------------------
Keston Kent UK
------------------------------
[Address]
<PAGE> 7
AMENDMENT TO CONSULTANCY CONTRACT
This Amendment to Consultancy Contract (this "Amendment") is entered
into as of this 1st day of December, 1997 by and among deCODE genetics, Inc., a
Delaware Corporation having its principal place of business at Lynghalsi 1, 110
Reykjavik, Iceland (the "Company"), Vane Associates, a partnership having its
principal place of business at 7 Beech Dell, Keston Park, Keston, Kent BR26EP,
Great Britain (the "Consultant") and Sir John Vane, having an address of 7 Beech
Dell, Keston Park, Keston, Kent BR26EP, Great Britain.
PRELIMINARY STATEMENTS
A. The Company and the Consultant have entered into that certain
Consultancy Contract (the "Contract") dated as of December 1, 1997 pursuant to
which the Consultant has agreed to provide consulting services to the Company.
B. Section 3.1 of the Contract provides for the payment of certain fees
and the issuance of options to purchase the Company's common stock to the
Consultant as compensation for the Consultant's services.
C. The Company and the Consultant wish to amend Section 3.1 of the
Contract as provided herein.
NOW, THEREFORE, in consideration of the foregoing statements and the
mutual covenants and agreements of the parties contained in this Amendment, the
parties hereto agree as follows:
1. Section 3.1 of the Contract is hereby deleted in its entirety and
replaced with the following paragraphs:
"3.1 In consideration of the Consultant's Services and subject to
approval by the Company's Board of Directors, which shall be
confirmed to Consultant prior to commencement, the Company
shall pay to Vane Associates $2,000 per day for each Board
Meeting that Sir John Vane ("Sir John") attends and shall
issue to Sir John, on the date of this agreement, and on each
of the subsequent three anniversaries of this agreement, an
option to purchase up to 15,000 shares of Common Stock of the
Company (the "Options"), provided that Sir John continues to
serves as a director of the Company at the time the Options
are to be issued.
"3.2 The Options shall be nonstatutory stock options, issued
outside of the Company's 1996 Equity Incentive Plan, and shall
have an exercise price equal to the fair market value of the
Company's Common Stock on each date of grant. The Options
shall vest immediately upon grant thereof.
-1-
<PAGE> 8
"3.3 In consideration of the exercise price of the Options, and in
the event that Sir John elects a deferred payment arrangement
as the method of payment Sir John shall (1) deliver payment to
the Company in an amount equal to the par value of the shares
of stock received upon exercise of the Options, and (2)
execute and deliver a nonrecourse promissory note, in form and
substance mutually agreeable to the parties (the "Note") to
the Company as payment for the remainder of the exercise price
of such Options. The Note shall be secured by a pledge to the
Company of the shares purchased upon exercise of the Options,
as evidenced by a pledge agreement to be entered into by the
Company and Sir John, in form and substance mutually agreeable
to the parties (the "Pledge Agreement"). Further, in the case
of any event of default under the Note, the Company's
exclusive remedy under the Note and Pledge Agreement shall be
the return of any shares of stock subject to the Pledge
Agreement having a fair market value equal to the then
outstanding principal balance of the Note, to the Company's
treasury."
2. Section 3.2 of the Contract shall be renumbered as Section 3.
4.
3. Except as specifically provided herein, the Contract shall be
unaffected by this Amendment and shall continue in full force and effect. Unless
otherwise expressly provided herein, the capitalized terms used in this
Amendment without further definition have the meanings ascribed thereto in the
Contract.
*****
-2-
<PAGE> 9
IN WITNESS WHEREOF, each of the parties hereto has caused to be
executed by its duly authorized representative this Amendment to Consultancy
Contract as of the date first set forth above.
deCODE genetics, Inc.
By: /s/ Kari Stefansson
-------------------
Kari Stefansson
President
VANE ASSOCIATES, a partnership
By: /s/ John Vane
----------------
Name: Sir John Vane
Title:
/s/ John Vane
---------------
Sir John Vane
-3-
<PAGE> 1
EXHIBIT 10.8
INDEMNITY AGREEMENT
THIS AGREEMENT is made and entered into this 1 day of December by and
between deCODE genetics, Inc., a Delaware corporation (the "Corporation"), and
SIR JOHN VANE ("Agent").
RECITALS
WHEREAS, Agent performs a valuable service to the Corporation in his
capacity as a director of the Corporation;
WHEREAS, the Corporation has adopted bylaws (the "Bylaws") providing
for the indemnification of the directors, officers, employees and other agents
of the Corporation, including persons serving at the request of the Corporation
in such capacities with other corporations or enterprises, as authorized by the
Delaware General Corporation Law, as amended (the "Code");
WHEREAS, the Bylaws and the Code, by their non-exclusive nature, permit
contracts between the Corporation and its agents, officers, employees and other
agents with respect to indemnification of such persons; and
WHEREAS, in order to induce Agent to continue to serve as director of
the Corporation, the Corporation has determined and agreed to enter into this
Agreement with Agent;
NOW, THEREFORE, in consideration of Agent's continued service as
director after the date hereof, the parties hereto agree as follows:
AGREEMENT
1. SERVICES TO THE CORPORATION. Agent will serve, subject to the terms
of the Corporation's Restated Certificate of Incorporation and Bylaws, as
director of the Corporation or as a director, officer or other fiduciary of an
affiliate of the Corporation (including any employee benefit plan of the
Corporation) faithfully and to the best of his ability so long as he is duly
elected and qualified in accordance with the provisions of the Bylaws or other
applicable charter documents of the Corporation or such affiliate; provided,
however, that Agent may at any time and for any reason resign from such position
(subject to any contractual obligation that Agent may have assumed apart from
this Agreement) and the Corporation or any affiliate shall have no obligation
under this Agreement to continue Agent in any such position.
2. INDEMNITY OF AGENT. The Corporation hereby agrees to hold harmless
and indemnify Agent to the fullest extent authorized or permitted by the
provisions of the Bylaws and the Code, as the same may be amended from time to
time (but, only to the extent that such amendment permits the Corporation to
provide broader indemnificationrights than the Bylaws or the Code permitted
prior to adoption of such amendment).
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3. ADDITIONAL INDEMNITY. In addition to and not in limitation of the
indemnification otherwise provided for herein, and subject only to the
exclusions set forth in Section 4 hereof, the Corporation hereby further agrees
to hold harmless and indemnify Agent:
(a) against any and all expenses (including attorneys' fees), witness
fees, damages, judgments, fines and amounts paid in settlement and any other
amounts that Agent becomes legally obligated to pay because of any claim or
claims made against or by him in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative (including an action by or in the right of the
Corporation) to which Agent is, was or at any time becomes a party, or is
threatened to be made a party, by reason of the fact that Agent is, was or at
any time becomes a director, officer, employee or other agent of Corporation, or
is or was serving or at any time serves at the request of the Corporation as a
director, officer, employee or other agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise; and
(b) otherwise to the fullest extent as may be provided to Agent by the
Corporation under the non-exclusivity provisions of the Code and Section 41 of
the Bylaws.
4. LIMITATIONS ON ADDITIONAL INDEMNITY. No indemnity pursuant to
Section 3 hereof shall be paid by the Corporation:
(a) on account of any claim against Agent for an accounting of profits
made from the purchase or sale by Agent of securities of the Corporation
pursuant to the provisions of Section 16(b) of the Securities Exchange Act of
1934 and amendments thereto or similar provisions of any federal, state or local
statutory law;
(b) on account of Agent's conduct that was knowingly fraudulent or
deliberately dishonest or that constituted willful misconduct;
(c) on account of Agent's conduct that constituted a breach of Agent's
duty of loyalty to the Corporation or resulted in any personal profit or
advantage to which Agent was not legally entitled;
(d) for which payment is actually made to Agent under a valid and
collectible insurance policy or under a valid and enforceable indemnity clause,
bylaw or agreement, except in respect of any excess beyond payment under such
insurance, clause, bylaw or agreement;
(e) if indemnification is not lawful (and, in this respect, both the
Corporation and Agent have been advised that the Securities and Exchange
Commission believes that indemnification for liabilities arising under the
federal securities laws is against public policy and is, therefore,
unenforceable and that claims for indemnification should be submitted to
appropriate courts for adjudication); or
(f) in connection with any proceeding (or part thereof) initiated by
Agent, or any proceeding by Agent against the Corporation or its directors,
officers, employees or other
2
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agents, unless (i) such indemnification is expressly required to be made by law,
(ii) the proceeding was authorized by the Board of Directors of the Corporation,
(iii) such indemnification is provided by the Corporation, in its sole
discretion, pursuant to the powers vested in the Corporation under the Code, or
(iv) the proceeding is initiated pursuant to Section 9 hereof.
5. CONTINUATION OF INDEMNITY. All agreements and obligations of the
Corporation contained herein shall continue during the period Agent is a
director, officer, employee or other agent of the Corporation (or is or was
serving at the request of the Corporation as a director, officer, employee or
other agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise) and shall continue thereafter so long as Agent
shall be subject to any possible claim or threatened, pending or completed
action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative, by reason of the fact that Agent was serving in
the capacity referred to herein.
6. PARTIAL INDEMNIFICATION. Agent shall be entitled under this
Agreement to indemnification by the Corporation for a portion of the expenses
(including attorneys' fees), witness fees, damages, judgments, fines and amounts
paid in settlement and any other amounts that Agent becomes legally obligated to
pay in connection with any action, suit or proceeding referred to in Section 3
hereof even if not entitled hereunder to indemnification for the total amount
thereof, and the Corporation shall indemnify Agent for the portion thereof to
which Agent is entitled.
7. NOTIFICATION AND DEFENSE OF CLAIM. Not later than thirty (30) days
after receipt by Agent of notice of the commencement of any action, suit or
proceeding, Agent will, if a claim in respect thereof is to be made against the
Corporation under this Agreement, notify the Corporation of the commencement
thereof; but the omission so to notify the Corporation will not relieve it from
any liability which it may have to Agent otherwise than under this Agreement.
With respect to any such action, suit or proceeding as to which Agent notifies
the Corporation of the commencement thereof:
(a) the Corporation will be entitled to participate therein at its own
expense;
(b) except as otherwise provided below, the Corporation may, at its
option and jointly with any other indemnifying party similarly notified and
electing to assume such defense, assume the defense thereof, with counsel
reasonably satisfactory to Agent. After notice from the Corporation to Agent of
its election to assume the defense thereof, the Corporation will not be liable
to Agent under this Agreement for any legal or other expenses subsequently
incurred by Agent in connection with the defense thereof except for reasonable
costs of investigation or otherwise as provided below. Agent shall have the
right to employ separate counsel in such action, suit or proceeding but the fees
and expenses of such counsel incurred after notice from the Corporation of its
assumption of the defense thereof shall be at the expense of Agent unless (i)
the employment of counsel by Agent has been authorized by the Corporation, (ii)
Agent shall have reasonably concluded that there may be a conflict of interest
between the Corporation and Agent in the conduct of the defense of such action
or (iii) the Corporation shall not in fact have
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employed counsel to assume the defense of such action, in each of which cases
the fees and expenses of Agent's separate counsel shall be at the expense of the
Corporation. The Corporation shall not be entitled to assume the defense of any
action, suit or proceeding brought by or on behalf of the Corporation or as to
which Agent shall have made the conclusion provided for in clause (ii) above;
and
(c) the Corporation shall not be liable to indemnify Agent
under this Agreement for any amounts paid in settlement of any action or claim
effected without its written consent, which shall not be unreasonably withheld.
The Corporation shall be permitted to settle any action except that it shall not
settle any action or claim in any manner which would impose any penalty or
limitation on Agent without Agent's written consent, which may be given or
withheld in Agent's sole discretion.
8. EXPENSES. The Corporation shall advance, prior to the final
disposition of any proceeding, promptly following request therefor, all expenses
incurred by Agent in connection with such proceeding upon receipt of an
undertaking by or on behalf of Agent to repay said amounts if it shall be
determined ultimately that Agent is not entitled to be indemnified under the
provisions of this Agreement, the Bylaws, the Code or otherwise.
9. ENFORCEMENT. Any right to indemnification or advances granted by
this Agreement to Agent shall be enforceable by or on behalf of Agent in any
court of competent jurisdiction if (i) the claim for indemnification or advances
is denied, in whole or in part, or (ii) no disposition of such claim is made
within ninety (90) days of request therefor. Agent, in such enforcement action,
if successful in whole or in part, shall be entitled to be paid also the expense
of prosecuting his claim. It shall be a defense to any action for which a claim
for indemnification is made under Section 3 hereof (other than an action brought
to enforce a claim for expenses pursuant to Section 8 hereof, provided that the
required undertaking has been tendered to the Corporation) that Agent is not
entitled to indemnification because of the limitations set forth in Section 4
hereof. Neither the failure of the Corporation (including its Board of Directors
or its stockholders) to have made a determination prior to the commencement of
such enforcement action that indemnification of Agent is proper in the
circumstances, nor an actual determination by the Corporation (including its
Board of Directors or its stockholders) that such indemnification is improper
shall be a defense to the action or create a presumption that Agent is not
entitled to indemnification under this Agreement or otherwise.
10. SUBROGATION. In the event of payment under this Agreement, the
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Agent, who shall execute all documents required and shall
do all acts that may be necessary to secure such rights and to enable the
Corporation effectively to bring suit to enforce such rights.
11. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on Agent by this
Agreement shall not be exclusive of any other right which Agent may have or
hereafter acquire under any statute, provision of the Corporation's Certificate
of Incorporation or Bylaws, agreement, vote of stockholders or directors, or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding office.
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12. SURVIVAL OF RIGHTS.
(a) The rights conferred on Agent by this Agreement shall continue
after Agent has ceased to be a director, officer, employee or other agent of the
Corporation or to serve at the request of the Corporation as a director,
officer, employee or other agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise and shall inure to the
benefit of Agent's heirs, executors and administrators.
(b) The Corporation shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Corporation, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform if no such succession
had taken place.
13. SEPARABILITY. Each of the provision of this Agreement is a separate
and distinct agreement and independent of the others, so that if any provision
hereof shall be held to be invalid for any reason, such invalidity or
unenforceability shall not affect the validity or enforceability of the other
provisions hereof. Furthermore, if this Agreement shall be invalidated in its
entirety on any ground, then the Corporation shall nevertheless indemnify Agent
to the fullest extent provided by the Bylaws, the Code or any other applicable
law.
14. GOVERNING LAW. This Agreement shall be interpreted and enforced in
accordance with the laws of the State of Delaware.
15. AMENDMENT AND TERMINATION. No amendment, modification, termination
or cancellation of this Agreement shall be effective unless in writing signed by
both parties hereto.
16. IDENTICAL COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall for all purposes be deemed to be an
original but all of which together shall constitute but one and the same
Agreement. Only one such counterpart need be produced to evidence the existence
of this Agreement.
17. HEADINGS. The headings of the sections of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction hereof.
18. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given (i)
upon delivery if delivered by hand to the party to whom such communication was
directed or (ii) upon the third business day after the date on which such
communication was mailed if mailed by certified or registered mail with postage
prepaid:
(a) If to Agent, at the address indicated on the signature page hereof.
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(b) If to the Corporation, to
deCODE genetics, Inc.
Attention: Dr. Kari Stefansson
Lynghalsi 1
IS-110 Reykjavik, Iceland
or to such other address as may have been furnished to Agent by the Corporation.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement on
and as of the day and year first above written.
deCODE genetics, Inc.
By: /s/ Kari Stefansson
---------------------
Kari Stefansson
President and Secretary
AGENT
/s/ John Vane
-------------
Name: Sir John Vane
Address:
White Angles 7 Beech Dell
Keston, Kent BR26EP
UK
6.
<PAGE> 1
EXHIBIT 10.9
[NOTE: CERTAIN PORTIONS OF THIS DOCUMENT HAVE BEEN MARKED TO INDICATE THAT
CONFIDENTIALITY HAS BEEN REQUESTED FOR THIS CONFIDENTIAL INFORMATION. THE
CONFIDENTIAL PORTIONS HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.]
SETTLEMENT AGREEMENT
BY AND BETWEEN
THE BETH ISRAEL DEACONESS MEDICAL CENTER
AND
DECODE GENETICS, INC.
This License Agreement (hereinafter, the "Agreement") is effective as
of the 31st day of December 1997 (hereinafter, the "Effective Date") between
Beth Israel Deaconess Medical Center (hereinafter "BIDMC"), a nonprofit
corporation existing under the laws of the Commonwealth of Massachusetts and
having its principal place of business at One Deaconess Road, Boston, MA 02215,
and deCode Genetics, Inc., (hereinafter "deCode") a corporation existing under
the laws of Delaware and having its principal place of business at Lynghais 1,
110 Reykjavik, Iceland.
WHEREAS, utilizing BIDMC facilities and resources Dr. Kari Stefansson
performed a study of multiple sclerosis and identified linkage to an
approximately 200 kb segment of DNA;
WHEREAS, Dr. Stefansson has identified at least two genes in the HLA
region which are associated with myelin-forming cells and are candidate genes
for multiple sclerosis;
WHEREAS, Dr. Stefansson also began systematically sequencing the DNA
from the 200 kb segment using facilities and resources of BIDMC;
WHEREAS, the parties have agreed that any Technology (as defined below)
made by Dr. Stefansson identified above, between November 1, 1993 and the
Effective Date, shall be jointly owned by the parties.
NOW THEREFORE, in consideration of the premises and mutual covenants
and conditions set forth below, BIDMC and deCode agree as follows:
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1. DEFINITIONS.
1.1 "TECHNOLOGY" shall mean all inventions creations ideas, know-how,
data, and information, whether patentable or not, which have been conceived,
reduced to practice, developed, derived, collected, made or otherwise generated
by Dr. Stefansson, between November 1, 1993 and the Effective Date, alone or in
collaboration with one or more or employees, staff members or contractors of
BIDMC, and which are associated with the linkage of the 200 kb segment of DNA to
the multiple sclerosis trait.
1.2 "LICENSED PATENTS" shall mean all patents, patent applications,
reissues, reexaminations, renewals, divisions, and continuations throughout the
world, including but not limited to those listed on Exhibit A, directed, to
inventions that have been made between November 1, 1993 and the Effective Date
by Dr. Stefansson alone or in collaboration with one or more employees, staff
members, or contractors of BIDMC, covering or relating to the Technology.
1.3 "KNOWHOW" shall mean all confidential technology, whether
patentable or not, that has been discovered, invented, or developed between
November 1, 1993 and the Effective Date by Dr. Stefansson alone or in
collaboration with one or more employees, staff members, or contractors of BIDMC
during the course of performing research on the Technology and which is useful
in connection with the discovery, optimization, manufacture, use, or sale of any
Royalty-Bearing Products.
1.4 "ROYALTY-BEARING PRODUCT" shall mean any product which is developed
and sold by deCode or its sublicensees, which is derived from the 200 kb segment
of DNA and which is intended for the diagnosis or treatment of multiple
sclerosis.
1.5 "NET SALES" shall mean the gross amount invoiced by deCode or its
Affiliates for sales by deCode or its Affiliates of Royalty-Bearing Products,
less (a) credits or allowances, if any, actually granted, (b) discounts actually
allowed, (c) freight, postage, and insurance charges and additional special
packaging charges, (d) customs duties, (e) excises, sales taxes, duties or other
taxes imposed upon and paid with respect to such sales (excluding what is
commonly known as income taxes), and (f) deductions for bad debts.
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1.6 "SUBLICENSE INCOME" shall mean license fees and royalties paid to
deCode or its Affiliates by sublicensees of deCode or its Affiliates for sales
of Royalty-Bearing Products by the sublicensees, but shall not include debt or
equity investments, and research and development payments.
1.7 "VALID CLAIM" shall mean a claim of any unexpired United States or
foreign patent or patent application which shall not have been withdrawn,
cancelled, or disclaimed, nor held invalid by a court of competent jurisdiction
in an unappealed or unappealable decision, and in the case of a patent
application, has not been pending for more than five (5) years.
1.8 "MAJOR MARKET COUNTRY" means the United States, United Kingdom,
Germany, France, Italy or Japan.
1.9 "FDA" shall mean the United States Food and Drug Administration or
the equivalent governmental agencies in a Major Market Country (including the
European Medicines Evaluation Agency).
1.10 "AFFILIATE" means any corporation, company, partnership, joint
venture and/or firm which controls, is controlled by or is under common
control with a party. The purposes of this Section 1.10, "control" shall mean,
(a) in a case of corporate entities, direct or indirect ownership of at least
50% of the stock or shares having the right to vote for the election of
directors and (b) in a case of noncorporate entities, direct or indirect
ownership of at least 50% of the equity interest with the power to direct the
management and policies of such noncorporate entities.
2. OWNERSHIP.
BIDMC and deCode shall jointly own the Licensed Patents and the
Knowhow. BIDMC and deCode agree to execute or have executed all documents and
assignments reasonably necessary to establish BIDMC and deCode as the record
owners of the Licensed Patents and the Knowhow. The Technology and resulting
Licensed Patents and Knowhow are limited to genes for multiple sclerosis in the
200 kb segment of DNA and BIDMC shall not have, or acquire, any rights to any
other genes identified by Dr. Stefansson or deCode in such 200 kb segment of
DNA.
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3. LICENSED GRANT
BIDMC hereby grants deCode and its Affiliates, and deCode and its
Affiliates, accept, an exclusive, worldwide license to all of BIDMC's interest
in and to the Licensed Patents and the Knowhow, including the right to
sublicense all such rights, under terms not inconsistent with the terms set
forth in this Agreement to make, have made, use, sell, offer to sell, and import
Royalty-Bearing Products.
4. LICENSE FEES, MILESTONES, MAINTENANCE FEES, AND ROYALTIES.
4.1 LICENSE FEES.
4.1.1 CASH PAYMENT. deCode shall make the following payments
to BIDMC upon the occurrence of the following events:
[CONFIDENTIAL TREATMENT REQUESTED]
These cash payments are non-refundable and not creditable against
future royalties that may be due.
4.1.2 PREFERRED STOCK PAYMENTS. deCode shall make the following
payments to BIDMC upon the occurrence of the following events:
(a) Upon execution of this Agreement by deCode and
BIDMC, deCode shall issue to BIDMC [CONFIDENTIAL TREATMENT REQUESTED] shares of
deCode's Series A Preferred Stock.
(b) Upon the first anniversary of the Effective Date,
deCode shall issue to BIDMC that number of shares of deCode's Series A Preferred
Stock that can
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be purchased with [CONFIDENTIAL TREATMENT REQUESTED] at a purchase price equal
to the last price paid per share (or the last valuation per share in the case of
a non-cash transaction, e.g., license agreement, lease line, etc.) for deCode's
preferred stock before the first anniversary of the Effective Date, or if deCode
closes an initial public offering, the last price paid by the public for
deCode's common stock at the close of trading on the day preceding the first
anniversary of the Effective Date.
(c) Upon the second anniversary of the Effective Date, deCode shall
issue to BIDMC that number of shares of deCode's Series A Preferred Stock that
can be purchased with [CONFIDENTIAL TREATMENT REQUESTED] at a purchase price
equal to the last price paid per share (or the last valuation per share in the
case of a non-cash transaction, e.g., license agreement, lease line, etc.) for
deCode's preferred stock before the second anniversary of the Effective Date, or
if deCode closes an initial public offering, the last price paid by the public
for deCode's common stock at the close of trading on the day preceding the
second anniversary of the Effective Date.
These license fees are non-refundable and not credible against future
royalties that may become due.
4.1.3 TERMS OF SERIES A PREFERRED STOCK.
(a) The Series A Preferred Stock paid to BIDMC pursuant to Sections
4.1.2. (a) - (c) above shall be issued pursuant to a stock purchase agreement in
substantially the form attached hereto as Exhibit B (the "Stock Purchase
Agreement"). Prior to each of the first anniversary and second anniversary of
the Effective Date with respect to each respective payment pursuant to Sections
4.1.2. (b) and (c) above, deCode shall prepare, execute and deliver to BIDMC the
Stock Purchase Agreement that shall set forth the appropriate price paid per
share and number of shares, and upon receiving BIDMC's executed copy thereof,
shall issue, and deliver to BIDMC a share certificate for the appropriate number
of shares of Series A Preferred Stock. Section 3(d) of the Stock Purchase
Agreement shall be utilized only in connection with the initial issuance of
[CONFIDENTIAL TREATMENT REQUESTED] shares of deCode's Series A Preferred Stock
to BIDMC pursuant to Section 4.1.2(a). Section 3(d) shall not be utilized in the
Stock Purchase Agreement in connection with the issuances to BIDMC pursuant to
Sections 4.1.2(b) and 4.1.2(c).
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(b) Upon such date that such appropriate number of shares of deCode's
Series A Preferred Stock is issued to BIDMC pursuant to Sections 4.1.2. (a)-(c)
above, BIDMC shall hold the same rights, preferences and privileges as the other
holders of outstanding shares of deCode Series A Preferred Stock on such date,
pursuant to deCode's Amended and Restated Certificate of Incorporation and
Amended and Restated Investor Rights Agreement in effect on such date.
4.2 MILESTONES. deCode shall make the following payments to
BIDMC within thirty (30) days of the first occurrence (and not for any
subsequent occurrences) of the following milestone events:
[CONFIDENTIAL TREATMENT REQUESTED]
These milestone payments are non-refundable and not creditable
against any future royalties that may be due.
4.3 ANNUAL MAINTENANCE FEES. deCode shall pay to BIDMC
[CONFIDENTIAL TREATMENT REQUESTED]on the first anniversary and each subsequent
anniversary of the Effective Date during the term of this Agreement. Such annual
maintenance fee shall be creditable against royalties that become due to BIDMC
in the calendar year following such payment.
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4.4 ROYALTIES.
4.4.1 ROYALTIES ON ROYALTY-BEARING PRODUCTS SOLD BY DECODE.
(A) THERAPEUTIC PATENTED PRODUCTS. deCode will pay to BIDMC a royalty
of [CONFIDENTIAL TREATMENT REQUESTED]of Net Sales for all Royalty-Bearing
Products that are approved by the FDA for therapeutic use in the country where
the Royalty-Bearing Products are sold and that are covered by at least one Valid
Claim of a Licensed Patent in the country where such Royalty-Bearing Products
are sold.
(B) DIAGNOSTIC PATENTED PRODUCTS. deCode will pay to BIDMC a royalty of
[CONFIDENTIAL TREATMENT REQUESTED]of Net Sales for all Royalty-Bearing Products
that are approved by the FDA for diagnostic use in the country where such
Royalty-Bearing Products are sold and that are covered by at least one Valid
Claim of a Licensed Patent in the country where such Royalty-Bearing Products
are sold.
(C) UNPATENTED THERAPEUTIC PRODUCTS INCLUDING KNOWHOW. deCode will pay
to BIDMC a royalty of [CONFIDENTIAL TREATMENT REQUESTED]of Net Sales for all
Royalty-Bearing Products that are approved by the FDA for therapeutic use in the
country where such Royalty-Bearing Products are sold and that are not covered by
at least one Valid Claim of a Licensed Patent in the country where such
Royalty-Bearing Products are sold.
(D) UNPATENTED DIAGNOSTIC PRODUCTS INCLUDING KNOWHOW. deCode will pay
to BIDMC a royalty of [CONFIDENTIAL TREATMENT REQUESTED]of Net Sales for all
Royalty-Bearing Products that are approved by the FDA for diagnostic use in the
country where such Royalty-Bearing Products are sold and that are not covered by
at least one Valid Claim of a Licensed Patent in the country where such
Royalty-Bearing Products are sold.
4.4.2 ROYALTIES ON ROYALTY-BEARING PRODUCTS SOLD BY SUBLICENSEES.
(A) PATENTED SUBLICENSEE PRODUCTS. deCode will pay to BIDMC
[CONFIDENTIAL TREATMENT REQUESTED]of all Sublicense Income paid to deCode for
sales of Royalty-Bearing Products that are covered by at least one Valid Claim
of a Licensed Patent in the country where such Royalty-Bearing Products are
sold.
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<PAGE> 8
(B) UNPATENTED SUBLICENSEE PRODUCTS INCLUDING KNOWHOW.
deCode will pay to BIDMC [CONFIDENTIAL TREATMENT REQUESTED] of all Sublicense
income paid to deCode for sales of Royalty-Bearing Products that are not covered
by at least one Valid Claim of a Licensed Patent in the country where such
Royalty-Bearing Products are sold.
(C) MINIMUM SUBLICENSE PAYMENTS. In the event that the royalty payments
described in this section total less than [CONFIDENTIAL TREATMENT REQUESTED]of
Net Sales of a sublicensee of Royalty-Bearing Products approved for therapeutic
use or [CONFIDENTIAL TREATMENT REQUESTED]of Net Sales of a sublicensee of
Royalty-Bearing Products approved for diagnostic use, the parties agree to meet
in good faith to negotiate whether such payments are commercially reasonable
payments to BIDMC in light of how other consideration, such as equity funding
paid by the sublicensee to deCode shall be allocated.
(D) SUBLICENSE INCOME PAYMENT TERMS. Sublicensee's income which is not
royalty income, but which is owed to BIDMC under this Section 4.4.2(i.e.
licensing fees and the like) shall be paid to BIDMC by deCode within thirty
(30)days from the date that deCode receives such payment from a sublicensee.
4.4.3 DURATION OF ROYALTY OBLIGATIONS. The royalty obligations of
deCode shall terminate on a country-by-country basis upon the latter of (i) the
last to expire of the Licensed Patents in such country and (ii) fifteen (15)
years after the first commercial sale of a Royalty-Bearing Product in such
country.
4.4.4 QUARTERLY PAYMENTS. With regard to Net Sales, royalties due
thereon shall be payable quarterly, within forty-five (45) days after the end of
each calendar quarter, based upon the Net Sales of the Royalty-Bearing Products
during such preceding calendar quarter, commencing with the calendar quarter in
which the first commercial sale of any Royalty-Bearing Product is made. With
regard to Sublicense Income received by deCode for sales of Royalty-Bearing
Products, royalties due thereon shall be payable quarterly, within sixty (60)
days after the end of each calendar quarter, based upon the Sublicense Income
received by deCode during such preceding calendar quarter, commencing with the
calendar quarter in which the first commercial sale of any Royalty-Bearing
Product is made by a sublicensee of deCode.
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4.4.5 REPORTS. deCode shall furnish to BIDMC at the same time as
each payment is made by deCode, a detailed written report of the Net Sales of
Royalty-Bearing Products and the Sublicense Income received by decode for sales
of Royalty-Bearing Products and the royalties due and payable for such calendar
quarter.
4.4.6 RECORDS. deCode shall keep full, complete and proper
records and accounts of its sales of Royalty-Bearing Products and Sublicense
Income received by deCode for sales of Royalty-Bearing Products to enable the
royalties payable thereon to be determined. BIDMC shall have the right at its
own expense to appoint an independent certified public accounting firm approved
by deCode, which approval shall not be unreasonably withheld, to audit deCode's
records which are necessary to verify the royalties payable pursuant to this
Agreement. Such audit shall be at BIDMC's expense; provided, however, that if
the audit discloses that BIDMC has been underpaid royalties by at least five
percent (5%) for the audited period, then deCode shall reimburse BIDMC for any
such reasonable audit costs, together with an amount equal to the additional
royalties to which BIDMC is entitled as disclosed by the audit. BIDMC may
exercise its right of audit no more frequently than once in any calendar year.
The accounting firm shall disclose to BIDMC only information relating solely to
the accuracy of the royalty payments. deCode shall preserve and maintain all
such records required for audit for a period of two (2) years after the calendar
quarter to which the record applies.
4.4.7 NO DUPLICATE ROYALTIES. Under no circumstances shall deCode be
obligated to pay more than one royalty on any Royalty-Bearing Product.
4.4.8 FORM OF PAYMENT: TAXES. All amounts payable to BIDMC hereunder
shall be payable in United States funds without deductions for taxes,
assessments, fees or charges of any kind, except for the deductions provided in
Section 1.5. deCode shall be responsible for the payment of all withholding
taxes imposed by any country on any royalty or other payment payable to BIDMC
hereunder. All amounts payable to BIDMC hereunder shall be payable in United
States dollars in Boston, Massachusetts, or at such other place as BIDMC may
reasonably designate, provided, however, that if the law of any foreign country
prevents any payment payable to BIDMC hereunder to be made in Boston,
Massachusetts, or as otherwise designated by BIDMC or prevents any such payment
to be made in United States dollars, BIDMC agrees to accept such royalty in form
and place as permitted, including deposits by deCode in the applicable foreign
currency in a local bank or banks in such country designated by deCode. If any
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currency conversion is required in connection with any payments to BIDMC
hereunder, such conversion shall be made at the buying rate for the transfer of
such other currency as quoted by The Wall Street Journal on the last business
day of the applicable accounting period, in the case of any payment if payable
with respect to a specified accounting period, or, in the case of any other
payment, the last business day prior to the date of such payment.
4.5 INTEREST. In the event that any payment (other than royalty
payment) due hereunder is not made when due, the payment shall accrue interest
beginning on the Effective Date at the annual rate of eighteen percent (18%). In
the event any royalty payments are not made when due, the payment shall accrue
interest beginning on the first day following the calendar quarter in which such
payment is due calculated at the annual rate of the sum of (a) two percent (2%)
plus (b) the prime interest rate quoted by The Wall Street Journal on the date
said payment is due, or on the date the payment is made, whichever is higher. In
either case, the interest shall be compounded on the last day of each calendar
quarter, provided that in no event shall said annual rate exceed the maximum
interest rate permitted by law in regard to such payments. Such payments when
made shall be accompanied by all interest so accrued. Said interest and the
payment and acceptance thereof shall not negate or waive the right of BIDMC to
any other remedy, legal or equitable, to which it may be entitled because of the
delinquency of the payment.
5. TERM AND TERMINATION OF THIS AGREEMENT.
5.1 TERM. Unless terminated sooner in accordance with the terms
herein, this Agreement shall expire upon expiration of the last to expire of the
Licensed Patents, provided however that the license granted to deCode under
Section 3 with respect to the Knowhow shall survive such expiration.
5.2 TERMINATION WITHOUT CAUSE BY DECODE. For a period of thirty-six
(36) months from the Effective Date, deCode shall not have the right to
terminate this Agreement without cause. Upon the termination of such thirty-six
(36) month period,
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deCode shall not have the right to terminate this Agreement without cause for
additional twenty-four (24) months except that deCode shall have the right to
request termination of this Agreement if it determines that (i) the continued
research, development or distribution of Royalty-Bearing Products is not
commercially feasible, or (ii) the manufacture, use or sale of Royalty-Bearing
Products is covered by third party patents to which it is not willing to obtain
a license. Upon deCode's determination of either event (i) or (ii) described
above, deCode shall present to BIDMC in writing its determination, the rationale
for such determination and its request for BIDMC's consent for early
termination. The parties shall meet to discuss deCode's options and BIDMC agrees
not to unreasonably withhold consent to deCode's request, provided, however,
that deCode pay to BIDMC the difference between [CONFIDENTIAL TREATMENT
REQUESTED] and the total amount of annual maintenance fees already paid by
deCode to BIDMC pursuant to Section 4.3 above. After the fifth anniversary of
the Effective Date, deCode shall have the right to terminate this Agreement upon
thirty (30) days prior written notice to BIDMC.
5.3 TERMINATION UPON DEFAULT BY DECODE. In the event of default by
deCode, BIDMC may give deCode written notice of the default and elect to
terminate this Agreement ninety (90) days after receipt of the notice unless,
within said time period, deCode cures the default. Any dispute arising hereunder
shall be resolved in accordance with the provisions of Section 10.1.
5.4 RIGHTS UPON TERMINATION. Upon any termination of this Agreement,
the exclusive license granted to deCode in Section 3 shall terminate, and
deCode's maintenance fee and royalty obligations defined in Sections 4.3 and 4.4
shall also terminate. deCode's obligations under Sections 4.1, 4.2, 4.5, 6, 7.1,
7.2, 8 and 10.7, shall survive termination of this Agreement and in the event of
any termination of this Agreement, deCode shall continue to have the right to
exercise its rights as a joint owner of the Licensed Patents and the Knowhow.
Upon termination of this Agreement for any reason, nothing herein shall be
construed to release either party from any obligation that matured prior to the
effective date of such termination.
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6. WARRANTIES AND DISCLAIMERS.
6.1 deCode warrants and represents that it has the right to enter into
this Agreement.
6.2 BIDMC warrants and represents that all patents and patent
applications covering or relating to the Technology which were filed by or on
behalf of BIDMC are listed on Schedule A. deCode warrants and represents that it
has not filed any patent applications covering or relating to the Technology.
6.3 BIDMC warrants and represents that it has the right to enter into
this Agreement and to grant the licenses granted herein.
6.4 NEITHER PARTY MAKES ANY EXPRESS OR IMPLIED WARRANTY INCLUDING,
WITHOUT LIMITATION, ANY IMPLIED WARRANTY OF MERCHANTABILITY OR ANY IMPLIED
WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO ANY OF THE LICENSED
TECHNOLOGY OR ANY ROYALTY-BEARING PRODUCTS AND HEREBY DISCLAIMS THE SAME
6.5 NEITHER PARTY MAKES ANY EXPRESS OR IMPLIED WARRANTY THAT THE
MANUFACTURE, USE OR SALE OF ANY ROYALTY-BEARING PRODUCT WILL NOT INFRINGE ANY
PATENT OR OTHER RIGHT OF ANY PARTY AND HEREBY DISCLAIMS THE SAME.
7. PATENT MATTERS.
7.1 Patent Prosecution and Maintenance. deCode shall have the sole
responsibility for the prosecution and maintenance of the Licensed Patents.
deCode shall not abandon any patent application of the Licensed Patents or fail
to maintain any of the Licensed Patents without providing BIDMC with sixty (60)
days prior written notice to BIDMC. If deCode decides to abandon any patent
application or not to maintain any patent of the Licensed Patents, then BIDMC
may, at its own expense, assume control of the prosecution of such application
or maintenance of such patent.
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7.2 PROVISION OF INFORMATION TO BIDMC. deCode shall keep BIDMC informed
with regard to the patent prosecution of the Licensed Patents by providing to
BIDMC copies of all correspondence and filings with Patent Offices and an
opportunity to comment on such correspondence and filings prior to the time that
such papers are filed and submitted.
7.3 INFRINGEMENT ACTIONS.
7.3.1 CLAIMS OF INFRINGEMENT AGAINST THIRD PARTIES.
(a) deCode shall have the sole right to initiate an infringement or
other appropriate suit anywhere in the world against any third party who at any
time has infringed, or is suspected of infringing, any of the Licensed Patents
or of using without proper authorization or misappropriating all or any portion
of the Knowhow.
(b) deCode shall pay all expenses of the suit, including, without
limitation, attorneys' fees and court costs. Any damages, settlement fees or
other consideration for past infringement received as a result of such
litigation shall be treated as Sublicense Income after deCode deducts its
expenses related to such suit from the recovery. If necessary, BIDMC shall join
as a party to the suit but shall be under no obligation to participate except to
the extent that such participation is required as the result of being a named
party to the suit. BIDMC shall offer reasonable assistance to deCode in
connection therewith at no charge to deCode except for reimbursement of
reasonable expenses, including out-of-pocket expenses and salaries of BIDMC
personnel, incurred in rendering such assistance. deCode shall not settle any
such suit involving rights of BIDMC without obtaining the prior written consent
of BIDMC, which consent shall not be unreasonably withheld. If, after deCode has
had knowledge of such claim for at least six (6) months and following reasonable
notice from the BIDMC, deCode shall fail to take any action against any
Infringer which BIDMC may reasonably deem necessary or desirable to prevent such
infringement or violation, or to recover damages therefor, in addition to any
other remedy available to it, BIDMC may, upon notice to deCode, take any steps
BIDMC may deem appropriate against such Infringer at BIDMC's own expense.
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deCode shall assist BIDMC, at BIDMC's expense, as reasonably requested in taking
any such action against any such Infringer. Any amount recovered as a result of
any such action taken by BIDMC shall be retained by BIDMC.
7.3.2 CLAIMS OF INFRINGEMENT AGAINST DECODE.
(a) In the event that a third party at any time provides written notice
of a claim to, or brings an action, suit or proceeding against, any party or any
of their respective Affiliates or sublicensees, claiming infringement of its
patent rights or copyrights or unauthorized use or misappropriation of its
technology, based upon an assertion or claim arising out of the development,
manufacture, use or sale of Royalty-Bearing Products, such party shall promptly
notify the other party of the claim or the commencement of such action, suit or
proceeding enclosing a copy of the claim and/or all papers served. BIDMC agrees
to make its advice regarding the technical merits of any such claim reasonably
available to deCode.
(b) If deCode or any of its sublicensees, in order to operate under or
exploit the licenses granted under Section 3 of this Agreement in any country,
must, in deCode's or sublicensee's reasonable judgment, make payments to one or
more third parties to obtain a license or similar right under a patent or other
technology in the absence of which Royalty-Bearing Products could not legally be
developed, manufactured, used, marketed, imported, sold, or offered to be sold
in such country, one-half 1/2) of such third party payments shall be set off
against the royalty payments otherwise due to BIDMC provided that in no event
shall the royalty payments due BIDMC be reduced by more than fifty percent
(50%). During the course of negotiations between deCode and such third party, if
requested by deCode, BIDMC shall render to deCode reasonable assistance as
necessary for deCode to secure such license or similar right. The negotiation
and final terms of such license or similar right shall be in the sole discretion
of the deCode.
8. INDEMNIFICATION AND INSURANCE.
8.1 PRODUCT LIABILITY INDEMNITY. deCode shall indemnify, defend and
hold harmless BIDMC and its trustees, officers, medical and professional staff,
employees and agents and their respective successors, heirs and assigns (the
"Indemnitees"),
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against any and all ability, damage, loss or expense (including reasonable
Attorneys' fees and expenses of litigation) incurred by or imposed upon the
Indemnitees, or any one of them, in connection with any claims, suits, actions,
demands or judgments arising out of any theory of product liability (including,
but not limited to, actions in the form of tort, warranty, or strict liability)
and arising out of the design, production, manufacture, sale, use, lease or
promotion by deCode or by a sublicensee, Affiliate or agent of deCode of any
product, process or service relating to, or developed pursuant to this
Agreement. deCode's indemnification obligations under this Section 8.1 shall not
Apply to any damage, loss or expense directly attributable to the negligent
activity of the Indemnitees.
8.2 INSURANCE. At such time as any Royalty-Bearing Product is being
commercially distributed or sold by deCode or by a sublicensee, Affiliate or
agent of deCode, deCode shall, at its sole cost and expense, procure and
maintain policies of comprehensive general liability insurance in amounts not
less than $2 million per incident and $2 million aggregate naming the
Indemnitees as additional insureds. Such comprehensive general liability
insurance shall provide (a) product liability coverage and broad form
contractual liability coverage for deCode's indemnification under Section 8.1
above. If deCode elects to self-insure all or part of the limits described above
(including deductibles or retentions which are in excess of $250,000 annual
aggregate), such self-insurance programs must be acceptable to BIDMC. deCode
shall provide BIDMC with written evidence of such insurance upon request of
BIDMC. deCode shall provide BIDMC with written notice prior to any cancellation,
non-renewal or material change in such insurance. Upon such notice BIDMC shall
have the right to terminate this Agreement. deCode shall maintain such
commercial general liability insurance during (a) the period that any such
product, process or service is being commercially distributed or sold (other
than for the purpose of obtaining regulatory approvals) by deCode or by a
sublicensee, Affiliate or agent of deCode and (b) a reasonable period after the
period referred to in (iii) (a) above which in no event shall be less than
fifteen (15) years.
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9. DUE DILIGENCE / GENERAL OBLIGATION.
deCode shall use commercially reasonable efforts to commercialize the
licensed Technology. In the event that deCode shall fail to comply with due
diligence obligations under this paragraph, deCode shall (i) within 60 days of
deCode's receipt of written notice of such failure, provide BIDMC a commercially
reasonable plan to remedy such failure within a time period not to exceed 180
days from the date of deCode's receipt of such notice and (ii) cure such failure
in accordance with such plan within the time provided for under such plan.
deCode shall provide BIDMC at least once per year a report of its activities and
efforts toward commercialization of the licensed Technology in sufficient detail
to allow BIDMC to monitor deCode's compliance with the due diligence provisions
of this Agreement. In addition, deCode shall meet with the Chief of Neurology of
BIDMC, or his/her designee, every six (6) months in order to enable such person
to monitor deCode's commercialization activities and to offer suggestions
relating to such commercialization. The sole remedy of BIDMC for any failure of
deCode to comply with the obligations set forth in this Section 9 to use
reasonable efforts to commercialize the licensed Technology shall be to obtain
immediate payment from deCode of all unpaid amounts specified in Sections 4.1
(provided that the preferred stock purchase price shall be the last price paid
per share (or the last valuation per share in the case of a non-cash
transaction, e.g. license agreement, lease line, etc.) for deCode's preferred
stock before the date of termination, or if deCode doses an initial public
offering, the last price paid by the public for deCode's common stock at the
close of trading on the day preceding the date of termination.) and 4.3 (due
through the fifth anniversary of the Effective Date) of this Agreement and
terminate the licenses to the Licensed Patents and Knowhow granted in Section 3
so that following such termination deCode will only have the non-exclusive right
as a joint owner to practice the Licensee Patents and Knowhow.
10. GENERAL PROVISIONS.
10.1 ARBITRATION. Any matter or disagreement arising out of this
Agreement shall be resolved by arbitration. Such matter or disagreement shall be
submitted for decision to a mutually selected arbitrator. If an arbitrator
cannot be agreed upon, the parties shall request the American Arbitration
Association to appoint an arbitrator.
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The arbitrator shall conduct the arbitration in accordance with the Rules of the
American Arbitration Association. The decision and award by the arbitrator shall
be final and binding. Judgment upon the award may be entered in any court having
jurisdiction thereof. Any arbitration pursuant to this Section 10.1 shall be
held in Boston, Massachusetts, or such other place as may be mutually agreed
upon in writing by the parties. The costs of any such arbitration shall be
shared equally by the parties.
10.2 ENTIRE AGREEMENT; MODIFICATION. This Agreement and the Mutual
Release attached hereto as Exhibit C set forth the entire agreement and
understanding between the parties as to the subject matter set forth in this
Agreement. There shall be no amendments or modifications to this Agreement,
except by a written document which is signed by both parties.
10.3 MASSACHUSETTS LAW. This Agreement shall be construed and enforced
in accordance with the laws of the Commonwealth of Massachusetts.
10.4 HEADINGS. The headings for each article and section of this
Agreement have been inserted for convenience of reference only and are not
intended to limit or expand on the meaning of the language contained in the
particular article or section.
10.5 SEVERABILITY. If any provision of this Agreement is ultimately
held to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
10.6 NO WAIVER. Any delay in enforcing a party's rights under this
Agreement or any waiver as to a particular default or other matter shall not
constitute a waiver of such party's rights to the future enforcement of its
rights under this Agreement, excepting only as to an expense written and signed
waiver as to a particular matter for a particular period of time.
10.7 ATTORNEY FEES. In any dispute between the parties, the attorney
fees and court costs of the prevailing party shall be reimbursed by the other
party.
10.8 ASSIGNMENTS. This Agreement shall not be assignable by either of
the parties without the express written consent of the other party, which
consent shall
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not be unreasonably withheld, except each party may assign this Agreement
without consent of the other party, but with notice, to any successors in
interest of the assigning party's business related to this Agreement.
10.9 NOTICES. Any notices given pursuant to this Agreement shall be in
writing and shall be sent by hand, certified mail, overnight courier, or fax
addressed as follows
FOR BIDMC: Beth Israel Deaconess Medical Center
One Deaconess Road
Boston, MA 02215
Fax No. 617-632-7196
Attention: Barry I. Eisenstein, M.D.
with a copy to:
Ropes & Gray
One International Place
Boston, Massachusetts 02110-2624
Attention: Dacia A. Clayton, Esq.
FOR deCode: deCode Genetics, Inc.
Lynghais 1
110 Reykjavik, Iceland
Fax No. 354-564-1901
Attention: Kari Stefansson, M.D.
with a copy to:
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Attention: David E. Redlick, Esq.
Such notices shall be effective upon receipt by the addressee.
10.10 COMPLIANCE WITH U.S. LAWS. Nothing contained in this Agreement
shall require or permit BIDMC or deCode to do any act inconsistent with the
requirements of any United States law, regulation, or executive order as the
same may be in effect from time to time.
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10.11 COMPLIANCE WITH LAW. deCode shall comply with and shall. instruct
any sublicensee to comply, in all material respects, with all government
statutes and regulations that relate to Royalty-Bearing Products, including, but
not limited to, FDA statutes and regulations and the Export Administration Act
of 1979 (50 App. U.S.C.ss.2401 et.seq.), as amended, and the regulations
promulgated thereunder, and any applicable similar laws and regulations of any
other country. Without limiting the generality of the foregoing, deCode agrees
that all Royalty-Bearing Products used or sold in the United States shall be
manufactured substantially in the United States to the extent required by and in
compliance with the 35 U.S.C.ss.200 et.seq. and all implementing regulations
thereto as may be amended from time to time.
10.12 MARKING. deCode shall cause all Royalty-Bearing Products sold in
the United States to be marked with all U.S. patent numbers for any applicable
Licensed Patent, to the extent required by United States law. deCode shall
similarly cause all Royalty-Bearing Products shipped to or sold in any other
country to be marked with the patent number(s) for any applicable Licensed
Patent in such a manner as to conform with the patent laws and practice of such
country.
10.13 PUBLICITY. Except as required by law or permitted hereunder,
deCode shall not use the name of the BIDMC or BIDMC's Affiliates, nor that of
any staff member employee, or student or BIDMC or its Affiliates, or any
adaptation thereof, in any advertising, promotional or sales literature,
offering materials, business plan or any other form of publicity without prior
written consent obtained from BIDMC and from the individual staff member,
employee or student if such individual's name is so used.
10.14 INDEPENDENT CONTRACTORS. For the purposes of this Agreement and
all services to be provided hereunder, each shall be, and shall be deemed to be,
an independent contractor and not an agent, partner, joint venturer or employee
of the other party. Neither party shall have authority to make any statements,
representations or commitments of any kind, or to take any action which shall be
binding on the other party, except as may be explicitly provided for herein or
authorized in writing.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date.
Beth Israel Deaconess Medical Center deCODE Genetics, Inc.
By: /s/ David Dolins By: /s/ Terrence McGuire
------------------------ ------------------------------
Title: President Title: Director & Assistant Secretary
------------------------ ------------------------------
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EXHIBIT A
LICENSED PATENTS
Provisional Patent Application Entitled,
[CONFIDENTIAL TREATMENT REQUESTED]
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EXHIBIT B
STOCK PURCHASE AGREEMENT
(Attached)
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DECODE GENETICS, INC.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
This SERIES A PREFERRED STOCK PURCHASE AGREEMENT ("Agreement") is made
effective as of January ___, 1998, by and between deCODE genetics, Inc., a
Delaware corporation (the "Company") and Beth Israel Deaconess Medical Center,
Inc., a Massachusetts corporation ("Purchaser").
Whereas, the parties hereto have entered into that certain License
Agreement, dated as of the date hereof (the "License Agreement"), and Section 4
of the License Agreement provides for the sale and issuance of the Company's
Series A Preferred Stock to Purchaser.
NOW THEREFORE, the parties hereto, intending to be legally bound, agree
as follows:
1. AUTHORIZATION AND SALE OF SHARES
1.1 AUTHORIZATION. The Company has authorized the sale and issuance to
Purchaser [CONFIDENTIAL TREATMENT REQUESTED] shares of Series A Preferred Stock
(the "Shares").
1.2 SALE. Subject to the terms and conditions hereof, the Company
hereby agrees to issue and sell to Purchaser, and Purchaser hereby agrees to
purchase from the Company, the Shares, for a purchase price of One Dollar
($1.00) per share, and an aggregate purchase price of [CONFIDENTIAL TREATMENT
REQUESTED], which purchase price is deemed to have been paid by Purchaser
pursuant to the terms set forth in Section 4 of the License Agreement.
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1.3 CLOSING. The closing of the sale of purchase of the Shares under
this Agreement shall be held on January 12, 1998, at the offices of Purchaser or
at such other time and place as the Company and Purchaser may agree (the
"Closing").
1.4 DELIVERY. At the Closing and upon full payment of the purchase
price of the Shares, the Company will deliver to Purchaser a certificate
representing the Shares, dated as of the date of the Closing.
2. REPRESENTATIONS TO PURCHASER
Purchaser hereby represents and warrants to the Company as follows:
2.1 Purchaser is acquiring the Shares for Purchaser's own account, not
as nominee or agent, for investment and not with a view to, or for resale in
connection with, any distribution or public offering thereof within the meaning
of the Securities Act of 1933, as amended (the "1933 Act").
2.2 Purchaser understands that (i) the Shares have not been registered
under the 1933 Act by reason of a specific exemption therefrom, that they must
be held by Purchaser indefinitely, and that Purchaser must, therefor, bear the
economic risk of such investment indefinitely, unless a subsequent disposition
thereof is registered under the 1933 Act or is exempt from such registration;
(ii) each certificate representing the Shares will be endorsed with the
following legend:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE
SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED."
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and (iii) the Company will instruct any transfer agent not to register the
transfer of any of the Shares unless the conditions specified in the foregoing
legend are satisfied.
2.3 Purchaser has been furnished with all the information necessary to
make an informed investment decision. Purchaser has been given access to such
information relating to the Company as Purchaser has requested.
2.4 By reason of Purchaser's business or financial experience,
Purchaser has the capacity to make the decision referred to in subsection (c)
above.
2.5 Purchase is an "accredited investor, "as such term is defined in
Rule 501(a) of Regulation D of the 1933 Act.
3. REPRESENTATIONS OF THE COMPANY.
The Company hereby represents and warrants to Purchaser as follows:
3.1 The Shares, when issued in compliance with the provisions of this
Agreement, will be fully paid and non-assessable.
3.2 The Company has all requisite legal and corporate power to execute
and deliver this Agreement, to issue and sell the Shares and to carry out and
perform its obligations under the terms of this Agreement.
3.3 All corporate action on the part of the Company, its directors and
stockholders necessary for the sale and issuance of the Shares and the
performance of the Company's obligations hereunder has been taken or will be
taken prior to the Closing.
3.4 Since October 30, 1997 until January 12, 1998, there has been no
change in the assets, liabilities, financial condition, business prospects or
operations of the Company, other than changes in the ordinary course of
business, none of which individually or in the aggregate
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has had or is expected to have a material adverse effect on such assets,
liabilities, financial condition, business prospects or operations of the
Company.
4. MISCELLANEOUS.
4.1 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Delaware as applied to agreements among Delaware
residents, made and to be performed entirely with the State of Delaware.
4.2 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein the provisions hereof shall inure to the benefit of, and be binding upon,
the successors, assigns, heirs, executors, and administrators of the parties
hereto.
4.3 ENTIRE AGREEMENT. This Agreement and the License Agreement
constitute the full and entire understanding and agreement among the parties
with regard to the subject matter hereof.
4.4. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument.
4.5 FURTHER ACTION. Each party shall, without further consideration,
take such further action and execute and deliver such further documents as may
be reasonably requested by the other party in order to carry out the provisions
and purposes of this Agreement.
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This Agreement is hereby executed as of the date first above written.
DECODE GENETICS, INC.
By:________________________________________
Kari Stefansson, President
BETH ISRAEL DEACONESS MEDICAL CENTER, INC.
By:________________________________________
Print Name:________________________________
Title:_____________________________________
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EXHIBIT C
MUTUAL RELEASE
(ATTACHED)
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MUTUAL RELEASE
IN CONSIDERATION OF THE MUTUAL RELEASES CONTAINED HEREIN AND FOR
OTHER GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of which
consideration is hereby acknowledged, Beth Israel Deaconess Medical Center, Inc.
("B.I."), for itself and for its successors, assigns, subsidiaries, and
affiliates, does hereby remise, release, and forever discharge Dr. Kari
Stefanson ("Dr. Kari Stefanson") and deCode genetics, Inc. ("deCode") and all of
their heirs, successors, assigns, affiliates, subsidiaries, officers, directors,
shareholders, employees, agents and attorneys (collectively, "the deCode
entitities") of and from all debts, demands, causes of action, accounts,
covenants, contracts, agreements, damages, and any and all claims, demands, and
liabilities whatsover of every name and nature, both in LAW and EQUITY, which
against the deCode entities, individually or collectively, B.I. and/or its
successors, assigns, subsidiaries, and affilitates now have or ever had from the
beginning of the world to this date, including without limitation any of the
foregoing that were, could have been, or could be asserted or interposed in
Civil Action No. 97-3046 in the Suffolk Superior Court of Massachusetts, but
excluding any of the foregoing arising out of or with respect to a certain
Settlement Agreement or a certain Amended and Restated Investor Rights Agreement
of even date between B.I. and deCode; and Dr. Stefanson and deCode, for
themselves and their heirs, successors, assigns, subsidiaries, and affiliates do
hereby remise, release, and forever discharge B.I. and all of its successors,
assigns, affiliates, subsidiaries, officers, diretors, shareholders, employees,
agents, and attorneys, (collectively, "the B.I. entities") of and from all
debts, demands, causes of action, accounts, covenants, contracts, agreements,
damages, and any and all claims, demands, and liabilities whatsoever of every
name and
29
<PAGE> 30
nature, both in LAW and EQUITY, which against B.I. entities, individually or
collectively, Dr. Stefanson, deCode, and/or their successors, assigns,
subsidiaries and affiliates now have or ever had from the beginning of the world
to this date, including without limitation any of the foregoing that were, could
have been, or could be asserted or interposed in Civil Action No. 97-3046 in the
Suffolk Superior Court of Massachuesetts, but excluding any of the foregoing
arising out of or with respect to a certain Settlement Agreement or a certain
Amended and Restated Investor Rights Agreement of even date between B.I. and
deCode.
IN WITNESS WHEREOF, the undersigned have executed this releas as
sealed instrument as of January ___, 1998.
BETH ISRAEL DEACONESS MEDICAL CENTER
By:__________________________________
Its:_________________________________
DR. KARI STEFANSSON
_________________________________
DECODE GENETICS, INC.
By:__________________________________
Its:_________________________________
30
<PAGE> 1
Exhibit 10.10
AMENDED AND RESTATED NON-RECOURSE PROMISSORY NOTE
$59,700 Reykjavik, Iceland
March 24, 1999
FOR VALUE RECEIVED, the undersigned hereby unconditionally promises to
pay to the order of deCODE genetics, Inc., a Delaware corporation (the
"Company"), at the Company's principal office or at such other place as the
holder hereof may designate in writing, on 1 January 2001, in lawful money of
the United States of America and in immediately available funds, the total price
of fifty nine thousand and seven hundred Dollars ($59,700), together with
interest, compounded annually, from 29 January, 1998 on the unpaid principal at
the rate of 6% per annum.
This Note may not be prepaid.
The full amount of this Note is secured by a pledge of shares of Common
Stock of the Company, and is subject to all of the terms and provisions of the
Amended and Restated Early Exercise Stock Purchase Agreement and the Amended and
Restated Pledge Agreement, each of even date herewith between the undersigned
and the Company. The Company's recovery against the undersigned for failure to
pay any amount owing hereunder when due shall be limited solely to the shares of
Common Stock or other collateral of the undersigned pledged to the Company in
the Amended and Restated Pledge Agreement. The undersigned shall not be liable
or have any personal liability in any other respect for the payment of any
amount due under this Note.
The undersigned hereby represents and agrees that the amounts due under
this Note are not consumer debt, and are not incurred primarily for personal,
family or household purposes, but are for business and commercial purposes only.
The undersigned hereby waives presentment, protest and notice of
protest, demand for payment, notice of dishonor and all other notices or demands
in connection with the delivery, acceptance, performance, default or endorsement
of this Note.
This Note shall be governed by, and construed, enforced and interpreted
in accordance with, the laws of the State of Delaware, excluding conflict of
laws principles that would cause the application of laws of any other
jurisdiction.
<PAGE> 2
This Amended and Restated Non-Recourse Promissory Note reflects
amendments to the Non-Recourse Promissory Note delivered to the Company by the
undersigned on 29 January, 1998, which amendments were agreed upon between the
Company and the undersigned on March 24, 1999. It supersedes and replaces in all
respects such Non-Recourse Promissory Note.
/s/ Hannes Smarason
------------------------------------
(signature)
Hannes T. Smarason
------------------------------------
(print name)
<PAGE> 1
EXHIBIT 10.11
[NOTE: CERTAIN PORTIONS OF THIS DOCUMENT HAVE BEEN MARKED TO INDICATE THAT
CONFIDENTIALITY HAS BEEN REQUESTED FOR THIS CONFIDENTIAL INFORMATION. THE
CONFIDENTIAL PORTIONS HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.]
RESEARCH COLLABORATION
AND
CROSS-LICENSE AGREEMENT
AMONG
F.HOFFMANN-LA ROCHE LTD
AND
HOFFMANN-LA ROCHE INC.
AND
DECODE GENETICS, INC.
DATED AS OF FEBRUARY 1, 1998
<PAGE> 2
TABLE OF CONTENTS
Page
1. DEFINITIONS ...................................................... 2
2. REPRESENTATIONS AND WARRANTIES ................................... 17
2.1 Representations and Warranties of Both Parties ................... 17
2.2 Representations of deCODE ........................................ 18
3. STEERING COMMITTEE ............................................... 18
3.1 Members .......................................................... 18
3.2 Responsibilities ................................................. 18
3.3 Meetings ......................................................... 20
3.4 Decisions ........................................................ 21
3.5 Minutes .......................................................... 21
3.6 Expenses ......................................................... 22
4. DISCLOSURE OF KNOW-HOW ........................................... 22
4.1 Disclosure of deCODE Know-How .................................... 22
4.2 Disclosure of Roche Know-How ..................................... 22
4.3 Mechanism for Exchange of Know-How ............................... 22
5. COLLABORATIVE RESEARCH PROGRAM ................................... 23
5.1 Exclusivity ...................................................... 23
5.2 Diseases ......................................................... 23
5.3 Research Programs ................................................ 26
5.4 Research Funding ................................................. 27
5.5 Use of Funds ..................................................... 32
5.6 Roche Review Right ............................................... 32
5.7 Conduct .......................................................... 33
5.8 Records .......................................................... 34
5.9 Plasma Samples ................................................... 34
5.10 Cell Lines and Tissue Samples .................................... 35
5.11 Biological Materials Transfer .................................... 35
5.12 Research Term .................................................... 36
5.13 Post-Research Term Developments Proposal ......................... 37
5.14 Validation of Targets ............................................ 39
6. DEVELOPMENT AND COMMERCIALIZATION ................................ 39
6.1 Commercialization Efforts by Roche for Selected Diseases ......... 39
6.2 Notice of Failure by Roche to Use Efforts for a Selected Disease . 40
6.3 Abandonment Of a Selected Disease ................................ 42
6.4 Sale After Registration .......................................... 43
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<PAGE> 3
TABLE OF CONTENTS (continued)
6.5 Commercialization Efforts by deCODE and its Sublicensees .......... 44
6.6 Reports ........................................................... 45
6.7 Ownership of Regulatory Filings ................................... 45
7. GRANT OF LICENSES ................................................. 46
7.1 Grants ............................................................ 46
7.2 Rights of First Negotiation ....................................... 47
8. EQUITY, PAYMENTS AND ROYALTIES .................................... 47
8.1 Equity ............................................................ 47
8.2 Payments .......................................................... 48
8.3 Royalties ......................................................... 51
8.4 Royalty Reductions ................................................ 54
8.5 Obligation to Pay Royalties ....................................... 56
8.6 Roche Supply Obligation ........................................... 56
8.7 Barred Royalties .................................................. 56
9. PAYMENTS AND REPORTS .............................................. 56
9.1 Payment ........................................................... 56
9.2 Mode of Payment ................................................... 57
9.3 Records Retention ................................................. 58
9.4 Audit Request ..................................................... 58
9.5 Taxes ............................................................. 60
9.6 Blocked Currency .................................................. 60
9.7 Interest on Late Payments ......................................... 60
9.8 Mechanism for Adjustment to Royalties ............................. 60
10. OWNERSHIP; PATENTS ................................................ 60
10.1 Ownership ......................................................... 60
10.2 Patent Filing, Maintenance and Prosecution Regarding Inventions ... 61
11. PATENT ENFORCEMENT AND INFRINGEMENT ............................... 64
11.1 Patent Enforcement ................................................ 64
11.2 Notice of Certification ........................................... 66
11.3 Infringement Actions by Third Parties ............................. 66
12. INDEMNIFICATION ................................................... 67
12.1 Research Activities ............................................... 67
12.2 Product Liability ................................................. 67
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<PAGE> 4
TABLE OF CONTENTS (continued)
12.3 Notice ........................................................... 67
13. PUBLICATION; NON-DISCLOSURE ...................................... 68
13.1 Publication ...................................................... 68
13.2 Non-Disclosure and Non-use; Exceptions ........................... 69
13.3 Authorized Disclosure ............................................ 70
13.4 Injunctive Relief ................................................ 70
13.5 Third Parties .................................................... 70
14. TERM; TERMINATION ................................................ 70
14.1 Term; Expiration ................................................. 70
14.2 Effect of Expiration ............................................. 71
14.3 Termination Without Cause ........................................ 71
14.4 Effect of Abandonment ............................................ 72
14.5 Breach by Roche Other than Under Section 6.2 or 6.4 .............. 75
14.6 Breach of Efforts Obligation by Roche ............................ 76
14.7 No Sales After Registration ...................................... 79
14.8 Breach by deCODE ................................................. 79
14.9 Obligations ...................................................... 80
14.10 Termination of Sublicenses ....................................... 80
14.11 Surviving Obligations ............................................ 81
14.12 No Waiver ........................................................ 81
14.13 Dispute .......................................................... 81
15. FORCE MAJEURE .................................................... 81
15.1 Events of Force Majeure .......................................... 81
16. MISCELLANEOUS .................................................... 82
16.1 Relationship of Parties .......................................... 82
16.2 Assignment ....................................................... 82
16.3 Disclaimer of Warranties ......................................... 82
16.4 Further Actions .................................................. 82
16.5 Notice ........................................................... 82
16.6 Use of Name ...................................................... 83
16.7 Public Announcements ............................................. 83
16.8 Waiver ........................................................... 84
16.9 Compliance with Law .............................................. 84
16.10 Severability ..................................................... 84
16.11 Amendment ........................................................ 85
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<PAGE> 5
TABLE OF CONTENTS (continued)
16.12 Governing Law .................................................. 85
16.13 Arbitration .................................................... 85
16.14 Entire Agreement ............................................... 86
16.15 Parties in Interest and Bankruptcy ............................. 86
16.16 Descriptive Headings ........................................... 86
16.17 Counterparts ................................................... 86
16.18 Interpretation ................................................. 87
EXHIBITS
Exhibit A Primary Diseases
Exhibit B Secondary Diseases
Exhibit C English Translation of Informed Consent Form
Exhibit D Initial Steering Committee
Exhibit E Form of Public Announcement
-iv-
<PAGE> 6
RESEARCH COLLABORATION
AND
CROSS-LICENSE AGREEMENT
THIS RESEARCH COLLABORATION AND CROSS-LICENSE AGREEMENT (this
"Agreement") dated as of February 1, 1998 is by and among Hoffmann-La Roche
Inc., a corporation duly organized and existing under the laws of the state of
New Jersey and having offices at 340 Kingsland Street, Nutley, New Jersey 07110
("Roche-Nutley") and F.Hoffmann-La Roche Ltd, a corporation duly organized and
existing under the laws of Switzerland and having offices at Grenzacherstrasse
124, CH-4070 Basel, Switzerland ("Roche-Basel"), and deCODE genetics, Inc., a
corporation duly organized and existing under the laws of the state of Delaware,
for and on behalf of itself and Islensk erfdagreining ehf., a wholly-owned
subsidiary of deCODE genetics, Inc., duly organized and existing under the laws
of Iceland, both having offices at Lynghalsi 1, IS-110 Reykjavik, Iceland
(individually and collectively "deCODE").
PRELIMINARY STATEMENTS
A. deCODE has developed an expertise in conducting research in the
field of human genetics and human genomics, an objective of which is to discover
potential targets and assays for use in drug discovery.
B. deCODE has research facilities, experienced personnel and other
capabilities conducive to conducting such research.
C. Roche-Nutley and Roche Basel (individually and collectively "Roche")
has expertise in drug discovery, and in developing, manufacturing and marketing
diagnostic and pharmaceutical products.
D. Roche and deCODE wish to collaborate to discover genetic variations
that affect the pathogenesis of diseases. The purpose of this collaboration is
to develop new methods to diagnose diseases and to obtain validated targets
useful in drug discovery.
E. The Parties recognize the importance of making the results of
research into the genetics of human diseases publicly available. They also
recognize the interest of participants in genetic studies of human disease to
have the results of such studies made publicly available. deCODE and Roche do,
however, consider it the most important interest of the participants to have the
results of genetic studies turned into methods to prevent, treat and/or diagnose
diseases.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants and agreements of the Parties contained in this Agreement, and
in a Series C
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<PAGE> 7
Preferred Stock and Warrant Purchase Agreement between Roche Finance Ltd and
deCODE ("Equity Agreement"), the Parties agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms will have those meanings
set forth in this Section 1 unless the context dictates otherwise.
1.1 "Abandoned Products" shall mean:
(a) all Therapeutic Products for a Selected Disease for which
Roche terminates this Agreement pursuant to Section 6.3(a)(i) prior to the first
Registration in any Major Country of a Therapeutic Product for such Selected
Disease;
(b) all Therapeutic Products in a given Major Country for a
Selected Disease for which Roche terminates this Agreement in the Major Country
pursuant to Section 6.3(a)(ii) after the first Registration in any Major Country
of a Therapeutic Product for such Selected Disease;
(c) all Diagnostic Products for a Selected Disease for which
Roche terminates this Agreement pursuant to Section 6.3(b)(i) prior to the first
Registration in any Major Country of a Diagnostic Product for such Selected
Disease;
(d) all Diagnostic Products in a given Major Country for a
Selected Disease for which Roche terminates this Agreement in the Major Country
pursuant to Section 6.3(b)(ii) after the first Registration in any Major Country
of a Diagnostic Product for such Selected Disease;
(e) a given Roche Product in a given country for which Roche
terminates this Agreement pursuant to Section 6.4(c) after Registration in such
country of such Roche Product;
(f) all Therapeutic Products for a Selected Disease for which
a Validated Target was obtained as of the effective date of termination of this
Agreement by Roche pursuant to Section 14.3(b)(i); and
(g) all Diagnostic Products for diagnosing a Disease that was
a Selected Disease as of the effective date of termination of this Agreement by
Roche pursuant to Section 14.3(b)(i).
Notwithstanding the foregoing, an Abandoned Product shall not
include a Roche Product which comprises a Roche Compound that, at the effective
date of such termination, is being marketed, prepared for commercial launch or
in clinical
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<PAGE> 8
development or for which Roche, its Affiliate or sublicensee can document a
substantial plan to clinically develop (provided that such Roche Compound is a
Clinical Candidate), for an indication in a Selected Disease if Roche, its
Affiliate or sublicensee, at the effective date of such termination, is then
marketing, preparing for commercial launch, clinically developing, or can
document a substantial plan for clinically developing a given product for the
same indication; provided, that such given product, at the Effective Date, was
not being marketed in any country by Roche, an Affiliate or sublicensee.
1.2 "Affiliate", with respect to any Party, shall mean (a) an
organization at least fifty percent (50%) of which is owned and/or controlled
directly or indirectly, by stock ownership or otherwise, by a Party, (b) an
organization which directly or indirectly owns and/or controls a Party, by stock
ownership or otherwise; or [CONFIDENTIAL TREATMENT REQUESTED].
1.3 "Annual Research Plan" shall mean, for each Research Program, a
reasonably detailed description of (i) the annual goals and scope of such
Research Program, and (ii) the annual activities, including without limitation
scientific work assigned to, and to be conducted by, each Party to discover
Candidate Genes and develop Validated Targets for the Disease that is the
subject of such Research Program.
1.4 "Antisense Agent" shall mean any pharmaceutically active agent
which (a) [CONFIDENTIAL TREATMENT REQUESTED] and (e) is conceived and reduced to
practice as a result of a Research Program by a Party, its Affiliate or its
Collaborator at any time during a period commencing on the Effective Date and
ending [CONFIDENTIAL TREATMENT REQUESTED]
1.5 "Biological Materials" shall mean [CONFIDENTIAL TREATMENT
REQUESTED]
1.6 "Biological Pathway" shall have that meaning as determined by a
Decision, made as necessary for the purposes of this Agreement and consistent
with the criteria set forth in Section 3.2(r).
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<PAGE> 9
1.7 "Candidate Gene" shall mean a Novel Gene which is the subject of a
Candidate Gene
Identification.
1.8 "Candidate Gene Confirmation" shall mean the Decision, as reflected
in a Minutes, that a Candidate Gene is Confirmed.
1.9 "Candidate Gene Identification" shall mean the Decision, as
reflected in a Minutes, that a Novel Gene affects the pathogenesis of a Disease
in Iceland and that the knowledge of such affect is novel.
1.10 "Clinical Candidate" shall mean a Roche Compound or product that
Roche, its Affiliate or sublicensee has subjected to formal toxicology and
absorption, distribution, metabolism and excretion testing in non-human animals.
1.11 "Collaborator" shall mean, (i) for Roche, a Third Party with whom
Roche has agreed jointly to research and/or develop one or more Roche Products
who agrees to be bound by the terms and conditions of this Agreement, and (ii)
for deCODE, a Third Party with whom deCODE has agreed jointly to research and/or
develop one or more deCODE Products who agrees to be bound by the terms and
conditions of this Agreement.
1.12 "Combination Product" shall mean:
-
(a) For a Product other than a Diagnostic Product, a Product
containing both (i) at least one pharmaceutically active agent that is a
Compound and (ii) one or more pharmaceutically active agents that are not
Compounds.
(b) For a Diagnostic Product other than a Plasma Diagnostic
Product, a Product (i) useful in diagnosis, prognosis, prediction or disease
management of a Selected Disease and at least one other disease that is not a
Selected Disease, or (ii) containing (1) a component which causes such
Combination Product to be a Diagnostic Product, and (2) at least one other
component that is able to detect and/or quantify the presence or amount of (A) a
gene other than a Disease Gene, or (B) a product of a gene other than a Disease
Gene, or (C) a product of a gene that is not a member of the Biological Pathway
of which a product of a Disease Gene is a member.
(c) For a Plasma Diagnostic Product, a Product containing a
component which causes such Product to be a Plasma Diagnostic Product and at
least one other component that is able to detect and/or quantify the presence or
amount of (i) a product of a gene other than a Disease Gene, or (ii) a product
of a gene that is not a member of the Biological Pathway of which a product of a
Disease Gene is a member.
1.13 "Compound" shall mean a deCODE Compound or a Roche Compound.
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<PAGE> 10
1.14 "Confidential Information" shall mean any and all Technical
Information that is (i) disclosed by one Party ("Disclosing Party") to the other
Party ("Receiving Party") under this Agreement or the Secrecy Agreement between
the Parties dated September 5, 1997, and which at the time of disclosure is
clearly marked as "Confidential," but not Technical Information which is orally
or visually disclosed to a Receiving Party unless such oral or visual disclosure
is described or summarized in a writing, marked as "Confidential" and provided
to the Receiving Party within forty-five (45) days after such oral or visual
disclosure, or (ii) Program Know-How.
1.15 "Confirm" or "Confirmed" shall mean a Decision that a Candidate
Gene has been confirmed as affecting the pathogenesis of a Disease. In any
event, a demonstration by deCODE [CONFIDENTIAL TREATMENT REQUESTED] shall be the
subject of a Decision that a Candidate Gene has been confirmed as affecting the
pathogenesis of the Selected Disease.
1.16 "Decision" shall mean a decision pursuant to Section 3.4 and shall
be effective as of the date the Minutes reflecting the decision are finalized as
provided in Section 3.5.
1.17 "deCODE Compound" shall mean an Antisense Agent or a Gene Therapy
Agent.
1.18 "deCODE Generalized Technology" shall mean any Technical
Information relating to generalized methods for conducting genomics research and
characterizing the function of genes which deCODE or its Affiliates, prior to or
during the Research Term, owns or controls (provided that deCODE or its
Affiliates has the right to license or otherwise make available such Technical
Information to Roche).
1.19 "deCODE Invention" shall mean an Invention conceived and reduced
to practice solely by one or more Representatives of deCODE.
1.20 "deCODE Know-How" shall mean (i) any Technical Information,
excluding deCODE Generalized Technology, which deCODE or its Affiliates, prior
to or during the Research Term, owns or controls (provided that deCODE or its
Affiliates has the right to license or otherwise make available such Technical
Information to Roche) which relates to the Research Programs or is necessary to
make, have made, use, offer for sale, sell or import Roche Products, or (ii) any
Program Know-How which deCODE or its Affiliates owns or controls, either solely
or jointly with Roche.
1.21 "deCODE Patents" shall mean (i) any Patents, excluding Patents
claiming deCODE Generalized Technology, which deCODE or its Affiliates, prior to
or during the Research Term, owns or controls (provided that deCODE or its
Affiliates has the right
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<PAGE> 11
to license or otherwise make available such Patents to Roche) which relate to
the Research Programs or are necessary to make, have made, use, offer for sale,
sell or import Products, or (ii) any Program Patent which deCODE or its
Affiliates owns or controls, either solely or jointly with Roche.
1.22 "deCODE Patent Valid Claim" shall mean: (i) a claim of any issued
and unexpired deCODE Patent which has not been disclaimed, revoked or held
unpatentable, invalid or unenforceable by final decision of a court or other
governmental agency of competent jurisdiction, which decision is unappealable or
unappealed within the time allowed for appeal, and which claim is otherwise
enforceable, or (ii) a claim of a patent application that is a deCODE Patent
that has not been on file in a given country with the applicable patent office
for more than five (5) years from the earliest date from which the patent
application was filed or claims priority in the given country.
1.23 "deCODE Product" shall mean any (i) pharmaceutical product which
comprises, in whole or as a component thereof, as its pharmaceutically active
agent, a deCODE Compound, or (ii) Abandoned Product, or (iii) Reverted Product.
1.24 "Development Program" shall mean the drug discovery and
development activities performed by a Party in accordance with Section 6 to
discover and/or develop Products.
1.25 "Diagnostic Product" shall mean any product in the form of a
device, compound, kit or service useful for the diagnosis, prognosis, prediction
or disease management of a Selected Disease which device, compound, kit or
service contains a component which is (a) able to detect and/or quantify the
presence or amount of [CONFIDENTIAL TREATMENT REQUESTED] such component being
conceived and reduced to practice as a result of a Research Program by a Party,
its Affiliate or its Collaborator, at any time during a period commencing on the
Effective Date and ending [CONFIDENTIAL TREATMENT REQUESTED]
Diagnostic Product shall also mean any product in the form of
a device, compound, kit or service [CONFIDENTIAL TREATMENT REQUESTED], such
component being conceived and reduced to practice as a result of a Research
Program by a Party, its Affiliates or its Collaborator at any time during a
period commencing on the Effective Date and ending [CONFIDENTIAL TREATMENT
REQUESTED].
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<PAGE> 12
1.26 "Direct Gene Expression Agent Type 1" shall mean any
pharmaceutically active agent which is (a) [CONFIDENTIAL TREATMENT REQUESTED]
and (b) conceived and reduced to practice as a result of a Research Program by a
Party, its Affiliate or its Collaborator at any time during a period commencing
on the Effective Date and ending [CONFIDENTIAL TREATMENT REQUESTED].
1.27 "Direct Gene Expression Agent Type 2" shall mean any
pharmaceutically active agent which agent is (a) [CONFIDENTIAL TREATMENT
REQUESTED] and (b) conceived and reduced to practice as a result of a Research
Program by a Party, its Affiliate or its Collaborator at any time during a
period commencing on the Effective Date and ending [CONFIDENTIAL TREATMENT
REQUESTED]
1.28 "Direct Gene Expression Product Type 1" shall mean any
pharmaceutical product which comprises, in whole or as a component thereof, as
its pharmaceutically active agent, a Direct Gene Expression Agent Type 1.
1.29 "Direct Gene Expression Product Type 2" shall mean any
pharmaceutical product which comprises, in whole or as a component thereof, as
its pharmaceutically active agent, a Direct Gene Expression Agent Type 2.
1.30 "Disease Gene" shall mean a Candidate Gene that is the subject of
a Candidate Gene Confirmation.
1.31 "Diseases" shall mean the Primary Diseases, Secondary Diseases,
and Selected Diseases, collectively.
1.32 "Dollar" or "$" shall mean USA Dollars.
1.33 "Drug Type 1" shall mean any pharmaceutically active agent which
(a) [CONFIDENTIAL TREATMENT REQUESTED] and (b) is conceived and reduced to
practice as a result of a Research Program by a Party, its Affiliate or its
Collaborator at any time during a period commencing on the Effective Date and
ending [CONFIDENTIAL TREATMENT REQUESTED]; provided, however, that a Drug Type 1
is not an Antisense Agent, a Gene Therapy Agent, a Direct Gene Expression Agent
Type 1 or a Direct Expression Agent Type 2.
1.34 "Drug Type 2" shall mean any pharmaceutically active agent which
(a) [CONFIDENTIAL TREATMENT REQUESTED]
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<PAGE> 13
[CONFIDENTIAL TREATMENT REQUESTED], and (b) is conceived and reduced to practice
as a result of a Research Program by a Party, its Affiliate or its Collaborator
at any time during a period commencing on the Effective Date and ending
[CONFIDENTIAL TREATMENT REQUESTED]; provided, however, that a Drug Type 2 is not
an Antisense Agent, a Gene Therapy Agent, a Direct Gene Expression Agent Type 1,
a Direct Expression Agent Type 2 or a Drug Type 1.
1.35 "Drug Product Type 1" shall mean any pharmaceutical product which
comprises, in whole or as a component thereof, as its pharmaceutically active
agent, a Drug Type 1.
1.36 "Drug Product Type 2" shall mean any pharmaceutical product which
comprises, in whole or as a component thereof, as its pharmaceutically active
agent, a Drug Type 2.
1.37 "Effective Date" shall mean February 1, 1998; provided that the
Parties have executed the Equity Agreement on or before February 1, 1998.
Execution of the Equity Agreement shall be a condition precedent to this
Agreement.
1.38 "Europe" shall mean the United Kingdom, France, Germany, Italy,
and Spain.
1.39 "FDA" shall mean the USA Food and Drug Administration, or the
successor thereto, or any corresponding foreign registration or regulatory
authority.
1.40 "First Commercial Sale" shall mean, with respect to a Product in a
country of the Territory, the first commercial sale to a Third Party (other than
a sublicensee) by a Party, its Affiliates or sublicensees, as the case may be,
of the Product in the country, after obtaining Registration for the Product in
the given country or, if for a country where no Registration for the Product is
required, the date of first commercial sale of such Product by the Party, its
Affiliates or sublicensees to a Third Party (other than a sublicensee) in the
country. "First Commercial Sale" shall not mean the sale of a Product for use in
a clinical trial or for compassionate use.
1.41 "FTE" shall mean a full time equivalent scientific person year of
scientific work on or in direct connection with a Research Program, carried out
by a Representative of deCODE. Scientific work on or in direct connection with
the Research Programs includes, but is not limited to, experimental laboratory
work, recording and writing of results, reviewing literature and references,
holding scientific discussions, managing and leading scientific staff and
carrying out project management duties.
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<PAGE> 14
1.42 "FTE Rate" shall mean [CONFIDENTIAL TREATMENT REQUESTED] per FTE.
The FTE Rate shall include all personnel, equipment, reagents and all other
expenses including support staff and overhead for or associated with an FTE.
1.43 "Gene Therapy Agent" shall mean any pharmaceutically active agent
which (a) consists of nucleic acid or a functional analog, derivative or homolog
thereof [CONFIDENTIAL TREATMENT REQUESTED], and (b) upon delivery by any means,
compensates, either completely or partially, for the genetic defect that
underlies the Selected Disease the pathogenesis of which is affected by the
Disease Gene, and (c) is conceived and reduced to practice as a result a
Research Program by a Party, its Affiliate or its Collaborator at any time
during a period commencing on the Effective Date and ending [CONFIDENTIAL
TREATMENT REQUESTED].
1.44 "IND" shall mean an Investigational New Drug application, as
defined in the Federal Food, Drug and Cosmetic Act and the regulations
promulgated thereunder, conducted or sponsored by Roche, its Affiliates or
sublicensees, for initiating in the USA human clinical testing for prevention or
treatment of a Selected Disease using a Roche Product, or any corresponding
foreign application, registration or certification in [CONFIDENTIAL TREATMENT
REQUESTED].
1.45 "IND Filing" shall mean the filing of an IND based upon which
human clinical testing commences in [CONFIDENTIAL TREATMENT REQUESTED].
1.46 "Invention" shall mean Program Know-How which is conceived or
reduced to practice by one or more Representatives of a Party or jointly by
Representatives of the Parties as a result of a Research Program.
1.47 "Joint Invention" shall mean an Invention conceived or reduced to
practice jointly by Representatives of the Parties.
1.48 "Major Country" shall mean [CONFIDENTIAL TREATMENT REQUESTED].
1.49 "Major Research Program" shall mean a research program directed to
discovering genetic variations that affect the pathogenesis of a Primary Disease
and obtaining validated targets useful in drug discovery for the Primary
Disease.
1.50 "Minor Research Program" shall mean a research program directed to
discovering genetic variations that affect the pathogenesis of a Secondary
Disease and obtaining validated targets useful in drug discovery for the
Secondary Disease.
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1.51 "Minutes" shall mean the final minutes of a Steering Committee
meeting, as finalized under Section 3.5.
1.52 "NDA" shall mean a New Drug Application or a Product License
Application, as the case may be, for a Roche Product, for prevention or
treatment of a Selected Disease, filed with the FDA in the USA or any
corresponding foreign application, registration or certification in
[CONFIDENTIAL TREATMENT REQUESTED].
1.53 "NDA Filing" shall mean, for a given NDA for a given Roche
Product, a communication from the FDA that the NDA for the given product is
accepted for review by the FDA in [CONFIDENTIAL TREATMENT REQUESTED], as the
case may be.
1.54 "Net Sales" and the related term "Adjusted Gross Sales" shall have
the following meanings: -
(a) As to Roche:
(i) "Adjusted Gross Sales" shall mean, with respect to any Roche
Product, the amount of gross sales invoiced by Roche, its Affiliates or
sublicensees to Third Parties for such Roche Product, commencing with the First
Commercial Sale of such Roche Product, less deductions for the following items
which are included in the invoiced amounts and do not exceed reasonable and
customary amounts in the country in which such sale occurred: (1) returns
(including withdrawals and recalls), (2) rebates (price reductions including
Medicaid and similar types of rebates, e.g., chargebacks), (3) volume (quantity)
discounts granted at the time of invoicing, (4) sales taxes and other taxes
directly linked and included in the gross sales amount, as computed in the
Roche's Sales Statistics for the countries concerned. Adjusted Gross Sales shall
also include the amount or fair market value of all other consideration received
by Roche, its Affiliates or sublicensees with respect to Roche Products, whether
such consideration is in cash, payment in kind, exchange or another form.
(ii) "Net Sales" shall mean the amount calculated by subtracting from
Adjusted Gross Sales a lump sum deduction of [CONFIDENTIAL TREATMENT REQUESTED]
of Adjusted Gross Sales for those sales related deductions which are not
accounted for on a product-by-product basis (e.g. outward freights, postage,
transportation insurance, packing materials for dispatch of goods, custom
duties, discounts granted later than at the time of invoicing, cash discounts
and other direct expenses).
(b) As to deCODE:
(i) "Adjusted Gross Sales" shall mean, with respect to any deCODE
Product, the amount of gross sales invoiced by deCODE or its Affiliates to
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Third Parties for such deCODE Product, commencing with the First Commercial Sale
of such deCODE Product, less deductions for the following items which are
included in the invoiced amounts and do not exceed reasonable and customary
amounts in the country in which such sale occurred: (1) returns (including
withdrawals and recalls), (2) rebates (price reductions including Medicaid and
similar types of rebates, e.g., chargebacks), (3) volume (quantity) discounts
granted at the time of invoicing, and (4) sales taxes and other taxes directly
linked and included in the gross sales amount. Net Sales shall also include the
amount or fair market value of all other consideration received by deCODE or its
Affiliates with respect to deCODE Products, whether such consideration is in
cash, payment in kind, exchange or another form.
(ii) "Net Sales" shall mean the amount calculated by subtracting from
Adjusted Gross Sales a lump sum deduction of [CONFIDENTIAL TREATMENT REQUESTED]
for those sales related deductions which are not accounted for on a
product-by-product basis (e.g. outward freights, postage, transportation
insurance, packing materials for dispatch of goods, custom duties, discounts
granted later than at the time of invoicing, cash discounts and other direct
expenses).
(c) In the event the price of a Diagnostic Product (including a
Diagnostic Product that becomes an Abandoned Product or a Reverted Product)
includes an amount to cover instrument system costs or amortisation recovery
under an Instrument System Rental Plan or similar plan, the Net Sales for such
Diagnostic Product shall be reduced by [CONFIDENTIAL TREATMENT REQUESTED]of Net
Sales.
(d) For a Combination Product that is not a Diagnostic Product, the
Parties shall meet approximately one (1) year prior to commercial launch of such
Combination Product to negotiate in good faith and agree to an appropriate
adjustment to Net Sales to reflect the relative significance of each Compound
contained in the Combination Product. If, after good faith negotiations (not to
exceed ninety (90) days, which can be extended by mutual agreement), the Parties
can not agree to an appropriate adjustment, Net Sales shall be equal to Net
Sales of the Combination Product multiplied by a fraction, the numerator of
which is the reasonable fair market value of the Compound(s) and the denominator
of which is the reasonable fair market value of all pharmaceutically active
agents contained in the Combination Product.
(e) For a Combination Product that is a Diagnostic Product, the Parties
shall meet approximately three (3) months prior to commercial launch of such
Combination Product to negotiate in good faith and agree to an appropriate
adjustment to Net Sales to reflect the relative significance of each component
of the Combination Product that causes such Combination Product to be a
Diagnostic Product. If, after good faith negotiations (not to exceed thirty (30)
days, which can be extended by mutual agreement), the Parties can not agree to
an appropriate adjustment, Net Sales shall be equal to Net Sales of the
Combination Product multiplied by a fraction, the numerator of which is the
reasonable fair market value of the component(s) of said Product which
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cause said Product to be a Diagnostic Product, and the denominator of which is
the reasonable fair market value of the Combination Product.
(f) With respect to Products sold in combination with other products by
Roche, its Affiliates or sublicensees with respect to Roche Products, and by
deCODE or its Affiliates, with respect to deCODE Products, in a capitation or
bundled transaction (each, a "Bundled Transaction"), the Parties agree to
negotiate in good faith and agree on a reasonable mechanism for fairly
calculating Net Sales resulting from such Bundled Transaction to reflect the
relative value of the Product to the other products included in the Bundles
Transaction.
(g) For a Diagnostic Product that is a kit for nucleic acid
amplification, the Parties shall meet approximately three (3) months prior to
commercial launch of such Diagnostic Product to negotiate in good faith and
agree to an appropriate adjustment to Net Sales to reflect the relative
significance of each component (e.g., sample preparation, amplification and
detection) of the Diagnostic Product.
1.55 "Novel Gene" shall mean a gene [CONFIDENTIAL TREATMENT REQUESTED]
1.56 "Participants" shall mean those persons who enroll to participate
in harvesting programs or other studies being conducted as part of a Research
Program.
1.57 "Party" shall mean deCODE or Roche and, when used in the plural,
shall mean deCODE and Roche.
1.58 "Patents" shall mean all patents and patent applications
throughout the Territory, and any extensions, renewals, continuations,
continuations-in-part, divisions, patents-of-addition, reissues, reexaminations,
registrations, patents of confirmation, patents of importation, and
Supplementary Protection Certificates and foreign counterparts thereof.
1.59 "Plasma Diagnostic Product" shall mean a Diagnostic Product
derived from Biological Materials.
1.60 "Primary Diseases" shall mean the Diseases listed in Exhibit A, as
it may be modified from time to time.
1.61 "Product" shall mean Roche Products and deCODE Products,
collectively.
1.62 "Program Know-How" shall mean any and all Technical Information,
including any Invention, that is developed or conceived and reduced to practice
solely by a Party, or jointly by both Parties, as a result of a Research
Program; provided,
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however, that any Technical Information that is developed or conceived and
reduced to practice as a result of a Research Program solely by one or more
Representatives of deCODE relating to generalized methods for conducting
genomics research and characterizing the function of genes shall be considered
deCODE Generalized Technology but not Program Know-How.
1.63 "Program Patents" shall mean any and all Patents claiming an
Invention. -
1.64 "Program Patent Valid Claim" shall mean: (i) a claim of any issued
and unexpired Program Patent which has not been disclaimed, revoked or held
unpatentable, invalid or unenforceable by final decision of a court or other
governmental agency of competent jurisdiction, which decision is unappealable or
unappealed within the time allowed for appeal, and which claim is otherwise
enforceable, or (ii) a claim of a patent application that is a Program Patent
that has not been on file in a given country with the applicable patent office
for more than [CONFIDENTIAL TREATMENT REQUESTED] from the earliest date from
which the patent application was filed or claims priority in the given country.
1.65 "Registration" shall mean, for a given country and a given Product
for diagnosing, preventing or treating a Selected Disease, an official approval,
resulting from an application for such official approval in the given country
filed by Roche, its Affiliate or sublicensee, which is required by the
government or health authority of the given country for the Product to be
offered for sale in such country, including authorizations as may be required
for the production, importation, pricing, reimbursement and sale of such Product
in such country, and for subsequent regulatory filings for line extensions
and/or additional indications of such Product.
1.66 "Representative of a Party" shall mean an employee of a Party or
any other person who is contractually required to assign or grant exclusive
rights in and to Program Know-How to a Party.
1.67 "Research Programs" shall mean the Major Research Programs and
Minor Research Programs, collectively. A Research Program does not include steps
involved in drug discovery and development of Products, including without
limitation Development Programs.
1.68 "Research Term" shall mean, subject to Sections 5.12 and 5.13, a
five (5) year period commencing on the Effective Date and ending on February 1,
2003, unless earlier terminated as otherwise provided in this Agreement.
1.69 "Reverted Products" shall mean:
(a) all Therapeutic Products for a Selected Disease for which deCODE
terminates this Agreement pursuant to Section 14.6(a)(i) prior to the first
Registration in any Major Country of a Therapeutic Product for such Selected
Disease;
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(b) all Therapeutic Products in a given Major Country for a Selected
Disease for which deCODE terminates this Agreement in the Major Country pursuant
to Section 14.6(a)(ii) after the first Registration in any Major Country of a
Therapeutic Product for such Selected Disease;
(c) all Diagnostic Products for a Selected Disease for which deCODE
terminates this Agreement pursuant to Section 14.6(b)(i) prior to the first
Registration in any Major Country of a Diagnostic Product for such Selected
Disease;
(d) all Diagnostic Products in a given Major Country for a Selected
Disease for which deCODE terminates this Agreement in the Major Country pursuant
to Section 14.6(b)(ii) after the first Registration in any Major Country of a
Diagnostic Product for such Selected Disease;
(e) a given Roche Product in a given country for which deCODE
terminates this Agreement pursuant to Section 14.7 after Registration in such
country of such Roche Product;
(f) all Therapeutic Products for a Selected Disease for which a
Validated Target was obtained as of the effective date of termination of this
Agreement by deCODE pursuant to Section 14.5(a)(iii)(2); and
(g) all Diagnostic Products for diagnosing a Disease that was a
Selected Disease as of the effective date of termination of this Agreement by
deCODE pursuant to Section 14.5(a)(iii)(2).
Notwithstanding the foregoing, a Reverted Product shall not include a
Roche Product which comprises a Roche Compound that, at the effective date of
such termination, is being marketed, prepared for commercial launch or in
clinical development or for which Roche, its Affiliate or sublicensee can
document a substantial plan to clinically develop (provided that such Roche
Compound is a Clinical Candidate), for an indication in a Selected Disease if
Roche, its Affiliate or sublicensee, at the effective date of such termination,
is then marketing, preparing for commercial launch, clinically developing, or
can document a substantial plan for clinically developing a given product for
the same indication; provided, that such given product, at the Effective Date,
was not being marketed in any country by Roche, an Affiliate or sublicensee.
1.70 "Roche Compound" shall mean a Direct Gene Expression Agent Type 1,
a Direct Gene Expression Agent Type 2, a Drug Type 1, or a Drug Type 2.
1.71 "Roche Invention" shall mean an Invention conceived and reduced to
practice solely by one or more Representatives of Roche.
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1.72 "Roche Know-How" shall mean (i) any Technical Information which Roche or
its Affiliates, prior to or during the Research Term, owns or controls (provided
that Roche or its Affiliates has the right to license or otherwise make
available such Technical Information to deCODE) which relates to the Research
Programs or is necessary to make, have made, use, offer for sale, sell or import
deCODE Products (excluding [CONFIDENTIAL TREATMENT REQUESTED]), or (ii) any
Program Know-How which Roche or its Affiliates owns or controls either solely or
jointly with deCODE.
1.73 "Roche Patents" shall mean (i) any Patents which Roche or its Affiliates,
prior to or during the Research Term, owns or controls (provided that Roche or
its Affiliates has the right to license or otherwise make available such Patents
to deCODE) which relate to the Research Programs or are necessary to make, have
made, use, offer for sale, sell or import Products (excluding [CONFIDENTIAL
TREATMENT REQUESTED] or (ii) any Program Patent which Roche or its Affiliates
owns or controls, either solely or jointly with deCODE.
1.74 "Roche Patent Valid Claim" shall mean: (i) a claim of any issued and
unexpired Roche Patent which has not been disclaimed, revoked or held
unpatentable, invalid or unenforceable by final decision of a court or other
governmental agency of competent jurisdiction, which decision is unappealable or
unappealed within the time allowed for appeal, and which claim is otherwise
enforceable, or (ii) a claim of a patent application that is a Roche Patent that
has not been on file in a given country with the applicable patent office for
more than [CONFIDENTIAL TREATMENT REQUESTED] from the earliest date from which
the patent application was filed or claims priority in the given country
1.75 "Roche Product" shall mean Diagnostic Products and Therapeutic Products,
collectively.
1.76 "Royalty Sublicensing Income" shall mean that portion of Sublicensing
Income directly attributable to royalties received by deCODE from its Third
Party licensees with respect to such Third Party licensees' sales of a given
deCODE Product in a given country.
1.77 "Royalty Term" shall mean:
(a) As to Roche, for a given Roche Product in a given country in the
Territory, a period of time commencing on the First Commercial Sale of the given
Roche Product in the given country and ending on the later of: (i) [CONFIDENTIAL
TREATMENT REQUESTED] from the date of the First Commercial Sale of such Roche
Product in such country, or (ii) the last date on which the making, having made,
using, offering for sale, selling or importing of the
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Roche Product in the given country by Roche, its Affiliates or sublicensees is
claimed by a deCODE Patent Valid Claim or a Program Patent Valid Claim.
(b) As to deCODE, for a given deCODE Product in a given country in the
Territory, a period of time commencing (i) with respect to Net Sales, on the
First Commercial Sale of the given deCODE Product in the given country, and (ii)
with respect to Sublicensing Income, on the Effective Date, and ending on the
later of: (1) [CONFIDENTIAL TREATMENT REQUESTED] from the date of the First
Commercial Sale of such deCODE Product in such country, or (2) the last date on
which the making, having made, using, offering for sale, selling or importing of
the deCODE Product in the given country by deCODE, its Affiliates or
sublicensees is claimed by a Roche Patent Valid Claim or a Program Patent Valid
Claim.
(c) If, in a country in the Territory, the above definition of Royalty
Term is unenforceable, then for such country, Royalty Term shall mean the
longest term as may be enforceable under the applicable laws of such country,
provided that in no event shall the Royalty Term in such country exceed the
maximum term above.
1.78 "Secondary Diseases" shall mean the Diseases listed in Exhibit B, as it may
be modified from time to time.
1.79 "Selected Disease" shall mean a Primary Disease or a Secondary Disease for
which a Candidate Gene is the subject of a Candidate Gene Confirmation.
1.80 "Steering Committee" shall mean the body organized and acting pursuant to
Section 3.
1.81 "Sublicensing Income" shall mean all monetary consideration, including, for
example, up-front payments, milestones, and royalties, received by deCODE from
its Third Party licensees with respect to a given deCODE Product, but excluding
any amounts received from Third Party licensees to reimburse deCODE for research
and development expenses of deCODE which deCODE can reasonably document.
1.82 "Technical Information" shall mean information, data or know-how (whether
patentable or not patentable), including without limitation, ideas, concepts,
formulas, manufacture, methods, procedures, designs, compositions of matter,
plans, applications, specifications, drawings, techniques, materials (including
without limitation biological materials such as Biological Materials, RNA, DNA,
DNA fragments, organisms, proteins, polypeptides, plasmids, vectors and the
like) compounds, products, processes, research, technical data, apparatus,
equipment, samples, inventions, discoveries, and the like, as well as
improvements related thereto.
1.83 "Territory" shall mean the entire world
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1.84 "Therapeutic Products" shall mean any pharmaceutical product which
comprises, in whole or as a component thereof, as its pharmaceutically active
agent, a Roche Compound.
1.85 "Third Party" shall mean any party other than a Party, or an Affiliate of a
Party.
1.86 "USA" shall mean the United States of America. -
1.87 "Validated Target" shall mean a biological molecule which is the subject of
a Decision that such biological molecule is [CONFIDENTIAL TREATMENT REQUESTED].
2. REPRESENTATIONS AND WARRANTIES.
2.1 Representations and Warranties of Both Parties. Each Party represents and
warrants to the other Party that, as of the Effective Date:
(a) such Party is duly organized and validly existing under the laws of
the state or country of its incorporation and has full corporate power and
authority to enter into this Agreement and to carry out the provisions hereof;
and
(b) such Party has taken all corporate action necessary to authorize
the execution and delivery of this Agreement and the fulfilling of its
obligations under this Agreement; and
(c) such Party is not aware of any impediment which would inhibit its
ability to fulfill the terms and conditions imposed on it by this Agreement; and
(d) such Party has disclosed all material information in its possession
or control requested by the other Party relating to the subject matter of this
Agreement and other material information in its possession or control, which, in
its reasonable opinion, would be material to the other Party entering into this
Agreement, and to its knowledge such information does not contain any untrue
statement of material fact or omit to state a material fact; and
(e) such Party, without having conducted a formal investigation, is not
aware of any patent rights or other proprietary rights of any Third Party which
might be infringed by either Party carrying out its obligations under this
Agreement; and
(f) such Party has the right to grant the other Party the rights and
licenses hereby granted under this Agreement.
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2.2 Representations of deCODE. deCODE represents and warrants to Roche that:
(a) As of the Effective Date, there are no patents or patent
applications that deCODE owns or controls in the Territory which could preclude
Roche from carrying out its obligations under this Agreement and which deCODE
does not have the right to license or otherwise make available to Roche; and
(b) all Participants have signed, or will have signed before becoming a
Participant, an informed consent form in accordance with the English language
translation of an informed consent form in Exhibit C.
3. STEERING COMMITTEE.
3.1 Members. The Parties shall establish a Steering Committee, which shall
consist of six (6) members, three (3) members from each Party. Two (2) members
from each Party must be both (i) a member of senior management and (ii) a
scientist. The initial members of the Steering Committee are set forth on
Exhibit D. Members of the Steering Committee may be represented at any meeting
by a designee appointed by such member for such meeting. The initial chairperson
shall be selected by deCODE and is designated on Exhibit D. The initial
chairperson shall serve as chairperson for the first contract year. Thereafter,
the chairperson of the Steering Committee for a given contract year shall be
selected within thirty (30) days of the beginning of such given contract year on
an alternating basis between the Parties, and shall serve as chairperson during
such given contract year. The initial secretary shall be selected by Roche and
is designated on Exhibit D. The initial secretary shall serve as secretary for
the first contract year. Thereafter, the secretary of the Steering Committee for
a given contract year shall be selected within thirty (30) days of the beginning
of such given contract year by the Party not designating the chairperson for the
same given contract year, and shall serve as secretary during such given
contract year. Each Party shall be free to change its members, on prior written
notice to the other Party. Each Party may, in its discretion, invite
non-Committee Representatives of such Party, provided that each Party approves
the other Party's invitee(s) in advance.
3.2 Responsibilities. The Steering Committee shall:
(a) oversee all Research Programs;
(b) evaluate and determine scientific criteria to be implemented under
all Research Programs;
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(c) establish a mechanism by which the Parties will exchange deCODE
Know-How and Roche Know-How, including Program Know-How, and oversee the
exchange of such Know-How;
(d) commencing on the Effective Date, discuss and prepare an Annual
Research Plan for each Research Program for the first year of the Research Term
and, prior to thirty (30) days after the Effective Date, finalize an Annual
Research Plan for each Research Program for the first year of the Research Term
and have each such Annual Research Plan signed and dated by a representative of
each Party on the Steering Committee;
(e) not less than three (3) months prior to each anniversary of the
Effective Date during the Research Term, discuss and prepare an Annual Research
Plan for each ongoing Research Program, and, prior to each anniversary of the
Effective Date during the Research Term, finalize an Annual Research Plan for
each Research Program for the next year of the Research Term and have each such
Annual Research Plan signed and dated by a representative of each Party on the
Steering Committee;
(f) decide upon approval of proposed amendments or modifications to any
Annual Research Plan;
(g) evaluate data from all Research Programs;
(h) coordinate the activities of the Parties, and review and evaluate
progress, under the Research Programs, provided that the Steering Committee
shall not have authority to make any determination that either Party is in
breach of its obligations under the Research Programs;
(i) discuss, prepare and finalize an Annual Research Plan for a
Research Program for any new Primary Disease or new Secondary Disease;
(j) decide about: (1) whether any Novel Gene is a Candidate Gene, and
(2) whether any Candidate Gene is Confirmed;
(k) monitor qualifications for Representatives of deCODE who will
perform deCODE's research obligations under the Research Programs contemplated
under this Agreement;
(l) decide if there is a scientific need for plasma samples
[CONFIDENTIAL TREATMENT REQUESTED] each Research Program;
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(m) from time to time, if necessary, adjust the fee for plasma samples
under Section 5.9 to reflect the actual costs and expenses incurred by deCODE in
connection with providing such plasma samples to Roche;
(n) decide if there may be a scientific need for cell lines and/or
tissue samples for each Disease and, if so, determine from time to time the
number of cell lines and/or tissue samples reasonably required for each Disease,
which shall not be more than from [CONFIDENTIAL TREATMENT REQUESTED]
Participants with a given Disease and [CONFIDENTIAL TREATMENT REQUESTED]
Participants acting as control subjects with respect to the given Disease;
(o) if cell lines and/or tissue samples are determined to be required
from a Research Program by the Steering Committee, [CONFIDENTIAL TREATMENT
REQUESTED];
(p) decide when a Disease has been mapped to a chromosomal location and
whether a mapping reveals that what was considered one (1) Disease by the
Parties as of the Effective Date is, instead, more than one (1) disease;
(q) decide whether any Validated Targets have been obtained;
(r) as and when necessary for purposes of this Agreement, decide
whether: [CONFIDENTIAL TREATMENT REQUESTED]; and
(s) perform any other activities related to the Research Programs as
the Parties may request from time to time, other than deciding that a Party is
in breach of an obligation under this Agreement.
3.3 Meetings. During the Research Term and until one (1) year after the
end of the Research Term the Steering Committee shall meet at least twice every
contract year, and more frequently as the Parties deem appropriate, on such
dates, places and at such times as the Parties shall agree. Thereafter, during
the term of this Agreement, the Steering Committee shall meet on an as needed
basis on such dates, places and at such times as the Parties shall agree. The
meetings shall alternate between the offices of the Parties unless the Parties
otherwise agree. The chairperson shall, if practicable, send notice of all
meetings to all members of the Steering Committee no less than twenty (20) days
before the date of the meeting. The Steering Committee may also convene
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or be polled or consulted from time to time by means of telecommunications,
video conferences or correspondence, as deemed necessary or appropriate;
provided, however, that the Steering Committee meet in person at least twice
every contract year during the Research Term and until one (1) year after the
end of the Research Term.
3.4 Decisions.
(a) The Steering Committee may decide on any subject matter that is
subject to the Steering Committee's decision-making authority. All decisions of
the Steering Committee shall be made by consensus of the members (or their
designees) present at any meeting. Such consensus shall require that at least
two (2) members of each Party are present at such meeting.
(b) In the event that consensus cannot be reached by the Steering
Committee after good faith discussions with respect to a matter that is subject
to its decision-making authority, then (except as set forth in Section
8.2(a)(i)), the matter shall be referred for further review and resolution to
the President of Global Pharma Research at Roche, or such other similar position
designated by Roche from time to time, and the Chief Executive Officer at
deCODE, or such other similar position designated by deCODE from time to time
(such officers, collectively, the "Executive Officers"). The Executive Officers
of each Party shall use reasonable efforts to resolve the matter within thirty
(30) days after the matter is referred to them. If the Executive Officers cannot
resolve the matter within thirty (30) days, then: (i) if the matter pertains to
relations with Participants, or research sites, consultants, investigators or
vendors in Iceland, or any governmental authority in Iceland, the matter shall
be decided by the Executive Officer of deCODE in good faith, giving appropriate
consideration to the reasonable business and scientific concerns of Roche; and
(ii) if the matter pertains to any other subject, the matter shall be decided by
the Executive Officer of Roche in good faith, giving appropriate consideration
to the reasonable business and scientific concerns of deCODE.
(c) No decision, either by the Steering Committee or an Executive
Officer, on any matter that is subject to the Steering Committee's
decision-making authority, may have the effect of materially increasing the
economic burdens or the research responsibilities of a Party without the prior
written approval of such Party.
3.5 Minutes. Promptly after each Steering Committee meeting, the
secretary of the Steering Committee shall prepare and distribute to the
chairperson draft minutes of the meeting, which shall provide a description in
reasonable detail of the discussions had at the meeting and a list of any
actions, decisions or determinations approved by the Steering Committee and a
list of any issues to be resolved by the Executive Officers. The chairperson may
then comment on the draft minutes. The secretary shall discuss with the
chairperson any comments of the chairperson and circulate a final draft of the
minutes to all members of the Steering Committee within fifteen (15) days of the
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meeting. The members of the Steering Committee shall then have fifteen (15) days
after circulation of the final draft minutes to provide their comments thereon
to the secretary of the Steering Committee. If a member of the Steering
Committee does not comment to the secretary on the draft minutes within the
fifteen (15) day period after circulation, said member is deemed to have agreed
to the final draft minutes. Upon the expiration of the fifteen (15) day period
after circulation, the secretary and the chairperson of the Steering Committee
shall have an additional fifteen (15) days to discuss the other members'
comments and finalize the minutes. The secretary and chairperson shall each sign
and date the final minutes. The signature of the chairperson and the secretary
on the final minutes shall indicate each Party's assent to the minutes. With the
sole exception of specific items of the meeting minutes to which the chairperson
and the secretary cannot agree and which are escalated as provided below, final
minutes of all Steering Committee meetings shall be finalized no later than
forty five (45) days after the meeting to which the minutes pertain. If at any
time during the preparation and finalization of the Steering Committee meeting
minutes the secretary and the chairperson of the committee do not agree on any
issue with respect to the minutes, this issue shall be resolved by the
escalation process provided in Section 3.4(b). The decision resulting from the
escalation process shall be recorded by the secretary of the Steering Committee
in an amended finalized minutes for said meeting. All other issues in the
minutes which are not subject to such escalation shall be finalized within the
above-mention forty-five (45) days.
3.6 Expenses. Each Party shall be responsible for all travel and
related costs and expenses for its members and non-Committee invitees to attend
meetings of, and otherwise participate on, the Steering Committee.
4. DISCLOSURE OF KNOW-HOW
4.1 Disclosure of deCODE Know-How. Promptly following the Effective
Date, deCODE shall disclose to Roche all existing deCODE Know-How and
thereafter. deCODE shall disclose to Roche on an ongoing basis during the
Research Term all additional deCODE Know-How .
4.2 Disclosure of Roche Know-How. Promptly following the Effective
Date, Roche shall disclose to deCODE such Roche Know-How and thereafter Roche
shall disclose to deCODE on an ongoing basis during the Research Term all
additional Roche Know-How.
4.3 Mechanism for Exchange of Know-How. The Steering Committee shall
establish a mechanism by which the Parties will exchange deCODE Know-How and
Roche Know-How, including Program Know-How, in accordance with this Agreement,
and oversee the exchange of such Know-How.
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5. COLLABORATIVE RESEARCH PROGRAM.
5.1 Exclusivity. Nothing in this Agreement shall prohibit deCODE or its
Affiliates from using Program Know-How relating to Disease Genes, Validated
Targets or members of a Biological Pathway of which a Disease Gene is a member
for: (i) carrying out research relating to generalized methods for conducting
genomic research and relating to generalized methods for characterizing the
function of genes, or (ii) making, having made, using, offering for sale,
selling or importing deCODE Products. However, other than as provided in the
preceding sentence, for a Selected Disease, during the period commencing on the
Effective Date and ending [CONFIDENTIAL TREATMENT REQUESTED], neither deCODE nor
its Affiliates shall use, for the benefit of a Third Party, without the prior
written consent of Roche, Program Know-How relating to [CONFIDENTIAL TREATMENT
REQUESTED]. In not event shall Roche unreasonably withhold such consent.
5.2 Diseases.
(a) Primary Diseases. The Primary Diseases are set forth in
Exhibit A, as it may be amended from time to time. Each Primary Disease shall be
the subject of an independent and separate Major Research Program. For a period
commencing on the Effective Date and ending [CONFIDENTIAL TREATMENT REQUESTED],
Roche shall, at all times, fund [CONFIDENTIAL TREATMENT REQUESTED] to be
allocated among the Primary Diseases as set forth in this Agreement or as the
Parties may otherwise agree.
(b) Secondary Diseases. The Secondary Diseases are set forth in
Exhibit B, as it may be amended from time to time. Each Secondary Disease shall
be the subject of an independent and separate Minor Research Program. For a
period commencing on the Effective Date and ending [CONFIDENTIAL TREATMENT
REQUESTED], Roche shall, at all times, fund [CONFIDENTIAL TREATMENT REQUESTED]
to be allocated among the Secondary Diseases as set forth in this Agreement or
as the Parties may otherwise agree.
(c) Making a Disease a Selected Disease. -
(i) For a given Primary or Secondary Disease, during the
Research Term, should a Party in good faith believe that it has identified a
Novel Gene with respect to a Disease, such Party shall promptly provide written
notice to the Steering Committee identifying the Novel Gene, the Disease and the
basis for such Party's belief. The Steering Committee shall, as promptly as
practicable after receipt of such notification, meet to discuss whether such
Novel Gene is, in the opinion of the
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Steering Committee, a Candidate Gene with respect to such Disease. The Steering
Committee shall record its Decision in the Minutes of such meeting pursuant to
Section 3.5. If the Steering Committee decides that the Novel Gene is a
Candidate Gene with respect to such Disease, the Minutes shall identify the
Disease and a detailed description of the Candidate Gene and the basis for the
Steering Committee Decision, and such Minutes shall be considered a Candidate
Gene Identification and such Novel Gene shall be considered a Candidate Gene. If
the Steering Committee determines that such Novel Gene is not a Candidate Gene
with respect to such Disease, the Minutes shall identify the Disease and a
detailed description of the Novel Gene and the basis for the Steering Committee
Decision, and such Minutes shall not be considered a Candidate Gene
Identification and such Novel Gene shall not be considered a Candidate Gene.
(ii) For a given Candidate Gene, should a Party in good faith
believe that such Candidate Gene has been or should be considered confirmed as
affecting the pathogenesis of a Disease, such Party shall promptly provide
written notice to the Steering Committee identifying such Candidate Gene, the
Disease and the basis for such Party's belief. The Steering Committee shall, as
promptly as practicable after receipt of such notification, meet to discuss
whether such Candidate Gene is in the opinion of the Steering Committee,
Confirmed. The Steering Committee shall record its Decision in the Minutes of
such meeting pursuant to Section 3.5. If the Steering Committee makes a Decision
that such Candidate Gene is Confirmed, the Minutes shall identify the Disease
and a detailed description of the Candidate Gene and the basis for the Steering
Committee Decision, and such Minutes shall be considered a Candidate Gene
Confirmation, and such Candidate Gene shall be considered a Disease Gene, and
the Disease shall be considered a Selected Disease. If the Steering Committee
makes a Decision that such Candidate Gene is not Confirmed, the Minutes shall
identify the Disease and a detailed description of the Candidate Gene and the
basis for the Steering Committee Decision, and such Minutes shall not be
considered a Candidate Gene Confirmation, and the Candidate Gene shall not be
considered a Disease Gene.
(d) Abandonment for a Disease. Subject to the terms and conditions
of this Agreement, commencing [CONFIDENTIAL TREATMENT REQUESTED] after the
Effective Date, at any time during the Research Term, Roche may, for any reason,
terminate this Agreement with respect to all Roche Products for a Disease other
than a Selected Disease by giving [CONFIDENTIAL TREATMENT REQUESTED] prior
written notice to deCODE. In such event, the effective date of termination shall
be the date [CONFIDENTIAL TREATMENT REQUESTED] after Roche provides such written
notice to deCODE. Following a termination of this Agreement by Roche with
respect to all Roche Products for a Disease other than a Selected Disease
pursuant to this Section 5.2(d), all licenses granted by deCODE to Roche under
Section 7 and any other applicable Section of this Agreement shall terminate
with respect to Roche Products for such Disease. In addition, at deCODE's
request, within sixty (60) days after the date of such termination, Roche shall
transmit to deCODE all reports, information and data in the possession or
control of Roche, its Affiliates or its sublicensees for such Disease generated
or developed as result of the relevant Research Program (provided that Roche
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has the right to make available such information to deCODE). After the
effective date of such termination, in no event shall Roche, its Affiliates
or sublicensees make, have made, use, offer for sale, sell or import Roche
Products for such Disease. If Roche terminates this Agreement pursuant to this
Section 5.2(d) with respect to Roche Products for a Disease, such Disease shall
no longer be considered a Disease under this Agreement.
(e) Switching Diseases.
(i) Making a Secondary Disease a Primary Disease. Subject to
the terms and conditions of this Agreement, Roche may, at any time during the
Research Term, provide written notice to deCODE that Roche wishes to make a
Secondary Disease a Primary Disease. Upon deCODE's receiving such notice, the
Steering Committee shall, within sixty (60) days of such notice discuss, prepare
and finalize an Annual Research Plan for the new Primary Disease. deCODE shall,
within thirty (30) days of finalization by the Steering Committee of such Annual
Research Plan, commence a separate and independent Major Research Program for
such new Primary Disease and conduct such Major Research Program as described in
such Annual Research Plan.
(ii) Making a Primary Disease a Secondary Disease. Subject to
the terms and conditions of this Agreement, Roche may, at any time during the
Research Term, provide written notice to deCODE that Roche wishes to make a
Primary Disease a Secondary Disease. Upon deCODE's receiving such notice, the
Steering Committee shall, within sixty (60) days of such notice discuss, prepare
and finalize an Annual Research Plan for the new Secondary Disease. deCODE
shall, within thirty (30) days of finalization by the Steering Committee of such
Annual Research Plan, commence a separate and independent Minor Research Program
for such new Secondary Disease and conduct such Minor Research Program as
described in such Annual Research Plan.
(f) Adding a New Disease. Roche may, at any time during the
Research Term, request in writing that the Parties discuss the selection of a
new disease to be a Primary Disease or Secondary Disease. The parties shall then
discuss whether or not to conduct a Research Program for such new disease. In
the event that the Parties agree to conduct a Research Program for such new
disease (a "New Disease"), such New Disease shall be deemed to be a Primary
Disease or a Secondary Disease, as the case may be. The Steering Committee
shall, within sixty (60) days thereafter, discuss, prepare and finalize an
Annual Research Plan for such New Disease. deCODE shall, within thirty (30) days
of finalization by the Steering Committee of such Annual Research Plan, commence
a Major Research Program or a Minor Research Program, as the case may be, for
such New Disease and conduct such Research Program as described in such Annual
Research Plan. Nothing in this Section 5.2(f) shall obligate either Party to
agree to any New Diseases.
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5.3 Research Programs.
(a) Scope.
(i) Major Research Programs.
(1) Each Major Research Program shall have as its subject
an independent and separate Primary Disease. For each Major Research Program,
deCODE shall conduct, at its cost except as provided in Section 5.4(a), those
activities that are assigned to deCODE in the Annual Research Plan for such
Major Research Program. Unless otherwise mutually agreed in writing by Roche and
deCODE, deCODE shall assign [CONFIDENTIAL TREATMENT REQUESTED] per Major
Research Program per contract year during the Research Term.
(2) For a period commencing on the Effective Date and
ending [CONFIDENTIAL TREATMENT REQUESTED], there shall, at all times, be
[CONFIDENTIAL TREATMENT REQUESTED] independent and separate Major Research
Programs.
(ii) Minor Research Programs.
(1) During the Research Term, the Parties shall undertake
each Minor Research Program to maintain sufficient Technical Information related
to the Secondary Disease that is the subject of such Minor Research Program so
that such Secondary Disease could become the subject of a Major Research Program
within ninety (90) days of notice from Roche of its wish to make such Secondary
Disease a Primary Disease. For each Minor Research Program, deCODE shall
conduct, at its cost except as provided in Section 5.4(b), those activities that
are assigned to deCODE in the Annual Research Plan for such Minor Research
Program. Unless otherwise mutually agreed in writing by Roche and deCODE, deCODE
shall assign [CONFIDENTIAL TREATMENT REQUESTED] per Minor Research Program per
contract year during the Research Term.
(2) For a period commencing on the Effective Date and
ending [CONFIDENTIAL TREATMENT REQUESTED], there shall, at all times, be
[CONFIDENTIAL TREATMENT REQUESTED] independent and separate Minor Research
Programs. At any time during the Research Term, Roche shall not be required to
provide funding for more than [CONFIDENTIAL TREATMENT REQUESTED] per contract
year for all Minor Research Programs.
(b) Oversight. The Steering Committee shall oversee each Research
Program.
(c) Annual Research Plan. For the first year of the Research Term,
commencing on the Effective Date, the Steering Committee will discuss and
prepare an Annual Research Plan for each Research Program and will finalize an
Annual Research Plan for each Research Program on or prior to thirty (30) days
after the Effective Date.
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Thereafter, during the Research Term, the Steering Committee shall
(i) commencing not less than three (3) months prior to each anniversary of the
Effective Date, discuss and prepare an Annual Research Plan for each Research
Program for the upcoming contract year, and (ii) prior to each anniversary of
the Effective Date during the Research Term, finalize an Annual Research Plan
for each Research Program for the upcoming year of the Research Term. Each
Annual Research Plan may be amended from time to time upon Steering Committee
approval. Each Annual Research Plan, and any amendment thereto, shall be signed
and dated by a representative of each Party on the Steering Committee.
(d) FTE Rate Adjustment. For a period commencing on the Effective
Date and until [CONFIDENTIAL TREATMENT REQUESTED], the FTE Rate shall be
[CONFIDENTIAL TREATMENT REQUESTED]. Beginning on February 1, 2001, the FTE Rate
shall be adjusted at the beginning of each contract year during the Research
Term. The adjustment for the payments due on [CONFIDENTIAL TREATMENT REQUESTED]
under Section 5.4 shall reflect the average of: (i) the difference between
December [CONFIDENTIAL TREATMENT REQUESTED] and December 1997 in the Consumer
Price Index for All Urban Consumers ("CPI-U") for All Items as reported in the
CPI Detailed Report published by the U.S. Department of Labor Bureau of Labor
Statistics, and (ii) the difference between December [CONFIDENTIAL TREATMENT
REQUESTED] and December 1997 in the Product Price Index ("PPI") for All Products
as reported in the PPI Detailed Report published by the U.S. Department of Labor
Bureau of Labor Statistics. The adjustment for the payments due on [CONFIDENTIAL
TREATMENT REQUESTED] under Section 5.4 shall reflect the average difference
between the CPI-U between December [CONFIDENTIAL TREATMENT REQUESTED] and
December [CONFIDENTIAL TREATMENT REQUESTED] and the PPI between December
[CONFIDENTIAL TREATMENT REQUESTED] and December [CONFIDENTIAL TREATMENT
REQUESTED]. With respect to any additional contract year during the Research
Term, the adjustment to the FTE Rate shall be made in like manner.
(e) Use of FTEs. The Parties acknowledge that deCODE's utilization
of Representatives of deCODE during the course of each Research Program may
fluctuate during the Research Term and that deCODE's obligation to allocate a
certain number of FTEs to a Research Program, and satisfaction of such
obligation, will be based on such allocation calculated over the course of a
given year of the Research Term.
5.4 Research Funding.
(a) Major Research Programs. Subject to the terms and conditions of
this Agreement, for each Major Research Program then in effect on the relevant
due date, Roche shall pay to deCODE the following amounts, which shall be due
and payable as follows:
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[CONFIDENTIAL TREATMENT REQUESTED]
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[CONFIDENTIAL TREATMENT REQUESTED]
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(b) Minor Research Programs. Subject to the terms and
conditions of this Agreement, for each Minor Research Program then in effect on
the relevant due date, Roche shall pay to deCODE the following amounts, which
shall be due and payable as follows:
[CONFIDENTIAL TREATMENT REQUESTED]
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[CONFIDENTIAL TREATMENT REQUESTED]
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[CONFIDENTIAL TREATMENT REQUESTED]
(c) Adjustment to Amount of Payment. The Parties acknowledge and agree
that the amount of each quarterly payment set forth in Sections 5.4(a) and
5.4(b) are determined based on [CONFIDENTIAL TREATMENT REQUESTED] of the number
of FTEs to be allocated to such Research Program by deCODE for an contract year
[CONFIDENTIAL TREATMENT REQUESTED], multiplied by the FTE Rate.
(d) Other Expenses. Subject to Sections 5.4(a) and 5.4(b), each Party
shall be - responsible for its own costs and expenses related to each Research
Program.
(e) Method of Payment. Payments under this Section 5.4 shall be made by
Roche to deCODE by wire transfer to:
State Street Bank and Trust Co.
225 Franklin Street
Boston, MA 02110-2804
Account No. 94262524
ABA No. 011000028
or such other account as deCODE may, from time to time, designate to Roche in
writing.
(f) FTE Support. At any time during the Research Term, Roche
shall not be required to provide funding for more than [CONFIDENTIAL TREATMENT
REQUESTED] per contract year for all Major Research Programs. At any time during
the Research Term, Roche shall not be required to provide funding for more than
[CONFIDENTIAL TREATMENT REQUESTED] per contract year for all Minor Research
Programs.
5.5 Use of Funds. deCODE will use funding provided by Roche under this
Section 5 only in support of the Research Programs. deCODE will not use any
Third Party funding in direct support of a Research Program. The use of any
Third Party funding by deCODE in indirect support of a Research Program shall
not adversely impact Roche's rights and licenses under this Agreement.
5.6 Roche Review Right.
(a) Within thirty (30) days following the end of each quarter
of the Research Term, deCODE shall prepare and submit to Roche a statement
setting forth for each Research Program the number of deCODE scientists who
actually worked on
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such Research Program during the previous quarter and the portion of an FTE that
each such deCODE scientist worked on such Research Program.
(b) deCODE shall keep full, true and accurate books of account
containing all information necessary to determine the correctness of the number
of deCODE scientists who actually worked on any Research Program during any
period of the Research Term and the portion of an FTE that each such deCODE
scientist worked on any such Research Program. Such books of account shall be
kept at deCODE's principal place of business. Not more than once per contract
year during the Research Term, Roche or its authorized independent public
accountant shall have the right to engage deCODE's independent public
accountant, at reasonable times and upon reasonable notice, to examine on
deCODE's premises, such records of deCODE. Results of any such examination shall
be made available to both Parties. Roche shall bear the cost of such audit,
unless such audit indicates an overstatement of the number of FTEs that worked
on any Research Program by five percent (5%) or more, in which event deCODE
shall bear the costs of such audit.
5.7 Conduct.
(a) Each Party. Each Party shall for each Research Program:
(i) conduct such Research Program as described in each Annual Research
Plan for such Research Program;
(ii) use reasonable diligence to (1) perform the activities assigned to
such Party under the Annual Research Plan for such Research Program and (2)
complete such activities on a timely basis;
(iii) conduct such Research Program in good scientific manner, and in
compliance in all material respects with all requirements of applicable laws,
rules and regulations, and all other requirements of any applicable good
laboratory practices to attempt to achieve its objectives efficiently and
expeditiously;
(iv) within thirty (30) days following the end of each calendar quarter
during the Research Term, furnish the other Party with written reports
summarizing (1) all scientific work performed by such Party and (2) Program
Know-How developed by such Party (including without limitation a summary of
Inventions and results and data generated), in the conduct of such Research
Program during such calendar quarter;
(v) within sixty (60) days after the end of a given Research Program
or, as otherwise requested by the Steering Committee, furnish to the other Party
a detailed written report relating to (1) all scientific work performed by such
Party and (2) Program Know-How developed by such Party (including without
limitation a
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summary of Inventions and results and data generated), in the conduct of such
Research Program during such Research Program;
(vi) promptly disclose Inventions to the other Party in accordance with
Section 10; and
(vii) during the Research Term, allow Representatives of the other
Party, during normal business hours and with reasonable frequency, to visit the
offices and laboratories of such Party where such Research Program is being
conducted, and consult informally, during such visits or by telephone, with such
Party's Representatives performing scientific work on or in direct connection
with such Research Program; provided, however, that (1) such Representatives of
the other Party are under an agreement binding such Representatives to protect
Confidential Information to at least the same extent or greater as is required
of such other Party under this Agreement and (2) the Party allowing any such
visit approves in writing prior to such visit the other Party's Representatives,
which approval shall not be unreasonably withheld. Any such visit shall not
unreasonably interrupt the operations of the Party that is visited.
(b) Of Roche. To the extent that validation of a target is not part of
an Annual Research Plan for a Selected Disease, Roche shall use reasonable
efforts to obtain a Validated Target for such Selected Disease.
5.8 Records.
(a) During the Research Term and for each Research Program, deCODE and
Roche each shall maintain records in sufficient detail and in such good
scientific manner as to, in all material aspects, completely and accurately
reflect all scientific work performed and results achieved in the conduct of
such Research Program (including all Inventions and results and data generated
in the conduct of such Research Program). Such records shall be maintained in
separate, bound laboratory notebooks for each Research Program. The Parties
shall maintain such records in a form required under all applicable laws and
regulations of the Major Countries.
(b) During the Research Term and for each Research Program, deCODE and
Roche each shall have the right, during normal business hours and upon
reasonable notice, and subject to such reasonable procedures as the other Party
may require, to inspect all such records of the other Party relating to the
Research Programs. deCODE and Roche each shall maintain such records of the
other Party contained therein as Confidential Information in accordance with
Section 13 and shall not use such records except to the extent otherwise
permitted by this Agreement.
5.9 Plasma Samples. deCODE shall (i) harvest plasma samples from
Participants and (ii) preserve - such harvested plasma samples. The Steering
Committee shall determine if there is a scientific need for plasma samples
[CONFIDENTIAL TREATMENT REQUESTED]
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[CONFIDENTIAL TREATMENT REQUESTED]. If the Steering Committee determines that
there is a scientific need for plasma samples [CONFIDENTIAL TREATMENT REQUESTED]
5.10 Cell Lines and Tissue Samples. If the Steering Committee
determines that there may be a - scientific need for cell lines and/or tissue
samples for any Disease, [CONFIDENTIAL TREATMENT REQUESTED]
5.11 Biological Materials Transfer.
(a) For any Biological Material, deCODE shall provide Roche with all
related deCODE Know-How and shall inform Roche of any hazards or precautions
which need to be taken with respect to the Biological Material that deCODE is
aware of, or becomes aware of, during the term of this Agreement. deCODE shall
properly label, package, and transport the Biological Material in accordance
with all applicable laws and regulations and as reasonably requested by Roche.
Nothing herein shall be construed as giving Roche any title or ownership to any
Biological Materials. Roche may not use any Biological Material except in the
conduct of a Research Program or a Development Program without the prior written
consent of deCODE. Roche shall not supply any Biological Material to any Third
Party, other than Collaborators, without the prior written consent of deCODE. In
no event shall Roche use any Biological Materials to harvest DNA. Upon deCODE's
written request during the Research Term or one (1) year thereafter, Roche shall
destroy all unused Biological Materials.
(b) THE BIOLOGICAL MATERIALS ARE PROVIDED "AS IS" AND WITHOUT ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED,
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INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTY OF MERCHANTABILITY OR OF
FITNESS FOR ANY PARTICULAR PURPOSE OR ANY WARRANTY THAT THE USE OF THE
BIOLOGICAL MATERIALS WILL NOT INFRINGE OR VIOLATE ANY PATENT OR OTHER
PROPRIETARY RIGHTS OF ANY THIRD PARTY.
5.12 Research Term.
(a) End of Research Term. Subject to Sections 5.12(b), 5.12(c),
5.12(d), 5.12(e) and 5.13, the Research Term shall end on February 1, 2003.
Subject to Section 5.13, at the end of the Research Term, any Disease that was
the subject of an ongoing Research Program shall no longer be considered a
Disease provided such Disease is not otherwise a Selected Disease.
(b) Continuation. If Roche wishes to maintain [CONFIDENTIAL TREATMENT
REQUESTED] independent and separate Major Research Programs for [CONFIDENTIAL
TREATMENT REQUESTED] different Primary Diseases for the contract year commencing
[CONFIDENTIAL TREATMENT REQUESTED], then Roche shall notify deCODE in writing no
later than [CONFIDENTIAL TREATMENT REQUESTED] of Roche's intention to continue
the Research Term for the one (1) year period commencing [CONFIDENTIAL TREATMENT
REQUESTED]. If so continued, and if Roche wishes to maintain [CONFIDENTIAL
TREATMENT REQUESTED] independent and separate Major Research Programs for
[CONFIDENTIAL TREATMENT REQUESTED] different Primary Diseases for the contract
year commencing [CONFIDENTIAL TREATMENT REQUESTED], then Roche shall notify
deCODE in writing no later than [CONFIDENTIAL TREATMENT REQUESTED] of Roche's
intention to continue the Research Term for the one (1) year period commencing
[CONFIDENTIAL TREATMENT REQUESTED]. In any such notice, Roche shall list all
Diseases for which Roche, at that time, is then interested in maintaining Major
Research Programs and Minor Research Programs. The Research Term shall continue
for such one (1) year period commencing [CONFIDENTIAL TREATMENT REQUESTED] or
[CONFIDENTIAL TREATMENT REQUESTED], as the case may be, provided that Roche
maintains [CONFIDENTIAL TREATMENT REQUESTED] independent and separate Major
Research Programs for [CONFIDENTIAL TREATMENT REQUESTED] different Primary
Diseases during each such year. In the event that any Primary Disease becomes a
Selected Disease during any such year, Roche shall continue to fund
[CONFIDENTIAL TREATMENT REQUESTED] FTEs during such year, which shall be
allocated to the remaining Major Research Programs as the parties may agree. If
Roche does not send a notice pursuant to this Section 5.12(b) by [CONFIDENTIAL
TREATMENT REQUESTED], or if the Research Term is not otherwise continued
pursuant to Section 5.12(c), then the Research Term shall end on [CONFIDENTIAL
TREATMENT REQUESTED]. If Roche does not send a notice pursuant to this Section
5.12(b) by [CONFIDENTIAL TREATMENT REQUESTED], or if the Research Term is not
otherwise continued pursuant to Section 5.12(c), then the [CONFIDENTIAL
TREATMENT REQUESTED].
(c) Mutual Continuation. If Roche wishes to maintain less than
[CONFIDENTIAL TREATMENT REQUESTED], but at least [CONFIDENTIAL TREATMENT
REQUESTED], independent and separate Major Research Programs for less than
[CONFIDENTIAL TREATMENT REQUESTED], but at least [CONFIDENTIAL TREATMENT
REQUESTED], different Primary Diseases for the contract year commencing
[CONFIDENTIAL TREATMENT REQUESTED], then Roche shall notify deCODE in writing no
later than [CONFIDENTIAL TREATMENT REQUESTED] of Roche's desire to continue the
Research Term for the one (1) year period commencing [CONFIDENTIAL TREATMENT
REQUESTED]. If so continued or if continued for the contract year
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commencing [CONFIDENTIAL TREATMENT REQUESTED] pursuant to Section 5.12(b), and
if Roche wishes to maintain less than [CONFIDENTIAL TREATMENT REQUESTED], but at
least [CONFIDENTIAL TREATMENT REQUESTED], independent and separate Major
Research Programs for less than [CONFIDENTIAL TREATMENT REQUESTED], but at least
[CONFIDENTIAL TREATMENT REQUESTED], different Primary Diseases for the contract
year commencing [CONFIDENTIAL TREATMENT REQUESTED], then Roche shall notify
deCODE in writing no later than [CONFIDENTIAL TREATMENT REQUESTED] of Roche's
desire to continue the Research Term for the one (1) year period commencing
[CONFIDENTIAL TREATMENT REQUESTED]. In any such notice, Roche shall list all
Diseases for which Roche, at that time, is then interested in maintaining Major
Research Programs and Minor Research Programs. Upon consent of deCODE, the
Research Term shall continue for such one (1) year period commencing
[CONFIDENTIAL TREATMENT REQUESTED] or [CONFIDENTIAL TREATMENT REQUESTED], as the
case may be, provided that Roche maintains such number of independent and
separate Major Research Programs for such number of different Primary Diseases
as the Parties have initially agreed upon during each such year. In the event
that any Primary Disease becomes a Selected Disease during any such year, Roche
shall continue to fund the same number of FTEs initially agreed upon by the
parties during such year, which shall be allocated to the remaining Major
Research Programs as the parties may agree. If Roche does not send a notice
pursuant to this Section 5.12(c) by [CONFIDENTIAL TREATMENT REQUESTED], or if
the Research Term is not otherwise continued pursuant to Section 5.12(b), then
the Research Term shall end on [CONFIDENTIAL TREATMENT REQUESTED]. If Roche does
not send a notice pursuant to this Section 5.12(c) by [CONFIDENTIAL TREATMENT
REQUESTED], or if the Research Term is not otherwise continued pursuant to
Section 5.12(b), then the Research Term shall end on [CONFIDENTIAL TREATMENT
REQUESTED].
(d) Funding and FTE Commitment during Continuation Years. The level of
funding provided by Roche to deCODE under Section 5.4 and the number of FTEs
provided by deCODE under Section 5.3 for each such Research Program shall remain
unchanged by any continuation of the Research Term under Section 5.12(b) or
5.12(c) (except for adjustments to reflect any adjustments to the FTE Rate
pursuant to Section 5.3(d)), unless otherwise agreed in writing by the Parties.
(e) Extensions. Provided the Research Term has continued under Sections
5.12(b) and/or (c) until [CONFIDENTIAL TREATMENT REQUESTED], the Parties may
mutually agree to extend the Research Term beyond [CONFIDENTIAL TREATMENT
REQUESTED]for such number of Diseases, and on such terms, as the Parties may
mutually agree. In the event that Roche is interested in such an extension,
Roche shall so notify deCODE in writing no later than [CONFIDENTIAL TREATMENT
REQUESTED]. The level of funding to be provided by Roche to deCODE, the number
of FTEs to be provided by deCODE shall be determined by the Parties at such time
of any such mutual agreement of extension. Such extensions shall be deemed to be
included in the Research Term for all purposes under this Agreement except as
certain terms may be modified by the mutual agreement of the Parties.
5.13 Post-Research Term Developments Proposal.
(a) After the Research Term, deCODE shall have no further obligations
to conduct research activities. However, deCODE shall advise Roche, if during
the six
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(6) month period after the end of the Research Term (without giving effect to
any extension of the Research Term pursuant to this Section 5.13(a)), it obtains
mapping data or other significant information with respect to a disease that at
the end of the Research Term was a Disease (for example, new information that a
gene affects the pathogenesis of a Disease or confirming a Candidate Gene).
Then, Roche, in its sole discretion, may elect to provide funding to deCODE to
continue a Major Research Program with respect to such Disease for one (1)
additional six (6) month period. The funding for such Major Research Program
will be at the level provided during the last contract year of the Research
Term, either as provided in Section 5.4(a) (as adjusted due to any adjustment of
the FTE Rate pursuant to Section 5.3(d)) or at the level agreed upon pursuant to
Section 5.12(e), as the case may be, such work shall be deemed to be a part of a
Major Research Program, and the Research Term shall be extended with respect to
such Major Research Program. In addition, Roche shall reimburse deCODE for the
work performed by deCODE with respect to such Disease for the period from the
end of the original Research Term through the date that Roche elects to fund the
additional six (6) month period. Such reimbursement shall be at the same level
of funding that would have been provided for a Major Research Program during the
last contract year of the Research Term, either as provided in Section 5.4(a)
(as adjusted due to any adjustment of the FTE Rate pursuant to Section 5.3(d))
or at the level agreed upon pursuant to Section 5.12(e), as the case may be.
(b) Notwithstanding anything to the contrary, for any disease that at
the end of the Research Term was a Disease but was not a Selected Disease, the
following shall apply:
(i) If deCODE believes, at any time during the six (6) month period
following the six (6) month period after the end of the Research Term (without
giving effect to any extension of the Research Term pursuant to Section
5.13(a)), that a gene is either a Novel Gene, a Candidate Gene or a Disease Gene
(collectively, "Proposed Gene") for the Disease, it shall so notify Roche in
writing ("deCODE Notice").
(ii) If Roche, at any time within the sixty (60) day period following
receipt of a deCODE Notice, notifies deCODE in writing that Roche is interested
in negotiating for the rights to such Proposed Gene (a "Roche Notice"), then the
Parties shall conduct good faith negotiations on an exclusive basis directed to
Roche acquiring such rights. In the event that Roche does not provide a Roche
Notice to deCODE during such sixty (60) day period, then deCODE shall be free to
offer such rights to any Third Party under any terms and conditions without any
obligations to Roche.
(iii) In the event that, within six (6) months after the Roche Notice
is provided, the Parties fail to execute an agreement related to Roche acquiring
such rights, then deCODE shall be free to offer such rights to any Third Party
on terms and conditions no more favorable, taken as a whole, than the most
favorable terms last offered by Roche to deCODE for such rights. Within ten (10)
days after the expiration
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of such six (6) month period, Roche shall provide deCODE with a written document
setting forth such terms.
5.14 Validation of Targets. For a given Selected Disease, at any time
during the term of the Agreement, [CONFIDENTIAL TREATMENT REQUESTED], such Party
shall promptly provide written notice to the Steering Committee [CONFIDENTIAL
TREATMENT REQUESTED]. The Steering Committee shall, as promptly as practicable
after receipt of such notification, meet to discuss whether [CONFIDENTIAL
TREATMENT REQUESTED]. The Steering Committee shall record its Decision in the
Minutes of such meeting pursuant to Section 3.5. If the Steering Committee makes
a Decision that [CONFIDENTIAL TREATMENT REQUESTED]. If the Steering Committee
makes a Decision that [CONFIDENTIAL TREATMENT REQUESTED]
6. DEVELOPMENT AND COMMERCIALIZATION. -
6.1 Commercialization Efforts by Roche for Selected Diseases.
(a) For a Selected Disease, once a first Validated Target is obtained,
during the term of this Agreement, Roche, directly or through an Affiliate or
sublicensee, will use reasonable commercial efforts [CONFIDENTIAL TREATMENT
REQUESTED].
(b) Once a first Candidate Gene is Confirmed for a Selected Disease,
during the term of this Agreement, Roche, directly or through an Affiliate or
sublicensee, will use reasonable commercial efforts [CONFIDENTIAL TREATMENT
REQUESTED].
(c) Therapeutic Efforts and Diagnostic Efforts, as the case may be, for
a given Roche Product for a Selected Disease shall mean reasonable commercial
efforts, consistent with sound and reasonable business practices and judgment,
comparable to efforts exerted by Roche for its own products of a like kind and
at a like stage of development and having similar potential, taking into account
scientific, business and marketing considerations.
(d) For a given Selected Disease, prior to the first Registration of a
Therapeutic Product for such Selected Disease in any Major Country, Roche's
exercise
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of Therapeutic Efforts is to be determined by judging Roche's Efforts taken as a
whole in the Major Countries. For a given Selected Disease, prior to the first
Registration of a Diagnostic Product for such Selected Disease in any Major
Country, Roche's exercise of Diagnostic Efforts is to be determined by judging
Roche's Efforts taken as a whole in the Major Countries.
(e) For a given Selected Disease, after the first Registration of a
Therapeutic Product for such Selected Disease in any Major Country, Roche's
exercise of Therapeutic Efforts is to be determined by judging Roche's Efforts
taken on a Major Country-by-Major Country basis. For a given Selected Disease,
after the first Registration of a Diagnostic Product for such Selected Disease
in any Major Country, Roche's exercise of Diagnostic Efforts is to be determined
by judging Roche's Efforts taken as a whole taken on a Major Country-by-Major
Country basis.
6.2 Notice of Failure by Roche to Use Efforts for a Selected Disease.
(a) Therapeutic Products for a Disease.
(i) For a given Selected Disease, prior to the first Registration in
any Major Country of a Therapeutic Product for such Selected Disease, if deCODE
reasonably believes that Roche is not using Therapeutic Efforts, [CONFIDENTIAL
TREATMENT REQUESTED].
(ii) For a given Selected Disease, after the first Registration in any
Major Country of a Therapeutic Product for such Selected Disease, if deCODE
reasonably believes that Roche is not using Therapeutic Efforts in any Major
Country,
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[CONFIDENTIAL TREATMENT REQUESTED], then deCODE shall be entitled to proceed
under of Section 14.6(a)(ii) of this Agreement.
(b) Diagnostic Products for a Disease.
(i) For a given Selected Disease, prior to the first Registration in
any Major Country of a Diagnostic Product for such Selected Disease, if deCODE
reasonably believes that Roche is not using Diagnostic Efforts, [CONFIDENTIAL
TREATMENT REQUESTED]
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[CONFIDENTIAL TREATMENT REQUESTED], then deCODE shall be entitled to proceed
under Section 14.6(b)(i) of this Agreement.
(ii) For a given Selected Disease, after the first Registration in any
Major Country of a Diagnostic Product for such Selected Disease, if deCODE
reasonably believes that Roche is not using Diagnostic Efforts in any Major
Country, [CONFIDENTIAL TREATMENT REQUESTED], then deCODE shall be entitled to
proceed under Section 14.6(b)(ii) of this Agreement.
6.3 Abandonment Of a Selected Disease.
(a) For Therapeutic Products.
(i) For a given Selected Disease, commencing [CONFIDENTIAL TREATMENT
REQUESTED] Effective Date, at any time during the term of this Agreement prior
to the first Registration in any Major Country of a Therapeutic Product for such
Selected Disease, Roche may, for any reason, terminate this Agreement with
respect to all Therapeutic Products for the Selected Disease by giving
[CONFIDENTIAL TREATMENT REQUESTED] prior written notice to deCODE. In such
event, the effective date of termination shall be the date [CONFIDENTIAL
TREATMENT REQUESTED] after Roche provides such written notice to deCODE. The
effects of such termination shall be governed by Section 14.4(a)(ii). After the
effective date of such termination, in no event shall Roche, its Affiliates or
sublicensees make, have made, use, offer for sale, sell or import Therapeutic
Products for such Selected Disease.
(ii) For a given Selected Disease, commencing [CONFIDENTIAL TREATMENT
REQUESTED]after the Effective Date, at any time during the term of this
Agreement after the first
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Registration in any Major Country of a Therapeutic Product for such Selected
Disease, Roche may, for any reason, terminate this Agreement in a given Major
Country with respect to all Therapeutic Products for the Selected Disease by
giving six (6) months' prior written notice to deCODE. In such event, the
effective date of termination shall be the date six (6) months after Roche
provides such written notice to deCODE. The effects of such termination shall be
governed by Section 14.4(a)(iii). After the effective date of such termination,
in no event shall Roche, its Affiliates or sublicensees make, have made, use,
offer for sale, sell or import Therapeutic Products for such Selected Disease in
such given Major Country.
(b) For Diagnostic Products.
(i) For a given Selected Disease, commencing nine (9) months after the
Effective Date, at any time during the term of this Agreement prior to the first
Registration in any Major Country of a Diagnostic Product for such Selected
Disease, Roche may, for any reason, terminate this Agreement with respect to all
Diagnostic Products for the Selected Disease by giving six (6) months' prior
written notice to deCODE. In such event, the effective date of termination shall
be the date six (6) months after Roche provides such written notice to deCODE.
The effects of such termination shall be governed by Section 14.4(b)(ii). After
the effective date of such termination, in no event shall Roche, its Affiliates
or sublicensees make, have made, use, offer for sale, sell or import Diagnostic
Products for such Selected Disease.
(ii) For a given Selected Disease, commencing nine (9) months after the
Effective Date, at any time during the term of this Agreement after the first
Registration in any Major Country of a Diagnostic Product for such Selected
Disease, Roche may, for any reason, terminate this Agreement in a given Major
Country with respect to all Diagnostic Products for the Selected Disease by
giving six (6) months' prior written notice to deCODE. In such event, the
effective date of termination shall be the date six (6) months after Roche
provides such written notice to deCODE. The effects of such termination shall be
governed by Section 14.4(b)(iii). After the effective date of such termination,
in no event shall Roche, its Affiliates or sublicensees make, have made, use,
offer for sale, sell or import Diagnostic Products for such Selected Disease in
such given Major Country.
(c) If Roche terminates this Agreement pursuant to this Section 6.3(a)
and (b) with respect to all Therapeutic Products and all Diagnostic Products for
a Disease, such Disease shall no longer be considered a Disease under this
Agreement.
6.4 Sale After Registration.
(a) Time Period. For a given Roche Product which is the subject of a
Registration in a given country, Roche, its Affiliate or sublicensee shall,
within one (1)
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year after such Registration, make a First Commercial Sale of the given Roche
Product in the given country.
(b) Notice of Failure. If Roche, its Affiliate or sublicensee has not,
within one (1) year after Registration of a Roche Product in a given country,
made a First Commercial Sale of the given Roche Product in the given country,
deCODE may provide Roche written notice to Roche specifying the same.
[CONFIDENTIAL TREATMENT REQUESTED], then deCODE shall be entitled to proceed
under Section 14.7 of this Agreement.
(c) Abandonment of a Roche Product after Registration. Notwithstanding
anything to the contrary herein, at any time during the term of this Agreement,
Roche may, for any reason, terminate this Agreement in a given country with
respect to a given Roche Product that was the subject of a Registration in the
given country by giving [CONFIDENTIAL TREATMENT REQUESTED] prior written notice
to deCODE. In such event, the effective date of such termination shall be the
date [CONFIDENTIAL TREATMENT REQUESTED] after Roche provides such written notice
to deCODE. The effects of such termination shall be governed by Section 14.4(c).
After the effective date of such termination, in no event shall Roche, its
Affiliates or sublicensees make, have made, use, offer for sale, sell or import
the given Roche Product in the given country.
6.5 Commercialization Efforts by deCODE and its Sublicensees. During
the term of this Agreement, deCODE shall have no diligence obligation with
respect to deCODE Products for a Selected Disease other than using reasonable
efforts to identify
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and obtain a licensee for such deCODE Products in the event deCODE determines
not to develop deCODE Products for the Selected Disease directly or through an
Affiliate. In the event that deCODE grants rights to any deCODE Products for a
Selected Disease to a licensee, deCODE shall require such licensee to use
reasonable commercial efforts, in the Major Countries as a whole, directed to
the commercialization of at least one (1) deCODE Product for such Selected
Disease ("Sublicensee's Required Efforts").
6.6 Reports.
(a) By Roche.
(i) At least once per year during the term of this Agreement, Roche
will inform deCODE as to the goals and scope of each Roche Development Program.
(ii) For a Selected Disease, commencing at the end of the Research
Program for such Selected Disease, and until the Registration of a Diagnostic or
Therapeutic Product in a given Major Country for such Selected Disease, within
sixty (60) days after the end of each calendar year, Roche shall provide to
deCODE a written summary of Roche's, its Affiliates and sublicensees Therapeutic
Efforts and Diagnostic Efforts during such previous calendar year, provided that
Roche is permitted by any such sublicensee to share such information with
deCODE. The written summary shall also include information relating to the plan
for pursuing regulatory approvals, the estimated date for making any IND Filing
or NDA Filing, the expected date of receipt of approval of any IND or an NDA,
and the anticipated launch date with respect to each Roche Product in each Major
Country, to the extent such information is available. All such summaries shall
be treated by deCODE as Confidential Information under Section 13.
(b) By deCODE. For a Selected Disease, commencing at the end of the
Research Program for such Selected Disease, and until the first registration of
a deCODE Product in any Major Country, within sixty (60) days after the end of
each calendar year, provided deCODE determines not to develop deCODE Products
for the Selected Disease directly or through an Affiliate, deCODE shall provide
to Roche a written summary of: (i) deCODE's and its Affiliates' efforts to
identify and obtain a licensee for deCODE Products for the Selected Disease, and
(ii) the Sublicensee's Required Efforts of deCODE's licensees in the Major
Countries during such previous year; provided that deCODE is permitted by such
sublicensee to share such information with Roche. All such summaries shall be
treated by Roche as Confidential Information under Section 13.
6.7 Ownership of Regulatory Filings. Other than as explicitly provided
for in this Agreement, nothing herein shall be construed as giving deCODE any
title or ownership to any IND, NDA or other regulatory filings related to a
Roche Product. Other than as explicitly provided for in this Agreement, nothing
herein shall be construed as
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giving Roche any title or ownership to any IND, NDA or other regulatory filings
related to a deCODE Product.
7. GRANT OF LICENSES.
7.1 Grants.
(a) To Roche. Subject to the terms and conditions of this Agreement,
deCODE grants to Roche and its Affiliates (i) the sole and exclusive worldwide
right and license under deCODE Know-How and deCODE Patents, and (ii) a
non-exclusive right and license to use deCODE Generalized Technology, to make,
have made, use, offer for sale, sell and import Roche Products in the Territory.
The Parties acknowledge that the above rights and licenses includes, without
limitation, the right and license to make, have made and use Disease Genes and
Validated Targets in the Territory to research and develop Roche Products. The
rights and licenses granted to Roche pursuant to this Section 7.1(a) shall
include the right to grant sublicenses thereto. Roche shall advise deCODE of all
sublicenses granted under this Agreement. If Roche grants a sublicense, all of
the terms and conditions of this Agreement shall apply to the sublicensee to the
same extent as they apply to Roche for all purposes. Roche guarantees and
assumes responsibility for the performance of all obligations so imposed on such
sublicensee by reason of operation of any such sublicense.
(b) To deCODE. Subject to the terms and conditions of this Agreement,
Roche grants to deCODE and its Affiliates the sole and exclusive worldwide right
and license, with the right to sublicense (subject to Section 7.2), under Roche
Know-How and Roche Patents, to make, have made, use, offer for sale, sell and
import deCODE Products in the Territory. The Parties acknowledge that the above
right and license includes, without limitation, the right and license to make,
have made and use Disease Genes and Validated Targets in the Territory to
research and develop deCODE Products. The rights and licenses granted to deCODE
pursuant to this Section 7.1(b) shall include the right to grant sublicenses
thereto. deCODE shall advise Roche of all sublicenses granted under this
Agreement. If deCODE grants a sublicense, all of the terms and conditions of
this Agreement shall apply to the sublicensee to the same extent as they apply
to deCODE for all purposes.
(c) Research Programs. Each Party grants to the other Party and its
Affiliates a fully paid-up, non-royalty bearing non-exclusive right and license,
without the right to grant sublicenses, under such Party's respective Know-How
and Patents, for the sole and exclusive purpose of the other Party fulfilling
its research obligations under any and all Research Programs under this
Agreement.
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7.2 Rights of First Negotiation.
(a) deCODE Notice. If, at any time during the term of this Agreement,
deCODE is interested in offering rights to a deCODE Product to a Third Party,
deCODE shall give written notice ("deCODE Notice") to Roche of its interest.
Such deCODE Notice shall include sufficient information regarding such deCODE
Product as deCODE, in good faith, deems reasonably necessary for Roche to make a
reasonably informed decision regarding whether or not Roche wishes to pursue
negotiations for such rights.
(b) Decision Period. Roche shall have a period of sixty (60) days,
extendible by mutual agreement of the Parties, said period to commence on the
receipt by Roche of the deCODE Notice ("Decision Period"), to decide whether or
not it wishes to pursue negotiations for such rights.
(c) Negotiations. In the event that Roche, within such Decision Period,
provides written notice to deCODE that it is interested in pursuing negotiations
for such rights, then the Parties shall conduct good faith negotiations on an
exclusive basis directed to Roche acquiring such rights.
(d) Third Party Terms. In the event that, within six (6) months after
Roche provides written notice to deCODE that it is interested in pursuing
negotiations for such rights, the Parties fail to execute an agreement related
to Roche acquiring such rights, then deCODE shall be free to offer such rights
to any Third Party on terms and conditions no more favorable, taken as a whole,
than the most favorable terms last offered by Roche to deCODE for such rights.
Within ten (10) days after the expiration of such six (6) month period, Roche
shall provide deCODE with a written document setting forth such terms.
(e) New Opportunity. In the event that Roche, within such Decision
Period, does not provide written notice to deCODE that it is interested in
pursuing negotiations for such rights, (i) deCODE shall be free to offer such
rights to any Third Party under any terms and conditions, and (ii) in the event
additional material new findings not yet presented to Roche are developed during
a two (2) year period commencing on the date that is the end of the Decision
Period, and unless prohibited by agreement or ongoing negotiations with a Third
Party, deCODE shall give Roche the opportunity to review such additional data
and to reconsider its interest in such negotiation.
8. EQUITY, PAYMENTS AND ROYALTIES.
8.1 Equity. Either prior to or contemporaneously with the execution of
this Agreement, the Parties shall enter the Equity Agreement, upon such terms
and conditions as are set forth in such Equity Agreement.
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8.2 Payments.
(a) Discovery Payments.
(i) Roche shall pay to deCODE a non-refundable payment of [CONFIDENTIAL
TREATMENT REQUESTED] within thirty (30) days after [CONFIDENTIAL TREATMENT
REQUESTED] and receipt by Roche of an invoice for such sum. The Steering
Committee shall pursuant to Section 3.4(a) decide [CONFIDENTIAL TREATMENT
REQUESTED]. In any event, only one (1) payment under this Section 8.2(a)(i)
shall be due for each Disease, regardless of the [CONFIDENTIAL TREATMENT
REQUESTED]
(ii) Roche shall pay deCODE the following nonrefundable payments within
thirty (30) days after the occurrence of the following events with respect to
each Disease and receipt by Roche of an invoice for such sum:
[CONFIDENTIAL TREATMENT REQUESTED]
(b) Development Payments - Therapeutic Products. For a given
Therapeutic Product, Roche shall pay to deCODE the following nonrefundable
payments
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within thirty (30) days after the occurrence of the following events ("Events")
as set forth below in Table I:
[CONFIDENTIAL TREATMENT REQUESTED]
(c) Payment Limitations. For a given Therapeutic Product, Roche will
make each of such payments under Section 8.2(b) only once, for the first
occurrence of an Event for the Therapeutic Product, independent of the number of
occurrences of the Event for the Therapeutic Product. In the event that Roche's
clinical development of any Therapeutic Product for a Selected Disease (an
"Original Product") terminates and, at or after the time of such termination,
Roche is engaged or subsequently becomes engaged in clinical development of any
other Therapeutic Product for such Selected Disease (a "Replacement Product")
and both the Original Product and the Replacement Product treat or prevent the
Selected Disease through the same Biological Pathway, then Roche shall be
entitled to a credit against milestone payments due pursuant to Section 8.2(b)
with respect to the Replacement Product in the amount equal to all milestone
payments actually paid with respect to the Original Product prior to termination
of development thereof.
By way of illustration, assume that for a given Selected Disease, where
each Therapeutic Product treats or prevents the Selected Disease through the
same Biological Pathway:
(i) In Year 1:
(1) Therapeutic Product 1, a Direct Gene Expression Product Type 1,
reaches Event 1,
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(2) Therapeutic Product 2, a Direct Gene Expression Product Type 2,
reaches Event 1, and
(3) Therapeutic Product 3, a Drug Product Type 2, reaches Events 1 and
2.
[CONFIDENTIAL TREATMENT REQUESTED]
(ii) In Year 2:
(1) Roche terminates the development of Therapeutic Product 1,
(2) Therapeutic Product 2 reaches Event 2,
(3) Therapeutic Product 3 reaches Event 3, and
(4) Therapeutic Product 4, a Direct Gene Expression Product Type 1,
reaches Events 1 and 4.
[CONFIDENTIAL TREATMENT REQUESTED]
(iii) In Year 3:
(1) Roche terminates the development of Therapeutic Product 2,
(2) Therapeutic Product 3 reaches Events 4 and 5, and
(3) Therapeutic Product 4 reaches Event 5.
[CONFIDENTIAL TREATMENT REQUESTED]
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[CONFIDENTIAL TREATMENT REQUESTED]
(d) Diagnostic Product. Roche shall pay to deCODE the following
nonrefundable payments within thirty (30) days after the occurrence of the
following events ("Event") with respect to Diagnostic Products for each Selected
Disease:
[CONFIDENTIAL TREATMENT REQUESTED]
Roche will make each of such payments under this Section 8.2(d) only
once with respect to each Selected Disease, for the first occurrence of a
respective Event with the first Diagnostic Product to reach such Event with
respect to such Selected Disease.
8.3 Royalties.
(a) Royalty Rates Paid by Roche. For a given Roche Product, during the
Royalty Term for the Roche Product, Roche shall pay to deCODE a royalty on Net
Sales of the given Roche Product, on a country-by-country basis, at the
following rates as set forth in Table II:
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[CONFIDENTIAL TREATMENT REQUESTED]
(b) Royalty Rates Paid by deCODE.
(i) For a given deCODE Product other than an Abandoned Product or a
Reverted Product, during the Royalty Term for the deCODE Product, deCODE shall
pay to Roche a royalty of [CONFIDENTIAL TREATMENT REQUESTED] on Net Sales of the
given deCODE Product, on a country-by-country basis, [CONFIDENTIAL TREATMENT
REQUESTED] of the Sublicensing Income received by deCODE from its sublicensees
with respect to the given deCODE Product.
(ii) For a given deCODE Product that is an Abandoned Product, during
the Royalty Term for the Abandoned Product, deCODE shall pay to Roche a royalty
on Net Sales of the given Abandoned Product, on a country-by-country basis, at
the following rates as set forth in Table III:
[CONFIDENTIAL TREATMENT REQUESTED]
If for a given deCODE Product that is an Abandoned Product, deCODE
licenses rights to such Abandoned Product to a Third Party in a given country,
then during the Royalty Term for the Abandoned Product deCODE shall pay to
Roche:
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(1) [CONFIDENTIAL TREATMENT REQUESTED] of the Sublicensing Income received by
deCODE from its sublicensees in the given country with respect to the given
Abandoned Product that is a Drug Product Type 1 or Type 2, (2) [CONFIDENTIAL
TREATMENT REQUESTED] of the Sublicensing Income received by deCODE from its
sublicensees in the given country with respect to the a given Abandoned Product
that is a Direct Gene Expression Product Type 1 or Type 2, and (3) [CONFIDENTIAL
TREATMENT REQUESTED] of the Sublicensing Income received by deCODE from its
sublicensees in the given country with respect to the given Abandoned Product
that is a Diagnostic Product.
Notwithstanding the above, the royalties otherwise due under this
Section 8.3(b)(ii) to Roche for Abandoned Products other than a Diagnostic
Product shall be reduced by [CONFIDENTIAL TREATMENT REQUESTED] if such Abandoned
Product was not the subject of an IND Filing by Roche, its Affiliate or
sublicensee prior to the date Roche gives notice of such abandonment.
(iii) For a given deCODE Product that is a Reverted Product, if such
Reverted Product is (1) a Therapeutic Product which, at the time of the
effective date of termination was the subject of an IND Filing by Roche, its
Affiliate or sublicensee, or (2) a Diagnostic Product, then during the Royalty
Term for the Reverted Product, deCODE shall pay to Roche a royalty on Net Sales
of the given Reverted Product, on a country-by-country basis, at the following
rates as set forth in Table IV:
[CONFIDENTIAL TREATMENT REQUESTED]
If for a given deCODE Product that is a Reverted Product, where such
Reverted Product is (1) a Therapeutic Product which, at the time of the
effective date of termination was the subject of an IND Filing by Roche, its
Affiliate or sublicensee, or (2) a Diagnostic Product, deCODE licenses rights to
such Reverted Product to a Third Party in a given country, then during the
Royalty Term for the Reverted Product deCODE shall pay to Roche: (1)
[CONFIDENTIAL TREATMENT REQUESTED] of the Sublicensing Income received by deCODE
from its sublicensees in the given country with respect to the given Reverted
Product that is a Drug Product Type I or Type II, and (2) [CONFIDENTIAL
TREATMENT REQUESTED] of the Sublicensing Income received by deCODE from its
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sublicensees in the given country with respect to the given Reverted Product
that is a Diagnostic Product.
8.4 Royalty Reductions.
(a) Reductions for no Valid Claim.
(i) Reduction for Roche. The royalties otherwise due under Section
8.3(a) shall be reduced, on a country-by-country basis, by [CONFIDENTIAL
TREATMENT REQUESTED] with respect to a given Roche Product in a given country if
Roche's (i) making, having made or using Disease Genes and Validated Targets to
make, have made, use, offer for sale, sell and import the Roche Product, or (ii)
making, having made, using, offering for sale, selling or importing the Roche
Product, is not claimed by a deCODE Patent Valid Claim or a Roche Patent Valid
Claim in such country.
(ii) Reduction for deCODE. The royalties or percentage of Royalty
Sublicensing Income otherwise due under Section 8.3(b) shall be reduced, on a
country-by-country basis, by [CONFIDENTIAL TREATMENT REQUESTED] with respect to
a given deCODE Product in a given country if, deCODE's (i) making, having made
or using Disease Genes and Validated Targets to make, have made, use, offer for
sale, sell and import the deCODE Product, and (ii) making, having made, using,
offering for sale, selling or importing the deCODE Product is not claimed by a
Roche Patent Valid Claim of a Roche Patent solely owned by Roche in such
country.
(b) Reduction for Generic Competition.
(i) By Roche. Roche may reduce the royalties otherwise due under
Section 8.3(a), on a country-by-country basis, by [CONFIDENTIAL TREATMENT
REQUESTED] with respect to a given Roche Product in a given country if, in such
country, in any calendar quarter, one or more Third Parties markets a product
("Third Party Product") having as a pharmaceutically active ingredient the same
Compound as the Roche Product, or its salt, where (1) the manufacture, use or
sale of such Third Party Product is not claimed by a deCODE Patent Valid Claim
of an issued deCODE Patent or a Roche Patent Valid Claim of an issued Roche
Patent in such country, and (2) such Third Party Product(s), in aggregate, have
at least [CONFIDENTIAL TREATMENT REQUESTED] of the aggregate unit volume of
sales for such Roche Product and such Third Party Product in any calendar year
in such country, as measured by IMS published data or such other index as the
Parties may agree upon.
(ii) By deCODE. deCODE may reduce the royalties or percentage of
Royalty Sublicensing Income otherwise due under Section 8.3(b), on a
country-by-country basis, by [CONFIDENTIAL TREATMENT REQUESTED] with respect to
a given deCODE Product in a given country if, in such country, in any calendar
quarter, one or more Third Parties markets a Third Party Product having as a
pharmaceutically active ingredient the same
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Compound as the deCODE Compound, or its salt, where (1) the manufacture, use or
sale of such Third Party Product is not claimed by a in a deCODE Patent Valid
Claim of an issued deCODE Patent or a Roche Patent Valid Claim of an issued
Roche Patent in such country, and (2) such Third Party Product(s), in aggregate,
have at least [CONFIDENTIAL TREATMENT REQUESTED] of the aggregate unit volume of
sales for such deCODE Product and such Third Party Product in any calendar year
in such country, as measured by IMS published data or such other index as the
Parties may agree upon.
(c) Third Party Royalties. If, for a given Product in a given country,
a Party believes that the making, having made, using, offering for sale, selling
or importing the given Product in the given country would represent a
significant risk of infringement of a Third Party Patent, the Party shall notify
the other Party in writing, and the Parties will in good faith discuss the need
to obtain a license from the Third Party ("Third Party License"). If the Parties
fail to agree as to the need for such Third Party License, the Parties will
submit the matter to patent counsel acceptable to both Parties for a legal
opinion about the need to obtain such Third Party License. The Parties will
[CONFIDENTIAL TREATMENT REQUESTED] the costs associated with such legal opinion.
If the Parties agree on the need for the Third Party License, or if
patent counsel provides reasons as to why the making, having made, offering for
sale, selling or importing of the given Product in the given country would
represent a significant risk of infringement of the Third Party Patent, the
Party may reduce the royalties or percentage of Royalty Sublicensing Income
otherwise due under Section 8.3 for the given Product by an amount equal to
[CONFIDENTIAL TREATMENT REQUESTED] of the royalties and payments paid by the
Party to such Third Party under the Third Party License.
Notwithstanding the above, for a given Product, in no event shall such
reduction apply to a Third Party License from a Collaborator where the Third
Party License results from a collaboration having as its subject the Product.
(d) Limit of Reductions to Royalties. Notwithstanding anything to the
contrary, a Party may not reduce the royalties or percentage of Royalty
Sublicensing Income due to the other Party for any calendar quarter on account
of any reductions in royalties or percentage of Royalty Sublicensing Income
provided for in this Section 8.4 by an amount which would reduce the amount of
royalties or the amount of Royalty Sublicensing Income, as the case may be,
otherwise due under Section 8.3 by more than [CONFIDENTIAL TREATMENT REQUESTED].
Any amount of reductions in royalties or percentage of Royalty Sublicensing
Income which exceed the foregoing limits for a given calendar quarter may be
applied by the Party in subsequent calendar quarters, subject again to the
foregoing limitations. The limitations to the royalty and Royalty Sublicensing
Income reductions provided in this Section 8.4 shall not apply against
additional credits or reductions or deductions under any other Sections of this
Agreement.
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8.5 Obligation to Pay Royalties.
(a) Sales among Roche and its Affiliates and Sublicensees. The
obligation to pay royalties to deCODE under Section 8.3 is imposed only once
with respect to the same unit of Roche Product, regardless of the number of
deCODE Patents pertaining thereto. There shall be no obligation to pay royalties
to deCODE under Section 8.3 on sales of Roche Products among Roche and its
Affiliates and its sublicensees, but in such instances the obligation to pay
royalties shall arise only upon the sale by Roche, its Affiliates or its
sublicensees to Third Parties (other than sublicensees of Roche).
(b) Sales among deCODE and its Affiliates. The obligation to pay
royalties to Roche under Section 8.3 is imposed only once with respect to the
same unit of deCODE Product, regardless of the number of Roche Patents
pertaining thereto. There shall be no obligation to pay royalties on Net Sales
or a percentage of Royalty Sublicensing Income to Roche under Section 8.3 on
sales of deCODE Products among deCODE and its Affiliates and its sublicensees,
but in such instances the obligation to pay royalties on Net Sales shall arise
only upon the sale by deCODE or its Affiliates to Third Parties (other than
sublicensees of deCODE) and the obligation to pay a percentage of Royalty
Sublicensing Income shall arise only upon the sale by deCODE's sublicensees to
Third Parties.
8.6 Roche Supply Obligation. During the Royalty Term, Roche shall
provide quantities of Roche Products necessary or required by the persons who
are both citizens and residents of Iceland for the prevention, diagnosis and/or
treatment of the Diseases at no charge.
8.7 Barred Royalties. If the royalties set out in this Section 8, after
giving effect to all reductions and credits to such royalties allowable under
this Agreement, are higher than the maximum royalties permitted by the law or
regulations of a given country, the royalty payable for such country shall be
equal to the maximum permitted under such law or regulations.
9. PAYMENTS AND REPORTS.
9.1 Payment. Except as otherwise provided in this Agreement, all
royalties on Net Sales of Roche Products shall be calculated quarterly as of
[CONFIDENTIAL TREATMENT REQUESTED] (each as being the last day of a
[CONFIDENTIAL TREATMENT REQUESTED]) and shall be paid by Roche within sixty (60)
days after the end of each [CONFIDENTIAL TREATMENT REQUESTED] for which such Net
Sales are calculated. Each such payment shall be accompanied by a statement,
Product-by-Product and country-by-country, of the amount of Net Sales during
such calendar quarter and the amount of royalties due on such Net Sales.
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Except as otherwise provided in this Agreement, all royalties on Net Sales of
deCODE Products and the amount of Sublicensing Income due shall be calculated
quarterly as of March 31, June 30, September 30 and December 31 (each as being
the last day of a calendar quarter) and shall be paid by deCODE within sixty
(60) days after the end of each calendar quarter for which such Net Sales or
Sublicensing Income are calculated. Each such payment shall be accompanied by a
statement, Product-by-Product and country-by-country, of the amount of Net
Sales, the amount of royalties due on such Net Sales, or the amount of
Sublicensing Income due, as the case may be.
9.2 Mode of Payment. A Party shall make all payments required under
this Agreement as directed by the other Party from time to time in United States
Dollars or such other currency as the Parties may mutually agree.
(a) For Roche and its Affiliates. For Roche and its Affiliates,
whenever for the purpose of calculating royalty conversion from any foreign
currency shall be required, such conversion shall be made as follows: when
calculating the Adjusted Gross Sales, the amount of such sales in foreign
currencies shall be converted into Swiss Francs as computed in the central
Roche's Swiss Francs Sales Statistics for the countries concerned, using the
average monthly rate of exchange at the time for such currencies as retrieved
from the Reuters System; and when calculating the royalties on Net Sales, such
conversion shall be at the average rate of the Swiss Franc to the Dollar, as
retrieved from the Reuters System for the applicable [CONFIDENTIAL TREATMENT
REQUESTED].
(b) For a Sublicensee of Roche in a Country. For a sublicensee of
Roche, whenever for the purpose of calculating royalty conversion from any
foreign currency shall be required, such conversion shall be made as follows:
when calculating the Adjusted Gross Sales, the amount of such sales shall be
reported by the sublicensee to Roche within thirty (30) days from the end of the
[CONFIDENTIAL TREATMENT REQUESTED], after having converted each applicable
monthly sales in foreign currency into the Dollar using the average rates of
exchange published in The Wall Street Journal (or some other source agreed upon
in writing by the Parties for the country) for each respective month of the
applicable [CONFIDENTIAL TREATMENT REQUESTED].
(c) For deCODE and its Affiliates. For deCODE and its Affiliates,
whenever for the purpose of calculating royalty conversion from any foreign
currency shall be required, such conversion shall be made as follows: when
calculating the Adjusted Gross Sales and Net Sales, the amount of such sales in
foreign currencies shall be converted into Dollars, as computed for the country
concerned using the average monthly rate of exchange listed in The Wall Street
Journal (or some other source agreed upon in writing by the Parties for the
country) for each applicable month of the applicable calendar quarter.
(d) For a Sublicensee of deCODE in a Country. For a sublicensee of
deCODE, the Sublicensing Income shall be calculated by conversion of such
amount
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from the currency in which it was paid to deCODE into Dollars as computed for
the country concerned using the average monthly rate of exchange listed in The
Wall Street Journal (or some other source agreed upon in writing by the Parties
for the country) for each applicable month of the applicable calendar quarter.
9.3 Records Retention. Each Party shall keep, and require its
Affiliates and sublicensees to keep, full, true and accurate books of account in
accordance with generally accepted accounting principles, consistently applied
("Books of Account") containing all particulars that may be necessary for the
purpose of calculating all royalties and Sublicensing Income payable to the
other Party under this Agreement for a period of three calendar (3) years after
the end of the calendar year in which such sales occurred. Such Books of Account
shall be kept at the principal place of business of the Party, its Affiliates or
its sublicensees, as the case may be.
9.4 Audit Request.
(a) By deCODE. At deCODE's expense, deCODE or its authorized
independent public accountant has the right to engage Roche's independent public
accountant to perform, on behalf of deCODE or its independent public accountant,
an audit, conducted in accordance with generally accepted auditing standards in
the USA, of such Books of Account of Roche, its Affiliates and sublicensees that
are deemed necessary by Roche's independent public accountants to report on
Adjusted Gross Sales and Net Sales of the Roche Products for the period or
periods requested by deCODE. Results of any such examination shall be made
available to both Parties. deCODE or its authorized independent public
accountant shall have the right to review the reports prepared by Roche's
independent public accountant and make inquiries of Roche's independent public
accountant regarding such reports.
Such audit shall not be performed more frequently than once per
calendar year nor more frequently than once with respect to Books of Account
covering any specific period of time, upon at least thirty (30) working days'
prior written notice, and shall be conducted during regular business hours in
such a manner as to not unnecessarily interfere with Roche's normal business
activities.
All Books of Account referred to under this Section 9.4(a) shall be
used only for the purpose of verifying royalty statements or compliance with
this Agreement and (ii) shall be treated by deCODE as Confidential Information
under Section 13.
The failure of deCODE to request verification of any royalty
calculation during the period under Section 9.3 when Books of Account have to be
retained shall be considered acceptance of the accuracy of such reporting.
In the event that such audit shall indicate that in any calendar year
the royalties which should have been paid by Roche are greater than those which
were
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actually paid by Roche, then Roche shall promptly pay the underpaid amount to
deCODE and, if the royalties which should have been paid by Roche are at least
five percent (5%) greater than those which were actually paid by Roche, then
Roche shall also reimburse deCODE for the reasonable cost of such audit. In the
event that such audit shall indicate that in any calendar year the royalties
which were actually paid by Roche are greater than those which should have been
paid, then, at Roche's option, deCODE shall promptly reimburse to Roche the
overpaid amount or Roche shall deduct the overpaid amount from the next royalty
payment to be paid deCODE.
(b) By Roche. At Roche's expense, Roche or its authorized independent
public accountant has the right to engage deCODE's independent public accountant
to perform, on behalf of Roche or its independent public accountant, an audit,
conducted in accordance with generally accepted auditing standards in the USA,
of such Books of Account of deCODE, its Affiliates and sublicensees that are
deemed necessary by deCODE's independent public accountants to report on
Adjusted Gross Sales, Net Sales and Sublicensing Income of the deCODE Products
for the period or periods requested by Roche. Results of any such examination
shall be made available to both Parties. Roche or its authorized independent
public accountant shall have the right to review the reports prepared by
deCODE's independent public accountant and make inquiries of deCODE's
independent public accountant regarding such reports.
Such audit shall not be performed more frequently than once per
calendar year nor more frequently than once with respect to Books of Account
covering any specific period of time, upon at least thirty (30) working days'
prior written notice, and shall be conducted during regular business hours in
such a manner as to not unnecessarily interfere with deCODE's normal business
activities.
All Books of Account referred to under this Section 9.4(b) shall be
used only for the purpose of verifying royalty statements or compliance with
this Agreement and (ii) shall be treated by Roche as Confidential Information
under Section 13.
The failure of Roche to request verification of any royalty calculation
during the period under Section 9.3 when Books of Account have to be retained
shall be considered acceptance of the accuracy of such reporting.
In the event that such audit shall indicate that in any calendar year
the royalties which should have been paid by deCODE are greater than those which
were actually paid by deCODE, then deCODE shall promptly pay the underpaid
amount to Roche and, if the royalties which should have been paid by deCODE are
at least five percent (5%) greater than those which were actually paid by
deCODE, then deCODE shall also reimburse Roche for the reasonable cost of such
audit. In the event that such audit shall indicate that in any calendar year the
royalties which were actually paid by deCODE are greater than those which should
have been paid, then, at deCODE's option,
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Roche shall promptly reimburse to deCODE the overpaid amount or deCODE shall
deduct the overpaid amount from the next royalty payment to be paid Roche.
9.5 Taxes. All amounts owing to a Party ("owed Party") specified in
this Agreement shall be paid by the other Party ("paying Party") net of all
applicable taxes, fees, and other charges excluding only taxes on the paying
Party's income. In particular, any tax required to be withheld by a paying Party
under the laws of any country for the account of the Owed Party ("Withholding
Taxes"), shall be promptly paid by the paying Party for and on behalf of the
owed Party to the appropriate governmental authority, and the paying Party shall
furnish the owed Party with proof of payment of such tax. Any such tax actually
paid on the owed Party's behalf shall be deducted from royalty payments due the
owed Party. The Paying Party will reasonably assist the owed Party in minimizing
the Withholding Taxes applicable to any payment made by the paying Party and in
claiming tax refund at the owed Party's request.
9.6 Blocked Currency. In each country where the local currency is
blocked by applicable law and cannot be removed from such country, royalties
accrued in that country shall be paid to the owed Party in such country in local
currency by deposit in a local bank designated by the owed Party.
9.7 Interest on Late Payments. Any payment under this Agreement that is
not paid on or before the date such payment is due shall bear interest, to the
extent permitted by applicable law, at the [CONFIDENTIAL TREATMENT REQUESTED]
from time to time, or such other index as the Parties may agree in writing,
[CONFIDENTIAL TREATMENT REQUESTED], calculated in the number of days such a
payment is overdue.
9.8 Mechanism for Adjustment to Royalties. For the first calendar
quarter of each calendar year during the term of this Agreement, a Party shall
be entitled to deduct from the royalties owed to the other Party for that
quarter any reductions, deductions or credits on royalties allowed under this
Agreement during the previous calendar year provided the Party did not otherwise
previously take such reductions or credits. In the event that any reductions,
deductions or credits otherwise allowable to a Party in the last calendar year
during the term of the Agreement have not been fully utilized by such Party upon
the expiration of this Agreement, then the other Party shall reimburse such
Party for the allowable amount.
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10. OWNERSHIP; PATENTS.
10.1 Ownership.
(a) Technical Information. Except as otherwise provided in this
Agreement, this Agreement does not grant either Party any rights in or to
Technical Information, or any Patents related thereto, owned or controlled by
the other Party.
(b) Inventions. deCODE shall solely own deCODE Inventions and resulting
Patents. Roche shall solely own Roche Inventions and resulting Patents. The
Parties shall jointly own Joint Inventions and resulting Patents. The
determination of inventorship shall be made in accordance with the patent laws
of the relevant countries of the Territory.
10.2 Patent Filing, Maintenance and Prosecution Regarding Inventions.
(a) Disclosure. As soon as a Party concludes that an Invention has been
made, it shall promptly inform the Steering Committee, and provide a summary of
the Invention. Should a Party be faced with a possible loss of rights in a Major
Country, such communication may take place promptly after filing a priority
patent application for the Invention.
(b) Filing.
(i) deCODE Inventions and Roche Inventions. For deCODE Inventions and
Roche Inventions, the Party owning the Invention shall have the first right of
election to prepare and file a priority patent application for the Invention, at
its own cost. Should the Party owning the Invention elect not to prepare and/or
file any such patent application, it shall (i) provide the other Party with
written notice as soon as reasonably possible after making such election but in
any event no later than sixty (60) days before the other Party would be faced
with a possible loss of rights in a Major Country, (ii) give the other Party the
right, at the other Party's election and sole expense, to prepare and file the
priority application, and (iii) offer reasonable assistance to the other Party
in connection with such preparation and filing at no cost to the other Party
except for reimbursement of reasonable out-of-pocket expenses incurred by the
Party owning the Invention in rendering such assistance.
The filing Party shall perform corresponding foreign filings at its own
cost, after having discussed the countries for foreign filings with the
non-filing Party within nine (9) months after the priority filing. Should the
Parties not agree on the countries for foreign filings, either Party will have
the right to file the subject of the priority application in the name of both
Parties in any country of its own choice at its own cost in any country where
the Parties do not agree as to filing.
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(ii) Joint Inventions. For Joint Inventions, the Parties shall consult
and agree upon (i) which Party shall have the first right of election to
prepare and file a priority patent application for the Joint Invention, in the
name of both Parties, and (ii) sharing of costs.
The Party having the first right of election may elect to prepare and
file any such patent application at its own cost. Notwithstanding anything to
the contrary, if the Parties agreed to share costs, the non-filing Party shall
reimburse the filing Party in an amount equal to one-half of the reasonable
out-of-pocket expenses incurred by the filing Party in preparing and filing such
patent application, within thirty (30) days after receipt of an itemized invoice
from the filing Party.
Should the Party having the first right of election elect not to
prepare and/or file any such patent application, it shall (i) provide the other
Party with written notice as soon as reasonably possible after making such
election but in any event no later than sixty (60) days before the other Party
would be faced with a possible loss of rights in a Major Country, (ii) give the
other Party the right, at the other Party's election and sole expense, to
prepare and file the priority application in the name of both Parties, and (iii)
offer reasonable assistance to the other Party in connection with such
preparation and filing at no cost to the other Party except for reimbursement of
reasonable out-of-pocket expenses incurred by the Party owning the Invention in
rendering such assistance.
The filing Party shall perform corresponding foreign filings, at its
own cost and in the name of both Parties, after having discussed the countries
for foreign filings with the non-filing Party within nine (9) months after the
priority filing. Notwithstanding anything to the contrary, for corresponding
foreign filings filed in agreed upon countries, if the Parties agreed to share
costs, the non-filing Party shall reimburse the filing Party in an amount equal
to one-half of the reasonable out-of-pocket expenses incurred by the filing
Party in preparing and filing such corresponding foreign filings, within thirty
(30) days after receipt of an itemized invoice from the filing Party. Should the
Parties not agree on the countries for foreign filings, either Party will have
the right to file the subject of the priority application in the name of both
Parties in any country of its own choice at its own cost in any country where
the Parties do not agree as to filing.
(c) Prosecution and Maintenance.
(i) deCODE Inventions and Roche Inventions. The filing Party shall
prosecute and reasonably maintain applications filed under Section 10.2(b)(i)
and patents resulting therefrom at its own expense. On request of the filing
Party, the non-filing Party will cooperate in all reasonable ways in connection
with the prosecution and maintenance of such applications and patents resulting
therefrom, at the expense of the filing Party for all out-of-pocket expenses
incurred by the non-filing Party as a result of such cooperation. Upon written
request, the filing Party shall inform the non-filing Party
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of the issuance of such patent application, initiation of an appeal of a
rejection of such patent application, or initiation of an interference involving
or an opposition to any such patent application or patent resulting therefrom.
The filing Party shall provide the non-filing Party, upon the non-filing Party's
written request, with copies of substantive communications to and from patent
offices regarding such patent applications and patents resulting therefrom in
sufficient time before the due date for response in order to give the non-filing
Party an opportunity to comment on the content thereof.
Should the filing Party no longer wish to prosecute and/or maintain any
such patent application or patent resulting therefrom, the filing Party shall
(i) provide the non-filing Party with written notice of its wish no later than
sixty (60) days before the patent or patent application would otherwise become
abandoned, (ii) give the non-filing Party the right, at the non-filing Party's
election and sole expense (subject to the credit set forth below), to prosecute
and/or maintain such patent or patent application, and (iii) offer reasonable
assistance to the non-filing Party in connection with such prosecution and/or
maintenance at no cost to the non-filing Party except for reimbursement of the
filing Party's reasonable out-of-pocket expenses incurred by the filing Party in
rendering such assistance. The non-filing Party shall be entitled to recoup one
hundred percent (100%) of such Party's documented reasonable out-of-pocket
expenses incurred to prosecute and/or maintain such patents and/or patent
applications by taking a credit against any royalty payment otherwise due, as
shown on the Net Sales statement provided under Section 9.1, up to a maximum
credit, when combined with the credit provided pursuant to Section 10.2(c)(ii),
in any given calendar quarter equal to twenty-five percent (25%) of such royalty
payments otherwise due, until such amount has been fully credited.
(ii) Joint Inventions. The filing Party shall prosecute and reasonably
maintain applications filed under Section 10.2(b)(ii) and patents resulting
therefrom.
For a given patent application filed under Section 10.2(b)(ii), should
the non-filing Party have had an obligation under Section 10.2(b)(ii) to
reimburse the filing Party in an amount equal to one-half of the reasonable
out-of-pocket expenses incurred by the filing Party in preparing and filing such
patent application, then the non-filing Party shall reimburse the filing Party
in an amount equal to one-half of the reasonable out-of-pocket expenses incurred
by the filing Party in prosecuting and maintaining such application and patents
resulting therefrom, within thirty (30) days after receipt of an itemized
invoice from the filing Party. For a given patent application filed under
Section 10.2(b)(ii), should the non-filing Party have had no obligation under
Section 10.2(b)(ii) to reimburse the filing Party in an amount equal to one-half
of the reasonable out-of-pocket expenses incurred by the filing Party in
preparing and filing such patent application, then the filing Party shall
prosecute and reasonably maintain such application and patents resulting
therefrom at its own cost.
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On request of the filing Party, the non-filing Party will cooperate in
all reasonable ways in connection with the prosecution and maintenance of such
applications and patents resulting therefrom, at the expense of the filing Party
for all out-of-pocket expenses incurred by the non-filing Party as a result of
such cooperation. Upon written request, the filing Party shall inform the
non-filing Party of the issuance of such patent application, initiation of an
appeal of a rejection of such patent application, or initiation of an
interference involving or an opposition to any such patent application or patent
resulting therefrom. The filing Party shall provide the non-filing Party, upon
the non-filing Party's written request, with copies of substantive
communications to and from patent offices regarding such patent applications and
patents resulting therefrom in sufficient time before the due date for response
in order to give the non-filing Party an opportunity to comment on the content
thereof.
Should the filing Party no longer wish to prosecute and/or maintain any
such patent application or patent resulting therefrom, the filing Party shall
(i) provide the non-filing Party with written notice of its wish no later than
sixty (60) days before the patent or patent application would otherwise become
abandoned, (ii) give the non-filing Party the right, at the non-filing Party's
election and sole expense (subject to the credit set forth below), to prosecute
and/or maintain such patent or patent application, and (iii) offer reasonable
assistance to the non-filing Party in connection with such prosecution and/or
maintenance at no cost to the non-filing Party except for reimbursement of the
filing Party's reasonable out-of-pocket expenses incurred by the filing Party in
rendering such assistance. The non-filing Party shall be entitled to recoup the
percentage of such Party's documented reasonable out-of-pocket expenses incurred
to prosecute and/or maintain such patents and/or patent applications as the
filing Party had agreed was its share of costs relating thereto pursuant to the
first paragraph of Section 10.2(b)(ii). Such amount shall be recouped by the
non-filing Party by taking a credit against any royalty payment otherwise due,
as shown on the Net Sales statement provided under Section 9.1, up to a maximum
credit, when combined with the credit provided pursuant to Section 10.2(c)(i),
in any given calendar quarter equal to twenty-five percent (25%) of such royalty
payments otherwise due, until such amount has been fully credited.
11. PATENT ENFORCEMENT AND INFRINGEMENT.
11.1 Patent Enforcement.
(a) Notice. Each Party shall promptly provide written notice to the
other Party during the term of this Agreement of any (i) known infringement or
suspected infringement of a Program Patent, (ii) institution by a Third Party of
a proceeding for the purpose of revoking or holding unpatentable, invalid or
unenforceable a claim of a Program Patent, or (ii) unauthorized use or
misappropriation of any Program Know-How by a Third Party of which it becomes
aware.
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(b) Responsible Party. For Program Patents and Program Know-How solely
owned by a Party, the Party owning such Program Patent or Program Know-How shall
have the first right of election to (i) initiate an infringement suit or (ii)
take such appropriate action as is reasonably required to defend against such
potential revoking or holding unpatentable, invalid or unenforceable a claim of
a Program Patent, or (iii) take such other appropriate action as is required to
restrain or otherwise prevent such known or suspected infringement or
unauthorized use or misappropriation ("Responsible Party"). For Program Patents
and Program Know-How jointly owned by the Parties, within thirty (30) days after
written notice under Section 11.1(a), the Parties shall consult and agree upon
which Party shall be the Responsible Party.
(c) Initiation of Suit or Action. Within a period of one hundred and
twenty (120) days after the Responsible Party provides or receives written
notice under Section 11.1(a), the Responsible Party, in its sole discretion,
shall decide whether or not to (i) initiate an infringement suit, (ii) take such
appropriate action as is reasonably required to defend against such potential
revoking or holding unpatentable, invalid or unenforceable a claim of a Program
Patent, or (iii) take such other appropriate action as is reasonably required to
restrain or otherwise prevent such known or suspected infringement or
unauthorized use or misappropriation ("Suit or Action", collectively).
If, within the one hundred and twenty (120) day period, the Responsible
Party advises the other Party of a decision to initiate a Suit or Action, the
Responsible Party, at its own cost, shall promptly initiate such Suit or Action
and provide written notice to the other Party of such initiation.
In the event that the Responsible Party does not advise the other Party
within the one hundred and twenty (120) day period a decision to initiate such
Suit or Action, or if the Responsible Party advises the other Party within the
one hundred and twenty (120) day period a decision not to initiate such Suit or
Action, the other Party shall thereafter have the right, at its own cost, to
initiate such Suit or Action.
The Party initiating the Suit or Action ("Initiating Party") shall
provide written notice to the Responsible Party of such initiation. The
Initiating Party shall keep the other Party informed of the status of any such
Suit or Action and, upon the other Party's written request, shall provide the
other Party with copies of all substantive documents filed in, and all
substantive communications relating to such Suit or Action. If necessary, the
other Party shall join as a party to the Suit or Action but shall be under no
obligation to participate except to the extent such participation is required as
the result of being named party to the suit or proceeding. At the Initiating
Party's written request, the other Party shall offer reasonable assistance to
the Initiating Party at no charge except for reimbursement of reasonable
out-of-pocket expenses incurred by the other Party in rendering such assistance.
Reasonable assistance shall include, without limitation, the execution of such
legal papers as are reasonably necessary for the prosecution, settlement or
compromise of such Suit or Action.
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Each party shall have the right to be represented in any such Suit or
Action by counsel of its own choice at its own expense.
(d) Recovery. Any recovery obtained by any Party as a result of any
Suit or Action shall be applied first to reimburse each Party for all costs and
expenses related to such Suit or Action, and if after such reimbursement any
funds shall remain from such recovery, such remaining funds shall be allocated
[CONFIDENTIAL TREATMENT REQUESTED] to the Party instituting such Suit or Action,
and [CONFIDENTIAL TREATMENT REQUESTED] to the other Party, but in no event shall
the other Party be entitled to receive more than the amount of royalties such
other Party would have received if the infringing Third Party's sales were
deemed to be Net Sales under this Agreement.
(e) Settlement. Neither Party shall settle or compromise any such Suit
or Action in a manner which would restrict the scope or enforceability of any
Program Patent or Program Know-How jointly owned by the Parties without the
prior written consent of the other Party, which consent shall not be
unreasonably withheld.
11.2 Notice of Certification. Notwithstanding anything to the contrary
in Section 11.1, for a Program Patent claiming the making, having made, using,
offering for sale, selling or importing of a Product, should either Party
receive a certification from a Third Party under the "Drug Price Competition and
Patent Term Restoration Act of 1984" (Public Law 98-417), as amended, or its
comparable law in a country other than the USA, then such Party shall
immediately give written notice to the other Party of such certification. The
Responsible Party shall have twenty-one (21) days from the date such Party
received the certification to initiate suit. In the event the twenty-one (21)
day period expires without the Responsible Party having initiated a suit, the
other Party shall have the right, but not the obligation, to immediately bring
suit against the Third Party that filed the certification. If either Party
initiates a suit within the forty-five (45) day period, it will immediately
notify the other Party.
11.3 Infringement Actions by Third Parties. Each Party shall promptly
notify the other Party in the event that a Third Party at any time provides
written notice to, or commences an action, suit or proceeding against such Party
or such Party's Affiliates or sublicensees accusing infringement of patent
rights or unauthorized use or misappropriation of its technology owned or
controlled by such Third Party, based on an assertion or claim arising out of
(i) Roche's, its Affiliate's or its sublicensees making, having made, using,
offering for sale, selling or importing Roche Products in the Territory under
deCODE Know-How or deCODE Patents, including, without limitation, the making,
having made, or using of Candidate Genes or Validated Targets under deCODE
Patents or deCODE Know-How by Roche, its Affiliates or its Collaborators to
research and/or develop Roche Products; (ii) deCODE's, its Affiliate's or its
sublicensees making, having made, using, offering for sale, selling or importing
deCODE Products in the Territory under Roche Know-How or Roche Patents,
including, without limitation, the making, having made, or using of Candidate
Genes or Validated Targets under Roche Patents
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or Roche Know-How by deCODE, its Affiliates or its Collaborators to research
and/or develop deCODE Products; (iii) either Party's fulfilling its obligations
under any and all Research Programs under this Agreement. The accused Party
shall defend, settle or compromise such action, suit or proceeding at its own
discretion and at its own cost; provided, however, that at the accused Party's
written request, the other Party shall offer reasonable assistance to the
accused Party at no charge except for reimbursement of reasonable out-of-pocket
expenses incurred by the other Party in rendering such assistance. Reasonable
assistance shall include, without limitation, the execution of such legal papers
as are reasonably necessary for the defense, settlement or compromise of such
action, suit or proceeding. Each party shall have the right to be represented in
any such action, suit or proceeding by counsel of its own choice at its own
expense.
12. INDEMNIFICATION.
12.1 Research Activities. Each Party agrees to indemnify, defend and
hold the other Party, its Affiliates and its sublicensees, if any, and their
respective directors, officers, employees and agents, harmless from and against
any and all liabilities, damages, losses, or reasonable costs and expenses
(including the reasonable fees of attorneys and other professionals)
(collectively "Claims") arising out of the activities of the indemnifying Party
in the conduct of any Research Program, except to the extent such Claims arose
out of or resulted from the negligence, recklessness or wrongful intentional
acts or omissions of the other Party, its Affiliates, or its sublicensees, if
any, and their respective directors, officers, employees and agents.
12.2 Product Liability. Each Party shall indemnify, defend and hold the
other Party, its Affiliates and its sublicensees, if any, and their respective
directors, officers, employees and agents, harmless from and against any and all
Claims arising out of the manufacture, use, distribution or sale of any Product
by the indemnifying Party, its Affiliates or its sublicensees due to any
negligence, recklessness or wrongful intentional acts or omissions by, or strict
liability of, the indemnifying Party, its Affiliates or its sublicensees, if
any, and their respective directors, officers, employees and agents, except, in
each case, to the extent such Claims are due to the negligence, recklessness or
wrongful intentional acts or omissions of the other Party, its Affiliates or its
sublicensees, if any, and their respective directors, officers, employees and
agents.
12.3 Notice. In the event that either Party is seeking indemnification
under Section 12.1 or 12.2, such Party shall inform the indemnifying Party of a
Claim as soon as reasonably practicable after it receives notice of the Claim,
shall permit the indemnifying Party to assume direction and control, at its
expense, of the defense of the Claim (including the sole right to settle the
claim at the sole discretion of the indemnifying Party, provided that such
settlement does not impose any material financial obligation on the indemnified
Party), and shall cooperate as requested (at the expense of the indemnifying
Party) in the defense of the Claim. The indemnified Party may, at
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its option and expense, be represented in the defense of the Claim by counsel of
its own choice.
13. PUBLICATION; NON-DISCLOSURE.
13.1 Publication.
(a) Manuscript. Both Parties recognize that each may wish to publish
the results of their scientific work relating to the Research Programs. However,
both Parties also recognize the importance of acquiring patent protection and of
maintaining Confidential Information as proprietary. Consequently, subject to
any applicable laws or regulations obligating either Party to do otherwise, any
proposed publication or oral presentation by either Party shall comply with this
Section 13.1. At least ninety (90) days before a manuscript is to be submitted
to a publisher, the publishing Party will provide the chairperson and secretary
of the Steering Committee with a copy of the manuscript]. If the publishing
Party wishes to make an oral presentation, it will provide the other Party
("Reviewing Party") with a copy of the abstract (if one is submitted) at least
forty (40) days before it is to be submitted. The publishing Party will also
provide to the Reviewing Party a copy of the text of the presentation, including
all slides, posters, and any other visual aids, at least forty (40) days before
the presentation is made.
(b) Review of Manuscript. The Reviewing Party in good faith will review
the manuscript, abstract, text or any other material provided under Section
13.1(a) ("Proposed Publication") to determine whether the Proposed Publication
(i) contains an Invention for which the Reviewing Party desires patent
protection or (ii) could reasonably be expected to have a material adverse
effect on the commercial value of any Confidential Information that the
Reviewing Party reasonably wishes to have remain proprietary. The Reviewing
Party will notify (each, a "Withdrawal Notice") the publishing Party within
thirty (30) days of receipt of the Proposed Publication if the Reviewing Party,
in good faith, determines that the Proposed Publication (i) contains an
Invention for which the Reviewing Party desires patent protection or (ii) could
reasonably be expected to have a material adverse effect on the commercial value
of any Confidential Information that the Reviewing Party reasonably wishes to
have remain proprietary.
(c) Delay or Withdrawal. If the Reviewing Party provides a Withdrawal
Notice that the Proposed Publication (i) contains an Invention for which the
Reviewing Party desires patent protection, the publishing Party shall delay its
publication or presentation for a period of ninety (90) days from the date of
such Withdrawal Notice, extendible upon mutual agreement, to allow for the
filing of a priority patent application claiming the Invention. If the Reviewing
Party provides a Withdrawal Notice that the Proposed Publication could
reasonably be expected to have a material adverse effect on the commercial value
of any Confidential Information that the Reviewing Party reasonably wishes to
have remain proprietary, the Reviewing Party shall recommend
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changes it reasonably believes necessary to preserve the Confidential
Information as proprietary. If the Proposed Publication contains Confidential
Information that was disclosed by the Reviewing Party to the publishing Party
under this Agreement, the publishing Party shall incorporate such recommended
changes. For all other Confidential Information, the Parties will consult in
good faith and agree on mutually acceptable modifications to the Proposed
Publication to avoid disclosure of such Confidential Information.
13.2 Non-Disclosure and Non-use; Exceptions. During the term of this
Agreement and for five (5) years thereafter, a Receiving Party shall (i) treat
Confidential Information provided by a Disclosing Party under this Agreement as
it would treat its own Confidential Information of a similar nature and take all
reasonable precautions not to disclose such Confidential Information to third
parties except Affiliates or potential sublicensees who agree to be bound by the
same terms and conditions as found in this Section 13, without the Disclosing
Party's prior written authorization and (ii) not use such Confidential
Information for other than fulfilling its obligations under this Agreement. The
provisions of this Section 13.2 shall not apply to such Confidential Information
which the Receiving Party can demonstrate by competent written proof:
(a) was known or used by the Receiving Party or its Affiliates prior to
the date of disclosure to the Receiving Party or its Affiliates by the
Disclosing Party; or
(b) either before or after the date of the disclosure to the Receiving
Party or its Affiliates, is lawfully disclosed to the Receiving Party or its
Affiliates by a third party rightfully in possession of such Confidential
Information and not under an obligation of confidentiality to the Disclosing
Party with respect to such Confidential Information; or
(c) either before or after the date of the disclosure to the Receiving
Party or its Affiliates, becomes published or generally known to the public
through no fault or omission on the part of the Receiving Party or its
Affiliates, but such inapplicability applies only after such Confidential
Information is published or becomes generally known; or
(d) is independently developed by the Receiving Party or its Affiliates
without reference to or reliance upon Confidential Information of the Disclosing
Party or its Affiliates; or
(e) is required to be disclosed by the Receiving Party, its Affiliates
or its sublicensees to comply with applicable laws, to defend or prosecute
litigation or to comply with governmental regulations; provided, however, the
Receiving Party, its Affiliate or sublicensee provides prior written notice of
such disclosure to the Disclosing Party or its Affiliates and, to the extent
practicable, takes reasonable and lawful actions to avoid and/or minimize the
degree of such disclosure.
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13.3 Authorized Disclosure. The provisions of Section 13.2 shall not
prevent either Party from (i) preparing, filing, prosecuting or maintaining
patent applications or patents related to an Invention or a Product, or (ii)
disclosing Confidential Information to persons working on behalf of the
Receiving Party or to governmental agencies, to the extent the Receiving Party
reasonably believes it is required or desirable to secure government approval
for the development or marketing of a Product, or (iii) upon imminent
Registration of a Product in a country, disclosing Confidential Information to
the extent reasonably necessary to promote the use and sale of the Product in
the country.
13.4 Injunctive Relief. The Parties acknowledge that monetary damages
alone may not adequately compensate the Disclosing Party in the event of a
breach by the Receiving Party of this Section 13, and that, in addition to all
other remedies available to the Disclosing Party at law or in equity, it may be
entitled to injunctive relief for the enforcement of its rights under this
Section 13 and to an accounting of profits made during the period of any breach
of the Receiving Party's obligations under this Section 13.
13.5 Third Parties. Unless otherwise agreed to in writing, each Party
shall require all Third Parties, including consultants, Collaborators,
subcontractors, sublicensees or agents involved in fulfilling its obligations
under this Agreement, to be bound by the same terms and conditions as found in
this Section 13.
14. TERM; TERMINATION.
14.1 Term; Expiration. This Agreement shall commence as of the
Effective Date and, unless sooner - terminated as provided hereunder, shall
expire as follows:
(a) As to each Roche Product in each country in the Territory, this
Agreement shall expire upon the expiration of the Royalty Term with respect to
such Roche Product in such country.
(b) As to each deCODE Product in each country in the Territory, this
Agreement shall expire upon the expiration of the Royalty Term with respect to
such deCODE Product in such country.
(c) This Agreement shall expire in its entirety upon the termination of
the Royalty Term with respect to all Roche Products and all deCODE Products
throughout the Territory.
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14.2 Effect of Expiration.
(a) Following expiration of the term of this Agreement with respect to
a Roche Product in a country in the Territory pursuant to Section 14.1(a), Roche
shall have the fully-paid, royalty-free, perpetual right and license to continue
to make, have made, use, offer for sale, sell and import such Roche Product in
such country. Following expiration of the term of this Agreement in its entirety
with respect to all Roche Products pursuant to Section 14.1(c), Roche shall have
the fully-paid, worldwide, royalty-free, perpetual right and license to continue
to make, have made, use, offer for sale, sell and import all Roche Products in
the Territory.
(b) Following expiration of the term of this Agreement with respect to
a deCODE Product in a country in the Territory pursuant to Section 14.1(b),
deCODE shall have the fully-paid, royalty-free, perpetual right and license to
continue to make, have made, use, offer for sale, sell and import such deCODE
Product in such country. Following expiration of the term of this Agreement in
its entirety with respect to all deCODE Products pursuant to Section 14.1(c),
deCODE shall have the fully-paid, worldwide, royalty-free, perpetual right and
license to continue to make, have made, use, offer for sale, sell and import all
deCODE Products in the Territory.
14.3 Termination Without Cause. -
(a) During the Research Term. During the Research Term, subject to
Sections 14.5, 14.6, 14.7 and 14.8, neither Party may terminate this Agreement
for any reason.
(b) After the Research Term.
(i) By Roche. Subject to Section 14.8, commencing at the end of the
Research Term, at any time during the term of this Agreement, Roche may, for any
reason, without affecting or altering Roche's other obligations under this
Agreement, terminate all rights and licenses by deCODE to Roche under this
Agreement by giving six (6) month's prior written notice to deCODE. In such
event deCODE shall be entitled to continue to exercise the rights granted to it
under this Agreement. The effective date of such termination shall be the date
six (6) months after Roche provides such written notice to deCODE. After the
effective date of such termination, in no event shall Roche, its Affiliates or
sublicensees make, have made, use, offer for sale, sell or import any Roche
Product for any Disease.
(ii) By deCODE. deCODE may, at any time and for any reason, without
affecting or altering deCODE's other obligations under this Agreement, terminate
all rights and licenses by Roche to deCODE under this Agreement with respect to
a Disease by giving six (6) month's prior written notice to Roche. In such event
Roche shall be entitled to continue to exercise the rights granted to it under
this Agreement.
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The effective date of such termination shall be the date six (6) months after
deCODE provides such written notice to Roche. After the effective date of such
termination, in no event shall deCODE, its Affiliates or sublicensees make, have
made, use, offer for sale, sell or import any deCODE Product for any Disease.
(c) Obligations. Termination of this Agreement by a terminating Party
under Section 14.3(b) shall not release the terminating Party, or its Affiliates
or sublicensees from any obligation to make payments or to pay royalties or the
percentage of Sublicensing Income to the other Party under this Agreement that
accrue prior to the effective date of such termination.
(d) Inventory. In the event of termination by a Party under Section
14.3(b), the terminating Party, its Affiliates and sublicensees shall have the
right for one (1) year after the effective date of such termination to sell or
otherwise dispose of all Products then in its inventory, and shall pay royalties
and the percentage of Sublicensing Income thereon, in accordance with the
provisions of this Agreement, as though the Agreement had not terminated. After
the first anniversary of the effective date of a termination by a terminating
Party under Section 14.3(b), in no event shall the terminating Party, its
Affiliates or sublicensees sell or otherwise dispose of a Product.
(e) Effect of Termination Without Cause. Following any such termination
of this Agreement by Roche pursuant to Section 14.3(b)(i): (i) all licenses
granted by deCODE to Roche under Section 7 and any other applicable Section of
this Agreement shall terminate; (ii) at deCODE's request, Roche shall transmit
to deCODE all reports, information and data in the possession or control of
Roche, its Affiliates or its sublicensees relating to Abandoned Products
(provided that Roche has the right to make available such information to deCODE)
within sixty (60) days after the date of such termination; and (iii) at deCODE's
request, Roche shall assign, and shall cause its Affiliates and sublicensees to
assign, to deCODE all regulatory filings and Registrations in the possession or
control of Roche, its Affiliates or its sublicensees as would enable deCODE to
carry on the development and/or marketing of Abandoned Products in the
Territory, within sixty (60) days of such termination.
Following any such termination of this Agreement by deCODE pursuant to
Section 14.3(b)(ii), all licenses granted by Roche to deCODE under Section 7 and
any other applicable Section of this Agreement shall terminate.
14.4 Effect of Abandonment.
(a) Therapeutic Products for a Selected Disease.
(i) Following a termination of this Agreement by Roche with respect to
all Therapeutic Products for a Selected Disease pursuant to Section 6.3(a)(i)
before obtaining a Validated Target for the Selected Disease, all licenses
granted by
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deCODE to Roche under Section 7 and any other applicable Section of this
Agreement shall terminate with respect to Therapeutic Products for such Selected
Disease. At deCODE's request, within sixty (60) days after the date of such
termination, Roche shall [CONFIDENTIAL TREATMENT REQUESTED].
(ii) Following a termination of this Agreement by Roche with respect to
all Therapeutic Products for a Selected Disease pursuant to Section 6.3(a)(i)
after obtaining a Validated Target for the Selected Disease and prior to the
first Registration in any Major Country of a Therapeutic Product for the
Selected Disease, all licenses granted by deCODE to Roche under Section 7 and
any other applicable Section of this Agreement shall terminate with respect to
Therapeutic Products for such Selected Disease. In addition, at deCODE's
request, within sixty (60) days after the date of such termination:
[CONFIDENTIAL TREATMENT REQUESTED].
(iii) Following a termination of this Agreement by Roche with respect
to all Therapeutic Products for a Selected Disease in a given Major Country
pursuant to Section 6.3(a)(ii) after the first Registration in any Major Country
of a Therapeutic Product for the Selected Disease, all licenses granted by
deCODE to Roche under Section 7 and any other applicable Section of this
Agreement shall terminate with respect to Therapeutic Products for such Selected
Disease in the given Major Country. In addition, at deCODE's request, within
sixty (60) days after the date of such termination: [CONFIDENTIAL TREATMENT
REQUESTED].
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(b) Diagnostic Products for a Selected Disease.
(i) Following a termination of this Agreement by Roche with respect to
all Diagnostic Products for a Selected Disease pursuant to Section 6.3(b)(i)
prior to the first Registration in any Major Country of a Diagnostic Product for
the Selected Disease, all licenses granted by deCODE to Roche under Section 7
and any other applicable Section of this Agreement shall terminate with respect
to such Diagnostic Products for such Selected Disease. In addition, at deCODE's
request, within sixty (60) days after the date of such termination:
[CONFIDENTIAL TREATMENT REQUESTED].
(ii) Following a termination of this Agreement by Roche with respect to
all Diagnostic Products for a Selected Disease in a given Major Country pursuant
to Section 6.3(b)(ii) after the first Registration in any Major Country of a
Diagnostic Product for the Selected Disease, all licenses granted by deCODE to
Roche under Section 7 and any other applicable Section of this Agreement shall
terminate with respect to Diagnostic Products for such Selected Disease in the
given Major Country. In addition, at deCODE's request, within sixty (60) days
after the date of such termination: [CONFIDENTIAL TREATMENT REQUESTED].
(c) Roche Product. Following a termination of this Agreement in a given
country by Roche with respect to a Roche Product pursuant to Section 6.4(c)
after such Roche Product was the subject of a Registration in the given country,
all licenses granted by deCODE to Roche under Section 7 and any other applicable
Section of this Agreement shall terminate with respect to the Roche Product in
the country. In addition, at deCODE's request, within sixty (60) days after the
date of such termination: [CONFIDENTIAL TREATMENT REQUESTED]
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[CONFIDENTIAL TREATMENT REQUESTED]
14.5 Breach by Roche Other than Under Section 6.2 or 6.4.
(a) Procedure.
(i) Failure by Roche to comply with any of its material obligations
contained in this Agreement, other than an obligation under Section 6.2 or 6.4,
shall entitle deCODE to give to Roche written notice ("Default Notice")
specifying the nature of the default and specifically stating that deCODE
intends to terminate this Agreement in the event Roche should fail to cure the
default.
(ii) Roche shall have a period ("Cure Period") of thirty (30) days
after a Default Notice to cure such default in the case of a payment default,
and ninety (90) days after a Default Notice in the case of all other defaults.
Such ninety (90) day period shall be extended to end one hundred and twenty
(120) days after a Default Notice, or otherwise as the Parties may agree, if
Roche within sixty (60) days after such Default Notice in good faith commences
and diligently continue actions to cure such default.
(iii) If, after a Cure Period, Roche does not cure the relevant
default, deCODE shall be entitled, without prejudice to any of its other rights
conferred on it by this Agreement, and in addition to any other remedies
available to it by law or in equity, to give a written notice either:
(1) terminating this Agreement in its entirety; or
(2) without affecting or altering Roche's other obligations under this
Agreement, terminating all rights licensed by deCODE to Roche under this
Agreement, in which event deCODE shall be entitled to continue to exercise the
rights granted to it under this Agreement.
(iv) The effective date of any such termination shall be the date that
Roche receives such notice pursuant to the preceding clause.
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(b) Effect of Such Breach.
(i) If deCODE terminates this Agreement in its entirety, after the
effective date of termination, in no event shall either Party, its Affiliates or
sublicensees make, have made, use, offer for sale, sell or import any Product
for any Disease.
(ii) If deCODE, without affecting or altering Roche's other obligations
under this Agreement, terminates all rights licensed by deCODE to Roche under
this Agreement (in which event deCODE shall be entitled to continue to exercise
the rights granted to it under this Agreement), then after the effective date of
such termination in no event shall Roche, its Affiliates or sublicensees make,
have made, use, offer for sale, sell or import any Roche Product for any
Disease. In addition, as to any Selected Disease for which a Validated Target
has been obtained, at deCODE's request, within sixty (60) days after the
effective date of such termination: [CONFIDENTIAL TREATMENT REQUESTED].
14.6 Breach of Efforts Obligation by Roche.
(a) Therapeutic Efforts for a Disease.
(i) If it is agreed by the Parties, or if it is resolved in accordance
with Section 16.13, that Roche, within the Evidence Period provided for in
Section 6.2(a)(i), has not [CONFIDENTIAL TREATMENT REQUESTED].
In addition, at deCODE's request, within sixty (60) days after the
effective date of such termination: [CONFIDENTIAL TREATMENT REQUESTED]
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[CONFIDENTIAL TREATMENT REQUESTED]
(ii) If it is agreed by the Parties, or if it is resolved in accordance
with Section 16.13, that Roche, within the Evidence Period provided for in
Section 6.2(a)(ii), has not [CONFIDENTIAL TREATMENT REQUESTED].
In addition, at deCODE's request, within sixty (60) days after the
effective date of such termination: [CONFIDENTIAL TREATMENT REQUESTED].
(b) Diagnostic Products for a Disease.
(i) If it is agreed by the Parties, or if it is resolved in accordance
with Section 16.13, that Roche, within the Evidence Period provided for in
Section 6.2(b)(i), has not [CONFIDENTIAL TREATMENT REQUESTED]
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[CONFIDENTIAL TREATMENT REQUESTED].
In addition, at deCODE's request, within sixty (60) days after the
effective date of such termination: [CONFIDENTIAL TREATMENT REQUESTED]
(ii) If it is agreed by the Parties, or if it is resolved in accordance
with Section 16.13, that Roche, within the Evidence Period provided for in
Section 6.2(b)(ii), has not [CONFIDENTIAL TREATMENT REQUESTED].
In addition, at deCODE's request, within sixty (60) days after the
effective date of such termination: [CONFIDENTIAL TREATMENT REQUESTED]
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14.7 No Sales After Registration.
(a) If it is agreed by the Parties, or if it is resolved in accordance
with Section 16.13, that Roche, within the Evidence Period provided for in
Section 6.4(b), has not [CONFIDENTIAL TREATMENT REQUESTED].
(b) In addition, at deCODE's request, within sixty (60) days after the
date of such termination: [CONFIDENTIAL TREATMENT REQUESTED].
14.8 Breach by deCODE.
(a) Procedure.
(i) Failure by deCODE to comply with any of its material obligations
contained in this Agreement, shall entitle Roche to give to deCODE written
notice ("Default Notice") specifying the nature of the default and specifically
stating that Roche intends to terminate this Agreement in the event deCODE
should fail to cure the default.
(ii) deCODE shall have a period ("Cure Period") of thirty (30) days
after a Default Notice to cure such default in the case of a payment default,
and ninety (90) days after a Default Notice in the case of all other defaults.
Such ninety (90) day period shall be extended to end one hundred and twenty
(120) days after a Default Notice, or otherwise as the Parties may agree, if
deCODE within sixty (60) days after
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such Default Notice in good faith commences and diligently continue actions to
cure such default.
(iii) If, after a Cure Period, deCODE does not cure the relevant
default, Roche shall be entitled, without prejudice to any of its other rights
conferred on it by this Agreement, and in addition to any other remedies
available to it by law or in equity, to give a written notice either:
(1) terminating this Agreement in its entirety; or
(2) without affecting or altering deCODE's other obligations under this
Agreement, terminating all rights licensed by Roche to deCODE under this
Agreement in whole, in which event Roche shall be entitled to continue to
exercise the rights granted to it under this Agreement.
(iv) The effective date of termination shall be the date that deCODE
receives such notice pursuant to the preceding clause.
(b) Effect of Such Breach.
(i) If Roche terminates this Agreement in its entirety, after the
effective date of termination, in no event shall either Party, its Affiliates or
sublicensees make, have made, use, offer for sale, sell or import any Product
for any Disease.
(ii) If Roche, without affecting or altering deCODE's other obligations
under this Agreement, terminates all rights licensed by Roche to deCODE under
this Agreement in whole (in which event Roche shall be entitled to continue to
exercise the rights granted to it under this Agreement), after the effective
date of such termination in no event shall deCODE, its Affiliates or
sublicensees make, have made, use, offer for sale, sell or import any deCODE
Product for any Disease.
14.9 Obligations. In no event shall a termination under Section 5.2(d),
Section 6 or under this Section 14 release a Party or its Affiliates or
sublicensees from any obligation to make payments or to pay royalties or a
percentage of Sublicensing Income to the other Party under this Agreement that
accrued prior to the effective date of termination.
14.10 Termination of Sublicenses. Upon any termination by Roche under
Section 5.2, 6.3(a), 6.3(b), 6.4(c) or 14.3(b)(i), or by deCODE under Section
14.6(a), 14.6(b), 14.7 or 14.5(a)(iii), all sublicenses granted by Roche under
this Agreement with respect to the rights and license being terminated shall
terminate simultaneously, subject, nevertheless, in the case of termination by
Roche under Section 14.3(b)(i), to Section 14.3(d). Upon any termination by
deCODE under Section 14.3(b)(ii) or by Roche under Section 14.8, all sublicenses
granted by deCODE under this Agreement with respect to
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the rights and license being terminated shall terminate simultaneously, subject,
nevertheless, in the case of termination by deCODE under Section 14.3(b)(ii), to
Section 14.3(d).
14.11 Surviving Obligations. Termination of this Agreement in its
entirety or expiration of this Agreement shall not terminate the Parties' rights
and obligations under Sections 5.6, 5.7(a)(v), 5.7(a)(vi), 5.8, 5.11(b), 9, 11
(only to the extent that a Suit or Action has been commenced prior to the date
of such termination or expiration), 12, 13.2, 13.3, 13.5, 14, 16.3, 16.4, 16.6,
16.12 and 16.13 which shall survive termination or expiration hereof, as well as
any other provision intended by the Parties to survive any such termination or
expiration hereof.
14.12 No Waiver. The right of deCODE to terminate under Section 14.5,
Section 14.6 or Section 14.7 and of Roche to terminate under Section 14.8, shall
not be affected in any way by a waiver or failure to take action with respect to
any previous default. An election of remedy by a Party for a material breach of
this Agreement under this Section on one occasion shall not constitute a waiver
as to any other remedy that may be available to such Party under this Section 14
as to any material breach on another occasion.
14.13 Dispute. And any dispute concerning whether a Party is in default
under the terms of this Agreement shall be referred for resolution in accordance
with Section 16.13. The effectiveness of any notice given pursuant to this
Section shall be tolled during and until such resolution of such dispute.
15. FORCE MAJEURE.
15.1 Events of Force Majeure. Neither Party shall be held liable or
responsible to the other Party nor be deemed to be in default under or in breach
of any provision of this Agreement for failure or delay in fulfilling or
performing any obligation of this Agreement when such failure or delay is due to
force majeure, and without the fault or negligence of the Party so failing or
delaying. For purposes of this Agreement, force majeure is defined as causes
beyond the control of the Party, including, without limitation, acts of God;
acts, regulations, or laws of any government; war; civil commotion; destruction
of production facilities or materials by fire, flood, earthquake, explosion or
storm; labor disturbances; epidemic; and failure of public utilities or common
carriers. In such event Roche or deCODE, as the case may be, shall immediately
notify the other Party of such inability and of the period for which such
inability is expected to continue. The Party giving such notice shall thereupon
be excused from such of its obligations under this Agreement as it is thereby
disabled from performing for so long as it is so disabled and the thirty (30)
days thereafter. The disabled Party shall also give notice immediately upon the
termination of the force majeure. To the extent possible, each Party shall use
reasonable efforts to minimize the duration of any force majeure.
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16. MISCELLANEOUS.
16.1 Relationship of Parties. Nothing in this Agreement is intended or
shall be deemed to constitute a partnership, agency, employer-employee or joint
venture relationship between the Parties. Each Party's performance under this
Agreement is that of a separate entity.
16.2 Assignment. Neither Party shall be entitled to assign its rights
hereunder without the express written consent of the other Party hereto, except
that both Roche and deCODE may otherwise assign their respective rights and
transfer their respective duties hereunder to any assignee of all or
substantially all of their respective businesses (or that portion thereof to
which this Agreement relates) or in the event of their respective merger or
consolidation or similar transaction. No assignment and transfer shall be valid
or effective unless and until the assignee/transferee shall agree in writing to
be bound by the provisions of this Agreement. Notwithstanding anything to the
contrary, during the Research Term, in no event shall deCODE be entitled to
assign its rights hereunder without the express written consent of Roche.
Notwithstanding anything to the contrary, without notice to the other Party,
either Party may at any time and for any reason assign all or certain rights and
obligations to its Affiliates who agree to be bound by the terms and conditions
of this Agreement; provided that such Party shall remain liable for all
obligations assigned to its Affiliates.
16.3 Disclaimer of Warranties. THE PARTIES EXPRESSLY DISCLAIM ALL
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR NON-INFRINGEMENT OF THIRD
PARTY RIGHTS, UNLESS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT.
16.4 Further Actions. Each Party agrees to execute, acknowledge and
deliver such further instruments, and to do all such other acts, as may be
necessary or appropriate in order to carry out the purposes and intent of this
Agreement.
16.5 Notice. Any notice or request required or permitted to be given
under or in connection with this Agreement shall be deemed to have been
sufficiently given if in writing and personally delivered or sent by certified
mail (return receipt requested), or overnight express courier service (signature
required), prepaid, to the Party for which such notice is intended, at the
address set forth for such Party below:
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(a) In the case of Roche, to:
F.Hoffmann-La Roche Ltd
Grenzacherstrasse 124
CH-4070 Basel
Switzerland
Attention: Corporate Law
and to:
Hoffmann-La Roche Inc.
340 Kingsland Street
Nutley, New Jersey 07110
Attention: Corporate Secretary
(b) In the case of deCODE, to:
deCODE genetics, Inc.
Lynghalsi 1
IS-110 Reykjavik
ICELAND
Attention: President
or to such other address for such Party as it shall have specified by like
notice to the other Party, provided that notices of a change of address shall be
effective only upon receipt thereof. If delivered personally, the date of
delivery shall be deemed to be the date on which such notice or request was
given, unless otherwise set forth in this Agreement. If sent by overnight
express courier service, the date of delivery shall be deemed to be the next
business day after such notice or request was deposited with such service,
unless otherwise set forth in this Agreement. If sent by certified mail, the
date of delivery shall be deemed to be the third business day after such notice
or request was deposited with the U.S. Postal Service, or the foreign equivalent
thereto, unless otherwise set forth in this Agreement.
16.6 Use of Name. Except as otherwise provided herein, neither Party
shall have any right, express or implied, to use in any manner the name or other
designation of the other Party or any other trade name or trademark of the other
Party for any purpose, without the prior written consent of the other Party.
16.7 Public Announcements.
(a) Disclosure of Agreement and Press Release. Except as required by
law (including, without limitation, disclosure requirements of the U.S.
Securities and Exchange Commission, Nasdaq or any other stock exchange on which
securities issued
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by deCODE are traded) and as permitted by Section 13.1, neither Party shall make
any public announcement concerning this Agreement, the Equity Agreement, or the
subject matter hereof or thereof, without the prior written consent of the other
Party, which shall not be unreasonably withheld. It shall not be unreasonable
for a Party to withhold consent with respect to any public announcement
containing any Confidential Information of such Party or the financial terms of
this Agreement. In the event of a required public announcement, the Party making
such announcement shall provide the other Party with a copy of the proposed text
prior to such announcement sufficiently in advance of the scheduled release of
such announcement to afford such other Party a reasonable opportunity to review
and comment upon the proposed text, which comment shall be incorporated unless
prohibited by law, as determined by counsel to the Party required to make such
public announcements. The Parties agree that each may make an initial public
announcement consistent with the form of announcement contained as Exhibit E.
(b) Exceptions. Nothing in Section 13 or Section 16.7 shall prevent
deCODE in connection with efforts to secure financing at any time during the
term of this Agreement, from issuing statements as to achievements made or the
status of the work being done by the Parties under this Agreement
("Statements"), so long as such Statements do not jeopardize the ability to
obtain patent protection on Inventions or disclose Confidential Information;
provided (except in the case of a public offering) the recipients of such
Statements agree in writing to maintain such Statements in confidence.
Nothing in Section 13 or Section 16.7 shall prevent deCODE from issuing
Statements necessary to comply with applicable law (including the disclosure
requirements of the U.S. Securities and Exchange Commission, Nasdaq or any other
stock exchange on which securities issued by deCODE are traded); provided that
deCODE shall provide Roche with a copy of the proposed text of such Statements
sufficiently in advance of the scheduled release thereof to afford Roche a
reasonable opportunity to review and comment upon the proposed text and discuss
any disagreements thereon.
16.8 Waiver. A waiver by either Party of any of the terms and
conditions of this Agreement in any instance shall not be deemed or construed to
be a waiver of such term or condition for the future, or of any subsequent
breach hereof. All rights, remedies, undertakings, obligations and agreements
contained in this Agreement shall be cumulative and none of them shall be in
limitation of any other remedy, right, undertaking, obligation or agreement of
either Party.
16.9 Compliance with Law. Nothing in this Agreement shall be deemed to
permit a Party to export, reexport or otherwise transfer any Technical
Information or Product under this Agreement without compliance with applicable
laws.
16.10 Severability. When possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any
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provision of this Agreement is held to be prohibited by or invalid under
applicable law, such provision will be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of this Agreement.
16.11 Amendment. No amendment, modification or supplement of any
provisions of this Agreement shall be valid or effective unless made in writing
and signed by a duly authorized officer of each Party.
16.12 Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Delaware.
16.13 Arbitration.
(a) Escalation. In the event the Parties are unable to resolve any
dispute, controversy or claim arising out of this Agreement, or the breach,
termination or invalidity thereof ("Dispute"), the Parties shall refer such
Dispute for further review and resolution to the Executive Officers of each
Party. The Executive Officers of each Party shall use reasonable efforts to
resolve the matter within thirty (30) days after the matter is referred to them.
(b) Binding Arbitration. If the Executive Officers cannot resolve the
Dispute within thirty (30) days, then such Dispute shall be settled by final and
binding arbitration pursuant to the then current commercial arbitration rules of
the American Arbitration Association ("AAA") as provided below:
(i) The Arbitration Tribunal shall consist of three (3) arbitrators.
Each Party shall nominate in the request for arbitration and the answer thereto
one (1) arbitrator and the two (2) arbitrators so named will then jointly
appoint the third arbitrator as chairman of the Arbitration Tribunal. If one
Party fails to nominate its arbitrator or, if the Party's arbitrators cannot
agree on the person to be named as chairman within sixty (60) days, the AAA
shall make the necessary appointments of arbitrator or chairman.
(ii) The place of arbitration shall be in New York, New York and the
arbitration proceedings shall be held in English.
(iii) The award of the Arbitration Tribunal shall be final and judgment
upon such an award may be entered in any competent court or application may be
made to any competent court for juridical acceptance of such an award and order
of enforcement.
(c) Injunctive Relief. Section 16.13(b) shall not prohibit a Party from
seeking - injunctive relief from a court of competent jurisdiction in the event
of a breach
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or prospective breach of this Agreement by the other Party which would cause
irreparable harm to the first Party.
16.14 Entire Agreement. This Agreement, together with the Exhibits,
which are attached hereto and made a part hereof, sets forth the entire
agreement and understanding between the Parties as to the subject matter hereof
and merges all prior discussions and negotiations between them, and neither of
the Parties shall be bound by any conditions, definitions, warranties,
understandings or representations with respect to such subject matter other than
as provided herein or as duly set forth on or subsequent to the date hereof in
writing and signed by a proper and duly authorized officer or representative of
the Party to be bound thereby.
16.15 Parties in Interest and Bankruptcy.
(a) All the terms and provisions of this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the Parties hereto and their
respective permitted successors and assigns under Section 16.2.
(b) Notwithstanding anything to the contrary, in the event that either
Party shall become insolvent, shall make an assignment to the benefit of
creditors, or shall have a petition in bankruptcy filed for or against it
(which, in the case of an involuntary petition, is not dismissed or stayed
within sixty (60) days after such petition is filed) ("Bankrupt Party"), the
other Party shall have the right to terminate this entire Agreement immediately
upon written notice of such termination and the provisions of Section 14.5 or
Section 14.8, as the case may be, shall apply. All rights and licenses granted
by the Bankrupt Party under this Agreement are, and shall otherwise be deemed to
be, for purposes of Section 365(n) of Title 11, US Code (the "Bankruptcy Code"),
licenses of rights to "intellectual property" as defined under Section 101(60)
of the Bankruptcy Code. Unless the other Party elects to terminate this
Agreement under this Section 16.15(b), the Parties agree that the other Party,
as a licensee of such rights under this Agreement, shall retain and may fully
exercise all of its rights and elections under the Bankruptcy Code, subject to
the continued fulfillment of its obligations under this Agreement.
16.16 Descriptive Headings. The descriptive headings of this Agreement
are for convenience only, and shall be of no force or effect in construing or
interpreting any of the provisions of this Agreement.
16.17 Counterparts. This Agreement may be executed simultaneously in
any number of counterparts, any one of which need not contain the signature of
more than one Party but all such counterparts taken together shall constitute
one and the same agreement.
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16.18 Interpretation. All defined terms used in this Agreement shall
have the meaning assigned to such term under this Agreement whether used in the
singular or plural.
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<PAGE> 93
IN WITNESS WHEREOF Hoffmann-La Roche Inc., F.Hoffmann-LaRoche Ltd, and deCODE
genetics, Inc. have caused this Agreement to be duly executed by their
authorized representatives on the dates written below.
HOFFMAN-LA ROCHE INC.
By: /s/ Dennis Y. Loh
Name: Dennis Y. Loh
Title: Vice President
Date: Jan. 23, 1998
F.HOFFMANN-LA ROCHE LTD
By:/s/ R. Schaffner By: /s/ Jonathan K.C. Knowles
Name: R. Schaffner Name: Jonathan K.C. Knowles
Title:Head of Pharma Licensing Title: President of Global Research
Date: Jan. 23, 1998 Date: Feb 2, 1998
DECODE GENETICS, INC.
By:/s/ Kari Stefansson
Name: Kari Stefansson
Title: President
Date:
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<PAGE> 94
EXHIBIT A
PRIMARY DISEASES
[CONFIDENTIAL TREATMENT REQUESTED]
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<PAGE> 95
EXHIBIT B
SECONDARY DISEASES
[CONFIDENTIAL TREATMENT REQUESTED]
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<PAGE> 96
EXHIBIT C
ENGLISH LANGUAGE TRANSLATION OF INFORMED CONSENT FORM
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<PAGE> 97
DECLARATION OF CONSENT
TO PARTICIPATE IN A STUDY OF THE HEREDITY OF XXXXX
I, the undersigned, having agreed to participate in this study, have been
apprised of the following:
1. The study involves research into the heredity of XXXXX in Icelandic families
for the purpose of isolating and identifying the genetic factors that contribute
to the disorder. The study has been approved by the Data Protection Commission
and the Ethics Committee. I understand that I may unconditionally decline to
participate or withdraw from participation in this study at any time.
2. I agree to be interviewed and respond to questions regarding this disorder so
that the condition may be diagnosed as accurately as possible.
3. 50 ml of blood will be drawn from a vein in order to isolate its genetic
components (deoxyribonucleic acid, DNA). Apart from the minor discomfort
associated with normal blood tests, there is little risk of adverse effects
beyond the possibility of bleeding, bruising and infection at the site of the
puncture.
4. May name and identification number will be recorded in a computer and used to
investigate my relation to other individuals who have been diagnosed with XXXXX.
This study will be performed by comparing the data with computerized
genealogical records with the authorization of the Data Protection Commission.
The computer records will also be used in processing the data and results of the
study.
5. Examination of the genetic specimens or mislabeling of tubes may result in
indication of erroneous paternity. Any such specimens will be designated as
mislabeled tubes, and the parties responsible for the study declare that they
will not seek further information regarding the specimen.
6. Conclusions of studies may be published in medical journals. Such
publications will contain no references to individuals or persons, and will
refer exclusively to numerical and coded data.
7. The parties conducting the study have undertaken to hold in confidence any
information provided by me and will to the best of their ability endeavor to
limit the distribution of personal information. Thus, no personal identification
will be used on specimens or documents; instead, bar codes will be used which
can only be deciphered using a specific key and the required equipment. It will
not be possible to gain access to any information regarding conclusions on an
individual basis.
8. The study is conducted by and in co-operation between XXXXX and deCODE
genetics, which is a company specializing in the study of genetic disorders.
9. I consent to the biological material and data collected on me being preserved
in encoded form so that both may be used later for research on other disorders
than those specified above, provided that such research is conducted for the
purpose of discovering mechanisms which could lead to a cure or preventive
measures. All handling of specimens and information shall conform to all the
rules on security and handling of data laid out herein and all research is
subject to the approval of the Data Protection Commission and the Ethics
Committee, otherwise, the keys enabling the data or specimens to be traced to me
shall be destroyed and the Data Protection Commission informed of the
destruction.
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<PAGE> 98
10. Our participation in this study will contribute to increase knowledge of the
genetics of XXXXX and could be useful in treatment or prevention. Financial
costs and work contribution in the study are paid for by the parties involved in
the study, and the results of the study will be based on a group of participants
as whole and not on individuals. I therefore renounce all claims to any
potential profits or economic gain resulting from this research. In the event
that the results can be sold, benefits will accrue to further research of this
disorder. XXXXX, or other disorders where heredity is a contributing factor.
- ---------------------------------------- -------------------------------
Signature of participant/custodian, date Signature of person responsible
for the study, date.
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EXHIBIT D
INITIAL STEERING COMMITTEE
Initial Steering Committee Members from Roche:
[CONFIDENTIAL TREATMENT REQUESTED]
Initial Steering Committee Members from deCODE:
Dr. Kari Stefansson
Dr. Jeffrey Gulcher
Dr. C. Augustine Kong
Initial Steering Committee Chairperson
Dr. Kari Stefansson
Initial Steering Committee Secretary
[CONFIDENTIAL TREATMENT REQUESTED]
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EXHIBIT E
FORM OF PUBLIC ANNOUNCEMENT
(Omitted)
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<PAGE> 1
EXHIBIT 10.12
AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
OF
DECODE GENETICS, INC.
AS FURTHER AMENDED AND RESTATED THROUGH MARCH 1, 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Page
1. DEFINITIONS..............................................................................................2
2. RESTRICTIONS ON TRANSFER; REGISTRATION...................................................................4
2.1 Restriction on Transfer......................................................................4
2.2 Demand Registration..........................................................................5
2.3 Piggyback Registrations......................................................................7
2.4 Form S-3 Registration........................................................................8
2.5 Series C Investor Registration Rights........................................................9
2.6 Expenses of Registration....................................................................10
2.7 Obligation of the Company...................................................................10
2.8 Termination of Registration Rights..........................................................12
2.9 Delay of Registration; Furnishing Information...............................................12
2.10 Indemnification.............................................................................12
2.11 Assignment of Registration Rights...........................................................14
2.12 Acceptance of Registration Rights...........................................................14
2.13 Limitation on Subsequent Registration Rights................................................15
2.14 "Market Standoff" Agreement.................................................................15
2.15 Rule 144 Reporting..........................................................................15
3. COVENANTS OF THE COMPANY................................................................................16
3.1 Basic Financial Information and Reporting...................................................16
3.2 Inspection Rights...........................................................................17
3.3 Confidentiality of Records..................................................................17
3.4 Reservation of Common Stock.................................................................17
3.5 Key Man Insurance...........................................................................17
3.6 Visitation Observer Rights..................................................................17
3.7 Proprietary Information and Inventions Agreement............................................18
3.8 Directors' Liability and Indemnification....................................................18
3.9 Real Property Holding Corporation...........................................................18
3.10 Additional Major Investor...................................................................19
3.11 Termination of Covenants....................................................................19
4. RIGHTS OF FIRST REFUSAL.................................................................................19
4.1 Roche Right of First Refusal................................................................19
4.2 Investor Rights of First Refusal............................................................20
4.3 Termination of Rights.......................................................................21
4.4 Reserved....................................................................................21
4.5 Excluded Securities.........................................................................21
4.6 Reserved....................................................................................22
</TABLE>
(i)
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
5. MISCELLANEOUS...........................................................................................22
5.1 Governing Law...............................................................................22
5.2 Future Employees............................................................................22
5.3 Survival....................................................................................22
5.4 Successors and Assigns......................................................................22
5.5 Severability................................................................................22
5.6 Amendment and Waiver........................................................................23
5.7 Delays or Omissions.........................................................................24
5.8 Notices.....................................................................................24
5.9 Titles and Subtitles........................................................................24
5.10 Counterparts................................................................................24
</TABLE>
(ii)
<PAGE> 4
TABLE OF CONTENTS (continued)
Page
EXHIBITS
EXHIBIT A Series A Investors
EXHIBIT B Series B Investors
EXHIBIT C Series C Investors
EXHIBIT D Investor Founders
EXHIBIT E Form of Director Indemnification Contract
(iii)
<PAGE> 5
DECODE GENETICS, INC.
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
THIS AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT (this "Agreement")
dated as of February 2, 1998, by and among deCODE genetics, Inc., a Delaware
corporation with offices at Lynghalsi 1, IS-110 Reykjavik, Iceland (the
"Company"), the investors listed on Exhibit A attached, as amended from time to
time (the "Series A Investors"), the investors listed on Exhibit B attached, as
amended from time to time (the "Series B Investors"), the investor listed on
Exhibit C attached, as amended from time to time (the "Series C Investor"), and,
solely for those provisions specifically provided in this Agreement, Kari
Stefansson and Jeffrey Gulcher, as listed on Exhibit D attached (the "Investor
Founders"). The Series A Investors, the Series B Investors and the Series C
Investor are collectively referred to as the "Investors" and each individually
as an "Investor."
PRELIMINARY STATEMENTS
A. Certain of the Series A Investors purchased 11,790,375 shares of
Series A Preferred Stock, $.001 par value per share, of the Company (the "Series
A Preferred Stock") and warrants (the "Series A Warrants") to purchase 1,137,814
shares of Series A Preferred Stock (the "Series A Warrant Shares") pursuant to
that certain Series A Preferred Stock and Warrant Purchase Agreement among the
Series A Investors and the Company dated as of August 23, 1996 (the "Series A
Purchase Agreement"). A certain other Series A Investor purchased 100,000 shares
of Series A Preferred Stock, and is obligated to acquire up to an additional
300,000 shares of Series A Preferred Stock, pursuant to that certain Settlement
Agreement between such Series A Investor and the Company dated as of December
31, 1997 (the "Settlement Agreement").
B. The Company contemplates that it will issue and sell to the Series B
Investors, as initially determined at such time, up to 5,000,000 shares of
Series B Preferred Stock, $.001 par value per share, of the Company (the "Series
B Preferred Stock") pursuant to a Series B Preferred Stock Purchase Agreement
among the Series B Investors and the Company (the "Series B Purchase
Agreement"), on terms and conditions including the terms and conditions relating
to the Series B Preferred Stock contained in this Agreement.
C. The Series C Investor has on this date: (i) purchased 2,500,000
shares of Series C Preferred Stock, $.001 par value per share, of the Company
(the "Series C Preferred Stock"), (ii) purchased warrants (the "Initial
Warrants") to purchase up to 250,000 shares of Series C Preferred Stock (the
"Initial Warrant Shares"), (iii) made a commitment to purchase an additional
1,111,111 shares of Series C Preferred Stock upon the achievement of certain
milestones, (iv) obtained a three-year option to purchase an additional 555,556
shares of Series C Preferred Stock, and (v) acquired the right to purchase
warrants (the "Subsequent Warrants") (the Initial Warrants and the Subsequent
Warrants collectively, the "Series C Warrants") to purchase an aggregate of
166,667 shares of Series C Preferred Stock (the "Subsequent Warrant Shares")
(the Initial Warrant Shares and the Subsequent Warrant Shares, the "Series C
Warrant Shares"), pursuant to that certain Series C Preferred Stock
<PAGE> 6
and Warrant Purchase Agreement of even date herewith between the Series C
Investor and the Company (the "Series C Purchase Agreement").
D. The Series A Investors are parties to that certain Amended and
Restated Investor Rights Agreement dated as of January 20, 1998 with the Company
(the "Existing Investor Rights Agreement").
E. In order to induce the Series C Investor to enter into and
consummate the transactions contemplated under the Series C Purchase Agreement,
the Company and the Series A Investors have agreed to amend and restate the
Existing Investor Rights Agreement to include the granting of certain rights to
the Series B Investors and the Series C Investor, as set forth in this
Agreement.
NOW, THEREFORE, in consideration of foregoing statements and the mutual
covenants and agreements of the Parties contained in this Agreement, the Series
A Purchase Agreement, the Settlement Agreement and the Series C Purchase
Agreement, and to be contained in the Series B Purchase Agreement, the parties
mutually agree as follows:
1. DEFINITIONS.
As used in this Agreement the following terms shall have the following
respective meanings:
1.1 "Common Stock" means the Common Stock, $.001 par value per share,
of the Company.
1.2 "Equity Securities" shall mean (i) any Common Stock, Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or other
security of the Company, (ii) any security convertible, with or without
consideration, into any Common Stock, Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock or other security (including any
option to purchase such a convertible security), (iii) any security carrying any
warrant or right to subscribe to or purchase any Common Stock, Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or other
security or (iv) any such warrant or right (including, without limitation, the
Series A Warrants and the Series C Warrants).
1.3 "Exchange Act" means the United States Securities Exchange Act of
1934, as amended.
1.4 "Founders Shares" shall mean the Common Stock issued to the
Investor Founders from time to time.
1.5 "Holder" means any person owning of record Shares or Registrable
Securities that have not been sold to the public or any assignee of record of
such Registrable Securities in accordance with Section 2.11.
1.6 "Initial Offering" means the Company's first firm commitment
underwritten public offering of its Common Stock registered under the Securities
Act.
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<PAGE> 7
1.7 "Major Investor" means any Investor (with its affiliates) who owns
not less than two percent (2%) of the Company's outstanding Common Stock
(treating all shares of Series A Preferred Stock, Series B Preferred Stock and
Series C Preferred Stock on an as-converted-to-Common Stock basis).
1.8 "Register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of
effectiveness of such registration statement or document.
1.9 "Registrable Securities" means (i) Common Stock issued or issuable
upon conversion of the Shares; and (ii) any Common Stock issued as (or issuable
upon the conversion or exercise of any warrants, right or other security which
is issued as) a dividend or other distribution with respect to, or in exchange
for or in replacement of, the Common Stock described in clause (i).
Notwithstanding the foregoing, Registrable Securities shall not include: (1) any
Common Stock not issued or issuable to Holders of Series A Preferred Stock,
Series B Preferred Stock and/or Series C Preferred Stock, except as specifically
provided in Section 2.3(d), or (2) any securities sold by a person to the public
either pursuant to a registration statement or Rule 144 promulgated under the
Securities Act or sold in a private transaction in which the transferror's
rights under Section 2 of this Agreement are not assigned.
1.10 "Registrable Securities then outstanding" shall be the number of
shares determined by calculating the total number of shares of the Company's
Common Stock that are Registrable Securities and either (i) are then issued and
outstanding, or (ii) are issuable pursuant to then exercisable or convertible
securities.
1.11 "Registration Expenses" shall mean all expenses incurred by the
Company in complying with Sections 2.2, 2.3, 2.4 and 2.5, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, reasonable fees and disbursements not
to exceed Fifteen Thousand Dollars ($15,000) of a single special counsel for the
Holders, blue sky fees and expenses and the expense of any special audits
incident to or required by any such registration (but excluding the compensation
of regular employees of the Company which shall be paid in any event by the
Company).
1.12 "Securities Act" shall mean the United States Securities Act of
1933, as amended.
1.13 "Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale.
1.14 "Shares" shall mean: (i) the Series A Preferred Stock issued
pursuant to the Series A Purchase Agreement, including the Series A Warrant
Shares issued upon exercise of the Series A Warrants issued pursuant to the
Series A Purchase Agreement, and the Series A Preferred Stock issued pursuant to
the Settlement Agreement; (ii) the Series B Preferred Stock issued pursuant to
the Series B Purchase Agreement; and (iii) the Series C Preferred Stock issued
pursuant to the Series C Purchase Agreement, including the Series C Warrant
Shares issued upon exercise of the Series C Warrants issued pursuant to, and
upon the exercise of the option granted under, the Series C Purchase Agreement.
-3-
<PAGE> 8
1.15 "Form S-3" means such form under the Securities Act as in effect
on the date hereof or any successor registration form under the Securities Act
subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.
1.16 "SEC" or "Commission" means the United States Securities and
Exchange Commission.
2. RESTRICTIONS ON TRANSFER; REGISTRATION.
2.1 Restriction on Transfer.
(a) Each Holder agrees not to make any disposition of all or
any portion of the Shares or Registrable Securities unless and until:
(i) There is then in effect a registration statement under
the Securities Act covering such proposed disposition and such disposition is
made in accordance with such registration statement; or
(ii) (A) The transferee has agreed in writing to be bound
by the terms of this Agreement, (B) such Holder shall have notified the Company
of the proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (C) if
reasonably requested by the Company, such Holder shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the
Securities Act. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144 except when the Company
reasonably believes, in unusual circumstances and after consultation with
counsel, that Rule 144 may not be available with respect to a proposed transfer.
(iii) Notwithstanding the provisions of Sections 2.1(a)(i)
and (ii), no such registration statement or opinion of counsel shall be
necessary for a transfer by a Holder in which no consideration is given and
which is (A) a partnership to its partners or former partners in accordance with
partnership interests, (B) a corporation to an affiliate or to its stockholders
in accordance with their interest in the corporation, (C) a limited liability
company to its members or former members in accordance with their interest in
the limited liability company, or (D) to the Holder's family member or trust for
the benefit of an individual Holder; provided, that the transferee will be
subject to the terms of this Agreement to the same extent as if he or she were
an original Holder under this Agreement.
(b) Each certificate representing Shares or Registrable
Securities shall (unless otherwise permitted by the provisions of this
Agreement) be stamped or otherwise imprinted with a legend substantially similar
to the following (in addition to any legend required under applicable United
States federal or state securities laws or as provided elsewhere in this
Agreement):
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<PAGE> 9
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR
UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED.
(c) The Company shall be obligated to reissue promptly
unlegended certificates at the request of any holder thereof if the holder shall
have obtained an opinion of counsel (which counsel may be counsel to the
Company) reasonably acceptable to the Company to the effect that the securities
proposed to be disposed of may lawfully be so disposed of without registration,
qualification or legend.
(d) Any legend endorsed on an instrument pursuant to
applicable United States state securities laws and the stop-transfer instruction
with respect to such securities shall be removed upon receipt by the Company of
an order of the appropriate blue sky authority authorizing such removal.
2.2 Demand Registration.
(a) Subject to the conditions of this Section 2.2, if the
Company shall receive a written request from the Holders of more than fifty
percent (50%) of the Registrable Securities then outstanding (the "Initiating
Holders") that the Company file a registration statement under the Securities
Act covering the registration of Registrable Securities having an aggregate
offering price to the public of not less than $5,000,000 (a "Qualified Public
Offering"), then the Company shall, within thirty (30) days of the receipt
thereof, give written notice of such request to all Holders, and subject to the
limitations of this Section 2.2, use its best efforts to effect, as soon as
practicable, the registration under the Securities Act of all Registrable
Securities that the Holders request to be registered. Notwithstanding the
foregoing, in the event that Form S-3 (or any successor or similar form) is not
available for offerings by the Company on, or at any time after, the date
fifteen (15) months after the Initial Offering, then the Initiating Holders
shall be deemed to be Holders of more than thirty percent (30%) of the
Registrable Securities then outstanding, and a Qualified Public Offering shall
be deemed to be Registrable Securities having an aggregate offering price to the
public of not less than $2,000,000.
(b) If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
this Section 2.2 and the Company shall include such information in the written
notice referred to in Section 2.2(a). In such event, the right of any Holder to
include its Registrable Securities in such registration shall be conditioned
upon such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting (unless otherwise mutually
agreed by a majority in interest of the Initiating Holders and such Holder) to
the extent provided herein. All Holders proposing to distribute their securities
through such
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<PAGE> 10
underwriting shall enter into an underwriting agreement in customary form with
the underwriter or underwriters selected for such underwriting by a majority in
interest of the Initiating Holders (which underwriter or underwriters shall be
reasonably acceptable to the Company). Notwithstanding any other provision of
this Section 2.2, if the underwriter advises the Company that marketing factors
require a limitation of the number of securities to be underwritten (including
Registrable Securities), then the Company shall so advise all Holders of
Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares that may be included in the underwriting shall be
allocated to the Holders of such Registrable Securities on a pro rata basis
based on the number of Registrable Securities held by all such Holders
(including the Initiating Holders). Any Registrable Securities excluded or
withdrawn from such underwriting shall be withdrawn from the registration.
(c) The Company shall not be required to effect a registration
pursuant to this Section 2.2:
(i) prior to August 23, 2000; or
(ii) after the Company has effected two (2) registrations
pursuant to this Section 2.2, and such registrations have been declared or
ordered effective; or
(iii) during the period starting with the date of
filing, and ending on the date one hundred eighty (180) days following the
effective date, of the registration statement pertaining to the Initial
Offering; provided that the Company makes reasonable good faith efforts to cause
such registration statement to become effective;
(iv) if within thirty (30) days of receipt of a written
request from Initiating Holders pursuant to Section 2.2(a), the Company gives
notice to the Holders of the Company's intention to make its Initial Offering
within ninety (90) days;
(v) if the Company shall furnish to Holders requesting a
registration statement pursuant to this Section 2.2, a certificate signed by the
Chairman of the Board stating that in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the Company and
its stockholders for such registration statement to be effected at such time, in
which event the Company shall have the right to defer such filing for a period
of not more than ninety (90) days after receipt of the request of the Initiating
Holders; provided that such right to delay a request shall be exercised by the
Company not more than once in any twelve (12) month period; or
(vi) if, after allocation in accordance with Section
2.2(b), the Registrable Securities to be registered in such registration
constitute (A) fifty percent (50%) or less of the Registrable Securities then
outstanding or have an aggregate offering price to the public of less than
$5,000,000; or (B) thirty percent (30%) or less of the Registrable Securities
then outstanding or have an aggregate offering price to the public of less than
$2,000,000, as applicable under Section 2.2(a).
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2.3 Piggyback Registrations.
(a) The Company shall notify all Holders of Registrable
Securities in writing at least thirty (30) days prior to the filing of any
registration statement under the Securities Act for purposes of a public
offering of securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of securities of the
Company, but excluding registration statements relating to employee benefit
plans or with respect to corporate reorganizations or other transactions under
Rule 145 of the Securities Act), and will afford each such Holder an opportunity
to include in such registration statement all or part of such Registrable
Securities held by such Holder. Each Holder desiring to include in any such
registration statement all or any part of the Registrable Securities held by it
shall, within fifteen (15) days after the above-described notice from the
Company, so notify the Company in writing. Such notice shall state the intended
method of disposition of the Registrable Securities by such Holder. If a Holder
decides not to include all of its Registrable Securities in any registration
statement thereafter filed by the Company, such Holder shall nevertheless
continue to have the right to include any Registrable Securities in any
subsequent registration statement or registration statements as may be filed by
the Company with respect to offerings of its securities, all upon the terms and
conditions set forth in this Section 2.3.
(b) If the registration statement under which the Company
gives notice under this Section 2.3 is for an underwritten offering, the Company
shall so advise the Holders of Registrable Securities. In such event, the right
of any such Holder to be included in a registration pursuant to this Section 2.3
shall be conditioned upon such Holder's participation in such underwriting and
the inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided in this Section 2.3(b). All Holders proposing to distribute
their Registrable Securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other
provision of the Agreement, but subject to the immediately following sentence,
if the underwriter determines in good faith that marketing factors require a
limitation of the number of shares to be underwritten, the number of shares that
may be included in the underwriting shall be allocated, first, to the Company
(or to Roche in the case of a registration pursuant to Section 2.5); second, to
the Holders on a pro rata basis based on the total number of Registrable
Securities held by the Holders; and third, to any stockholder of the Company
(other than a Holder) on a pro rata basis. Notwithstanding the foregoing, in no
event shall the amount of securities of the selling Holders included in the
registration be reduced below twenty-five percent (25%) of the total amount of
securities included in such registration, unless such offering is the Initial
Offering and such registration does not include shares of any other selling
stockholders (other than Excess Shares pursuant to Section 2.5), in which event
any or all of the Registrable Securities of the Holders may be excluded in
accordance with the immediately preceding sentence. In no event will shares of
any other selling stockholder (other than Excess Shares pursuant to Section 2.5)
be included in such registration which would reduce the number of shares which
may be included by Holders without the written consent of Holders of not less
than seventy-five (75%) of the Registrable Securities proposed to be sold in the
offering.
(c) The Company shall have the right to terminate or withdraw
any registration initiated by it under this Section 2.3 prior to the
effectiveness of such registration, whether or not any
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<PAGE> 12
Holder has elected to include securities in such registration. The Registration
Expenses of such withdrawn registration shall be borne by the Company in
accordance with Section 2.6.
(d) For purposes of this Section 2.3 only, all of the parties
to this Agreement agree that Kari Stefansson shall have the rights and
obligations of a Holder pursuant to this Section 2.3, and any shares of Common
Stock of the Company held by Dr. Stefansson shall be deemed Registrable
Securities for purposes of this Section 2.3.
2.4 Form S-3 Registration. In case the Company shall receive from
any Holder or Holders of Registrable Securities a written request or requests
that the Company effect a registration on Form S-3 (or any successor to Form
S-3) or any similar short-form registration statement and any related
qualification or compliance with respect to all or a part of the Registrable
Securities owned by such Holder or Holders, the Company will:
(a) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Holders of Registrable
Securities; and
(b) as soon as practicable, effect such registration and all
such qualifications and compliances as may be so requested and as would permit
or facilitate the sale and distribution of all or such portion of such Holder's
or Holders' Registrable Securities as are specified in such request, together
with all or such portion of the Registrable Securities of any other Holder or
Holders joining in such request as are specified in a written request given
within fifteen (15) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section 2.4:
(i) if Form S-3 (or any successor or similar form) is
not available for such offering by the Holders, or
(ii) if the Holders, together with the holders of any
other securities of the Company entitled to inclusion in such registration,
propose to sell Registrable Securities and such other securities (if any) at an
aggregate price to the public of less than $500,000 (following underwriter's
cut-backs, if any), or
(iii) if the Company shall furnish to the Holders a
certificate signed by the Chairman of the Board of Directors of the Company
stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its stockholders
for such Form S-3 Registration to be effected at such time, in which event the
Company shall have the right to defer the filing of the Form S-3 registration
statement for a period of not more than ninety (90) days after receipt of the
request of the Holder or Holders under this Section 2.4; provided, that such
right to delay a request shall be exercised by the Company not more than once in
any twelve (12) month period, or
(iv) if the Company has already effected two (2)
registrations on Form S-3 for the Holders pursuant to this Section 2.4, or
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(v) in any particular jurisdiction in which the Company
would be required to qualify to do business or to execute a general consent to
service of process in effecting such registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a
Form S-3 registration statement covering the Registrable Securities and other
securities to be requested to be registered as soon as practicable after receipt
of the request or requests of the Holders. All such Registration Expenses
incurred in connection with registrations requested pursuant to this Section 2.4
after the first two (2) registrations shall be paid by the selling Holders pro
rata in proportion to the number of shares sold by each.
2.5 Series C Investor Registration Rights.
(a) Subject to the conditions of this Section 2.5, in the
event that the initial Series C Investor, Roche Finance Ltd, or any of its
affiliates (collectively, "Roche") shall be the beneficial owner (within the
meaning of Rule 13d-3(d) promulgated under the Exchange Act, as interpreted by
independent counsel selected by Roche and reasonably acceptable to the Company)
of Registrable Securities in excess of 9.9% of the Common Stock immediately
after the close of the Company's Initial Offering (such Registrable Securities,
the "Excess Shares"), Roche shall have the right to require the Company to
include such Excess Shares in the registration statement filed under the
Securities Act pertaining to the Initial Offering. The Company shall notify
Roche in writing at least thirty (30) days prior to the filing of any
registration statement under the Securities Act pertaining to the Initial
Offering. If Roche desires to include in such registration statement all or any
part of the Excess Shares held by it, Roche shall, within fifteen (15) days
after the above-described notice from the Company, so notify the Company in
writing. Such notice shall state the intended method of disposition of the
Excess Shares by Roche. Notwithstanding the foregoing, the Company shall not be
obligated to include any Excess Shares in such registration statement pursuant
to this Section 2.5 without the approval of the lead underwriter. If the lead
underwriter does not consent to inclusion of the Excess Shares sought to be
included by Roche in the registration statement pertaining to the Initial
Offering or if the number of Excess Shares is cut back pursuant to Section
2.5(b), then the Company shall use its best efforts to effect registration of
the Excess Shares:
(i) if Roche requests inclusion of Excess Shares that
are not included in the registration statement pertaining to the Initial
Offering which have an aggregate price to the public of at least $2,000,000,
within one hundred eighty (180) days after the effective date of the
registration statement filed by the Company in connection with the Initial
Offering; or
(ii) if Roche requests inclusion of Excess Shares
that are not included in the registration statement pertaining to the Initial
Offering which have an aggregate price to the public of less than $2,000,000,
within one (1) year after the effective date of the registration statement filed
by the Company in connection with the Initial Offering.
(b) The right of Roche to have Excess Shares included in a
registration pertaining to the Company's Initial Offering pursuant to this
Section 2.5 shall be conditioned upon Roche's participation in the underwriting
and the inclusion of the Excess Shares in the underwriting to the extent
provided in this Section 2.5. If Roche proposes to distribute the Excess Shares
through
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<PAGE> 14
such underwriting, Roche shall enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for such underwriting by the
Company. Notwithstanding any other provision of this Agreement, if the
underwriter determines in good faith that marketing factors require a limitation
of the number of shares to be underwritten, the number of shares that may be
included in the underwriting shall be allocated, first, to the Company; second,
to Roche for the Excess Shares; third, to the Holders (under any other right
provided to the Holders in this Section 2); and fourth, to any stockholder of
the Company (other than a Holder) on a pro rata basis. No such reduction shall
reduce the securities being offered by the Company for its own account to be
included in the registration and underwriting. In no event will shares of any
other selling stockholder be included in such registration which would reduce
the number of Excess Shares which may be included by Roche without the written
consent of Roche.
(c) The Company shall have the right to terminate or withdraw
any registration pertaining to the Company's Initial Offering initiated by it
under this Section 2.5 prior to the effectiveness of such registration, whether
or not Roche has elected to include securities in such registration. The
Registration Expenses of such withdrawn registration shall be borne by the
Company in accordance with Section 2.6.
(d) The Company shall not be required to effect a registration
pursuant to Section 2.5(a)(i) or (ii) if the Company shall furnish to Roche a
certificate signed by the Chairman of the Board stating that, in the good faith
judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its stockholders for such registration statement
to be effected at such time, in which event the Company shall have the right to
defer such filing for a period of not more than ninety (90) days after the date
any such registration would otherwise be required to be effective pursuant to
Section 2.5(a)(i) or (ii).
2.6 Expenses of Registration. Except as specifically provided in
this Agreement, all Registration Expenses incurred in connection with any
registration, qualification or compliance pursuant to Section 2.2, or any
registration under Section 2.3, 2.4 or Section 2.5, shall be borne by the
Company. All Selling Expenses incurred in connection with any registrations
under this Agreement shall be borne by the holders of the securities so
registered, pro rata on the basis of the number of shares so registered. The
Company shall not, however, be required to pay for expenses of any registration
proceeding begun pursuant to Section 2.2 or 2.4, the request of which has been
subsequently withdrawn by the Initiating Holders unless: (a) the withdrawal is
based upon material adverse information concerning the Company of which the
Initiating Holders were not aware of the time of such request, or (b) the
Holders of a majority of Registrable Securities agree to forfeit their rights to
one requested registration pursuant to Section 2.2 or Section 2.4, as
applicable, (in which event such right shall be forfeited by all Holders). If
the Holders are required to pay the Registration Expenses, such expenses shall
be borne by the holders of securities (including Registrable Securities)
requesting such registration in proportion to the number of shares for which
registration was requested. If the Company is required to pay the Registration
Expenses of a withdrawn offering pursuant to clause (a) of this Section 2.6,
then the Holders shall not forfeit their rights pursuant to Section 2.2 or
Section 2.4 to a demand registration.
2.7 Obligation of the Company. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:
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<PAGE> 15
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use all reasonable efforts to
cause such registration statement to become effective, and, upon the request of
the Holders of a majority of the Registrable Securities registered thereunder,
keep such registration statement effective for up to ninety (90) days or, if
earlier, until the Holder or Holders have completed the distribution related
thereto.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement.
(c) Furnish to the Holders such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
(d) Use all reasonable efforts to register and qualify the
securities covered by such registration statement under such other United States
federal or state securities or blue sky laws of such jurisdictions as shall be
reasonably requested by the Holders, provided that the Company shall not be
required in connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any such states
or jurisdictions.
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder or Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Furnish, at the request of a majority of the Holders
participating in the registration, on the date that such Registrable Securities
are delivered to the underwriters for sale, if such securities are being sold
through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated as of such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering and reasonably satisfactory to a majority in interest of the Holders
requesting registration, addressed to the underwriters, if any, and to the
Holders requesting registration of Registrable Securities, and (ii) a letter
dated as of such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants of the Company to underwriters in an underwritten public
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<PAGE> 16
offering and reasonably satisfactory to a majority in interest of the Holders
requesting registration, addressed to the underwriters, if any, and if permitted
by applicable accounting standards, to the Holders requesting registration of
Registrable Securities.
2.8 Termination of Registration Rights. All registration rights
granted under this Section 2 shall terminate and be of no further force and
effect five (5) years after the date of the Company's Initial Offering. In
addition, a Holder's registration rights shall expire if (i) the Company has
completed its Initial Offering and is subject to the provisions of the Exchange
Act, (ii) such Holder (together with its affiliates, partners and former
partners) holds less than one percent (1%) of the Company's outstanding Common
Stock (treating all shares of Series A Preferred Stock, Series B Preferred Stock
and Series C Preferred Stock on an as-converted-to-Common Stock basis), and
(iii) all Registrable Securities held by and issuable to such Holder may be sold
under Rule 144 during any ninety (90) day period.
2.9 Delay of Registration; Furnishing Information.
(a) No Holder shall have any right to obtain or seek an
injunction restraining or otherwise delaying any such registration as the result
of any controversy that might arise with respect to the interpretation or
implementation of this Section 2.
(b) It shall be a condition precedent to the obligations of
the Company to take any action pursuant to Section 2.2, 2.3, 2.4 or 2.5 that the
selling Holders shall furnish to the Company such information regarding
themselves, the Registrable Securities held by them and the intended method of
disposition of such securities as shall be required to effect the registration
of their Registrable Securities.
2.10 Indemnification. In the event any Registrable Securities
are included in a registration statement under Section 2.2, 2.3, 2.4 or 2.5:
(a) To the extent permitted by United States federal or State
of Delaware law, the Company will indemnify and hold harmless each Holder, the
partners, officers, directors and legal counsel of each Holder, any underwriter
(as defined in the Securities Act) for such Holder and each person, if any, who
controls such Holder or underwriter within the meaning of the Securities Act or
the Exchange Act, against any losses, claims, damages, or liabilities (joint or
several) to which they may become subject under the Securities Act, the Exchange
Act or other United States federal or state law, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any of the following statements, omissions or violations (collectively a
"Violation") by the Company: (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any United
States state securities law or any rule or registration promulgated under the
Securities Act, the Exchange Act or any United States state securities law in
connection with the offering covered by such registration statement; and the
Company will reimburse each such Holder, partner, officer or director,
underwriter or controlling person for any
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<PAGE> 17
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement contained in this Section
2.10(a) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Company, which consent shall not be unreasonably withheld, nor shall the
Company be liable in any such case for any such loss, claim, damage, liability
or action to the extent that is arises out of or is based upon a Violation which
occurs in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by such Holder, partner,
officer, director, underwriter or controlling person of such Holder.
(b) To the extent permitted by United States federal or state
law, each Holder will, if Registrable Securities held by such Holder are
included in the securities as to which such registration, qualification or
compliance is being effected, indemnify and hold harmless the Company, each of
its directors, its officers, and legal counsel and each person, if any, who
controls the Company within the meaning of the Securities Act, any underwriter
and any other Holder selling securities under such registration statement or any
of such other Holder's partners, directors or officers or any person who
controls such Holder, against any losses, claims, damages or liabilities (joint
or several) to which the Company or any such director, officer, controlling
person, underwriter or other such Holder, or partner, director, officer or
controlling person of such other Holder may become subject under the Securities
Act, the Exchange Act or other United States federal or state law, insofar as
such losses, claims, damages or liabilities (or actions in respect thereto)
arise out of or are based upon any Violation, in each case to the extent (and
only to the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished by such Holder under an instrument
duly executed by such Holder and stated to be specifically for use in connection
with such registration; and each such Holder will reimburse any legal or other
expenses reasonably incurred by the Company or any such director, officer,
controlling person, underwriter or other Holder, or partner, officer, director
or controlling person of such other Holder in connection with investigating or
defending any such loss, claim, damage, liability or action if it is judicially
determined that there was such a Violation; provided, however, that the
indemnity agreement contained in this Section 2.10(b) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld; provided further, that in no event shall any
indemnity under this Section 2.10 exceed the net proceeds from the offering
received by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 2.10 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 2.10, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written
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<PAGE> 18
notice to the indemnifying party within a reasonable time of the commencement of
any such action, if materially prejudicial to its ability to defend such action,
shall relieve such indemnifying party of any liability to the indemnified party
under this Section 2.10, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 2.10.
(d) If the indemnification provided for in this Section 2.10
is held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any losses, claims, damages or liabilities referred to in
this Section 2.10, the indemnifying party, in lieu of indemnifying such
indemnified party thereunder, shall to the extent permitted by applicable United
States federal or State of Delaware law contribute to the amount paid or payable
by such indemnified party as a result of such loss, claim , damage or liability
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the Violation(s) that resulted in such loss, claim, damage or
liability, as well as any other relevant equitable considerations. The relative
fault of the indemnifying party and of the indemnified party shall be determined
by a court of law by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission to state a material
fact relates to information supplied by the indemnifying party of by the
indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission;
provided, that in no event shall any contribution by a Holder hereunder exceed
the proceeds from the offering received by such Holder.
(e) The obligations of the Company and Holders under this
Section 2.10 shall survive completion of any offering of Registrable Securities
in a registration statement. No Indemnifying Party, in the defense of any claim
or litigation, shall, except with the consent of each Indemnified Party, consent
to entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
2.11 Assignment of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this Section 2 may be
assigned by a Holder to a transferee or assignee of Registrable Securities which
(i) is a partner, general partner, limited partner or retired partner of a
Holder that is a partnership, (ii) is an affiliate of a Holder that is a
corporation or to the stockholders of such a Holder in accordance with their
interest in such Holder, (ii) is a Holder's family member or trust for the
benefit of an individual Holder, or (iii) acquires at least one percent (1%) of
the Company's outstanding Common Stock (treating all shares of Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock on an
as-converted-to-Common Stock basis); provided, however, (A) the transferor
shall, within ten (10) days after such transfer, furnish to the Company written
notice of the name and address of such transferee or assignee and the securities
with respect to which such registration are being assigned and (B) such
transferee shall agree to be subject to all restrictions set forth in this
Agreement.
2.12 Acceptance of Registration Rights. By acceptance of any
benefits under this Section 2, Holders of Registrable Securities hereby agree to
be bound by the provisions hereunder.
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2.13 Limitation on Subsequent Registration Rights. After the date
of this Agreement, the Company shall not, without the prior written consent of
the Holders of seventy-five percent (75%) of the Registrable Securities, enter
into any agreement with any holder or prospective holder of any securities of
the Company that would grant such holder registration rights senior to those
granted to the Holders hereunder or that would reduce the number of shares
includable by the Holders in the event of a registration pursuant to Section
2.3.
2.14 "Market Stand-Off" Agreement. If requested by the Company or
the representative of the underwriters of Common Stock (or other securities) of
the Company, each Holder shall not sell or otherwise transfer or dispose of any
Common Stock (or other securities) of the Company held by such Holder (other
than those included in the registration) for a period specified by the
representative of the underwriters not to exceed one hundred eighty (180) days
following the effective date of a registration statement of the Company filed
under the Securities Act, provided that:
(a) such agreement shall apply only to the Company's Initial
Offering; and
(b) all officers and directors of the Company and holders of
at least one percent (1%) of the Company's voting securities enter into similar
agreements.
The obligations described in this Section 2.14 shall not apply to a
registration relating solely to employee benefit plans on Form S-1 or Form S-8
or similar forms that may be promulgated in the future, or a registration
relating solely to a Commission Rule 145 transaction on Form S-4 or similar
forms that may be promulgated in the future. The Company may impose
stop-transfer instructions with respect to the shares of Common Stock (or other
securities) subject to the foregoing restriction until the end of said one
hundred eighty (180) day period.
2.15 Rule 144 Reporting. With a view to making available to the
Holders the benefits of certain rules and regulations of the SEC which may
permit the sale of the Registrable Securities to the public without
registration, the Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms
are understood and deemed in Rule 144 or any similar or analogous rule
promulgated under the Securities Act, at all times after the effective date of
the first registration filed by the Company for an offering of its securities to
the general public;
(b) File with the SEC, in a timely manner, all reports and
other documents required of the Company under the Exchange Act;
(c) So long as a Holder owns any Registrable Securities,
furnish to such Holder forthwith upon request: a written statement by the
Company as to its compliance with the reporting requirements of Rule 144, and of
the Exchange Act (at any time after it has become subject to such reporting
requirements); a copy of the most recent annual or quarterly report of the
Company; and such other reports and documents as a Holder may reasonably request
in availing itself of any rule or regulation of the SEC allowing it to sell any
such securities without registration.
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2.16 Applicability. The provisions of Section 2 shall apply to the
holders of the Company's Series B Preferred Stock originally issued pursuant to
the Stock Purchase Agreement dated as of June 30,1999. For purposes of this
Section 2 only and notwithstanding anything to the contrary contained in this
Agreement, the shares of Series B Preferred Stock so issued shall be deemed to
be Shares, as defined in Section 1.14 of this Agreement so that the shares of
(i) Common Stock issued or issuable upon conversion of such Shares and (ii) any
Common Stock issued as (or issuable upon the conversion or exercise of any
warrants, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, the
Common Stock described in clause (i) shall be Registrable Securities and the
holders thereof shall have all of the rights and obligations of Holders for
purposes of Section 2.
3. COVENANTS OF THE COMPANY.
3.1 Basic Financial Information and Reporting.
(a) The Company will maintain true books and records of
account in which full and correct entries will be made of all its business
transactions pursuant to a system of accounting established and administered in
accordance with generally accepted accounting principles consistently applied,
and will set aside on its books all such proper accruals and reserves as shall
be required under generally accepted accounting principles consistently applied.
(b) As soon as practicable after the end of each fiscal year
of the Company, and in any event within one hundred twenty (120) days
thereafter, the Company will furnish each Investor a consolidated balance sheet
of the Company, as at the end of such fiscal year, and a consolidated statement
of income and a consolidated statement of cash flows of the Company, for such
year, all prepared in accordance with generally accepted accounting principles
consistently applied and setting forth in each case in comparative form the
figures for the previous fiscal year, all in reasonable detail. Such financial
statements shall be accompanied by a report and opinion thereon by independent
public accountants of national standing selected by the Company's Board of
Directors.
(c) The Company will furnish each Series A Investor and the
Series C Investor, as soon as practicable after the end of the first, second and
third quarterly accounting periods in each fiscal year of the Company, and in
any event within forty-five (45) days thereafter, a consolidated balance sheet
of the Company as of the end of each such quarterly period, and a consolidated
statement of income and a consolidated statement of cash flows of the Company
for such period and for the current fiscal year to date, prepared in accordance
with generally accepted accounting principles, with the exception that no notes
need be attached to such statements and year-end audit adjustments may not have
been made.
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3.2 Inspection Rights.
(a) Each Series A Investor who is a Major Investor (each, a
"Major Series A Investor," and, collectively, the "Major Series A Investors")
shall be entitled to consult with and advise management of the Company on
significant business issues, including management's proposed annual operating
plans. Each Major Series A Investor shall be entitled to discuss the affairs,
finances and accounts of the Company or any of its subsidiaries with its
officers. Management will meet with each Major Series A Investor regularly
during each year at the Company's facilities, upon request by such Major Series
A Investor, at mutually agreeable times for such consultation and advice and to
review progress in achieving said plans.
(b) Each Major Series A Investor may examine the books and
records of the Company and visit and inspect the facilities and properties of
the Company and any of its subsidiaries, and may request information at
reasonable times and intervals concerning the general status of the Company's
financial condition and operations; provided, however, that the Company shall
not be obligated under this Section 3.2 with respect to a competitor of the
Company or with respect to information which the Board of Directors determines
in good faith is confidential and should not, therefore, be disclosed.
3.3 Confidentiality of Records. Each Investor agrees to use, and
to use its best efforts to insure that its authorized representatives use, the
same degree of care as such Investor uses to protect its own confidential
information to keep confidential any information furnished to it which the
Company identifies as being confidential or proprietary (so long as such
information is not in the public domain), except that such Investor may disclose
such proprietary or confidential information to any partner, subsidiary or
parent of such Investor for the purpose of evaluating its investment in the
Company as long as such partner, subsidiary or parent is advised of the
confidentiality provisions of this Section 3.3.
3.4 Reservation of Common Stock. The Company will at all time
reserve and keep available, solely for issuance and delivery upon the conversion
of the Series A Preferred Stock, the Series B Preferred Stock and Series C
Preferred Stock, all Common Stock issuable from time to time upon such
conversion.
3.5 Key Man Insurance. Subject to the approval of the Board of
Directors, the Company will use its best efforts to obtain and maintain in full
force and effect term life insurance in the amount of one million dollars
($1,000,000) on the life of Kari Stefansson, M.D., naming the Company as
beneficiary.
3.6 Visitation Observer Rights. If a Major Investor is a Series A
Investor or a Series C Investor and is not represented on the Company's Board of
Directors, the Company shall: (i) invite a representative of such Major Investor
to attend all meetings of its Board of Directors ("Board Meetings") in a
non-voting observer capacity, and in this respect shall give such representative
(with a copy, if so requested, to another person as may be designated by such
Major Investor from time to time) copies of all notices, minutes, consents, and
other material that it provides to its directors, which shall include fiscal
budgets and projections of the Company provided annually at least thirty
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<PAGE> 22
(30) days prior to the beginning of each fiscal year of the Company, and (ii)
give a representative of such Major Investor the right to meet with the
President of the Company at the Company's facilities, at mutually agreeable
times, to consult with and discuss the affairs, finances and accounts of the
Company; provided, however, that the Company reserves the right to exclude such
representative from access to any material or meeting or portion thereof if the
Company believes upon advice of counsel that such exclusion is reasonably
necessary to preserve the attorney-client privilege, to protect highly
confidential proprietary information or for other similar reasons; and provided,
further, that in no event shall the Series C Investor be entitled, as a result
of or in connection with any such materials, visit and/or discussion, to any
scientific, technical, financial and other information concerning, relating to
or used in connection with any strategic alliance, joint venture, sponsored
research program, licensing arrangement, or any other kind of agreement,
relationship or arrangement entered into, or proposed to be entered into, by the
Company with any third party for the purpose of gene discovery or the discovery,
development, manufacture or commercialization of drugs. The Company will
reimburse such representatives, except for such representatives of the Series C
Investor, for expenses incurred in connection with their attendance at Board
Meetings in accordance with its policy for reimbursing directors for attendance
at Board Meetings. Such expenses of such representatives of the Series C
Investor shall be borne by the Series C Investor. Such representative may
participate in discussions of matters brought to the Board. Except as otherwise
provided in Section 3.11(b), the rights granted under this Section 3.6 shall be
nonassignable, and shall terminate and be of no further effect with respect to
any Series A Investor or Series C Investor who is no longer a Major Investor.
3.7 Proprietary Information and Inventions Agreement. The
Company shall require all employees and consultants to execute and deliver a
Proprietary Information and Inventions Agreement in the form attached as Exhibit
C.
3.8 Directors' Liability and Indemnification. The Company's
Certificate of Incorporation and Bylaws shall provide: (i) for elimination of
the liability of directors to the maximum extent permitted by Delaware, USA law,
and (ii) for indemnification of directors for acts on behalf of the Company to
the maximum extent permitted by Delaware, USA law. In addition, the Company
shall enter into and use its best efforts to at all times maintain
indemnification contracts substantially in the form attached as Exhibit E with
each of its directors to indemnify such directors to the maximum extent
permissible under Delaware, USA law. The Company will use its reasonable efforts
to limit the liability, to the maximum extent permissible under Delaware, USA
law, of any Investor represented by or affiliated with a Director of the
Company.
3.9 Real Property Holding Corporation. The Company covenants that
it will operate in a manner such that it will not become a "United States real
property holding corporation" (a "USRPHC") as that term is defined in Section
897(c)(2) of the Internal Revenue Code of 1986, as amended, and the regulations
thereunder. The Company agrees to make determinations as to its status as a
USRPHC, and will file statements concerning those determinations with the
Internal Revenue Service, in the manner and at the times required under Reg.
Section 1.897-2(h), or any supplementary or successor provision thereto. Within
thirty (30) days of a request from an Investor or any of its partners, the
Company will inform the requesting party, in the manner set forth in Reg.
Section 1.897-2(h)(1)(iv) or any supplementary or successor provision thereto,
whether that party's interest in the Company constitutes a United States real
property interest (within the meaning of Internal
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Revenue Code Section 897(c)(1) and the regulations thereunder) and whether the
Company has provided to the Internal Revenue Service all required notices as to
its USRPHC status.
3.10 Additional Major Investor.
(a) The parties hereto agree that Kari Stefansson shall have
the rights and obligations of a Major Investor provided in Sections 3.1, 3.2,
3.3 and 3.6 hereof for so long as Dr. Stefansson continues to hold at least
250,000 shares of the Company's Common Stock or until the effective date of the
registration statement pertaining to the Initial Offering.
(b) The parties hereto further agree that Beth Israel
Deaconess Medical Center, Inc. ("Beth Israel Deaconess") shall have the rights
and obligations of a Major Investor provided for in Sections 3.1 and 3.2(b)
hereof for as long as Beth Israel Deaconess continues to hold at least 100,000
Shares. The Company shall send relevant information to the representative
appointed by Beth Israel Deaconess from time to time, upon notice to the
Company. Beth Israel Deaconess agrees that members of its finance department
shall be the sole persons to utilize and/or review the information that Beth
Israel Deaconess receives pursuant to Sections 3.1 and 3.2(b).
3.11 Termination of Covenants.
(a) Except as otherwise provided in Section 3.11(b), all
covenants of the Company contained in this Section 3 shall expire and terminate
as to each Investor on the effective date of the registration statement
pertaining to the Initial Offering, except that the covenants contained in
Section 3.1(b) and (c) of this Agreement shall continue after such effective
date with respect to each Major Investor given such right in such Section.
(b) The covenants contained in Section 3.6 with respect to
Roche shall continue for so long as Roche continues to hold at least fifty
percent (50%) in interest of the issued and outstanding Shares defined in
Section 1.14(iii) (including shares of Common Stock into which any such Shares
may have been converted), or until the end of the Research Term (as such term is
defined in that certain Research Collaboration and License Agreement dated of
even date herewith between the Company and Roche), whichever is later.
4. RIGHTS OF FIRST REFUSAL.
4.1 Roche Right of First Refusal.
(a) Roche shall have a right of first refusal to purchase up
to that number of the Equity Securities that the Company may, from time to time,
propose to sell and issue after the date of this Agreement, other than the
Equity Securities excluded by Section 4.5, which, when added to the Shares and
the shares of Common Stock held by Roche as of the date of exercise of such
right of first refusal, would make Roche the beneficial owner (within the
meaning of Rule 13d-3(d) promulgated under the Exchange Act, as interpreted by
independent counsel selected by Roche and reasonably acceptable to the Company)
of 9.9% of the Company's Common Stock (calculated on an as-converted-to-Common
Stock basis).
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(b) If the Company proposes to issue any Equity Securities,
other than the Equity Securities excluded by Section 4.5, it shall give each
Roche written notice of its intention, describing such Equity Securities, the
price and the terms and conditions upon which the Company proposes to issue the
same. Roche shall have ten (10) business days from the giving of such notice to
agree to purchase up to the maximum number of the Equity Securities that it is
entitled to purchase under this Section 4.1 for the price and upon the terms and
conditions specified in the notice by giving written notice to the Company and
stating therein the quantity of Equity Securities to be purchased.
Notwithstanding the foregoing, the Company shall not be required to offer or
sell such Equity Securities to Roche if such offer or sale would cause the
Company to be in violation of applicable United States federal securities laws
by virtue of such offer or sale.
(c) If Roche fails to exercise in full its right of first
refusal under this Section 4.1, the Company shall have seventy (70) days
thereafter to sell the Equity Securities in respect of which Roche's right was
not exercised, at a price and upon general terms and conditions materially no
more favorable to the purchasers thereof (including, without limitation,
Investor Founders) than specified in the Company's notice to Roche pursuant to
Section 4.1(b). If the Company has not sold such Equity Securities within
seventy (70) days of the notice provided pursuant to Section 4.1(b), the Company
shall not thereafter issue or sell any Equity Securities, without first offering
such securities to Roche in the manner provided above.
4.2 Investor Rights of First Refusal.
(a) Subject to the rights of Roche under Section 4.1, each
Investor Founder shall have a right of first refusal to purchase his pro rata
share of all Equity Securities that the Company may, from time to time, propose
to sell and issue after the date of this Agreement, other than the Equity
Securities excluded by Section 4.5. Each Investor Founder's pro rata share shall
be equal to the ratio of (A) the number of shares of the Company's Common Stock
(including all shares of Common Stock issued or issuable upon conversion of the
Shares) which such Investor Founder is deemed to be a holder of immediately
prior to the issuance of such Equity Securities, to (B) the total number of
shares of the Company's outstanding Common Stock (including all shares of Common
Stock issued or issuable upon conversion of the Shares or upon the exercise of
any outstanding warrants or options) immediately prior to the issuance of the
Equity Securities.
(b) If the Company proposes to issue any Equity Securities,
other than the Equity Securities excluded by Section 4.5, and Roche shall not
have purchased all of such Equity Securities pursuant to Section 4.1, the
Company shall give each Investor Founder written notice of its intention,
describing such Equity Securities, the price and the terms and conditions upon
which the Company proposes to issue the same. Each Investor Founder shall have
seven (7) days from the giving of such notice to agree to purchase his pro rata
share of the Equity Securities for the price and upon the terms and conditions
specified in the notice by giving written notice to the Company and stating
therein the quantity of Equity Securities to be purchased. Notwithstanding the
foregoing, the Company shall not be required to offer or sell such Equity
Securities to any Investor Founder who would cause the Company to be in
violation of applicable United States federal securities laws by virtue of such
offer or sale.
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(c) If not all of the Investor Founders elect to purchase
their pro rata share of the Equity Securities, then the Company shall promptly
notify in writing such Investor Founders who do so elect and shall offer such
Investor Founders the right to acquire such unsubscribed shares. Such Investor
Founders shall have five (5) days after receipt of such notice to notify the
Company of their election to purchase all or a portion thereof of the
unsubscribed shares. If the Investor Founders fail to exercise in full the
rights of first refusal, the Company shall have sixty (60) days thereafter to
sell the Equity Securities in respect of which such Investor Founders' rights
were not exercised, at a price and upon general terms and conditions materially
no more favorable to the purchasers thereof than specified in the Company's
notice pursuant to Section 4.2(b). If the Company has not sold such Equity
Securities within sixty (60) days of the notice provided pursuant to Section
4.2(b), the Company shall not thereafter issue or sell any Equity Securities,
without first offering such securities to the Investor Founders in the manner
provided above.
4.3 Termination of Rights. The rights of first refusal established
by this Section 4 shall not apply to, and shall terminate upon the effective
date of, the registration statement pertaining to the Company's Initial
Offering.
4.4 Reserved.
4.5 Excluded Securities. The rights of first refusal established
by this Section 4 shall have no application to any of the following Equity
Securities:
(a) up to an aggregate amount of 5,000,000 shares of Common
Stock (and/or options, warrants or other Common Stock purchase rights issued
pursuant to such options, warrants or other rights) issued or to be issued to
employees, officers or directors of, or consultants or advisors to the Company
(including members of the Company's Scientific Advisory Board) or any
subsidiary, pursuant to stock purchase or stock option plans or other
arrangements that are approved by the Board of Directors;
(b) stock issued pursuant to any rights or agreements
outstanding as of the date of this Agreement, options and warrants outstanding
as of the date of this Agreement; and stock issued pursuant to any such rights
or agreements granted after the date of this Agreement, provided that the rights
of first refusal and co-investment established by this Section 4 applied with
respect to the initial sale or grant by the Company of such rights or
agreements; provided, however, that such right shall not apply to the issuance
of the Series C Preferred Stock or the Series C Warrants being issued pursuant
to the Series C Purchase Agreement simultaneously herewith, or the issuance of
the Series C Warrant Shares upon the exercise of the Series C Warrants; and
provided further, however, that such right shall not apply to the issuance of
the Series B Preferred Stock to be issued pursuant to the Series B Purchase
Agreement as contemplated hereunder;
(c) any Equity Securities issued for consideration other than
cash pursuant to a merger, consolidation, acquisition or similar business
combination;
(d) shares of Common Stock issued in connection with any stock
split, stock dividend or recapitalization by the Company;
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(e) shares of Common Stock issued upon conversion of the
Shares;
(f) any Equity Securities issued pursuant to any equipment
leasing arrangement, or debt financing from a bank or similar financial
institution;
(g) any Equity Securities that are issued by the Company
pursuant to a registration statement filed under the Securities Act; and
(h) any Equity Securities issued in connection with corporate
partnering transactions, if such issuance is approved by the Board of Directors.
4.6 Reserved.
5. MISCELLANEOUS.
5.1 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Delaware, USA as applied to agreements
among Delaware, USA residents entered into and to be performed entirely within
Delaware, USA.
5.2 Future Employees. The parties hereto agree that, in the event
that shares of Common Stock held as of the date hereof by the Investor Founders
are repurchased by the Company as a result of the termination of any Investor
Founder's employment by or consulting relationship with the Company, it is the
Company's policy that these shares be used to recruit future employees whose
employment will be in the best interest of the Company. To the extent not
inconsistent with such policy, it is also the Company's policy to seek to
allocate the reissuance of such shares to residents or citizens of Iceland.
5.3 Survival. The representations, warranties, covenants, and
agreements made herein shall survive any investigation made by any Holder and
the closing of the transactions contemplated hereby. All statements as to
factual matters contained in any certificate or other instrument delivered by or
on behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.
5.4 Successors and Assigns. Except as otherwise expressly provided
in this Agreement, the provisions of this Agreement shall inure to the benefit
of, and be binding upon, the successors, assigns, heirs, executors, and
administrators of the parties hereto and shall inure to the benefit of and be
enforceable by each person who shall be a holder of Registrable Securities from
time to time; provided, however, that prior to the receipt by the Company of
adequate written notice of the transfer of any Registrable Securities specifying
the full name and address of the transferee, the Company may deem and treat the
person listed as the holder of such shares in its records as the absolute owner
and holder of such shares for all purposes, including the payment of dividends
or any redemption price.
5.5 Severability. In case any provision of the Agreement shall be
invalid, illegal, or unenforceable, the validity, legality, and enforceability
of the remaining provisions shall not in any
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way be affected or impaired thereby.
5.6 Amendment and Waiver.
(a) Except as otherwise expressly provided, neither this
Agreement nor any provision herein may be amended or waived except by a written
agreement signed by the parties hereto; provided, however, that:
(i) any of the provisions of Section 2 may be amended or
waived by the written consent of the Company and the Holders of at least
sixty-seven percent (67%) of the Registrable Securities then outstanding; except
that any amendment or waiver relating to (1) Section 2.5 shall require the
written consent of the Company and Roche; and (2) Section 2.3(d) shall require
the written consent of the Company and Kari Stefansson; and except that the
provisions of Section 2 may be granted, pari passu, to additional purchasers of
equity securities of the Company by the written consent of the Company and
Holders of at least fifty percent (50%) of the Registrable Securities then
outstanding;
(ii) any of the provisions of Section 3 may be amended
or waived by the written consent of the Company and Investors holding at least
sixty-seven percent (67%) in interest of the then issued and outstanding Shares
(including shares of Common Stock into which any such Shares may have been
converted); except that any amendment or waiver relating to: (1) Section 3.2
shall require the written consent of the Company and Series A Investors holding
at least fifty percent (50%) in interest of the then issued and outstanding
Shares defined in Section 1.14(i) (including shares of Common Stock into which
any such Shares may have been converted); (2) the rights of the Series A
Investors under Section 3.6 shall require the written consent of the Company and
Series A Investors holding at least fifty percent (50%) in interest of the then
issued and outstanding Shares defined in Section 1.14(i) (including shares of
Common Stock into which any such Shares may have been converted); (3) the rights
of the Series C Investor under Section 3.6 and Section 3.11(b) shall require the
written consent of the Company and the Series C Investors holding at least fifty
percent (50%) in interest of the then issued and outstanding Shares defined in
Section 1.14(iii) (including shares of Common Stock into which any such Shares
may have been converted); (4) Section 3.10(a) shall require the written consent
of the Company and Kari Stefansson; and (5) Section 3.10(b) shall require the
written consent of the Company and Beth Israel Deaconess;
(iii) any of the provisions of Section 4 may be amended
or waived by the written consent of the Company and Series C Investors and
Investor Founders holding at least sixty-seven percent (67%) in interest of the
then issued and outstanding Series C Preferred Stock issued pursuant to the
Series C Purchase Agreement, including the Series C Warrant Shares issued upon
exercise of the Series C Warrants issued pursuant to, and upon the exercise of
the option granted under, the Series C Purchase Agreement and the Founders
Shares (including shares of Common Stock into which any such Shares may have
been converted); except that any amendment or waiver relating to: (1) Section
4.1 shall require the written consent of the Company and Roche; and (2) the
rights of the Investor Founders under Section 4.2 shall require the written
consent of the Company and the Investor Founders holding at least sixty-seven
percent (67%) in interest of the then issued and outstanding Founders Shares;
and
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<PAGE> 28
(iv) any of the provisions of Section 5 may be amended
or waived by the written consent of the Company and Investors holding at least
sixty-seven percent (67%) in interest of the then issued and outstanding Shares
(excluding shares of Common Stock into which any such Shares may have been
converted).
(b) Notwithstanding the foregoing, this Agreement may be
amended with only the written consent of the Company to include additional
purchasers of Shares as "Investors," "Holders" and parties hereto.
5.7 Delays or Omissions. It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to any Holder, upon any breach,
default or noncompliance of the Company under this Agreement shall impair any
such right, power, or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of any
similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent, or approval of any kind or character on
any Holder's part of any breach, default or noncompliance under the Agreement or
any waiver on such Holder's part of any provisions or conditions of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, by law, or otherwise afforded to Holders, shall be cumulative and not
alternative.
5.8 Notices. All notices required or permitted hereunder shall be
in writing and shall be deemed effectively given: (i) upon personal delivery to
the party to be notified, (ii) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (iii) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (iv) one (1) day after deposit
with a nationally or internationally (as the case may be) recognized overnight
courier, specifying next day delivery, with written verification of receipt. All
communications shall be sent, if to the Company, to the address set forth in the
introductory paragraph to this Agreement, and if to the Investors, to the
address as set forth on Exhibit A, Exhibit B, Exhibit C or Exhibit D, as
applicable, or at such other address as such party may designate by ten (10)
days advance written notice to the other parties hereto.
5.9 Titles and Subtitles. The titles of the sections and
subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
5.10 Counterparts. This Agreement may be executed in any number of
counterparts each of which shall be an original, but all of which together shall
constitute one instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Investor
Rights Agreement, or have caused this Investor Rights Agreement to be executed
by its duly authorized officer, as of the date first above written.
deCODE genetics, Inc.
By: /s/ Kari Stefansson
---------------------------
Kari Stefansson
President
<PAGE> 30
(MULTIPLE SIGNATURE PAGES AND EXHIBITS OMITTED)
<PAGE> 1
EXHIBIT 10.13
OFFICER'S CERTIFICATE
I, the undersigned, do hereby certify and represent that:
1. I am the duly elected Senior Vice President and Chief Business
Officer of deCODE genetics, Inc., a Delaware Corporation.
2. Pursuant to Rule 306(a) of Regulation S-T, the following exhibit
10.13 to deCODE genetics, Inc.'s Registration Statement on Form S-1 is a fair
and accurate English translation of a document prepared in the Icelandic
language.
IN WITNESS WHEREOF, I have signed this Officer's Certificate in my
capacity as Senior Vice President and Chief Business Officer of deCODE genetics,
Inc. on this 7th day of March, 2000.
By: /s/ Hannes T. Smarason
-----------------------------------------
Name: Hannes T. Smarason
Title: Senior Vice President and Chief Business Officer
<PAGE> 2
[NOTE: CERTAIN PORTIONS OF THIS DOCUMENT HAVE BEEN MARKED TO INDICATE THAT
CONFIDENTIALITY HAS BEEN REQUESTED FOR THIS CONFIDENTIAL INFORMATION. THE
CONFIDENTIAL PORTIONS HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.]
COLLABORATION AGREEMENT
BETWEEN
THE ICELANDIC HEART ASSOCIATION, HJARTAVERND
AND ISLENSK ERFDAGREINING EHF.
The Icelandic Heart Association, Hjartavernd, (hereinafter "HV") and Islensk
erfdagreining ehf. (hereinafter "IE") hereby enter into the following
Agreement
on collaboration and financing of research into the heredity of certain
disorders.
I. DECLARATION OF INTENT
HV and IE agree to collaborate on the basis of this Agreement on searching for
genetic factors contributing to the genesis of certain disorders on which HV has
information in its database. Decisions shall be made separately on each
collaboration project, hereinafter referred to as "Research Projects" and a
written protocol and written operating plan will be drawn up for each Research
Project based on this Agreement, cf. Chapters II, IV and V.
The parties to this Agreement undertake to treat all personal information as
confidential, and the parties undertake to observe the guidelines of the Data
Protection Commission (or a specially appointed representative of the Data
Protection Commission) regarding the handling and processing of such information
as well as the conditions of the Science Ethics Committee of the Ministry of
Health.
II. CONTRIBUTION OF THE PARTIES
HV will supply each Research Project with clinical data and research conclusions
based on the files of participants in previous studies of HV and other clinical
information relating to individual projects.
Specialised staff of HV will be in charge of relations with the individuals
intended for participation in each Research Project, including the performance
of blood sampling. Furthermore, HV will contribute the specialised knowledge of
its heart specialists and genetics experts in the experimental design of each
Research Project, the conduct of experiments and interpretation of their
results.
IE will contribute its expertise in molecular genetics and statistical genetics
in all the areas required to achieve the established objectives of each Research
Project.
IE will also contribute its own equipment and research supplies (reagents) for
use in specially defined projects.
Furthermore, IE will pay to HV all additional costs resulting from the work of
HV on each Research Project (finance the additional material and wage cost
resulting from calling in participants for each individual Research Project and
the necessary sampling).
-1-
<PAGE> 3
III. RIGHTS OF THE PARTIES
IE will own all financial and commercial rights to individual Research Projects
and their conclusions and IE shall have the right to sell them before or after
each Research Project is concluded.
If IE or its parent company, deCODE genetics Inc., succeeds in contracting for
the sale of individual Research Projects or their conclusions or sells the
results of a Research Project to a third party, HV will receive as its share
[CONFIDENTIAL TREATMENT REQUESTED] of all payments to IE or to deCODE genetics
Inc., as applicable, during the term of the contract less the payment of the
research costs and the investment in IE or deCODE genetics Inc.
If IE or deCODE genetics INC. concludes a contract with a third party pursuant
to Paragraph 2 above, IE will pay to HV [CONFIDENTIAL TREATMENT REQUESTED] on
signature of such contract, and thereafter an annual amount of [CONFIDENTIAL
TREATMENT REQUESTED] during the course of the Research Project in question, the
total amount never to exceed [CONFIDENTIAL TREATMENT REQUESTED]. In the event
that the Research Project is concluded in a shorter time than five years by
achieving the objective of the Research Project, HV will receive on such
conclusion the amount which remains unpaid of the [CONFIDENTIAL TREATMENT
REQUESTED] for the Research Project in question. This amount will be paid to HV
for use in its own research other than the research covered by this Agreement,
but not for administrative costs. This payment is in addition to and independent
of the [CONFIDENTIAL TREATMENT REQUESTED] payment pursuant to Paragraph 2 of
this Chapter III.
In the event that it proves necessary to enter into collaboration with other
parties in respect of individual Research Projects, a further agreement shall be
reached on the division of payments between HV and such third party so that the
total payment by IE pursuant to the above remain unchanged.
On signature of this Agreement, IE will pay to HV in confirmation of their
mutual intent to collaborate, [CONFIDENTIAL TREATMENT REQUESTED] which HV shall
own and dispose of without specific commitment on the part of HV. [CONFIDENTIAL
TREATMENT REQUESTED]
IV. MANAGEMENT
Decisions regarding each Research Project will be taken by HV and IE jointly,
and a Steering Committee will be formed composed of an equal number of
representatives from each party to this Agreement in order to formulate rules on
the arrangement, control and implementation of each Research Project. The
Co-ordinator of each Research Project shall be selected from among the members
of the Steering Committee.
The Steering Committee is also responsible for defining the objectives of each
Research Project and establishing the professional requirements which the
parties to this Agreement approve as appropriate to the conduct of research.
The Steering Committee is responsible for the processing of data and publication
of results pursuant to the rules of Chapter V hereof.
-2-
<PAGE> 4
V. PROCESSING AND DISSEMINATION OF INFORMATION
The results of Research Projects will be published as soon as they fulfil
academic requirements and are fit for publication. In the event that a third
party submits to IE a request for postponement of the publication of results
when they are ready for publication pursuant to the above, the publication may
be delayed for a maximum of 90 days. Efforts shall be made at all times to
safeguard the commercial value of the results by means other than 90 days'
postponement.
The Steering Committee for each Research Project shall decide beforehand on the
Co-ordinator of the Project. As a rule, the Co-ordinator shall be the last
author of scientific articles, but the order of authors shall in other respects
conform to applicable rules in the international scientific community.
VI. LIMITATIONS ON COLLABORATION WITH OTHER PARTIES
HV covenants not to work with others on individual research projects on heredity
on which a decision has been made to collaborate with IE during the course of
such Research Project. In the event that IE or its parent company, deCODE
genetics INC. have contracted for the sale of the Research Project in question
and the Project leads to a discovery, HV covenants not to enter into
collaboration with other parties on the part of the Research Project which led
to the discovery for five years following the conclusion of the Research Project
or the part of the Project which led to a discovery. However, if the Research
Project does not lead to a discovery, HV is entitled to collaborate with other
parties following the conclusion of the Research Project. However, HV shall
retain its right to take up collaboration with other parties on genetic research
into the risk factors of coronary diseases and arteriosclerosis, but only
provided that individual Research Projects which IE and HV have decided to
collaborate on do not deal with the same subject.
IE covenants that during the course of a Research Project, IE will not take up
collaboration with other parties in the area of the Research Project in question
unless the Steering Committee regards such collaboration as necessary in order
to achieve the objectives of a Research Project. In the event that it should
prove necessary to add new partners to individual Research Projects, the
Steering Committee shall decide on the choice. In the event of a dispute within
the Steering Committee, HV will decide on the choice of additional partners.
However, the provisions of this Paragraph shall not preclude collaboration by IE
in the area of individual Research Projects with the parties who have negotiated
the purchase of the Research Project in question or its conclusions or results,
provided that such collaboration does not prejudice the rights of HV pursuant to
Paragraph 2 of Chapter III.
Subject to the provisions of Paragraph 1 of Chapter III, the parties to this
Agreement agree that this Agreement is not transferable, in part or in its
entirety, to other legal entities or individuals without the consent of both
parties to this Agreement.
VII. TERM AND CONCLUSION OF PROJECT
Collaboration on any individual Research Project shall normally continue for a
term of no longer than five years, or until individual research projects are
concluded. At the conclusion of a Project, all clinical data (DNA and all
information) shall, under all circumstances, be returned to HV. In the event
that one or both parties see reason to
-3-
<PAGE> 5
continue their collaboration following the agreed term, such continuation shall
be considered independently.
VII. SETTLEMENT OF DISPUTES
In the event of a dispute between the parties regarding the implementation of
this Agreement or performance which cannot be resolved within the Steering
Committee, two parties, one from each party to this Agreement, shall attempt to
reach a consensus on settlement of the dispute. In the event that no settlement
can be reached by these two parties within two weeks from the time that the
dispute was submitted to them, each party to this Agreement shall appoint one
arbitrator and the parties to this Agreement jointly request the appointment of
a neutral third arbitrator by the District Court of Reykjavik to participate in
the resolution of the dispute, and the three parties shall constitute an
arbitration tribunal. The tribunal shall conclude their resolution of the
dispute within one month from the time that the tribunal is fully constituted.
The cost of the work of the arbitration tribunal shall be subject to the
decision of the tribunal at each time. The work of the tribunal, procedure and
conclusions before the tribunal shall in other respects be governed, as
applicable, by Act No. 53/1989 on Contractual Arbitration.
Notwithstanding the above provisions on arbitration, issues involving the
collection of payments under this Agreement which are not in dispute between the
parties to this Agreement may be submitted to the courts, as well as any
disputes regarding financial claims which either party may make against the
other party on the basis of the decision of the arbitration tribunal regarding
the default or breach by the other party to this Agreement, provided that the
claim has not previously been submitted to the arbitration tribunal. Such issues
shall be submitted to the District Court of Reykjavik.
This Agreement is done in two identical copies, one to be held by each party to
this Agreement.
Reykjavik 13 February 1998
For Hjartavernd: For Islensk erfdagreining ehf.
Magnus Karl Petursson [sign.] Kari Stefansson [sign.]
Guomundur Porgeirsson [sign.]
Vilmundur Guonason [sign.]
Nikulas Sigfusson [sign.]
Aslaug Ottesen [sign.]
-4-
<PAGE> 1
EXHIBIT 10.14
OFFICER'S CERTIFICATE
I, the undersigned, do hereby certify and represent that:
1. I am the duly elected Senior Vice President and Chief Business
Officer of deCODE genetics, Inc., a Delaware Corporation.
2. Pursuant to Rule 306(a) of Regulation S-T, the following exhibit
10.14 to deCODE genetics, Inc.'s Registration Statement on Form S-1 is a fair
and accurate English translation of a document prepared in the Icelandic
language.
IN WITNESS WHEREOF, I have signed this Officer's Certificate in my
capacity as Senior Vice President and Chief Business Officer of deCODE genetics,
Inc. on this 7th day of March, 2000.
By: /s/ Hannes T. Smarason
--------------------------
Name: Hannes T. Smarason
Title: Senior Vice President and Chief Business Officer
<PAGE> 2
[NOTE: CERTAIN PORTIONS OF THIS DOCUMENT HAVE BEEN MARKED TO INDICATE THAT
CONFIDENTIALITY HAS BEEN REQUESTED FOR THIS CONFIDENTIAL INFORMATION. THE
CONFIDENTIAL PORTIONS HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.]
COLLABORATION AGREEMENT
BETWEEN
DR. HELGI JONSSON AND THORVALDUR INGVARSSON
AND ISLENSK ERFDAGREINING EHF.
Dr. Helgi Jonsson and Dr. Thorvaldur Ingvarsson (hereinafter "the Collaborating
Physicians) and Islensk erfdagreining ehf. (hereinafter "IE") hereby enter into
the following
Agreement
on research into osteoarthritis.
I. SUBJECT OF THE COLLABORATION
The Collaborating Physicians and IE agree to work together pursuant to this
Agreement on searching for genetic factors contributing to the genesis of
osteoarthritis. The proposed collaboration of the parties is hereinafter
referred to as the "Research Project".
II. CONTRIBUTION OF THE PARTIES
The Collaborating Physicians will supply the Research Project with biological
samples (blood samples), other clinical information and research data which they
possess or have access to regarding patients afflicted with osteoarthritis and
their relatives which are not afflicted with osteoarthritis.
The Collaborating Physicians will be in charge of relations with the individuals
intended for participation in the research, and/or their legal guardians,
including calling them in for blood samples and obtaining the informed consent
of the participants.
Furthermore, the Collaborating Physicians will contribute their specialised
knowledge and expertise regarding diagnosis of disorders, experimental design,
conduct of experiments and interpretation of their results.
IE will contribute its expertise in experimental design, conduct of experiments,
assessment of the heredity of the disorder and interpretation of the results of
research.
IE will also contribute equipment, research supplies, reagents and staff to
conduct experiments. IE will pay the cost of the Research Project, including the
material and wage costs of calling in participants for examination and required
samples. The Collaborating Physicians will submit a financial plan describing in
further detail the projected material and wage costs of the Project, see Annex
A.
III. RIGHTS OF THE PARTIES
IE will own all financial and commercial rights to the Research Project and its
conclusions. IE will have the right to sell to a third party the conclusions of
the Research Project or its results and to utilise the Research Project
financially in any other manner consistent with recognised ethical standards,
before or after the Research Project is concluded.
-1-
<PAGE> 3
IE and its parent company, deCODE genetics Inc., has contracted with a third
party on the sale of the Research Project, its possible conclusions and results.
The amount of the payment of such third party to IE and deCODE genetics Inc.
will depend on the success [CONFIDENTIAL TREATMENT REQUESTED] of all payments by
the third party to IE or to deCODE genetics Inc., as applicable, less the
deduction of the financing by the third party of the research costs and
investment in IE or deCODE genetics Inc.
IE will pay to the Collaborating Physicians jointly [CONFIDENTIAL TREATMENT
REQUESTED] on signature of this Agreement, and thereafter an annual amount of
[CONFIDENTIAL TREATMENT REQUESTED] during the course of the Research Project,
the total amount never to exceed [CONFIDENTIAL TREATMENT REQUESTED]. In the
event that the Research Project is concluded in a shorter time than five years
by achieving the objective of the Research Project, the Collaborating Physicians
will be paid on such conclusion the amount which remains unpaid of the
[CONFIDENTIAL TREATMENT REQUESTED] pursuant to this Paragraph. Payments pursuant
to this Paragraph shall be paid to the Collaborating Physicians for use in their
own research on osteoarthritis. The Collaborating Physicians may establish a
separate research fund for such purpose. Payments pursuant to this Paragraph are
in addition to and independent of the [CONFIDENTIAL TREATMENT REQUESTED] payment
pursuant to Paragraph 2 of this Chapter III. Allocation among the individual
Collaborating Physicians of the research cost payments made by IE to the
Collaborating Physicians pursuant to this Paragraph shall be no concern of IE.
IE is granted full authorisation by the Collaborating Physicians to deliver to
the party accepting the initial payment of IE to the Collaborating Physicians on
behalf of the Collaborating Physicians any payments which may be payable by IE
to the Collaborating Physicians pursuant to the terms of this Agreement.
The right of the Collaborating Physicians to payments pursuant to Paragraphs 2
and 3 of this Chapter III is based on the understanding that IE will not need to
pay other parties for the data and information which the Collaborating
Physicians have undertaken to supply pursuant to Paragraph 1 of Chapter II, and
that it will not be necessary for IE to enter into further collaboration with
other parties in Iceland regarding the study of osteoarthritis in order to
achieve the objectives of the Research Project. In the event that it proves
necessary for IE to negotiate payments to a third party in order to ensure
access to the data and information referred to in Paragraph 1 of Chapter II, or
if it proves necessary for IE to take up collaboration with other parties in
Iceland to achieve the objectives of the research, then the provisions of
Paragraphs 2 and 3 of this Chapter III shall be reviewed so that the total
payments of IE to the Collaborating Physicians and the third party remain the
same as the payments specified in Paragraphs 2 and 3.
IV. MANAGEMENT
Decisions regarding the Research Project will be taken by the Collaborating
Physicians and IE jointly, and a Steering Committee will be formed composed of
three representatives from each party to this Agreement in order to formulate
rules on the arrangement, control and implementation of the Research Project.
The Co-ordinator of the Research Project shall be selected from among the
members of the Steering Committee.
-2-
<PAGE> 4
The Steering Committee is also responsible for defining the objectives of the
Research Project and establishing the professional requirements which the
parties to this Agreement approve as adequate to the conduct of the research.
The Steering Committee is responsible for the processing of data and publication
of results pursuant to the rules of Chapter V hereof.
V. HANDLING PROCESSING AND DISSEMINATION OF INFORMATION
The parties to this Agreement undertake to treat all personal information as
confidential. The parties to this Agreement undertake to observe the guidelines
of the Data Protection Commission and, as applicable, the specially appointed
representative (observer) of the Data Protection Commission regarding the
handling and processing of such information as well as the guidelines and
conditions of the Science Ethics Committee, which is constituted pursuant to
legislation on Patients' Rights.
The results of the Research Project will be published as soon as they fulfil
academic requirements and are fit for publication. However, IE may postpone such
publication by a maximum of 90 days to provide sufficient time to secure
property rights relating to any invention arising out of the research. In the
event that a third party submits to IE a request for postponement of the
publication of results when they are ready for publication pursuant to the
above, the publication may be delayed for a maximum of 90 days.
The Steering Committee for each Research Project shall decide beforehand on the
Co-ordinator of the Project. As a rule, the Co-ordinator shall be the last
author of scientific articles, but the order of authors shall in other respects
conform to applicable rules in the international scientific community.
VI. LIMITATIONS ON COLLABORATION WITH OTHER PARTIES
The Collaborating Physicians covenant not to work, jointly or separately, with
others on research into the heredity of osteoarthritis during the course of the
Research Project. The individual Collaborating Physicians covenant not to enter
into collaboration with other parties on the part of the Research Project which
led to a discovery for five years following the conclusion of the Research
Project pursuant to this Agreement. However, if the Research Project does not
lead to a discovery, individual Collaborating Physicians are entitled to take up
collaboration with other parties regarding research into the heredity of
osteoarthritis following the conclusion of the Research Project.
IE covenants that during the course of the Research Project, IE will not take up
collaboration with other parties on research into the heredity of osteoarthritis
unless the Steering Committee regards such collaboration as necessary in order
to achieve the objectives of the Research Project. In the event that it should
prove necessary to add new partners to the Research Project, the Steering
Committee shall decide on the choice of such partner. In the event of a dispute
within the Steering Committee, the Collaborating Physicians will decide on the
choice of additional partners. Notwithstanding the above, the provisions of this
Paragraph shall not preclude collaboration by IE in the area of the Research
Project with the parties who have negotiated the purchase of the Research
Project, its conclusions or results, provided
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<PAGE> 5
that such collaboration does not prejudice the rights of the collaboration group
pursuant to Paragraphs 2 and 3 of Chapter III.
VII. TERM AND CONCLUSION OF PROJECT
The Research Project shall continue for a term of five years following the
signature of this Agreement unless it is concluded earlier. In the event of
substantial default by either party to this Agreement the other party may
terminate this Agreement. In the event of a dispute regarding the termination
rights of a party, such dispute shall be resolved pursuant to the terms of
Chapter VIII.
At the conclusion of the Project, all clinical data (blood samples and clinical
information) shall be returned to the Collaborating Physicians.
In the event that one or both parties see reason to continue their collaboration
following the agreed term, such continuation shall be considered independently.
VIII. SETTLEMENT OF DISPUTES
In the event of a dispute between the parties regarding the implementation of
this Agreement or performance which cannot be resolved within the Steering
Committee, two parties, one from each party to this Agreement, shall attempt to
reach a consensus on settlement of the dispute. In the event that no consensus
can be reached by these two parties within two weeks from the time that the
dispute was submitted to them, each party to this Agreement shall appoint one
arbitrator and the parties to this Agreement shall then jointly request the
appointment of a neutral third arbitrator by the District Court of Reykjavik to
participate in the resolution of the dispute, and the three parties shall
constitute an arbitration tribunal. The tribunal shall conclude their resolution
of the dispute within one month from the time that the tribunal is fully
constituted.
The cost of the work of the arbitration tribunal shall be subject to the
decision of the tribunal at each time. The work of the tribunal, procedure and
conclusions before the tribunal shall in other respects be governed, as
applicable, by Act No. 53/1989 on Contractual Arbitration.
Notwithstanding the above provisions on arbitration, issues involving the
collection of payments under this Agreement which are not in dispute between the
parties to this Agreement may be submitted to the courts, as well as any
disputes regarding financial claims which either party may make against the
other party on the basis of the decision of the arbitration tribunal regarding
the default or breach by the other party to this Agreement, provided that the
claim has not previously been submitted to the arbitration tribunal. Such issues
shall be submitted to the District Court of Reykjavik.
Reykjavik 31 March 1998
For the Collaborating Physicians: For Islensk erfdagreining ehf.
Dr. Helgi Jonsson [sign.] Kari Stefansson, Managing Director
[sign.]
Dr. Thorvaldur Ingvarsson [sign.]
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<PAGE> 1
EXHIBIT 10.15
OFFICER'S CERTIFICATE
I, the undersigned, do hereby certify and represent that:
1. I am the duly elected Senior Vice President and Chief Business
Officer of deCODE genetics, Inc., a Delaware Corporation.
2. Pursuant to Rule 306(a) of Regulation S-T, the following exhibit
10.15 to deCODE genetics, Inc.'s Registration Statement on Form S-1 is a fair
and accurate English translation of a document prepared in the Icelandic
language.
IN WITNESS WHEREOF, I have signed this Officer's Certificate in my
capacity as Senior Vice President and Chief Business Officer of deCODE genetics,
Inc. on this 7th day of March, 2000.
By: /s/ Hannes T. Smarason
----------------------------------
Name: Hannes T. Smarason
Title: Senior Vice President and Chief Business Officer
<PAGE> 2
[NOTE: CERTAIN PORTIONS OF THIS DOCUMENT HAVE BEEN MARKED TO INDICATE THAT
CONFIDENTIALITY HAS BEEN REQUESTED FOR THIS CONFIDENTIAL INFORMATION. THE
CONFIDENTIAL PORTIONS HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.]
COLLABORATION AGREEMENT
BETWEEN
THE RESEARCH GROUP ON ARTERIAL HYPERTENSION
AND ISLENSK ERFDAGREINING EHF.
The Research Group on arterial hypertension (hereinafter "RA,") and Islensk
erfdagreining ehf. (hereinafter "IE") hereby enter into the following
Agreement
on research into the heredity of arterial hypertension.
I. SUBJECT OF THE COLLABORATION
RA and IE agree to work together on searching for genetic factors contributing
to arterial hypertension. The proposed collaboration of the parties is
hereinafter referred to as the "Research Project".
II. CONTRIBUTION OF THE PARTIES
RA will supply the Research Project with biological samples (blood samples),
other clinical information and research data which RA possesses or has access to
regarding patients afflicted with arterial hypertension and their relatives
which are not afflicted with arterial hypertension.
RA will be in charge of relations with the individuals intended for
participation in the research, or their legal guardians, including calling them
in for blood samples and obtaining the informed consent of the participants.
Furthermore, RA will contribute its specialised knowledge and expertise
regarding diagnosis of disorders, experimental design, conduct of experiments
and interpretation of their results.
IE will contribute its expertise in experimental design, conduct of experiments,
assessment of the heredity of the disorder and interpretation of the results of
research.
IE will also contribute equipment, research supplies, reagents and staff to
conduct experiments. IE will pay all reasonable costs of the Research Project,
including the material and wage costs of calling in participants for examination
and sampling. RA will submit a financial plan following the signature of this
Agreement when there is sufficient information to assess the scope of the
Project.
III. RIGHTS OF THE PARTIES
IE will own all financial and commercial rights to the Research Project and its
conclusions. IE will have the right to sell to a third party the conclusions of
the Research Project or its results and to utilise the Research Project
financially in any other manner consistent with recognised ethical standards,
before or after the Research Project is concluded.
IE and its parent company, deCODE genetics Inc., has contracted with a third
party on the sale of the Research Project, its possible conclusions and results.
The amount of the payment of such third party to IE and deCODE genetics Inc.
will depend on the success of the Research Project. RA will receive as its share
[CONFIDENTIAL TREATMENT REQUESTED] of all payments by the third party to IE or
to deCODE genetics Inc., as applicable, during the term of
-1-
<PAGE> 3
such contract with the third party less the deduction of the financing by the
third party of the research costs and investment in IE or deCODE genetics Inc.
IE will pay to RA [CONFIDENTIAL TREATMENT REQUESTED] on signature of this
Agreement, and thereafter an annual amount of [CONFIDENTIAL TREATMENT REQUESTED]
during the course of the Research Project, the total amount never to exceed
[CONFIDENTIAL TREATMENT REQUESTED]. In the event that the Research Project is
concluded in a shorter time than five years by achieving the objective of the
Research Project, RA will be paid on such conclusion the amount which remains
unpaid of the [CONFIDENTIAL TREATMENT REQUESTED] pursuant to this Paragraph.
Payments pursuant to this Paragraph shall be used by RA to finance its own
research and purchase equipment for research. All payments will, following
deduction of the cost of the research, will go to the Equipment and Scientific
Research Fund of the Department of Internal Medicine of the National Hospital.
Payments pursuant to this Paragraph are in addition to and independent of the
[CONFIDENTIAL TREATMENT REQUESTED] payment pursuant to Paragraph 2 of this
Chapter III. IE is granted full authorisation by all the individuals engaged in
RA to deliver to the party accepting the initial payment of IE to RA on behalf
of RA any payments which may be subsequently payable by IE pursuant to the terms
of this Agreement. RA will employ a chartered accountant with full authority to
monitor payments, finances and reception of payments in respect of the Research
Project on behalf of RA, provided that IE receives verifiable notification
thereof with reasonable notice.
The right of RA to payments pursuant to Paragraphs 2 and 3 of this Chapter III
is based on the understanding that IE will not need to pay other parties for the
data and information which RA has undertaken to supply pursuant to Paragraph 1
of Chapter II, and that it will not be necessary for IE to enter into further
collaboration with other parties in Iceland regarding the study of arterial
hypertension in order to achieve the objectives of the Research Project. In the
event that it proves necessary for IE to negotiate payments to a third party in
order to ensure access to the data and information referred to in Paragraph 1 of
Chapter II, or if it proves necessary for IE to take up collaboration with other
parties in Iceland to achieve the objectives of the research, then the
provisions of Paragraphs 2 and 3 of this Chapter III shall be reviewed so that
the total payments of IE to RA and the third party remain the same as the
payments specified in Paragraphs 2 and 3. RA is not financially liable to IE for
the achievement of the scientific or commercial objectives of the research. In
the event that a third party effects the discontinuation of the research, RA
shall not be liable to IE in respect of such discontinuation, provided that all
payments to RA which have not been disposed of for the payment of research costs
are returned to IE.
IV. MANAGEMENT
Decisions regarding the Research Project will be taken by RA and IE jointly, and
a Steering Committee will be formed composed of two representatives from each
party to this Agreement in order to formulate rules on the arrangement, control
and implementation of the Research Project. The Co-ordinator of the Research
Project shall be selected from among the members of the Steering Committee
nominated by RA.
The Steering Committee is also responsible for defining the objectives of the
Research Project and establishing the professional requirements which the
parties to this Agreement approve as adequate to the conduct of the research.
-2-
<PAGE> 4
The Steering Committee is responsible for the processing of data and publication
of results pursuant to the rules of Chapter V hereof.
V. HANDLING, PROCESSING AND DISSEMINATION OF INFORMATION
The parties to this Agreement undertake to treat all personal information as
confidential. The parties to this Agreement undertake to observe the guidelines
of the Data Protection Commission and, as applicable, the specially appointed
representative (observer) of the Data Protection Commission regarding the
handling and processing of such information as well as the guidelines and
conditions of the Science Ethics Committee, which is constituted pursuant to Act
No. 74/1997 on Patients' Rights.
The results of the Research Project will be published as soon as they fulfil
academic requirements and are fit for publication. However, IE may postpone such
publication by a maximum of 90 days to secure property rights relating to any
invention arising out of the research. In the event that a third party submits
to IE a request for postponement of the publication of results when they are
ready for publication pursuant to the above, the publication may be delayed for
a maximum of 90 days.
VI. LIMITATIONS ON COLLABORATION WITH OTHER PARTIES
RA and individuals within the group covenant not to work, jointly or separately,
with others on research into the heredity of arterial hypertension during the
course of the Research Project. RA and individuals within the group covenant not
to enter into collaboration with other parties on the part of the Research
Project which led to a discovery for five years following the conclusion of the
Research Project pursuant to this Agreement. However, if the Research Project
does not lead to a discovery, individual parties within RA are entitled to take
up collaboration with other parties regarding research into the heredity of
arterial hypertension following the conclusion of the Research Project. This
limitation does not, however, apply to the collaboration of RA with a Canadian
party.
IE covenants that during the course of the Research Project, IE will not take up
collaboration with other parties on research into the heredity of arterial
hypertension unless the Steering Committee regards such collaboration as
necessary in order to achieve the objectives of the Research Project. In the
event that it should prove necessary to add new partners to the Research
Project, the Steering Committee shall decide on the choice of such partner. In
the event of a dispute within the Steering Committee, RA will decide on the
choice of additional partners. Notwithstanding the above, the provisions of this
Paragraph shall not preclude collaboration by IE in the area of the Research
Project with the parties who have negotiated the purchase of the Research
Project, its conclusions or results, provided that such collaboration does not
prejudice the rights of the research group pursuant to Paragraphs 2 and 3 of
Chapter III.
Subject to the provisions of Paragraphs 1 and 2 of Chapter III, the parties to
this Agreement agree that this agreement is not transferable, partly or wholly,
to other legal entities or individuals without the consent of both parties to
this Agreement.
VII. TERM AND CONCLUSION OF PROJECT
The Research Project shall continue for a term of five years following the
signature of this Agreement unless the Project is concluded earlier. In the
event of substantial
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<PAGE> 5
default by either party to this Agreement the other party may terminate this
Agreement. In the event of a dispute regarding the termination rights of a
party, such dispute shall be resolved pursuant to the terms of Chapter VIII.
At the conclusion of the Project, all clinical data (blood samples and clinical
information) shall be returned to RA.
In the event that one or both parties see reason to continue their collaboration
following the agreed term, such continuation shall be considered independently.
In the event that a third party effects the discontinuation of this research, RA
may terminate this Agreement with IE without compensation except as provided for
in Paragraph 4 of Chapter III hereof.
VIII SETTLEMENT OF DISPUTES
In the event of a dispute between the parties regarding the implementation of
this Agreement or performance which cannot be resolved within the Steering
Committee, two parties, one from each party to this Agreement, shall attempt to
reach a consensus on settlement of the dispute. In the event that no settlement
can be reached by these two parties within two weeks from the time that the
dispute was submitted to them, each party to this Agreement shall appoint one
arbitrator and the parties to this Agreement shall then jointly request the
appointment of a neutral third arbitrator by the District Court of Reykjavik to
participate in the resolution of the dispute, and the three parties shall
constitute an arbitration tribunal. The tribunal shall conclude their resolution
of the dispute within one month from the time that the tribunal is fully
constituted.
The cost of the work of the arbitration tribunal shall be subject to the
decision of the tribunal at each time. The work of the tribunal, procedure and
conclusions before the tribunal shall in other respects be governed, as
applicable, by Act No. 53/1989 on Contractual Arbitration.
Notwithstanding the above provisions on arbitration, issues involving the
collection of payments under this Agreement which are not in dispute between the
parties to this Agreement may be submitted to the courts, as well as any
disputes regarding financial claims which either party may make against the
other party on the basis of the decision of the arbitration tribunal regarding
the default or breach by the other party to this Agreement, provided that the
claim has not previously been submitted to the arbitration tribunal. Such issues
shall be submitted to the District Court of Reykjavik.
This Agreement is in 8 chapters on five pages. It is done in two copies, one to
be held by each party to this Agreement.
Reykjavik 3 June 1998
For the Research Group on arterial For Islensk erfdagreining ehf.
hypertension:
Thordur Hardarson, Physician [sign.] Kari Stefansson, Managing Director
[sign.]
-4-
<PAGE> 6
Arni Kristinsson, Physician [sign.]
-5-
<PAGE> 1
EXHIBIT 10.16
OFFICER'S CERTIFICATE
I, the undersigned, do hereby certify and represent that:
1. I am the duly elected Senior Vice President and Chief Business
Officer of deCODE genetics, Inc., a Delaware Corporation.
2. Pursuant to Rule 306(a) of Regulation S-T, the following exhibit
10.16 to deCODE genetics, Inc.'s Registration Statement on Form S-1 is a fair
and accurate English translation of a document prepared in the Icelandic
language.
IN WITNESS WHEREOF, I have signed this Officer's Certificate in my
capacity as Senior Vice President and Chief Business Officer of deCODE genetics,
Inc. on this 7th day of March, 2000.
By: /s/ Hannes T. Smarason
--------------------------
Name: Hannes T. Smarason
Title: Senior Vice President and Chief Business Officer
<PAGE> 2
CONTRACT ON SALE AND LEASEBACK
8 June 1998
ISLENSK ERFDAGREINING EHF.
AND
THE ICELANDIC INVESTMENT BANK
The Icelandic Investment Bank (Fjarfestingarbanki atvinnulifsins hf). ID no.
501097-2179, Armuli 13, Reykjavik, hereinafter termed the lessor, and Islensk
erfdagreining ehf., Lynghals 1, Reykjavik, hereinafter termed the lessee, have
made an agreement that the lessor shall purchase from the lessee the property
Lynghals 1, Reykjavik, pursuant to the attached contract of sale and transfer of
title marked Appendix I (hereinafter "contract of sale") and that the lessee
lease the property for the lessee's business, from the date of the contract of
sale. The lessor and lessee have thus made the following.
SALE AND LEASEBACK AGREEMENT
ON THE PROPERTY LYNGHALS 1
1. PROPERTY
The lessee leases from the lessor the property Lynghals 1, Reykjavik, together
with the concomitant land-lease rights (hereinafter "the property.") This
consists of industrial and office accommodation as described more fully in
Appendix 1.
2. AMOUNT OF LEASE
The purchase price of the property pursuant to the contract in Appendix 1 is a
total of ISK170,000,000 (one hundred and seventy million ISK). The amount of the
lease comprises the purchase price, contract charge and lessor's costs due to
registration and stamp duty on the contract in Appendix 1. Details of the
composition of the amount of the lease are to be found in Appendix II (summary
of conditions).
3. INITIAL LEASE PERIOD
The agreed period of the lease begins on 5 June 1998 and ends without formal
notice on 4 June 2008.
4. CONDITION OF PROPERTY
The lessee is familiar with the condition of the property and is satisfied with
it in every way.
5. LEASE PAYMENTS
Payments on the lease shall be made monthly in arrears, the date of payment
being the 5th day of each month for the prior month. The first date of payment
is 5 July 1998, and the last date of payment 5 June 2008. Payment dates thus
total 120. If the date of payment is not a banking day, the due date shall be
transferred to the next banking day following. A banking day shall be regarded
as a day when banks are open both in Iceland and in the country of origin of the
foreign currency in which the lease is denominated.
The monthly lease payment agreed is USD 26,671.25, which shall be raised or
lowered in accord with changes in LIBOR interest rates (London Inter Bank
Offered
-1-
<PAGE> 3
Rate) on the inter-bank market in London for one-month USD loans, vis-a-vis the
interest rate plus interest supplement stated in Appendix II of this contract.
The lease payment each month shall be a sum equivalent to payments on a 10-year
annuity loan with 12 repayments per year. When LIBOR interest is calculated,
this shall be done on the basis of the interest rates published on Reuters BBA
page at 11 am (GMT) two days before the due date, and this shall apply to the
next period.
Should the lease payment or other payments covered by this contract not be paid
on the due date, the debt shall be subject to the highest legal penalty interest
rates from due date to date of payment.
The lessee shall pay, during the period of the lease, fees/costs due to
collection and receipt of individual lease payments.
All payments covered by his contract shall be made at a place to be decided by
the lessor, who shall inform the lessee of this.
6. OPERATIONAL COSTS, ETC.
The lessee shall, in addition to lease payments pursuant to Art. 5, pay all
operational costs of the property, including all property taxes, contributions
to joint maintenance work, costs due to improvements to the plot or the
property, and cost of a managing committee for the building if applicable.
Should the lessor pay operational costs payable by the lessee under the terms
above, this amount is payable at the next due date for lease payments.
The lessee shall reimburse the lessor for all taxes and duties that may be
imposed upon this contract or in connection with it, including those due to the
lessor's ownership of the property. The same applies to compensation that the
lessor may be required to pay as owner of the property, not covered by ordinary
property-owners' insurance, pursuant to Art. 7, para. 4. This does not, however,
apply to taxes that may be levied on the lessor's revenue from this contract, or
property tax that may be levied on the lessor's assets.
7. MAINTENANCE OF PROPERTY
The lessee shall treat the property with care, and in keeping with the agreed
use.
The lessee shall be responsible, at the lessee's own expense, for all
maintenance of the property, inside and out. The property shall be maintained in
good condition, by such measures as painting the property and renewing flooring
and other surfaces, in keeping with good practice regarding the maintenance of
leased property.
Should the property or its appurtenances be damaged, the lessee shall take
measures to repair the damage at the lessee's own expense and as soon as
possible.
The lessee shall purchase property-owner's insurance in the name of the lessor
with regard to the property, and continue this throughout the period of the
lease.
Should the lessee not fulfil the above obligations regarding maintenance and
repair as specified above, the lessor may have maintenance or repairs carried
out at the lessee's expense, and require reimbursement of the cost on the next
due date of the lease.
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<PAGE> 4
8. ADDITIONS AND CONSTRUCTION
The lessee has the lessor's full permission to carry out those improvements and
additions to the property that are necessary in order to make it suitable for
the research work in human genetics and information technology that the lessee
carries out, and is known to the lessor. Those changes or improvements made by
the lessee to the property itself will automatically and without special
reimbursement become the property of the lessor, in keeping with practice in the
leasing and sale of commercial premises. The lessee shall seek the lessor's
consent for all changes which may be regarded as unusual for the activity of the
lessee. Should such changes or additions be made without the lessor's consent,
the lessor may require the property to be restored to its original condition,
without cost to the lessor.
The lessor is aware that the lessee plans to extend the property at Lynghals 1
within a few years. Permission has been obtained from municipal authorities for
an extension with a ground area of 1,500 sq.m. The lessor grants permission for
this extension to be carried out, should the lessee decide to undertake it. All
extensions to the existing property become the property of the lessee.
Concomitant land-lease rights, in keeping with the proportional size of the
present building and the extension to be constructed, will also become the
property of the lessee. The lessor undertakes to agree to the making of a new
agreement on the division of the property pursuant to the above, without any
special fee being paid. Costs of making the contract of division are to be paid
by the lessee.
Should the lessee intend to transfer property rights in an extension to Lynghals
1 to a third party, the lessor shall have preemptive rights to equal the offer
of the third party, whether this consists of sale, rental or sale and leaseback
of the extension. The lessor's pre-emptive right is contingent upon the lessor
still being owner of the property and payment of the outstanding amount of the
lease not having taken place pursuant to Art. 12.
9. OWNERSHIP, TRANSFER OF RIGHTS, ETC.
The lessor has, during the term of the lease, direct right of ownership in the
property.
The lessee shall, if liens should be imposed upon business equipment or other
chattels located on the property, whether as collateral or for attachment of
debts, ensure that the lien does not apply to the property. If any doubt exists
about this at the time of the lien being imposed, the property shall be clearly
excepted from the lien.
The lessor may transfer rights and obligations under the terms of this lease,
provided such as transfer does not in any way affect the rights of the lessee.
The lessee may not transfer the right to use of the property without the written
consent of the lessor. The lessor shall grant the lessee the right to sublet the
property, if it is certain that this will in no way affect the interests of the
lessor.
Direct ownership of the property and other ownership rights are transferred at
the end of the lease period to the lessee, or to a party nominated by the
lessee, provided the lessee has in every way fulfilled the obligations on the
lessee under the terms of this contract.
-3-
<PAGE> 5
10. INFORMATION
The lessee must submit to the lessor, no later than 6 months after the end of
the accounting year, a copy of the lessee's annual accounts.
11. RESCISSION AND SETTLEMENT
The lessor may rescind this contract if the lessee defaults seriously on
obligations under this contract.
Examples of serious default are:
1. The lessee neglects maintenance or repair to the property, so that it is at
risk of deterioration, or does not comply with the lessor's instructions to
rectify matters within four weeks from receipt of the notice.
2. The lessee sublets rights under the lease or sublets the property without
the consent of the lessor, and does not comply with the lessor's
instructions to rectify matters within four weeks of receipt of the notice.
3. The lessee does not make payments due on the lease, or other payments
payable to the lessor by the terms of this contract, on the due dates, and
remains in default for more than four weeks.
4. The lessee requests a moratorium on debts, an unsuccessful attempt is made
at attachment or impounding regarding the lessee, or liquidation
proceedings are requested by the lessee or creditors of the lessee, on the
basis of an unsuccessful attempt at attachment, the lessee seeks
composition of debts, or a decision is made to cease trading.
5. The lessee's financial position deteriorates so seriously after the signing
of the contract that it must be regarded as highly likely that the lessee
cannot fulfil obligations to the lessor, and the lessee does not comply
with the lessor's instruction to rectify the financial position within four
weeks of receipt of the notice.
Notices requiring rectification sent by the lessor to the lessee under the terms
of this article shall be sent by provable means, and the rectification required
shall be clearly stated.
Notice of rescission of the contract shall be in writing, and sent by provable
means.
Should the lessor rescind the contract due to default by the lessee, the lessee
shall within four weeks of the receipt of written notice of rescission pay to
the lessor all due but unpaid lease payments and other payments covered by this
contract which remain unpaid on the day of rescission, and all lease payments
not yet due, calculated to current value on the basis of the contract's interest
rate, minus half a percent (0.5% rescission supplement). The lessee's debt, thus
calculated, shall be subject to the highest legal penalty interest rates from
the above-mentioned due date until date of payment. In addition the lessee shall
pay the lessor, based upon invoices submitted by the lessor, all the lessor's
costs due to the default and rescission, including legal costs.
When the settlement has been completed as stated above, and the lessee shall be
free of all debt to the lessor, title to the property shall be transferred to
the lessee pursuant to Art. 9, para. 4.
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<PAGE> 6
If settlement to the lessor is not carried out within the time stated above, the
lessor shall as soon as possible attempt to sell the property on the free
market. In such attempts to sell, the lessor shall take into account the
interests of the lessee.
If the property is sold, the sales price, minus sales costs, shall be deducted
from the lessee's debt as stated above, if and when the lessor has received the
sales price in money. Payment by cheque, bank draft or bond is not regarded as
payment in money. Attempt at sale does not affect the lessee's obligation to
pay.
12. LESSEE'S RIGHT TO PAY OFF REMAINDER OF LEASE
The lessee has the right to terminate this contract and reacquire the property
and all rights pertaining to the plot and other rights specified in the contract
of sale in Appendix I, at any time during the period of the lease, by paying off
all due lease payments and those not yet due, together with interest accruing,
in keeping with the provisions of the contract, calculated to present value on
the basis of the interest rate of the contract, on the day of settlement. In the
case of such a settlement, all ownership rights in the property are transferred
to the lessee, pursuant to Art. 9, para. 4.
13. RETURN OF THE PROPERTY
Should the period of the lease expire without transfer of rights pursuant to
Art. 9 para 4, the lessee shall return the property to the lessor in the same
condition as when it was received. The lessee bears sole and unlimited
responsibility for compensation for deterioration of the property or damage to
it, insofar as this is not classifiable as fair wear and tear due to normal or
agreed use. Should a dispute arise between the lessor and lessee on the amount
of compensation due to damage to the leased property, it shall be decided by the
decision of one court-appointed assessor, whose decision shall be final. The
assessor shall be appointed, and work, on the basis of laws on courts of
arbitration.
14. NOTICE
All notices to the lessee may be given at the address stated on the front of
this contract, unless the lessee has provably informed the lessor of a new
address.
15. APPENDICES
The Appendices especially mentioned in the this contract and/or signed as
appendices to the contract, are a part of the contract.
16. JURISDICTION
Should a dispute arise from this contract, the case may be conducted in the
Reykjavik District Court.
17. HEADINGS
Headings of articles 1-17 form no part of the content of the contract.
Reykjavik 8 June 1998
On behalf of the Icelandic Investment Bank
(signed) Bjarni Armannsson
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<PAGE> 7
On behalf of Islensk erfdagreining ehf.
(signed) Kari Stefansson
Appendices:
I Contract and transfer of title dated 8 June 1998 II Summary of conditions
dated 8 June 1998
Witness to correct date, signature and financial competence of the parties
(signed) Tomas Sigurdsson, District Court Attorney
ID no. 180966-3159
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<PAGE> 8
CONDITIONS OF SALE AND LEASEBACK AGREEMENT ON THE PROPERTY LYNGHALS 1, REYKJAVIK
08.06.1998
<TABLE>
<CAPTION>
<S> <C>
Lessee Islensk erfdagreining ehf.
Lessor Icelandic Investment Bank
Leased item Property Lynghals 1, Reykjavik
Amount in ISK 170,000,000
Amount in USD 2,403,846.15
Exchange rate ISK/USD 70.72
Libor interest rate, BBA 5.65625%
Interest supplement 1.15%
Contract charge % 0.5%
Contract charge, USD 12,019.23
Stamp duty on sales contract, ISK 453,776.00
Cost due to registration of sale, ISK 3,600.00
Lease payment per month, USD 27,671.25
Payable, USD 2,385,359.50
Date of payment 09.06.1998
Paid into account no. 115-38-129228
Frequency of lease payments monthly
No. of lease payments 120
First due date 5.7.1998
Final due date 5.6.2008
Appendix I with sale and leaseback contract
</TABLE>
-7-
<PAGE> 9
Document drawn up by:
Tomas Sigurdsson, District Court Attorney
ID no. 180966-3159
Armuli 13a, 155 Reykjavik
CONTRACT OF SALE AND TRANSFER OF TITLE
Islensk erfdagreining ehf., ID no. 691295-3549, Lynghals 1, Reykjavik,
hereinafter termed the seller, hereby sells and transfers to the Icelandic
Investment Bank (Fjarfestingarbanki atvinnulifsins hf.), ID no. 501097-2179,
Armuli 13a, Reykjavik, hereinafter termed the buyer, to full ownership and right
of disposal of the property specified below.
I. THE ITEM TRANSFERRED.
The seller transfers to the buyer full ownership and right of disposal of the
property Lynghals 1, Reykjavik, together with all appurtenances, including the
appurtenant plot of land in keeping with land lease document numbered
E-12887/1981.
More precisely this consists of the following parts of the property, classified
by the numbering system of the Evaluation Office of Iceland.
<TABLE>
<CAPTION>
Evaluation no. Ev. Part Use Area Property
evaluation
<S> <C> <C> <C> <C>
204-4238 01 0001 warehouse 1,113.1m2 33,613,000
204-4239 01 0101 industrial 1,241.2m2 48,071,000
204-4240 01 0201 offices 965.2m2 31,760,000
3,319.5m2 113,444,000
</TABLE>
II. DELIVERY - CONDITION
The property transferred is delivered to the buyer today. The buyer has examined
the condition of the property and is entirely satisfied with it.
III. SALES PRICE AND PAYMENT
The agreed purchase price, ISK170,000,000, one hundred and seventy million ISK,
has been paid in full.
IV. OBLIGATIONS AND LIENS
The property is sold free of all liens with the exception of the above.
V. PROFITS AND COSTS
The purchaser shall receive the profits and pay the expenses of the property
sold from the day of delivery, but the seller until that time. The property is
leased back to the seller by a sale and leaseback agreement dated today, under
whose terms the seller shall pay all operational costs of the property.
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<PAGE> 10
Should a dispute arise from the transfer of title, the case may be conducted in
the Reykjavik District Court.
In confirmation of which, signatures of the buyer and seller in the presence of
witnesses.
Reykjavik 8 June 1998
Seller
On behalf of Islensk erfdagreining hf.
(signed) Kari Stefansson
Buyer
On behalf of the Icelandic Investment Bank
(signed) Bjarni Armannsson
Witnesses to the correct date, signature and financial competence of the
parties.
(signed) (illegible)
ID no. 080263-2289
(signed) Tomas Sigurdsson, district court attorney
ID no. 180966-3159
Appendix II with sale and leaseback agreement.
-9-
<PAGE> 1
EXHIBIT 10.17
OFFICER'S CERTIFICATE
I, the undersigned, do hereby certify and represent that:
1. I am the duly elected Senior Vice President and Chief Business
Officer of deCODE genetics, Inc., a Delaware Corporation.
2. Pursuant to Rule 306(a) of Regulation S-T, the following exhibit
10.17 to deCODE genetics, Inc.'s Registration Statement on Form S-1 is a fair
and accurate English translation of a document prepared in the Icelandic
language.
IN WITNESS WHEREOF, I have signed this Officer's Certificate in my
capacity as Senior Vice President and Chief Business Officer of deCODE genetics,
Inc. on this 7th day of March, 2000.
By: /s/ Hannes T. Smarason
--------------------------
Name: Hannes T. Smarason
Title: Senior Vice President and Chief Business Officer
<PAGE> 2
CONTRACT ON FINANCIAL LEASING
Lysing hf.
Sudurlandsbraut 22, 108 Reykjavik
Tel. 533 1500, Fax 533 1505. Free phone 800 6515
Document drawn up by: Gudridur Olafsdottir
Lysing hf.
CONTRACT ON FINANCIAL LEASING NO. 108237 copy
LYSING HF. Sudurlandsbraut 22, 1208 Reykjavik, ID no. 491086-1229
Tel. 533 1500. Fax 533 1505. Free phone 800 6515
As lessor and
Lessee: Islensk erfdagreining ehf.
Address: Lynghals 1, 110 Reykjavik
ID no: 691295
Tel. 570 1900
Hereinafter termed the lessee, make between them the following contract on
financial leasing:
ART. 1. THE LEASED ITEM
Various machinery and equipment as specified in the seller's invoice.
Photocopies of the original invoices are appended for further classification.
Year: 1998
ART. 2. AMOUNT OF LEASE
Amount of lease: ISK 400,000,000
VAT: 98,000,000
Total: 498,000,000
Indexed to USD: ISK 400,000,000
Total without VAT: ISK 400,000,000
Initial exchange rate: 71.39
In ISK and foreign currency: 5,603,026
ART. 3. SELLER
Islensk erfdagreining hf.
Lynghals 1
110 Reykjavik
ID no. 691295 3549
Tel. 570 1900
-1-
<PAGE> 3
ART. 4. INITIAL LEASE PERIOD
From 21.7.1998 to 20.7.2002 Day of payment 11.6.1998 Date of first payment
20.7.1998 Number of payments 48 Number of months 48
ART. 5. PAYMENT ARRANGEMENTS DURING INITIAL LEASE PERIOD
21.07.1998 - 20.07.2002
No. of payments 48
Payments indexed to USD ISK 9,515,884
Payments based on initial exchange rate/index ISK 9,515,884 (excl. VAT), to be
paid monthly incl. VAT.
ART. 6. MONTHLY CONTINUATION OF LEASE FOLLOWS END OF INITIAL LEASE PERIOD
From 21.07.2002
Payments indexed to USD ISK: 792,990
Payment excluding VAT based on initial exchange rate/index: 792,990
ART.7. INSURED BY:
Vatryggingafelag Islands hf.
Insurance amount: ISK400,000,000
Collection of premiums of chattels insurance: directly from the lessee
ART. 8. SURETY
Guarantor/owner of collateral: DeCode Genetics Inc.
ART. 9 APPENDICES TO THE CONTRACT:
Place of delivery
Invoice
ART. 10. SPECIAL CONDITIONS:
Islensk erfdagreining is aware that this contract is guaranteed by Landsbanki
Islands (National Bank of Iceland), which may take over this contract. A
contract charge is payable on this contract, 0.75% of the lease amount The
lessee shall pay interest on lease payments pursuant to Art. 13 of the contract.
ART. 11. THE ITEM LEASED
The item leased is specified in Art. 1, and the amount of this lease in Art. 2.
In addition, documents that describe the leased item more fully are appended to
this contract, and are a part of it.
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<PAGE> 4
ART. 12 PERIOD OF LEASE
The period of lease is specified in Arts. 4 and 6. The lessee cannot terminate
this contract except with a month's notice, when one month remains of the
initial lease period under the terms of Art. 4. Should the lessee not terminate
the contract as specified above, it will be extended indefinitely under the
terms of Art.6.
The lessee can terminate the extended lease with one month's written notice.
Should the lessee terminate this lease, the terms of Art. 29 apply to the return
of the leased item, and costs accruing.
ART. 13 PAYMENTS OF LEASE
The lessee shall make payments on the lease on the days agreed. The payment is
payable in advance, the first payment being at the beginning of the initial
lease period under the terms of Art. 4.
Should Lysing hf. pay the full or partial price of the leased item before the
beginning of the initial lease period under the terms of Art. 4, the lessee
shall pay, in addition to the first payment under the terms of Art.5, interest
from the date of payment to the first day of the basic lease period under the
terms of Art. 5.
If the contract is not index-linked, Lysing hf. has the right to recalculate the
payment specified in Arts. 5 and 6 to take into account changes in the interest
rates on non-index-linked loans from banks and savings banks as specified in
notices from the Central Bank of Iceland, after the date of this contract.
Lysing hf. has the right to recalculate payments indexed to foreign currency
exchange rates as specified in Arts. 5 and 6, in accord with changes that take
place in the Libor interest rates on the foreign currency or currencies in which
the lease payment is denominated.
ART. 14 INDEXATION
If the lease payment is index-linked, the lessee shall pay, in addition to the
lease payment, an indexation supplement. The supplement shall be calculated on
the basis of the changes that have occurred in the cost-of-living index to which
this contract is linked by the terms of Art. 2, to the index that applies on
each date of payment on the lease. A lower index, however, shall not be taken
into account.
Lease payments indexed to the changes in exchange rate of a currency abroad
and/or the rate of exchange of foreign currencies vis-a-vis the Icelandic krona
(ISK), are specified in ISK.
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<PAGE> 5
The lease payment is payable in ISK. Calculation shall be based upon the
published exchange rates of the Central Bank of Iceland for the currency or
currencies on the date of issue of the invoice.
ART. 15. OWNERSHIP
Lysing hf. is the owner of the leased item. The company may require the leased
item to be marked with a label supplied by the company to the lessee. The label
must not be removed during the period of lease.
At the lessee's expense, Lysing hf. will register its ownership of the leased
item, if this is legally obligatory or if the company feels it necessary.
The lessee may not undertake any declaration of legal consequence regarding the
leased item, and it is not a valid subject for enforcement of the lessee's
debts. The lessee may not permit others to use the leased item, nor pass it to
another party, without the consent of Lysing hf.
ART. 16. INSPECTION
The lessee has chosen the leased item, and shall undertake on behalf of Lysing
hf. to examine it, as the purchaser is obliged to do by the terms of the Act on
purchase of chattels No. 39/1922 and/or other legal rulings. Lysing hf. takes no
responsibility for the leased item. Lease payments must be made even if the
lessee is not satisfied with the leased item, or if it does not have the
qualities the lessee expected.
ART. 17. DELIVERY
The lessee takes the risk of the leased item being destroyed, damaged or
deteriorating after the seller has delivered the leased item, or after the risk
has passed from the seller to the purchaser under the terms of the Act on
purchase of chattels no. 39/1922, or other legal rulings.
ART. 18. COST OF TRANSPORT AND REGISTRATION
All costs incurred due to the packing and transportation of the leased item from
the seller to the lessee, as well as all costs pertaining to installation of the
leased item at the place of use, are the lessee's responsibility, payable by the
lessee.
The lessee shall also pay all costs pertaining to registration and transfer of
ownership.
ART. 19. SELLER'S DEFAULT
The lessee shall inform Lysing hf. in writing or by other equally reliable
means, should the leased item be faulty, or if a delay occurs in delivery by the
seller, so that all necessary measures may be taken against the seller due to
the default.
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<PAGE> 6
The lessee shall pay lease payments, even if the seller defaults on the contract
with Lysing hf. and/or the lessee.
The lessee may however be entitled to a reduction, compensation or reimbursement
as specified here:
a) Should the seller's default lead to a reduction of the purchase price, or
compensation payable by the seller, the lessee shall benefit fully from this in
the form of lower lease payments, and the lessee shall have no further claim on
Lysing hf. Otherwise, this contract shall remain valid.
b) Should the seller's default be so serious that the contract may be rescinded,
Lysing hf. shall make this decision and inform the lessee of its decision.
When the contract of purchase has been rescinded, a settlement shall take place
under the terms of Art. 30 between the lessee and Lysing hf. Refunds and/or
compensation shall be deductible from the claims of Lysing hf. against the
lessee, other than due and payable payments on the lease. Should the settlement
between Lysing hf. and the lessee not be completed within 30 days of the
contract being rescinded, Lysing hf. can demand settlement from the lessee under
the terms of Art. 30. The lessee has a right to a refund should the settlement
of Lysing hf. and the seller lead to payment of compensation by the seller.
The lessee shall pay the costs pertaining to presentation of the claim against
the seller due to the seller's default, whether the claim is made in the name of
Lysing hf. or of the lessee on behalf of the company.
ART. 20. HANDLING OF THE LEASED ITEM
The lessee shall maintain the leased item in good condition, and have all damage
repaired as soon as it occurs, as well as following all the
manufacturer's/seller's instructions on its use.
The lessee shall attend all service examinations recommended by the agent, and
have all maintenance and repair work carried out by the manufacturer/seller or a
party recognised by them, at the lessee's expense and without right to
reimbursement from Lysing hf. In addition the lessee shall always have the
equipment lubricated and have oil and filters changed as laid down in the
service manual. In the case of motor vehicles, this shall be done at least every
5,000 km, and shall be recorded in a lubrication record book for the vehicle.
The lessee shall ensure that laws are obeyed regarding all handling and use of
the leased item. Special care shall be taken that the leased item is equipped
with legally obligatory protective and safety equipment, in order to avoid the
risk of accident or illness. If safety equipment is removed, this is at the
lessee's risk. The lessee shall consult with public monitoring bodies if this is
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<PAGE> 7
required by law or regulations. The lessee shall pay all costs pertaining to
this, without right of reimbursement.
The lessee bears responsibility for the equipment being used only within the
limits prescribed by insurance companies for the use of the equipment, and by
those who are insured while using it. The equipment may not be subleased, used
in teaching or in competitive events, except with the written agreement of
Lysing hf.
The lessee may not alter the leased item. Should the lessee, in spite of the
above, have made changes to the leased item, it must be restored to its original
condition at the lessee's expense. The lessee may join the leased item with
items belonging to the lessee or to other parties, provided that there is no
risk to the right of ownership of Lysing hf. In the case of a vehicle, the
lessee may attach a towing mechanism to the leased item, provided that the
equipment is especially insured for the towing operation to be carried out, and
that it is within the limits tolerated by the equipment, according to
information provided by the seller.
The place of use shall be the lessee's place of business, unless the lessee
specifically requests otherwise, and the consent of Lysing hf. shall be stated
in this contract. If the assets with which the leased item is connected are
subject to a lien, the lessee shall except the leased item from the lien by
means of registering a declaration of Lysing hf.'s ownership of the leased item
on the form for registration of liens pertaining to the item to which the leased
item is attached, together with a statement of consent of the holder of the
lien. In subsequent documents regarding the lien, it shall also be stated that
the leased item is excepted from the lien.
The lessee may not transport the leased item out of the country without the
written consent of Lysing hf.
ART. 21. DAMAGE TO THE LEASED ITEM
The lessee is responsible for, and must compensate Lysing hf. for, all damage
that may occur to the leased item when it is in the lessee's keeping, or when
the lessee is otherwise responsible for risk to it. The lessee shall inform
Lysing hf. immediately in writing, or by other equally reliable means, of such
damage. Should it be possible, in the view of Lysing hf., to repair the leased
item, the lessee shall do so without delay.
The lessee bears responsibility for the repairs carried out after damage being
carried out by the seller's repair workshop, or a party recommended by the
seller, and that the repair be carried out satisfactorily and without delay.
The lessee's obligation to make payments is not affected by the leased item
being unusable due to damage or mechanical failure.
If damage to the leased item is so great that a doubt exists as to whether it
would be economical to repair it, the final decision shall be made by Lysing hf.
and the lessee
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<PAGE> 8
shall abide by that decision. Should the conclusion be that it is not economical
to repair the leased item, the contracting parties have the following options:
a) Should the lessee wish to renew the leased item, and if the insurance
compensation suffices to buy a comparable leased item, the terms of this
contract shall remain valid without change, regarding payments, period of lease,
etc.
b) The lessee can ask for the leased item to be replaced by another similar or
identical one, even if the price of the new item is up to 10% higher than the
insurance compensation for the leased item lost or destroyed. The terms of the
original contract shall apply, but the payments until the end of the period of
contract is recalculated.
c) Should the lessee not desire to renew the leased item, or if the purchase
price of the new leased item is more than 10% higher than the insurance
compensation, a settlement shall be made between the parties within 30 days,
under the terms of Art. 30. The insurance compensation is deductible from the
claim of Lysing hf. against the lessee, or is payable to the lessee, if the
settlement has been completed between Lysing hf. and the lessee before the
insurance compensation is paid.
ART. 22. DAMAGE CAUSE BY THE LEASED ITEM
During the period of this contract, the lessee bears responsibility for damage
that the leased item may cause, directly or indirectly. Should Lysing hf. be
compelled to pay compensation for such damage, the company has the right to
require reimbursement from the lessee.
ART. 23. INSURANCE
The leased item shall be insured during the period of the lease. Lysing hf. has
the right to purchase the necessary insurance for the leased item at the
lessee's expense. Insurance premiums are variable according to the terms of the
policy.
During the period of the lease, insurance shall be based upon the purchase price
of the leased item.
The insurance does not apply to transportation of the equipment from the place
of delivery to the place of use, nor to additional equipment, or installation of
the leased item, which shall be paid by the lessee, and the lessee must insure
these items specifically.
The lessee may purchase further insurance regarding the leased item, provided
that this does not affect the rights of Lysing hf.
The lessee shall be liable for damage below the minimum specified in the
insurance policy, and also for all claims made by the insurance company due to
violations of the conditions of insurance.
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<PAGE> 9
Invoices for premiums are sent direct to the lessee, but if they are not paid
within the period allowed, Lysing may, at the insurance company's request, pay
the premium and require reimbursement from the lessee, together with penalty
interest and collection costs under the terms of Art. 27.
ART. 24. RIGHT OF INSPECTION
A member of staff of Lysing hf. and/or a representative of the company has the
right to inspect the leased item during the period of lease. In the case of a
vehicle, the lessee acknowledges the right of Lysing hf. to call the leased item
in for inspection at any time, at seven days' notice, so that its condition may
be examined and its instruments read.
Should the lessee not comply with the request for inspection, Lysing's staff may
examine the item at its place of use or remove it to a place of examination at
the lessee's expense, wherever the item may be found, without any order of
attachment. The lessee shall for this purpose grant the lessee full access to
the leased item and the place where it is kept.
ART. 25. CHANGE OF ADDRESS
The lessee shall inform Lysing hf. at once of any change of address.
ART. 26. TAXES AND DUTIES
In addition to the lease payments, the lessee shall pay Lysing hf. a fee as
stated in the company's scale of charges, and all taxes or duties that may be
increased or imposed upon the leased item, the lease or the itself, including
value added tax. The lessee is also responsible for all costs pertaining to the
use or keeping of equipment. The lessee shall also pay all fines that may be
imposed, such as police fines, for example.
ART. 27. DEFAULT
Should the lessee not pay lease payments and other required payments on the due
date, the lessee shall pay Lysing hf. the maximum permissible punitive interest
on the amount outstanding, together with costs according to the list of charges
previously submitted by Lysing hf., and all other costs that may be incurred,
such as legal fees and charges.
Lysing hf. may continue to apply indexation to the sum owing.
ART. 28. REPUDIATION OF CONTRACT
Lysing hf. may repudiate this contract without notice should the lessee be in
default or violate the terms of the lease. For example:
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<PAGE> 10
a) If the lessee does not make the required payments as stated in this contract
on the due dates, or if Lysing hf. has had to pay unpaid compensation, duties or
fines for which the registered owner is responsible vis-a-vis a third party, cp,
Arts 22 and 26 of this contract.
b) If the lessee neglects to bring the equipment for inspection or neglects its
maintenance or repair of damage, as stated in the contract, or otherwise fails
to comply with the terms of Art. 20 on the handling of the leased item.
c) If the lessee does not grant the lessor or other person nominated by the
lessor access to the leased item on request.
d) If the lessee transports the leased item out of the country without the
lessor's consent.
e) If the above conditions of rescission apply to other leasing or loan
agreements subsisting between Lysing hf. and the lessee.
Lysing hf. may also rescind this agreement without notice if the following
circumstances apply:
a) If the estate of the lessee (or, if the lessee is a company with unlimited
liability, the estate of one of its owners) is subject to bankruptcy
proceedings, or if the lessee seeks composition with creditors.
b) If the financial position of the lessee (or if with unlimited liability, the
financial position of one of its owners) deteriorates considerably.
c) If such changes are made to the operations or organisation of the lessee's
business that the lessee's obligations under this contract cannot be fulfilled.
ART. 29. RETURN OF LEASED ITEM
Should this contract be terminated under the terms of Art. 12, 19, or 21, or
rescinded under the terms of Art. 28, the lessee shall without delay return the
leased item to the place specified by Lysing hf. The leased item shall be
returned undamaged and in normal condition for normal use incurred pursuant to
Art 20 of the lease.
The lessee may remove all additions which were not included in this contract and
are not counted as maintenance, but all damage caused by the attachment must be
repaired. The leased item shall be accompanied by a registration certificate if
the equipment is registered, service records and handbooks from the
manufacturer.
Until the leased item has been returned, it is the responsibility of the lessee.
The lessee shall pay all costs pertaining to returning the leased item, such as
for disconnection, packing, loading, transport and insurance, in addition to all
costs for cleaning, servicing, repair and legal inspection of the leased item.
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<PAGE> 11
Should the lessee not return the equipment as stated above, the lessee
acknowledges by signature on this contract the right of the owner to repossess
the leased item whenever and wherever it can be found, without an order of
attachment. The lessee shall for this purpose grant the lessor full access to
the place where the leased item is kept.
ART. 30. SETTLEMENT
Settlement between Lysing hf, and the lessee due to the contract being
terminated under the terms of Art. 19, 21 or 18 shall be as follows:
1. The lessee shall pay all outstanding lease payments as specified in Arts. 5
and 6, together with punitive interest and costs, pursuant to Art. 27.
2. The lessee shall pay all lease payments not yet due as specified in Art. 5 of
the contract and taxes and duties pursuant to Art. 26, insurance pursuant to
Art. 23 and all other costs pertaining to the leased item.
3. The lessee shall pay all costs pursuant to Art. 29 pertaining to the
termination or rescission of the contract and debt collection measures, together
with compensation for any damage that Lysing hf. may suffer due to the
cancellation of this contract before the initial lease period has expired.
Lysing hf. cannot, however, demand compensation unless the contract is rescinded
due to default by the lessee.
4. Punitive interest shall be charged on items 2-3 should settlement not be
completed within 15 days of the cancellation or rescission of the contract.
5. From the lessee's payment to Lysing hf. as specified in items 2-4 above, the
value of the leased item shall be deducted, when it has been returned and it has
been sold or leased to another party, and the new selling price shall be the
basis of calculation, after deduction of sales costs, repairs and other costs
pursuant to Art. 29. Should it not prove possible to sell or lease the leased
item within 30 days of the cancellation or rescission of the contract, Lysing
hf. may require a settlement to be made between the parties, as stated above, on
the basis of an evaluation of the cash value of the leased item, which
evaluation shall be carried out by Lysing hf. Should this evaluation (including
the selling price of the leased item) be disputed, either party may request that
court-appointed assessors, under Chapter IX of Act no. 91/1991, be appointed to
evaluate the leased item, provided the lessee has made a written objection to
the evaluation or settlement within 10 days of being informed of it. Otherwise,
the lessee must abide by the evaluation.
In the same way, reimbursements or damages from the seller of the leased item
due to defects or default pursuant to Art. 19, and insurance compensation if the
leased item is lost or destroyed, shall be deducted from the payment from the
lessee to Lysing hf. under items 2-4 above.
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<PAGE> 12
Should the settlement of the lease result in credit payable to the lessee,
Lysing hf. may, instead of paying this balance to the lessee, pay it toward
other claims or leases subsisting between the two parties.
ART. 31. LATENT DEFECTS AND OUTSTANDING CLAIMS
Should compensation or repair costs be incurred by Lysing hf. due to latent
faults or neglect, which was known or should have been known to the lessee, but
which was not made known when the leased item was returned, or delivered to a
new lessee, Lysing hf. has a right to demand reimbursement from the lessee,
together with all costs incurred at a result, including legal costs. The same
applies to all claims payable by the lessee such as taxes, duties and fines,
that were not evident when the lease ended or when the settlement was made.
ART. 32. BOOKKEEPING
The manner in which the payments are entered in the lessee's accounts is the
responsibility of the lessee and the lessee's accountant.
ART.33. TRANSFER
Lysing hf. may transfer this contract to a bank or other leasing company,
provided such a transfer does not affect the legal rights of the lessee. The
lessee may not transfer rights under this contract except with the consent of
Lysing hf.
ART 34. AMENDMENTS
Amendments to this contract may only be made by means of a written appendix,
signed by the contracting parties.
ART. 35 JURISDICTION
Cases of dispute regarding this contract may be conducted in the Reykjavik
District Court.
The undersigned lessee and guarantors have examined and have no objection to all
the conditions of this contract, Articles 1-35 and especially Article 20 on the
handling of the leased item and Articles 19, 21 and 22 that limit the
responsibility of the lessor, the terms on rescission in Article 28, the special
rights of the lessor in Articles 24 and 29 to repossess the leased item without
an attachment ruling, and the terms of settlement in Article 30. The lessee and
guarantors have also made a close examination of all appendices with the
contract. The lessee grants Lysing hf. the right to enquire about the lessee's
bank business during the period of validity of this lease.
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<PAGE> 13
Place: Reykjavik. Date 19.6.98
On behalf of Lysing hf, (signed) Olafur Helgi Olafsson (illegible)
Witnesses to correct signature, date and financial competence of the parties
Hannes Smarason ID no. 251167-3389 (sign.)
Elin Pordardottir ID no. 060763-4969(sign.)
Lessee: on behalf of Islensk erfdagreining ehf.
ID no. 691295-3549
Kari Stefansson (sign.)
We the undersigned undertake to stand surety for this contract on behalf of
DeCode Genetics Inc.
Kari Stefansson (sign.)
Hannes Smarason (sign.)
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<PAGE> 14
Lysing hf
Islensk erfdagreining ehf.
Lynghals 1
110 Reykjavik
Reykjavik, 19 June 1998
Re: contract on financial leasing no. 108237
It is hereby confirmed that Islensk erfdagreining has the right to terminate the
above contract at any time by paying off the amount outstanding.
On behalf of Lysing hf.
(signed)
Olafur Helgi Olafsson
CEO
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<PAGE> 1
EXHIBIT 10.18
OFFICER'S CERTIFICATE
I, the undersigned, do hereby certify and represent that:
1. I am the duly elected Senior Vice President and Chief Business
Officer of deCODE genetics, Inc., a Delaware Corporation.
2. Pursuant to Rule 306(a) of Regulation S-T, the following exhibit
10.18 to deCODE genetics, Inc.'s Registration Statement on Form S-1 is a fair
and accurate English translation of a document prepared in the Icelandic
language.
IN WITNESS WHEREOF, I have signed this Officer's Certificate in my
capacity as Senior Vice President and Chief Business Officer of deCODE genetics,
Inc. on this 7th day of March, 2000.
By: /s/ Hannes T. Smarason
--------------------------
Name: Hannes T. Smarason
Title: Senior Vice President and Chief Business Officer
<PAGE> 2
[deCODE GENETICS LOGO]
EMPLOYMENT CONTRACT
DeCODE Genetics ehf. (Islensk erfdagreining ehf.), State Registration No.
691295-3549, of Lynghals 10, Reykjavik ("the Employer"), on the one hand, and
Axel Nielsen 060665-3549
- ---------------------------------- -------------------------------------
(Employee name) (identification number)
whose address is __________ Hrismoar 1___________________ (" the Employee") on
the other hand
enter into the following Employment Contract:
1. FIELD OF WORK.
The Employee is hired to work as a/an ___VP of Finance, CFO____________
(job title, position)
for the Employer.
The workplace is the Employer's base of operations at Lynghals 1,
Reykjavik, but if the Employer's base of operations in Reykjavik
changes or increases in number, the Employee agrees to a change in his
workplace.
The Employee's work will involve financial management and he or she
will work under the supervision of Kari Stefansson
The Employer reserves the right to make changes in the Employee's
projects or supervision if the Employer deems this necessary.
2. PERIOD OF EMPLOYMENT
The Employee began work for the Employer on 2 June 1998. Termination of
employment by either party shall be with one week's notice for the
first three months of the employment period, which shall be a trial
period. For the next three months following the trial period, the
mutual notice period for termination shall be one month. After six
months' work, the mutual notice period for termination shall be three
months. At the completion of the trial period, termination shall be in
writing and be based on the end of the month.
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<PAGE> 3
3. JOB OBLIGATIONS
The Employee pledges to do the work he undertakes with a sense of duty
and diligence. While working for the Employer, the Employee may not,
unless with the Employer's written consent, work at other jobs or
participate in other employment that competes with the Employer's
operations, or that can conflict in some other way with the Employee's
work for the Employer.
Upon termination of his employment, the Employee has a duty to turn
over all documents and identification papers in his custody that
pertain to the Employer.
4. WORKING HOURS
The Employee's fixed working hours are from 9 o'clock to 5 o'clock
Monday through Friday, unless otherwise agreed. The Employee shall also
work other hours, if necessary, depending on to what extent the nature
of his projects so require, unless urgent circumstances prevent his
doing so. The days off are the holidays of the National Church, the
First Day of Summer, 1 May, 17 June and the first Monday in August.
If an urgent necessity comes up, the Employer can call the Employee to
work at any time outside normal working hours.
Mealtime, 30 minutes, shall be during the period 11:30 - 13:30 and is
not counted as part of working hours. On regular workdays, there shall
be two 15-minute coffee breaks, which are counted as part of working
hours.
During the period of employment, the Employer and Employee can agree on
an arrangement of working hours other than the one above.
5. WAGES
The Employee's fixed monthly wages are ISK .......................... .
Payment for work done outside regular working hours and for any kind of
work-related tasks is included in the above monthly wages.
Wages shall be paid monthly on the last working day of each month.
The wages stated above are complete remuneration for the work done by
the Employee. In addition, the Employee is granted an option to buy a
certain number of shares, pursuant to the attached agreement.
Wages and other wage terms shall be re-examined every year, taking into
consideration general wage changes and work results.
The rights of the Employee to vacation and parental leave will be
according to law.
When the Employee has earned a full right to vacation by working for
the Employer in the last vacation year, upon beginning his vacation or
no later than 15 August each year, he shall receive a special lump-sum
payment. This vacation supplement, based on full-time employment in the
preceding vacation year, shall be ISK 8,400, or a
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<PAGE> 4
proportional amount of this sum if part-time work or a shorter period
of work is involved. Vacation pay is not paid for vacation supplements.
The Employee pays 4% of his total wages as a premium into a pension
fund of his own choice, and the Employer pays 6% of the same amount.
6. ACCIDENTS, ILLNESS AND INSURANCE
In the event that the Employee has an accident at work, the Employer
shall pay for getting the Employee home or to hospital and, for each
instance, reimburse him for up to four weeks of normal, out-of-pocket
medical expenses which are not covered by district health insurance or
Social Security.
In each instance of an accident at work or a work-related illness
caused on the job or by it, or occurring during transport to and from
the workplace, the Employer shall pay up to three months' wages
according to the Employee's wage scale in effect when the accident or
illness occurs, provided that per diem paid for these days by the State
Social Security Institute and/or the district health insurance are paid
to the Employer. The provisions of this paragraph shall not prejudice
any additional rights the Employee may have under the law.
Wage payments to the Employee during absences due to illness shall be
arranged the first year so that two days are paid for each month
worked. When the Employee has worked for the Employer for one year or
longer, wage payments during absences due to illness shall be arranged
as follows: After one year, two months for every 12 months. After five
years of work for the Employer, four months for every 12 months, and
after 10 years working for the Employer, six months for every 12
months.
If an Employee becomes ill and for this reason cannot attend work, he
shall immediately notify his superior, who shall decide whether a
health certificate shall be provided. The certificate shall be from a
consulting physician if so requested. The Employer shall pay for the
health certificate if the above conditions are met.
After the first month at work a parent shall, without any deduction
from wages, be entitled to spend a total of seven workdays of every
12-month period in ministering to his sick children under the age of
13, provided that other care cannot be procured.
The Employer shall insure the Employee against death and permanent or
temporary disability caused by an accident while at work or while
travelling a normal route between his home and the workplace.
If, because of his work, the Employee has accommodations away from his
home, the accommodations replace his home, but the insurance shall also
cover normal trips between his home and these accommodations.
Compensation for death will be (as of 1 Jan. 1998):
1. If the deceased was not married and is not survived by a child and
has not been supporting an aged parent 67 years of age or older,
ISK 342,100.
2. If the deceased was not married but is survived by a child
(children) under 17 and/or has demonstrably supported an aged
parent or parents (aged 67 or older), ISK 1,083,500.
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<PAGE> 5
3. If the deceased was married, the compensation to the spouse
shall be ISK 1,479,700.
4. If the deceased is survived by a child (adopted child, foster
child) under 17 years of age, for each child ISK 284,800.
5. Compensation is paid under only one of sub-paragraphs no. 1, 2
or 3.
In addition to sub-paragraphs 2 and 3, compensation may be paid under
sub-paragraph 4.
The beneficiaries of death compensation provisions are:
1) Legal heirs.
2) Relevant parties equally
3) Surviving spouse.
4) Relevant children, but paid to surviving spouse if he/she is one of
the parents, or to an executor and/or trustee.
Compensation for permanent disability is paid in proportion to the
insurance amount of ISK 2,589,000 so that each degree of disability
from 26% to 50% is counted double, and each degree of disability from
51% to 100% works triple.
For temporary disability, per diem benefits of ISK 5,884 is paid per
week four weeks after the accident occurred and until the injured
person becomes able to work, although for no more than 48 weeks. ISK
785 per week are added to the per diem for each child under the age of
17 that the injured person is supporting.
The amounts of insurance will be reviewed twice a year, 1 January and 1
July, and increased in correspondence with changes in the
cost-of-living index.
The insurance goes into force as soon as the Employee begins work and
expires as soon as he stops working.
The policy terms of the insurance shall be the general policy terms in
force for wage earner job accident insurance at the Association of
Icelandic Insurance Companies at the time of signature of this
Employment contract is.
In the event that the Employer becomes liable for damages in respect of
the Employee, accident compensation and per diem paid to the Employee
under provisions of this Employment Contract shall be fully deductible
from any damages that the Employer may be made to pay. While the
payment of wages continues, per diem is paid to the Employer.
7. CONFIDENTIALITY
The Employee fills a job involving responsibility and confidentiality
for the Employer. He shall maintain the utmost confidentiality about
whatever he has become aware of in his job regarding the Employer and
the Employer's customers, and which can damage the interests of these
parties. Due to the nature of his work, the Employee is under
obligation to handle all information, documents and data to which he
has access in his work with the utmost confidentiality. This
confidentiality continues in force after termination of employment.
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<PAGE> 6
While the Employee works for the Employer and for one (1) year
thereafter, the Employee shall not encourage any of the Employer's
employees to leave the employment of the Employer.
If the Employee quits working for the Employer, he undertakes not to
accept work either directly or indirectly at competing companies or
with other competing parties, or to start up or join such operations
for at least two years after termination of employment.
8. PROPRIETARY INFORMATION AND INVENTIONS
Concurrently with the signing of this Employment Contract, the Employer
and Employee enter into an Agreement on Proprietary Information and
Inventions. That agreement is deemed a premise for and part of this
Employment Contract.
Reykjavik, 1 July 1998.
Employee On behalf of DECODE GENETICS, EHF.
Axel Nielsen [sign.] Olafur E. Fridriksson [sign.]
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<PAGE> 1
EXHIBIT 10.19
OFFICER'S CERTIFICATE
I, the undersigned, do hereby certify and represent that:
1. I am the duly elected Senior Vice President and Chief Business
Officer of deCODE genetics, Inc., a Delaware Corporation.
2. Pursuant to Rule 306(a) of Regulation S-T, the following exhibit
10.19 to deCODE genetics, Inc.'s Registration Statement on Form S-1 is a fair
and accurate English translation of a document prepared in the Icelandic
language.
IN WITNESS WHEREOF, I have signed this Officer's Certificate in my
capacity as Senior Vice President and Chief Business Officer of deCODE genetics,
Inc. on this 7th day of March, 2000.
By: /s/ Hannes T. Smarason
--------------------------
Name: Hannes T. Smarason
Title: Senior Vice President and Chief Business Officer
<PAGE> 2
[NOTE: CERTAIN PORTIONS OF THIS DOCUMENT HAVE BEEN MARKED TO INDICATE THAT
CONFIDENTIALITY HAS BEEN REQUESTED FOR THIS CONFIDENTIAL INFORMATION. THE
CONFIDENTIAL PORTIONS HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.]
COLLABORATION AGREEMENT
BETWEEN
A COLLABORATION GROUP ON ALZHEIMER'S DISEASE AND
RELATED DISORDERS
AND ISLENSK ERFDAGREINING EHF.
The Collaborative Group on Alzheimer's Disease and Related Disorders
(hereinafter "CGAD,") and Islensk erfdagreining ehf (hereinafter "IE") hereby
enter into the following
Agreement
on research into the heredity of Alzheimer's Disease and related disorders.
I. SUBJECT OF THE COLLABORATION
CGAD and IE agree to work together pursuant to this Agreement on searching for
genetic factors contributing to the genesis of Alzheimer's Disease and related
disorders. The proposed collaboration of the parties is hereinafter referred to
as the "Research Project".
II. CONTRIBUTION OF THE PARTIES
CGAD will supply the Research Project with biological samples (blood samples),
other clinical information and research data which CGAD possesses or has access
to regarding patients afflicted with Alzheimer's Disease and related disorders
and their relatives which are not afflicted with Alzheimer's Disease or related
disorders.
CGAD will be in charge of relations with the individuals intended for
participation in the research, or their legal guardians, including calling them
in for blood samples and obtaining the informed consent of the participants.
Furthermore, CGAD will contribute its specialised knowledge and expertise
regarding diagnosis of disorders, experimental design, conduct of experiments
and interpretation of their results.
IE will contribute its expertise in experimental design, conduct of experiments,
assessment of the heredity of the disorder and interpretation of the results of
research.
IE will also contribute equipment, research supplies, reagents and staff to
conduct experiments. IE will pay all costs of the Research Project, including
the material and wage costs of calling in participants for examination and
required sampling. CGAD will submit a financial plan on signature of the
Agreement assessing the projected material and wage costs of the Project, see
Annex A.
III. RIGHTS OF THE PARTIES
IE will own all financial and commercial rights to the Research Project and its
conclusions. IE will have the right to sell to a third party the conclusions of
the Research Project or its results and to utilise the Research Project
financially in any other manner consistent with recognised ethical standards,
before or after the Research Project is concluded.
IE and its parent company, deCODE genetics Inc., has contracted with a third
party on the sale of the Research Project, its possible conclusions and results.
The amount
-1-
<PAGE> 3
of the payment of such third party to IE and deCODE genetics Inc. will depend on
the success of the Research Project. CGAD will receive as its share
[CONFIDENTIAL TREATMENT REQUESTED] of all payments by the third party to IE or
to deCODE genetics Inc., as applicable, during the term of such contract with
the third party less the deduction of the financing by the third party of the
research costs and investment in IE or deCODE genetics Inc.
IE will pay to CGAD [CONFIDENTIAL TREATMENT REQUESTED] on signature of this
Agreement, and thereafter an annual amount of [CONFIDENTIAL TREATMENT REQUESTED]
during the course of the Research Project, the total amount never to exceed
[CONFIDENTIAL TREATMENT REQUESTED]. In the event that the Research Project is
concluded in a shorter time than five years by achieving the objective of the
Research Project, CGAD will be paid on such conclusion the amount which remains
unpaid of the [CONFIDENTIAL TREATMENT REQUESTED] pursuant to this Paragraph.
Payments pursuant to this Paragraph shall be used by CGAD to finance its own
research on Alzheimer's Disease and related disorders. CGAD may establish a
separate research fund for such purpose. Payments pursuant to this Paragraph are
in addition to and independent of the [CONFIDENTIAL TREATMENT REQUESTED] payment
pursuant to Paragraph 2 of this Chapter III. IE is granted full authorisation by
all the individuals engaged in CGAD to deliver to the party accepting the
initial payment of IE to CGAD on behalf of CGAD any payments which may be
subsequently payable by IE pursuant to the terms of this Agreement.
The right of CGAD to payments pursuant to Paragraphs 2 and 3 of this Chapter III
is based on the understanding that IE will not need to pay other parties for the
data and information which CGAD has undertaken to supply pursuant to Paragraph 1
of Chapter II, and that it will not be necessary for IE to enter into further
collaboration with other parties in Iceland regarding the study of Alzheimer's
Disease and related disorders in order to achieve the objectives of the Research
Project. In the event that it proves necessary for IE to negotiate payments to a
third party in order to ensure access to the data and information referred to in
Paragraph 1 of Chapter II, or if it proves necessary for IE to take up
collaboration with other parties in Iceland to achieve the objectives of the
research, then the provisions of Paragraphs 2 and 3 of this Chapter III shall be
reviewed so that the total payments of IE to CGAD and the third party remain the
same as the payments specified in Paragraphs 2 and 3. CGAD is not financially
liable to IE for the achievement of the scientific or commercial objectives of
the research.
IV. MANAGEMENT
Decisions regarding the Research Project will be taken by CGAD and IE jointly,
and a Steering Committee will be formed composed of two representatives from
each party to this Agreement in order to formulate rules on the arrangement,
control and implementation of the Research Project. The Co-ordinator of the
Research Project shall be selected from among the members of the Steering
Committee.
The Steering Committee is also responsible for defining the objectives of the
Research Project and establishing the professional requirements which the
parties to this Agreement approve as adequate to the conduct of the research.
The Steering Committee is responsible for the processing of data and publication
of results pursuant to the rules of Chapter V hereof.
-2-
<PAGE> 4
V. HANDLING, PROCESSING AND DISSEMINATION OF INFORMATION
The parties to this Agreement undertake to treat all personal information as
confidential. The parties to this Agreement undertake to observe the guidelines
of the Data Protection Commission and, as applicable, the specially appointed
representative (observer) of the Data Protection Commission regarding the
handling and processing of such information as well as the guidelines and
conditions of the Science Ethics Committee, which is constituted pursuant to Act
No. 74/1997 on Patients' Rights.
The results of the Research Project will be published as soon as they fulfil
academic requirements and are fit for publication. However, IE may postpone such
publication by a maximum of 90 days to provide sufficient time to secure
property rights relating to any invention arising out of the research. In the
event that a third party submits to IE a request for postponement of the
publication of results when they are ready for publication pursuant to the
above, the publication may be delayed for a maximum of 90 days.
VI. LIMITATIONS ON COLLABORATION WITH OTHER PARTIES
CGAD and individuals within the group covenant not to work, jointly or
separately, with others on research into the heredity of Alzheimer's Disease and
related disorders during the course of the Research Project. CGAD and
individuals within the group covenant not to enter into collaboration with other
parties on the part of the Research Project which led to a discovery for five
years following the conclusion of the Research Project pursuant to this
Agreement. However, if the Research Project does not lead to a discovery,
individual parties within CGAD are entitled to take up collaboration with other
parties regarding research into the heredity of Alzheimer's Disease and related
disorders following the conclusion of the Research Project.
IE covenants that during the course of the Research Project, IE will not take up
collaboration with other parties on research into the heredity of Alzheimer's
Disease and related disorders unless the Steering Committee regards such
collaboration as necessary in order to achieve the objectives of the Research
Project. In the event that it should prove necessary to add new partners to the
Research Project, the Steering Committee shall decide on the choice of such
partner. In the event of a dispute within the Steering Committee, CGAD will
decide on the choice of additional partners. Notwithstanding the above, the
provisions of this Paragraph shall not preclude collaboration by IE in the area
of the Research Project with the parties who have negotiated the purchase of the
Research Project, its conclusions or results, provided that such collaboration
does not prejudice the rights of the collaboration group pursuant to Paragraphs
2 and 3 of Chapter III.
VII. TERM AND CONCLUSION OF PROJECT
The Research Project shall continue for a term of five years following the
signature of this Agreement unless it is concluded earlier. In the event of
substantial default by either party to this Agreement the other party may
terminate this Agreement. In the event of a dispute regarding the termination
rights of a party, such dispute shall be resolved pursuant to the terms of
Chapter VIII.
At the conclusion of the Project, all clinical data (blood samples and clinical
information) shall be returned to CGAD.
-3-
<PAGE> 5
In the event that one or both parties see reason to continue their collaboration
following the agreed term, such continuation shall be considered independently.
VIII. SETTLEMENT OF DISPUTES
In the event of a dispute between the parties regarding the implementation of
this Agreement or performance which cannot be resolved within the Steering
Committee, two parties, one from each party to this Agreement, shall attempt to
reach a consensus on settlement of the dispute. In the event that no consensus
can be reached by these two parties within two weeks from the time that the
dispute was submitted to them, each party to this Agreement shall appoint one
arbitrator and the parties to this Agreement shall then jointly request the
appointment of a neutral third arbitrator by the District Court of Reykjavik to
participate in the resolution of the dispute, and the three parties shall
constitute an arbitration tribunal. The tribunal shall conclude their resolution
of the dispute within one month from the time that the tribunal is fully
constituted.
The cost of the work of the arbitration tribunal shall be subject to the
decision of the tribunal at each time. The work of the tribunal, procedure and
conclusions before the tribunal shall in other respects be governed, as
applicable, by Act No. 53/1989 on Contractual Arbitration.
Notwithstanding the above provisions on arbitration, issues involving the
collection of payments under this Agreement, which are not in dispute between
the parties to this Agreement may be submitted to the courts, as well as any
disputes regarding financial claims which either party may make against the
other party on the basis of the decision of the arbitration tribunal regarding
the default or breach by the other party to this Agreement, provided that the
claim has not previously been submitted to the arbitration tribunal. Such issues
shall be submitted to the District Court of Reykjavik.
IX. RESERVATION REGARDING THE CONCLUSION OF A FRAMEWORK AGREEMENT BETWEEN
THE REYKJAVIK MUNICIPAL HOSPITAL AND IE
This Agreement is concluded subject to the existence of a valid framework
agreement on collaboration between the Reykjavik Municipal Hospital and IE and
that this Agreement between CGAD and IE is confirmed by the Executive Board of
the Reykjavik Municipal Hospital.
This Agreement is in 9 chapters on five pages and accompanied by Annex A. It is
done in two copies, one to be held by each party to this Agreement.
Reykjavik 19 July 1998
For the Collaboration Group on For Islensk erfdagreining ehf.
Alzheimer's Disease and related
disorders:
Jon Snaedal, Head Physician, Geriatric Kari Stefansson, Managing Director
Ward, Reykjavik Municipal Hospital [sign.]
[sign.]
Palmi Jonsson, Head Physician, Geriatric
-4-
<PAGE> 6
Ward, Reykjavik Municipal Hospital
[sign.]
Sigurbjorn Bjornsson, Specialist,
Geriatric Ward, Reykjavik Municipal
Hospital [sign.]
-5-
<PAGE> 7
ANNEX A
Cost estimate per month on the research collaboration of CGAD and IE
[CONFIDENTIAL TREATMENT REQUESTED]
Notes:
1. Item 1: A data collection period of 18 months is foreseen. This time
could by shortened by adding staff, but this would also increase cost.
2. Items 2-3: incidental costs; equal payments are assumed.
Costs of items 2-3, as well as any other incidental costs, will be submitted to
the Steering Committee of the research project for approval.
CGAD will submit invoices to IE for all the above costs as well as any other
incidental costs.
-6-
<PAGE> 1
EXHIBIT 10.20
OFFICER'S CERTIFICATE
I, the undersigned, do hereby certify and represent that:
1. I am the duly elected Senior Vice President and Chief Business
Officer of deCODE genetics, Inc., a Delaware Corporation.
2. Pursuant to Rule 306(a) of Regulation S-T, the following exhibit
10.20 to deCODE genetics, Inc.'s Registration Statement on Form S-1 is a fair
and accurate English translation of a document prepared in the Icelandic
language.
IN WITNESS WHEREOF, I have signed this Officer's Certificate in my
capacity as Senior Vice President and Chief Business Officer of deCODE genetics,
Inc. on this 7th day of March, 2000.
By: /s/ Hannes T. Smarason
--------------------------
Name: Hannes T. Smarason
Title: Senior Vice President and Chief Business Officer
<PAGE> 2
[NOTE: CERTAIN PORTIONS OF THIS DOCUMENT HAVE BEEN MARKED TO INDICATE THAT
CONFIDENTIALITY HAS BEEN REQUESTED FOR THIS CONFIDENTIAL INFORMATION. THE
CONFIDENTIAL PORTIONS HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.]
COLLABORATION AGREEMENT
BETWEEN
THE RESEARCH GROUP ON OSTEOPOROSIS
AND ISLENSK ERFDAGREINING EHF.
The Research Group on ostoeporosis (hereinafter "RO,") and Islensk erfdagreining
ehf. (hereinafter "IE") hereby enter into the following
Agreement
on research into the heredity of osteoporosis and related disorders.
I. SUBJECT OF THE COLLABORATION
RO and IE agree to work together on searching for genetic factors contributing
to osteoporosis and related disorders. The proposed collaboration of the parties
is hereinafter referred to as the "Research Project".
II. CONTRIBUTION OF THE PARTIES
RO will supply the Research Project with biological samples (blood samples),
other clinical information and research data which RO possesses or has access to
regarding patients afflicted with osteoporosis and related disorders and their
relatives which are not afflicted with osteoporosis or related disorders.
RO will be in charge of relations with the individuals intended for
participation in the research, or their legal guardians, including calling them
in for blood samples and obtaining the informed consent of the participants.
Furthermore, RO will contribute its specialised knowledge and expertise
regarding diagnosis of disorders, experimental design, conduct of experiments
and interpretation of their results.
IE will contribute its expertise in experimental design, conduct of experiments,
assessment of the heredity of the disorder and interpretation of the results of
research.
IE will also contribute equipment, research supplies, reagents and staff to
conduct experiments. IE will pay all reasonable costs of the Research Project,
including the material and wage costs of calling in participants for examination
and samples. RO will submit a financial plan assessing the projected material
and wage costs of the Project when there is sufficient information to assess its
scope.
III. RIGHTS OF THE PARTIES
IE will own all financial and commercial rights to the Research Project and its
conclusions. IE will have the right to sell to a third party the conclusions of
the Research Project or its results and to utilise the Research Project
financially in any other manner consistent with recognised ethical standards,
before or after the Research Project is concluded.
IE and its parent company, deCODE genetics Inc., has contracted with a third
party on the sale of the Research Project, its possible conclusions and results.
The amount of the payment of such third party to IE and deCODE genetics Inc.
will depend on the success of the Research Project. RO will receive as its share
[CONFIDENTIAL TREATMENT REQUESTED] of all payments by the third party to IE or
to deCODE genetics Inc., as applicable, during the term of
1
<PAGE> 3
such contract with the third party less the deduction of the financing by the
third party of the research costs and investment in IE or deCODE genetics Inc.
IE will pay to RO [CONFIDENTIAL TREATMENT REQUESTED] on signature of this
Agreement, and thereafter an annual amount of [CONFIDENTIAL TREATMENT REQUESTED]
during the course of the Research Project, the total amount never to exceed
[CONFIDENTIAL TREATMENT REQUESTED]. In the event that the Research Project is
concluded in a shorter time than five years by achieving the objective of the
Research Project, RO will be paid on such conclusion the amount which remains
unpaid of the [CONFIDENTIAL TREATMENT REQUESTED] pursuant to this Paragraph.
Payments pursuant to this Paragraph shall be used to finance research on
osteoporosis and related disorders. Payments pursuant to this Paragraph are in
addition to and independent of the [CONFIDENTIAL TREATMENT REQUESTED] payment
pursuant to Paragraph 2 of this Chapter III. IE is granted full authorisation by
all the individuals engaged in RO to deliver to the party accepting the initial
payment of IE to RO on behalf of RO any payments which may be subsequently
payable by IE pursuant to the terms of this Agreement. All payments pursuant to
Paragraphs 2 and 3 shall be made to the Research laboratory on bone fracture and
osteoporosis at the Reykjavik Municipal Hospital.
The right of RO to payments pursuant to Paragraphs 2 and 3 of this Chapter III
is based on the understanding that IE will not need to pay other parties for the
data and information which RO has undertaken to supply pursuant to Paragraph 1
of Chapter II, and that it will not be necessary for IE to enter into further
collaboration with other parties in Iceland regarding the study of osteoporosis
and related disorders in order to achieve the objectives of the Research
Project. In the event that it proves necessary for IE to negotiate payments to a
third party in order to ensure access to the data and information referred to in
Paragraph 1 of Chapter II, or if it proves necessary for IE to take up
collaboration with other parties in Iceland to achieve the objectives of the
research, then the provisions of Paragraphs 2 and 3 of this Chapter III shall be
reviewed so that the total payments of IE to RO and the third party remain the
same as the payments specified in Paragraphs 2 and 3.
IV. MANAGEMENT
Decisions regarding the Research Project will be taken by RO and IE jointly, and
a Steering Committee will be formed composed of two representatives from each
party to this Agreement in order to formulate rules on the arrangement, control
and implementation of the Research Project. The Co-ordinator of the Research
Project shall be selected from among the members of the Steering Committee.
The Steering Committee is also responsible for defining the objectives of the
Research Project and establishing the professional requirements which the
parties to this Agreement approve as appropriate to the conduct of the research.
The Steering Committee is responsible for the processing of data and publication
of results pursuant to the rules of Chapter V hereof.
V. HANDLING PROCESSING AND DISSEMINATION OF INFORMATION
The parties to this Agreement undertake to treat all personal information as
confidential. The parties to this Agreement undertake to observe the guidelines
of the Data Protection Commission and, as applicable, the specially appointed
representative (observer) of the Data Protection Commission regarding the
handling and processing
2
<PAGE> 4
of such information as well as the guidelines and conditions of the Science
Ethics Committee, which is constituted pursuant to Act No. 74/1997 on Patients'
Rights.
The results of the Research Project will be published as soon as they fulfil
academic requirements and are fit for publication. However, IE may postpone such
publication by a maximum of 90 days to secure property rights relating to any
invention arising out of the research. In the event that a third party submits
to IE a request for postponement of the publication of results when they are
ready for publication pursuant to the above, the publication may be delayed for
a maximum of 90 days.
VI. LIMITATIONS ON COLLABORATION WITH OTHER PARTIES
RO and individuals within the group covenant not to work, jointly or separately,
with others on research into the heredity of osteoporosis and related disorders
during the course of the Research Project. RO and individuals within the group
covenant not to enter into collaboration with other parties on the part of the
Research Project which led to a discovery for five years following the
conclusion of the Research Project pursuant to this Agreement. However, if the
Research Project does not lead to a discovery, individual parties within RO are
entitled to take up collaboration with other parties regarding research into the
heredity of osteoporosis and related disorders following the conclusion of the
Research Project.
IE covenants that during the course of the Research Project, IE will not take up
collaboration with other parties on research into the heredity of osteoporosis
and related disorders unless the Steering Committee regards such collaboration
as necessary in order to achieve the objectives of the Research Project. In the
event that it should prove necessary to add new partners to the Research
Project, the Steering Committee shall decide on the choice of such partner. In
the event of a dispute within the Steering Committee, RO will decide on the
choice of additional partners. Notwithstanding the above, the provisions of this
Paragraph shall not preclude collaboration by IE in the area of the Research
Project with the parties who have negotiated the purchase of the Research
Project, its conclusions or results, provided that such collaboration does not
prejudice the rights of the research group pursuant to Paragraphs 2 and 3 of
Chapter III.
VII. TERM AND CONCLUSION OF PROJECT
The Research Project shall continue for a term of five years following the
signature of this Agreement unless the Project is concluded earlier. In the
event of substantial default by either party to this Agreement the other party
may terminate this Agreement. In the event of a dispute regarding the
termination rights of a party, such dispute shall be resolved pursuant to the
terms of Chapter VIII.
At the conclusion of the Project, all clinical data (blood samples and clinical
information) shall be returned to RO.
In the event that one or both parties see reason to continue their collaboration
following the agreed term, such continuation shall be considered independently.
VIII. SETTLEMENT OF DISPUTES
In the event of a dispute between the parties regarding the implementation of
this Agreement or performance which cannot be resolved within the Steering
Committee,
3
<PAGE> 5
two parties, one from each party to this Agreement, shall attempt to reach a
consensus on settlement of the dispute. In the event that no settlement can be
reached by these two parties within two weeks from the time that the dispute was
submitted to them, each party to this Agreement shall appoint one arbitrator and
the parties to this Agreement shall then jointly request the appointment of a
neutral third arbitrator by the District Court of Reykjavik to participate in
the resolution of the dispute, and the three parties shall constitute an
arbitration tribunal. The tribunal shall conclude their resolution of the
dispute within one month from the time that the tribunal is fully constituted.
The cost of the work of the arbitration tribunal shall be subject to the
decision of the tribunal at each time. The work of the tribunal, procedure and
conclusions before the tribunal shall in other respects be governed,, as
applicable, by Act No. 53/1989 on Contractual Arbitration.
Notwithstanding the above provisions on arbitration, issues involving the
collection of payments under this Agreement which are not in dispute between the
parties to this Agreement may be submitted to the courts, as well as any
disputes regarding financial claims which either party may make against the
other party on the basis of the decision of the arbitration tribunal regarding
the default or breach by the other party to this Agreement. Such issues shall be
submitted to the District Court of Reykjavik.
IX. RESERVATION REGARDING THE CONCLUSION OF A FRAMEWORK AGREEMENT BETWEEN
THE REYKJAVIK MUNICIPAL HOSPITAL AND IE
This Agreement is concluded subject to the existence of a valid framework
agreement on collaboration between the Reykjavik Municipal Hospital and IE and
that this Agreement between RO and IE is confirmed by the Reykjavik Municipal
Hospital.
This Agreement is in 9 chapters on four pages. It is done in two copies, one to
be held by each party to this Agreement.
Reykjavik 19 July 1998
For the Research Group on Osteoporosis: For Islensk erfdagreining ehf.
Gunnar Sigurdsson, Head Physician [sign.] Kari Stefansson, Managing Director
[sign.]
Isleifur Olafsson, Head Physician [sign.]
4
<PAGE> 1
EXHIBIT 10.21
OFFICER'S CERTIFICATE
I, the undersigned, do hereby certify and represent that:
1. I am the duly elected Senior Vice President and Chief Business
Officer of deCODE genetics, Inc., a Delaware Corporation.
2. Pursuant to Rule 306(a) of Regulation S-T, the following exhibit
10.21 to deCODE genetics, Inc.'s Registration Statement on Form S-1 is a fair
and accurate English translation of a document prepared in the Icelandic
language.
IN WITNESS WHEREOF, I have signed this Officer's Certificate in my
capacity as Senior Vice President and Chief Business Officer of deCODE genetics,
Inc. on this 7th day of March, 2000.
By: /s/ Hannes T. Smarason
--------------------------
Name: Hannes T. Smarason
Title: Senior Vice President and Chief Business Officer
<PAGE> 2
[deCODE GENETICS LOGO]
EMPLOYMENT CONTRACT
DeCODE Genetics ehf. (Islensk erfdagreining ehf.), State Registration No.
691295-3549, of Lynghals 10, Reykjavik ("the Employer"), on the one hand, and
Kristjan Erlendsson 300949-2669
- --------------------------------------------- ---------------------------------
(Employee name) (identification number)
whose address is __________ Vadlasel 12___________________ (" the Employee") on
the other hand enter into the following Employment Contract:
1. FIELD OF WORK.
The Employee is hired to work as a/an ___ VP for Clinical and Academic
Collaborations_________________ (job title, position)
for the Employer.
The workplace is the Employer's base of operations at Lynghals 1,
Reykjavik, but if the Employer's base of operations in Reykjavik
changes or increases in number, the Employee agrees to a change in his
workplace.
The Employee's work will be relations with co-operating physicians and
he or she will work under the supervision of Kari Stefansson
The Employer reserves the right to make changes in the Employee's
projects or supervision if the Employer deems this necessary.
2. PERIOD OF EMPLOYMENT
The Employee began work for the Employer on 1 September 1998.
Termination of employment by either party shall be with one week's
notice for the first three months of the employment period, which shall
be a trial period. For the next three months following the trial
period, the mutual notice period for termination shall be one
<PAGE> 3
month. After six months' work, the mutual notice period for termination
shall be three months. At the completion of the trial period,
termination shall be in writing and be based on the end of the month.
3. JOB OBLIGATIONS
The Employee pledges to do the work he undertakes with a sense of duty
and diligence. While working for the Employer, the Employee may not,
unless with the Employer's written consent, work at other jobs or
participate in other employment that competes with the Employer's
operations, or that can conflict in some other way with the Employee's
work for the Employer.
Upon termination of his employment, the Employee has a duty to turn
over all documents and identification papers in his custody that
pertain to the Employer.
4. WORKING HOURS
The Employee's fixed working hours are from 9 o'clock to 5 o'clock
Monday through Friday, unless otherwise agreed. The Employee shall also
work other hours, if necessary, depending on to what extent the nature
of his projects so require, unless urgent circumstances prevent his
doing so. The days off are the holidays of the National Church, the
First Day of Summer, 1 May, 17 June and the first Monday in August.
If an urgent necessity comes up, the Employer can call the Employee to
work at any time outside normal working hours.
Mealtime, 30 minutes, shall be during the period 11:30 - 13:30 and is
not counted as part of working hours. On regular workdays, there shall
be two 15-minute coffee breaks, which are counted as part of working
hours.
During the period of employment, the Employer and Employee can agree on
an arrangement of working hours other than the one above.
5. WAGES
The Employee's fixed monthly wages are ISK .......................... .
Payment for work done outside regular working hours and for any kind of
work-related tasks is included in the above monthly wages.
Wages shall be paid monthly on the last working day of each month.
The wages stated above are complete remuneration for the work done by
the Employee. In addition, the Employee is granted an option to buy a
certain number of shares, pursuant to the attached agreement.
Wages and other wage terms shall be re-examined every year, taking into
consideration general wage changes and work results.
The rights of the Employee to vacation and parental leave will be
according to law.
2
<PAGE> 4
When the Employee has earned a full right to vacation by working for
the Employer in the last vacation year, upon beginning his vacation or
no later than 15 August each year, he shall receive a special lump-sum
payment. This vacation supplement, based on full-time employment in the
last vacation year, shall be ISK 8,400, or a proportional amount of
this sum if part-time work or a shorter period of work is involved.
Vacation pay is not paid for vacation supplements.
The Employee pays 4% of his total wages as a premium into a pension
fund of his own choice, and the Employer pays 6% of the same amount.
6. ACCIDENTS, ILLNESS AND INSURANCE
In the event that the Employee has an accident at work, the Employer
shall pay for getting the Employee home or to hospital and, for each
instance, reimburse him for up to four weeks of normal, out-of-pocket
medical expenses which are not covered by district health insurance or
Social Security.
In each instance of an accident at work or a work-related illness
caused on the job or by it, or occurring during transport to and from
the workplace, the Employer shall pay up to three months' wages
according to the Employee's wage scale in effect when the accident or
illness occurs, provided that per diem paid for these days by the State
Social Security Institute and/or the district health insurance are paid
to the Employer. The provisions of this paragraph shall not prejudice
any additional rights the Employee may have under the law.
Wage payments to the Employee during absences due to illness shall be
arranged the first year so that two days are paid for each month
worked. When the Employee has worked for the Employer for one year or
longer, wage payments during absences due to illness shall be arranged
as follows: After one year, two months for every 12 months. After five
years of work for the Employer, four months for every 12 months, and
after 10 years working for the Employer, six months for every 12
months.
If an Employee becomes ill and for this reason cannot attend work, he
shall immediately notify his superior, who shall decide whether a
health certificate shall be provided. The certificate shall be from a
consulting physician if so requested. The Employer shall pay for the
health certificate if the above conditions are met.
After the first month at work a parent shall, without any deduction
from wages, be entitled to spend a total of seven workdays of every
12-month period in ministering to his sick children under the age of
13, provided that other care cannot be procured.
The Employer shall insure the Employee against death and permanent or
temporary disability caused by an accident while at work or while
travelling a normal route between his home and the workplace.
If, because of his work, the Employee has accommodations away from his
home, the accommodations replace his home, but the insurance shall also
cover normal trips between his home and these accommodations.
Compensation for death will be (as of 1 Jan. 1998):
1. If the deceased was not married and is not survived by a child and
has not been supporting an aged parent 67 years of age or older,
ISK 342,100.
3
<PAGE> 5
2. If the deceased was not married but is survived by a child
(children) under 17 and/or has demonstrably supported an aged
parent or parents (aged 67 or older), ISK 1,083,500.
3. If the deceased was married, the compensation to the spouse shall
be ISK 1,479,700.
4. If the deceased is survived by a child (adopted child, foster
child) under 17 years of age, for each child ISK 284,800.
5. Compensation is paid under only one of sub-paragraphs no. 1, 2
or 3.
In addition to sub-paragraphs 2 and 3, compensation may be paid under
sub-paragraph 4.
The beneficiaries of death compensation provisions are:
1) Legal heirs.
2) Relevant parties equally
3) Surviving spouse.
4) Relevant children, but paid to surviving spouse if he/she is one of
the parents, or to an executor and/or trustee.
Compensation for permanent disability is paid in proportion to the
insurance amount of ISK 2,589,000 so that each degree of disability
from 26% to 50% is counted double, and each degree of disability from
51% to 100% works triple.
For temporary disability, per diem benefits of ISK 5,884 is paid per
week four weeks after the accident occurred and until the injured
person becomes able to work, although for no more than 48 weeks. ISK
785 per week are added to the per diem for each child under the age of
17 that the injured person is supporting.
The amounts of insurance will be reviewed twice a year, 1 January and
1 July, and increased in correspondence with changes in the
cost-of-living index.
The insurance goes into force as soon as the Employee begins work and
expires as soon as he stops working.
The policy terms of the insurance shall be the general policy terms in
force for wage earner job accident insurance at the Association of
Icelandic Insurance Companies at the time of signature of this
Employment Contract is.
In the event that the Employer becomes liable for damages in respect of
the Employee, accident compensation and per diem paid to the Employee
under provisions of this Employment Contract shall be fully deductible
from any damages that the Employer may be made to pay. While the
payment of wages continues, per diem is paid to the Employer.
7. CONFIDENTIALITY
The Employee fills a job involving responsibility and confidentiality
for the Employer. He shall maintain the utmost confidentiality about
whatever he has become aware of in his job regarding the Employer and
the Employer's customers, and which can damage the interests of these
parties. Due to the nature of his work, the Employee
4
<PAGE> 6
is under obligation to handle all information, documents and data to
which he has access in his work with the utmost confidentiality. This
confidentiality continues in force after termination of employment.
While the Employee works for the Employer and for one (1) year
thereafter, the Employee shall not encourage any of the Employer's
employees to leave the employment of the Employer.
If the Employee quits working for the Employer, he undertakes not to
accept work either directly or indirectly at competing companies or
with other competing parties, or to start up or join such operations
for at least two years after termination of employment.
8. PROPRIETARY INFORMATION AND INVENTIONS
Concurrently with the signing of this Employment Contract, the Employer
and Employee enter into an Agreement on Proprietary Information and
Inventions. That agreement is deemed a premise for and part of this
Employment Contract.
Reykjavik, 4 September 1998.
Employee On behalf of DECODE GENETICS, EHF.
Kristjan Erlendsson [sign.] Olafur E. Fridriksson [sign.]
5
<PAGE> 1
EXHIBIT 10.22
OFFICER'S CERTIFICATE
I, the undersigned, do hereby certify and represent that:
1. I am the duly elected Senior Vice President and Chief Business
Officer of deCODE genetics, Inc., a Delaware Corporation.
2. Pursuant to Rule 306(a) of Regulation S-T, the following exhibit
10.22 to deCODE genetics, Inc.'s Registration Statement on Form S-1 is a fair
and accurate English translation of a document prepared in the Icelandic
language.
IN WITNESS WHEREOF, I have signed this Officer's Certificate in my
capacity as Senior Vice President and Chief Business Officer of deCODE genetics,
Inc. on this 7th day of March, 2000.
By: /s/ Hannes T. Smarason
--------------------------
Name: Hannes T. Smarason
Title: Senior Vice President and Chief Business Officer
<PAGE> 2
CO-OPERATION AGREEMENT
BETWEEN
REYKJAVIK HOSPITAL
AND
ISLENSK ERFDAGREINING EHF.
INTRODUCTION
The Act on Patients' Rights stipulates that medical records shall be preserved
in the health institutions where they are recorded. The Data Protection
Commission, appointed by the Minister of Justice, and the Science Ethics
Committee can, however, grant access to information from medical records,
including biosamples, for purposes of scientific research as defined by law.
Islensk erfdagreining ehf. searches, in co-operation with various scientists,
for genes that contribute to the causes of diseases or symptoms of diseases. The
objective of the Co-operation Agreement between the above parties is to ensure
the swift and efficient execution of research projects and facilitate access to
the information necessary for their completion.
Reykjavik Municipal Hospital (hereafter referred to as "the Hospital"), State
Reg. No. 531195-2999, Fossvogur, Reykjavik, and Islensk erfdagreining ehf.
(hereafter referred to as "Ie"), State Reg. No. 691295-3549, Lynghals 1,
Reykjavik, hereby agree to co-operate on research. This Agreement will provide a
framework for individual research contracts that Ie has entered into with
individuals or teams employed by the Hospital, regarding specific research
projects. Such research projects shall always be conducted on the basis of
written contracts and measures shall be taken to ensure that such contracts
conform in all respects to this co-operation Agreement.
Ie and the Hospital have therefore entered into the following
Co-operation Agreement
CHAPTER 1
DEFINITIONS
In this Co-operation Agreement the following concepts shall have the meaning set
out below:
Surveillance Committee: A committee composed of representatives of Ie and the
Hospital, having the task of monitoring the implementation of this Co-operation
Agreement.
Executive Committee: A committee composed of representatives of research parties
and Ie, having the task of supervising the execution of individual research
projects.
Research Parties:
I) Employees of the Hospital participating in the conduct of any research
project in co-operation with Ie, and/or
II) Other parties participating in the conduct of any research project
jointly with the parties specified under I) above.
Neither the Hospital nor Ie is a research party in this sense.
<PAGE> 3
Research Data: Health information, including biosamples, and any further
clinical information that has a bearing on a given research project. Each
research contract shall contain a definition of all relevant research data.
Research Contract: A contract between research parties on the one hand and Ie on
the other regarding a particular research project.
Research Projects: A complete or partial research activity with the
participation of Ie, the objective of which is to find genetic factors that
cause a specific disease, disease symptoms or a response to treatment.
CHAPTER 2
SCOPE
The provisions of this Co-operation Agreement shall apply to all research
projects, regarding which a specific research contract has been made relating to
a specified research project in which employees of the Hospital participate and
are granted access to research data in the custody of the Hospital.
A specific research contract, in writing, shall be made between the research
parties and Ie for each separate research project. Such contracts shall refer to
the Co-operation Agreement between the Hospital and Ie. Such contracts shall
also specify that no contracts shall take effect for the Hospital until such
time as the Hospital has confirmed its acceptance by signature. Ie undertakes
not to commence work on a research project until such contract has been signed
by the Hospital. Under normal circumstances it is understood that the Hospital
will come to a decision regarding contracts within 4 weeks after all required
documents have been submitted.
The term of research contracts shall be specified and they shall expire without
express termination at the end of the term. In individual research contracts the
contracting parties may negotiate a specific mutual period of notice of
termination during the term of the contract.
In the event that the research parties are unable to complete a research project
within the specified time limit or wish to continue work on a research project,
the term of the relevant research contract may be extended by one year at a
time, provided that the Hospital approves such extension.
CHAPTER 3
OBTAINING PERMITS
Under this Agreement, access to research data preserved by the Hospital shall be
subject to prior approval by the Science Ethics Committee, appointed by the
Minister for Health and Insurance pursuant to State Regulation No. 449/1997 on
scientific research in the health sector, following comments from the Hospital's
Ethics Committee. Scientific research shall also be subject to the approval of
the Data Protection Commission, appointed by the Minister of Justice.
2
<PAGE> 4
CHAPTER 4
SUPERVISION, SURVEILLANCE, AND CONFIDENTIALITY
4.1 Supervision of Individual Research Projects:
The supervision of individual research projects shall be jointly in the hands of
the relevant research parties and Ie, which will form an Executive Committee.
Further provisions regarding supervision shall be included in the research
contract.
4.2 Surveillance Committee:
The Hospital and Ie shall appoint a Surveillance Committee, composed of four
members, to monitor the execution of this Co-operation Agreement. Two
representatives of each of the parties to the Agreement shall be appointed to
the committee. Each party shall also appoint two alternate members to replace
committee members in their absence. The committee shall meet once every month,
or as often as the committee may decide. Should either of the parties to the
Agreement think there is cause for a meeting, such party may instruct his
representatives in the surveillance committee to take steps to call such a
meeting, which shall then be called with five days' notice.
4.3 Obligation of Ie et al. to Inform
Ie undertakes to submit to the surveillance committee all contracts made between
Ie and individuals or teams employed by the Hospital at the time that such
contract is made or subsequently employed by the Hospital. The surveillance
committee shall have complete access to all research data of any given research
project on which a research contract has been made.
The Surveillance Committee shall have unlimited access to the accounts of Ie
relating to research projects covered by a research contract. The accounts of
each research project shall be kept separately from other accounts of Ie. Ie
further undertakes to submit to the surveillance committee complete information
regarding payments under a research contract, and as regards the sale of a
research project, its results or findings to a third party. The access that the
Hospital has to the accounts of Ie under this Article shall have the purpose of
enabling the Hospital to preserve its financial interests in its dealings with
Ie.
Ie undertakes to submit to the Hospital all contracts concluded before this
Co-operation Agreement took effect, between Ie and individuals or teams employed
by the Hospital at the time this Co-operation Agreement is made. Such contracts
shall be subject to the provisions of this Co-operation Agreement.
Where it is stated in this Agreement that the surveillance committee may require
information, access to accounts or research data etc., it shall be assumed that
each representative of the Hospital shall have such rights regardless of the
view of other committee members.
4.4 Confidentiality
The representatives of the Hospital on the surveillance committee shall be bound
by complete confidentiality regarding all matters of which they may acquire
knowledge in the course of their work. This applies equally to the contents of
contracts, research plans, results from research, business plans and all other
information that should fairly
3
<PAGE> 5
and reasonably remain confidential in the interest of Ie. Under no circumstances
may the substance of such information be divulged to a third party without the
express permission of Ie. The confidentiality obligations of a Hospital
representative shall remain effective even if he resigns his employment or this
Agreement is terminated. Directors and employees of the Hospital who, in the
course of their work, must deal with information of a sensitive nature provided
to them by Hospital representatives on the surveillance committee, are under the
same obligation.
Confidentiality obligations as defined under this Article apply equally to Ie
representatives on the surveillance committee with respect to the Hospital.
CHAPTER 5
EXPENSES
All expenses incurred by each research project shall be paid by Ie. Ie will pay
the additional expenses incurred by the Hospital in connection with the
performance of a research project after a research contract has taken effect,
i.e. material and wage costs. This does not apply to administrative expenses of
the Hospital. The Hospital shall submit to Ie a monthly invoice, which Ie
undertakes to pay within 10 days of issue. Payments under this Article shall be
considered as expense outlay under Section 7.3 of this Agreement, and be added
to fixed payments, variable payments and other payments under the same Section
7.3.
CHAPTER 6
TREATMENT OF RESEARCH DATA
Research parties shall have access to necessary research data in the custody of
the Hospital for use in a specific research project for which a research
contract has been made, the data having been defined therein, subject to
compliance with law, regulations, government stipulations and the provisions of
this Agreement.
Exempt from access under Paragraph 1 of this Article are biosamples that the
Hospital has collected for other use than that described in this Agreement and
individual research contracts. Ie shall only be granted access to such
biosamples if permitted by the Board of Directors/Director of the biosample bank
in question and the Medical Director of the Hospital, and then only to such
extent as permitted by them at each time.
The custody of research data shall conform to the provisions of law at each
time, currently the provisions of Articles 14 and 15 of Act No. 74/1997 on
Patients' Rights. Furthermore, the provisions of Act No. 121/1989 on the
Recording and Handling of Personal Data shall be observed.
Ie may not remove from Iceland any research data defined in a research contract
and provided by the Hospital for a specific research project.
On the completion of a research project, Ie shall within four weeks return all
research data to the Hospital that were obtained from that institution. The
Hospital is entitled to copies of any research data to which the Hospital has
granted access in respect of the research project in question. The provisions of
this Paragraph shall remain in effect regardless of the cause of termination of
the research project, whether this is caused
4
<PAGE> 6
by the expiration of the term of the research contract, cancellation or
termination thereof or other reasons.
CHAPTER 7
RIGHTS OF PARTIES
7.1 Financial Rights to Research Results
Unless otherwise agreed, Ie shall become the owner of all financial and
commercial rights over research projects under this Agreement and their results
with due regard, however, to Paragraph 2 of Section 7.3 hereof. Ie has the right
to sell results or findings from research projects to a third party, and to
utilise them in any other way consistent with accepted ethical criteria both
before and after the research projects are completed.
7.2 Making of Research Agreements
Employees of the Hospital intending to enter into co-operation with Ie should
first consult with the Medical Director of the Hospital.
7.3 Payments to the Hospital
Ie shall pay a fixed proportion and/or a fixed payment out of all funds obtained
on the basis of projects in which the employees of the Hospital participate
according to research contracts made under this Agreement.
The total amount of payments for research projects shall be negotiated for each
research contract. Each research contract shall provide for fixed annual
payments, reimbursement for expense outlay of the Hospital during research as
stated in Chapter 5 hereof, and a variable payment determined by the outcome of
a research project, results or findings thereof being sold to a third party. The
amount of the variable payment negotiated in each research contract shall never
be lower than 5% of all payments rendered by the third party to Ie. Individual
research contracts may depart from the above provision on variable payment based
on the outcome of the sale of a research project or results or findings thereof,
provided that a provision is inserted into the research contract in its place to
ensure payment of amounts which are at least equal to the specified minimum. All
payments under research contracts shall accrue to a special fund in the custody
of the Hospital.
The total amount of fixed payments, variable payments and other payments as
described in Paragraph 2 of this Section 7.3 shall be used to support scientific
activity within the Hospital. Payments under Paragraph 2 shall be divided as
follows: 25% shall be allocated to general scientific activity as determined by
the Hospital, and 75% shall be allocated to scientific activity as decided by
the employees of the Hospital who contributed to the work for which the payments
were received. The above manner of dividing payments shall apply unless
otherwise agreed between the employees in question and the Hospital.
In the event that individuals or teams employed by the Hospital enter into a
research contract with Ie and a third party, not connected with the Hospital,
the manner of division of payments to each party shall be stipulated in the
research contract. The research contract shall specifically define the grounds
on which the division of payments is decided, and state the arguments behind
that division. Employees of the
5
<PAGE> 7
Hospital shall not be considered as third parties, not connected with the
Hospital, in the sense defined in this Co-operation Agreement.
7.4 Treatment Methods based on Research Results
Ie undertakes to endeavour, in its negotiations with third parties regarding
purchase of results or findings of all research projects under this Agreement,
to ensure that the Hospital, for the benefit of its patients, is granted free
access to any methods or pharmaceuticals that the third party may develop on the
basis of results from research projects under this Agreement to prevent,
diagnose and treat disease.
CHAPTER 8
TERM OF THIS AGREEMENT AND TERMINATION
This Agreement shall remain in effect for as long as it is not formally
terminated. Either party to the Agreement may terminate the Agreement with one
year's notice. However, termination of the Agreement does not include research
contracts that have already been made regarding specific research projects and
approved by the Hospital. Such research contracts may be completed even if this
Agreement has been terminated, provided that the term of such contracts does not
exceed 5 years. Individual research contracts, however, may be terminated during
their term of effect, provided that the contracts in question contain provisions
for such termination.
In the event that either party to a research contract is of the opinion that the
other party has violated the provisions of the research contract, that party
shall without delay submit his comments. If the other party has not remedied the
fault within 4 weeks from receiving the comments, the complaining party may
terminate the research contract with 3 months' notice. This shall apply whether
the research contract contains provisions for termination or not, and
irrespective of the length of any notice of termination that may have been
agreed therein, cf. the provisions of Paragraph 3 of Chapter 2.
Payments that Ie has already made or have become due prior to termination
pursuant to Paragraphs 1 and 2, shall be non-refundable from the Hospital.
CHAPTER 9
DEFAULT AND DEFAULT PROVISIONS
If either party to this Co-operation Agreement is guilty of substantial default,
the other party may cancel the Agreement. Substantial default can, for instance,
refer to non-payment of the agreed payments, improper or unauthorised use of
research data, unreasonable restrictions of research parties' access to research
data of the Hospital pursuant to this Agreement. Should the Agreement be
cancelled by the Hospital on the basis of this provision, all research contracts
are thereby cancelled, including those that have been approved by the Hospital.
Payments that Ie has already made, or have become due prior to cancellation of
the Agreement, shall be non-refundable from the Hospital. The provisions of
chapter 8 of this Agreement do not apply to cancellation of this kind. In the
event of any dispute regarding a party's right to cancel the Agreement, the
settlement procedure for such disputes shall be in accordance with the
provisions of chapter 12.
Should Ie cease research during the term of a research contract, or events or
circumstances cause research under such contract to halt or cease, the research
6
<PAGE> 8
contract shall be regarded as terminated. Such an event or circumstance may, for
example, consist of the revelation that normal progress and continuous research
under a given research contract is halted for a minimum of 6 months. All
provisions of the research contract, including the provisions regarding
limitations imposed on co-operation between the relevant employees of the
Hospital and third parties, will then become null and void.
CHAPTER 10
LIABILITY FOR DAMAGES
As it is not a commercial enterprise, the Hospital exempts itself from any kind
of liability for damages that may arise as a result of this Agreement, or
research contracts made on the basis of this Agreement, or any other event that
may arise during co-operation between the parties to the Agreement. This
exemption covers all events and circumstances that may lead to the Hospital
becoming liable for damages. The reasons for such liability, e.g. errors,
defects, information leak, improper use of research data, injuries, actions or
behaviour of employees etc., are irrelevant in this context.
CHAPTER 11
OTHER ITEMS
11.1 This Agreement is non-transferable
This Agreement, or any right thereunder, is non-transferable except by consent
of both parties thereto. The Agreement becomes void upon termination,
cancellation, or in the event that Ie becomes unable to perform its obligations.
11.2 Scientific and Commercial Responsibility
The Hospital is in no way responsible for the achievement of any scientific or
commercial objectives of individual research projects.
11.3 Court Decisions - Amendments of Legislation
If any amendments to legislation are made or court decisions are passed that in
any way disrupt the premises or basis on which the contracts are made, the
parties thereto shall review the existing contracts for the purpose of bringing
them into conformity as necessary.
11.4 On the Publication of Research Results
Research results shall be published as soon as they comply with academic
requirements and are fit for publication. However, Ie may postpone publication
for a maximum of 90 days in order to ensure that there will be enough time to
secure the property rights relating to any inventions that may be produced by
research. In the event that a third party requests that Ie does not publish
results when ready as described above, publication may be postponed for a
maximum of 90 days.
11.5 Treatment of Samples etc.
This Agreement in no way limits the Hospital's right to send samples or other
data to other places in Iceland or abroad for research etc, or to take normal
action in diagnosing diseases and providing patients with service as necessary
at any time. This shall apply even if a research contract has been made between
Ie and certain employees of the Hospital regarding the same diseases or
comparable disease symptoms, and such contract has been approved by the
Hospital.
7
<PAGE> 9
11.6 Limitations on Co-operation under Research Contracts
Provisions in individual research contracts entered into by individuals or teams
in the employ of the Hospital that stipulate limitations regarding co-operation
with third parties in searching for the genetic factors of diseases under the
relevant research contracts, entail no obligations of any kind for the Hospital.
Provisions in individual research contracts, entered into by individuals or
teams in the employ of the Hospital, that stipulate limitations regarding
co-operation with third parties in circumstances when a contract on the sale of
a research project has been concluded confer no obligations of any kind upon the
Hospital.
The fact that individual research contracts are signed by the Hospital does not
in any way alter the substance of Articles 1 and 2.
CHAPTER 12
SETTLEMENT OF DISPUTES
12.1 Settlement of Disputes
In the event of a dispute between the parties to this Agreement regarding
performance or compliance that cannot be resolved by the surveillance committee,
two persons, one from each party, shall endeavour to reach an agreement on its
settlement. If a settlement is not reached between those two persons within two
weeks of the submission of the dispute, each party to the Agreement shall
appoint one arbitrator and then jointly request the appointment of an impartial
third arbitrator by the District Court of Reykjavik to assist in the resolution
of the dispute, thus forming a tribunal of three arbitrators. The arbitration
tribunal shall reach a decision in the matter within 3 months from the
appointment of the third arbitrator. The cost of the work of the tribunal shall
be determined by the tribunal at each time. The work, procedure and rulings of
the arbitration tribunal shall otherwise be governed, as appropriate at any
time, by Act No. 53/1989 on Contractual Arbitration.
Notwithstanding the above provisions on arbitration, cases involving the
collection of payments under this Agreement which are not in dispute between the
parties may be submitted to the public courts. The same applies to cases of
financial claims made by one party against the other, based on rulings of the
arbitration tribunal regarding non-performance or breach by the latter of this
Agreement. Such cases shall be submitted to the District Court of Reykjavik.
Interim Provisions
Ie undertakes, immediately upon the signing of this Agreement, to initiate a
revision of all research contracts made on individual research projects under
this Agreement for the purpose of bringing their provisions on terms of payment
into conformance with the provisions of Section 7.3 of this Agreement, and in
other ways adapting them to the provisions of this Agreement. This revision
process shall be completed within approximately three months from the signing of
this Agreement. All research contracts shall then be submitted to the Hospital
for approval pursuant to the provisions of chapter 2 hereof.
REYKJAVIK, 4 NOVEMBER 1998
For Reykjavik Hospital For Islensk erfdagreining ehf.
8
<PAGE> 1
Exhibit 10.23
AMENDED AND RESTATED NON-RECOURSE PROMISSORY NOTE
$479,880 Reykjavik, Iceland
March 24, 1999
FOR VALUE RECEIVED, the undersigned hereby unconditionally promises to
pay to the order of deCODE genetics, Inc., a Delaware corporation (the
"Company"), at the Company's principal office or at such other place as the
holder hereof may designate in writing, on 1 February, 2003, in lawful money of
the United States of America and in immediately available funds, the total price
of 479,880 Dollars ($479,880), together with interest, compounded annually,
from 16 November, 1998 on the unpaid principal at the rate of 6% per annum.
This Note may not be prepaid.
The full amount of this Note is secured by a pledge of shares of Common
Stock of the Company, and is subject to all of the terms and provisions of the
Amended and Restated Early Exercise Stock Purchase Agreement and the Amended and
Restated Pledge Agreement, each of even date herewith between the undersigned
and the Company. The Company's recovery against the undersigned for failure to
pay any amount owing hereunder when due shall be limited solely to the shares of
Common Stock or other collateral of the undersigned pledged to the Company in
the Amended and Restated Pledge Agreement. The undersigned shall not be liable
or have any personal liability in any other respect for the payment of any
amount due under this Note.
The undersigned hereby represents and agrees that the amounts due under
this Note are not consumer debt, and are not incurred primarily for personal,
family or household purposes, but are for business and commercial purposes only.
The undersigned hereby waives presentment, protest and notice of
protest, demand for payment, notice of dishonor and all other notices or demands
in connection with the delivery, acceptance, performance, default or endorsement
of this Note.
This Note shall be governed by, and construed, enforced and interpreted
in accordance with, the laws of the State of Delaware, excluding conflict of
laws principles that would cause the application of laws of any other
jurisdiction.
<PAGE> 2
This Amended and Restated Non-Recourse Promissory Note reflects
amendments to the Non-Recourse Promissory Note delivered to the Company by the
undersigned on 16 November, 1998, which amendments were agreed upon between the
Company and the undersigned on March 24, 1999. It supersedes and replaces in all
respects such Non-Recourse Promissory Note.
/s/ Sigurdur I. Bjornsson
------------------------------------
(signature)
Sigurdur I. Bjornsson
------------------------------------
(print name)
<PAGE> 1
EXHIBIT 10.24
OFFICER'S CERTIFICATE
I, the undersigned, do hereby certify and represent that:
1. I am the duly elected Senior Vice President and Chief Business
Officer of deCODE genetics, Inc., a Delaware Corporation.
2. Pursuant to Rule 306(a) of Regulation S-T, the following exhibit
10.24 to deCODE genetics, Inc.'s Registration Statement on Form S-1 is a fair
and accurate English translation of a document prepared in the Icelandic
language.
IN WITNESS WHEREOF, I have signed this Officer's Certificate in my
capacity as Senior Vice President and Chief Business Officer of deCODE genetics,
Inc. on this 7th day of March, 2000.
By: /s/ Hannes T. Smarason
--------------------------
Name: Hannes T. Smarason
Title: Senior Vice President and Chief Business Officer
<PAGE> 2
CO-OPERATION AGREEMENT
BETWEEN
THE ICELAND STATE HOSPITAL
AND
ISLENSK ERFDAGREINING EHF.
INTRODUCTION
The Act on Patients' Rights stipulates that medical records shall be preserved
in the health institutions where they are recorded. The Data Protection
Commission, appointed by the Minister of Justice, and the Science Ethics
Committee can, however, grant access to information from medical records,
including biosamples, for purposes of scientific research as defined by law.
Islensk erfdagreining ehf. searches, in co-operation with various scientists,
for genes that contribute to the causes of diseases or symptoms of diseases. The
objective of the Co-operation Agreement between the above parties is to ensure
the swift and efficient execution of research projects and facilitate access to
the information necessary for their completion.
The Iceland State Hospital (hereafter referred to as "the Hospital"), State Reg.
No. 540269-6379, Raudararstigur 31, Reykjavik, and Islensk erfdagreining ehf.
(hereafter referred to as "Ie"), State Reg. No. 691295-3549, Lynghals 1,
Reykjavik, hereby agree to co-operate on research. This Agreement will provide a
framework for individual research contracts that Ie has entered into with
individuals or teams employed by the Hospital, regarding specific research
projects. Such research projects shall always be conducted on the basis of
written contracts and measures shall be taken to ensure that such contracts
conform in all respects to this co-operation Agreement.
Ie and the Hospital have therefore entered into the following
Co-operation Agreement
CHAPTER 1
DEFINITIONS
In this Co-operation Agreement the following concepts shall have the meaning set
out below:
Surveillance Committee: A committee composed of representatives of Ie and the
Hospital, having the task of monitoring the implementation of this Co-operation
Agreement.
Executive Committee: A committee composed of representatives of research parties
and Ie, having the task of supervising the execution of individual research
projects.
Research Parties:
I) Employees of the Hospital participating in the conduct of any research
project in co-operation with Ie, and/or
II) Other parties participating in the conduct of any research project
jointly with the parties specified under I) above.
Neither the Hospital nor Ie is a research party in this sense.
<PAGE> 3
Research Data: Health information, including biosamples, and any further
clinical information that has a bearing on a given research project. Each
research contract shall contain a definition of all relevant research data.
Research Contract: A contract between research parties on the one hand and Ie on
the other regarding a particular research project.
Research Projects: A complete or partial research activity with the
participation of Ie, the objective of which is to find genetic factors that
cause a specific disease, disease symptoms or a response to treatment.
CHAPTER 2
SCOPE
The provisions of this Co-operation Agreement shall apply to all research
projects, regarding which a specific research contract has been made relating to
a specified research project in which employees of the Hospital participate and
are granted access to research data in the custody of the Hospital.
A specific research contract, in writing, shall be made between the research
parties and Ie for each separate research project. Such contracts shall refer to
the Co-operation Agreement between the Hospital and Ie. Such contracts shall
also specify that no contracts shall take effect for the Hospital until such
time as the Hospital has confirmed its acceptance by signature. Ie undertakes
not to commence work on a research project until such contract has been signed
by the Hospital. Under normal circumstances it is understood that the Hospital
will come to a decision regarding contracts within 4 weeks after all required
documents have been submitted.
The term of research contracts shall be specified and they shall expire without
express termination at the end of the term. In individual research contracts the
contracting parties may negotiate a specific mutual period of notice of
termination during the term of the contract.
In the event that the research parties are unable to complete a research project
within the specified time limit or wish to continue work on a research project,
the term of the relevant research contract may be extended by one year at a
time, provided that the Hospital approves such extension.
CHAPTER 3
OBTAINING PERMITS
Under this Agreement, access to research data preserved by the Hospital shall be
subject to prior approval by the Science Ethics Committee, appointed by the
Minister for Health and Insurance pursuant to State Regulation No. 449/1997 on
scientific research in the health sector, following comments from the Hospital's
Ethics Committee. Scientific research shall also be subject to the approval of
the Data Protection Commission, appointed by the Minister of Justice.
2
<PAGE> 4
CHAPTER 4
SUPERVISION, SURVEILLANCE, AND CONFIDENTIALITY
4.1 Supervision of Individual Research Projects:
The supervision of individual research projects shall be jointly in the hands of
the relevant research parties and Ie, which will form an Executive Committee.
Further provisions regarding supervision shall be included in the research
contract.
4.2 Surveillance Committee:
The Hospital and Ie shall appoint a Surveillance Committee, composed of four
members, to monitor the execution of this Co-operation Agreement. Two
representatives of each of the parties to the Agreement shall be appointed to
the committee. Each party shall also appoint two alternate members to replace
committee members in their absence. The committee shall meet once every month,
or as often as the committee may decide. Should either of the parties to the
Agreement think there is cause for a meeting, such party may instruct his
representatives in the surveillance committee to take steps to call such a
meeting, which shall then be called with five days' notice.
4.3 Obligation of Ie et al. to Inform
Ie undertakes to submit to the surveillance committee all contracts made between
Ie and individuals or teams currently or previously employed by the Hospital at
the time that such contract was made or before such contract was made. The
surveillance committee shall have complete access to all research data of any
given research project on which a research contract has been made.
The Surveillance Committee shall have unlimited access to the accounts of Ie
relating to research projects covered by a research contract. The accounts of
each research project shall be kept separately from other accounts of Ie. Ie
further undertakes to submit to the surveillance committee complete information
regarding payments under a research contract, and as regards the sale of a
research project, its results or findings to a third party. The access that the
Hospital has to the accounts of Ie under this Article shall have the purpose of
enabling the Hospital to preserve its financial interests in its dealings with
Ie.
Ie undertakes to submit to the Hospital all contracts concluded before this
Co-operation Agreement took effect, between Ie and individuals or teams employed
by the Hospital at the time this Co-operation Agreement is made. Such contracts
shall be subject to the provisions of this Co-operation Agreement.
Where it is stated in this Agreement that the surveillance committee may require
information, access to accounts or research data etc., it shall be assumed that
each representative of the Hospital shall have such rights regardless of the
view of other committee members.
4.4 Confidentiality
The representatives of the Hospital on the surveillance committee shall be bound
by complete confidentiality regarding all matters of which they may acquire
knowledge in the course of their work. This applies equally to the contents of
contracts, research plans, results from research, business plans and all other
information that should fairly
3
<PAGE> 5
and reasonably remain confidential in the interest of Ie. Under no circumstances
may the substance of such information be divulged to a third party without the
express permission of Ie. The confidentiality obligations of a Hospital
representative shall remain effective even if he resigns his employment or this
Agreement is terminated. Directors and employees of the Hospital who, in the
course of their work, must deal with information of a sensitive nature provided
to them by Hospital representatives on the surveillance committee, are under the
same obligation.
Confidentiality obligations as defined under this Article apply equally to Ie
representatives on the surveillance committee with respect to the Hospital.
CHAPTER 5
EXPENSES
All expenses incurred by each research project shall be paid by Ie. Ie will pay
the additional expenses incurred by the Hospital in connection with the
performance of a research project after a research contract has taken effect,
i.e. material and wage costs. This does not apply to administrative expenses of
the Hospital. The Hospital shall submit to Ie a monthly invoice, which Ie
undertakes to pay within 10 days of issue. Payments under this Article shall be
considered as expense outlay under Section 7.3 of this Agreement, and be added
to fixed payments, variable payments and other payments under the same Section
7.3.
CHAPTER 6
TREATMENT OF RESEARCH DATA
Research parties shall have access to necessary research data in the custody of
the Hospital for use in a specific research project for which a research
contract has been made, the data having been defined therein, subject to
compliance with law, regulations, government stipulations and the provisions of
this Agreement.
Exempt from access under Paragraph 1 of this Article are biosamples that the
Hospital has collected for other use than that described in this Agreement and
individual research contracts. Ie shall only be granted access to such
biosamples if permitted by the Board of Directors/Director of the biosample bank
in question and the Medical Director of the Hospital, and then only to such
extent as permitted by them at each time.
The custody of research data shall conform to the provisions of law at each
time, currently the provisions of Articles 14 and 15 of Act No. 74/1997 on
Patients' Rights. Furthermore, the provisions of Act No. 121/1989 on the
Recording and Handling of Personal Data shall be observed.
Ie may not remove from Iceland any research data defined in a research contract
and provided by the Hospital for a specific research project.
On the completion of a research project, Ie shall within four weeks return all
research data to the Hospital that were obtained from that institution. The
Hospital is entitled to copies of any research data to which the Hospital has
granted access in respect of the research project in question. The provisions of
this Paragraph shall remain in effect regardless of the cause of termination of
the research project, whether this is caused
4
<PAGE> 6
by the expiration of the term of the research contract, cancellation or
termination thereof or other reasons.
CHAPTER 7
RIGHTS OF PARTIES
7.1 Financial Rights to Research Results
Unless otherwise agreed, Ie shall become the owner of all financial and
commercial rights over research projects under this Agreement and their results
with due regard, however, to Paragraph 2 of Section 7.3 hereof. Ie has the right
to sell results or findings from research projects to a third party, and to
utilise them in any other way consistent with accepted ethical criteria both
before and after the research projects are completed.
7.2 Making of Research Agreements
Employees of the Hospital intending to enter into co-operation with Ie should
first consult with the Medical Director of the Hospital.
7.3 Payments to the Hospital
Ie shall pay a fixed proportion and/or a fixed payment out of all funds obtained
on the basis of projects in which the employees of the Hospital participate
according to research contracts made under this Agreement.
The total amount of payments for research projects shall be negotiated for each
research contract. Each research contract shall provide for fixed annual
payments, reimbursement for expense outlay of the Hospital during research as
stated in Chapter 5 hereof, and a variable payment determined by the outcome of
a research project, results or findings thereof being sold to a third party. The
amount of the variable payment negotiated in each research contract shall never
be lower than 5% of all payments rendered by the third party to Ie. Individual
research contracts may depart from the above provision on variable payment based
on the outcome of the sale of a research project or results or findings thereof,
provided that a provision is inserted into the research contract in its place to
ensure payment of amounts which are at least equal to the specified minimum. All
payments under research contracts shall accrue to a special fund in the custody
of the Hospital.
The total amount of fixed payments, variable payments and other payments as
described in Paragraph 2 of this Section 7.3 shall be used to support scientific
activity within the Hospital. Payments under Paragraph 2 shall be divided as
follows: 25% shall be allocated to general scientific activity as determined by
the Hospital, and 75% shall be allocated to scientific activity as decided by
the employees of the Hospital who contributed to the work for which the payments
were received. The above manner of dividing payments shall apply unless
otherwise agreed between the employees in question and the Hospital.
In the event that individuals or teams employed by the Hospital enter into a
research contract with Ie and a third party, not connected with the Hospital,
the manner of division of payments to each party shall be stipulated in the
research contract. The research contract shall specifically define the grounds
on which the division of payments is decided, and state the arguments behind
that division. Employees of the
5
<PAGE> 7
Hospital shall not be considered as third parties, not connected with the
Hospital, in the sense defined in this Co-operation Agreement.
7.4 Treatment Methods based on Research Results
Ie undertakes to endeavour, in its negotiations with third parties regarding
purchase of results or findings of all research projects under this Agreement,
to ensure that the Hospital, for the benefit of its patients, is granted free
access to any methods or pharmaceuticals that the third party may develop on the
basis of results from research projects under this Agreement to prevent,
diagnose and treat disease.
CHAPTER 8
TERM OF THIS AGREEMENT AND TERMINATION
This Agreement shall remain in effect for as long as it is not formally
terminated. Either party to the Agreement may terminate the Agreement with one
year's notice. However, termination of the Agreement does not include research
contracts that have already been made regarding specific research projects and
approved by the Hospital. Such research contracts may be completed even if this
Agreement has been terminated, provided that the term of such contracts does not
exceed 5 years. Individual research contracts, however, may be terminated during
their term of effect, provided that the contracts in question contain provisions
for such termination.
In the event that either party to a research contract is of the opinion that the
other party has violated the provisions of the research contract, that party
shall without delay submit his comments. If the other party has not remedied the
fault within 4 weeks from receiving the comments, the complaining party may
terminate the research contract with 3 months' notice. This shall apply whether
the research contract contains provisions for termination or not, and
irrespective of the length of any notice of termination that may have been
agreed therein, cf. the provisions of Paragraph 3 of Chapter 2.
Payments that Ie has already made or have become due prior to termination
pursuant to Paragraphs 1 and 2, shall be non-refundable from the Hospital.
CHAPTER 9
DEFAULT AND DEFAULT PROVISIONS
If either party to this Co-operation Agreement is guilty of substantial default,
the other party may cancel the Agreement. Substantial default can, for instance,
refer to non-payment of the agreed payments, improper or unauthorised use of
research data, unreasonable restrictions of research parties' access to research
data of the Hospital pursuant to this Agreement. Should the Agreement be
cancelled by the Hospital on the basis of this provision, all research contracts
are thereby cancelled, including those that have been approved by the Hospital.
Payments that Ie has already made, or have become due prior to cancellation of
the Agreement, shall be non-refundable from the Hospital. The provisions of
chapter 8 of this Agreement do not apply to cancellation of this kind. In the
event of any dispute regarding a party's right to cancel the Agreement, the
settlement procedure for such disputes shall be in accordance with the
provisions of chapter 12.
Should Ie cease research during the term of a research contract, or events or
circumstances cause research under such contract to halt or cease, the research
6
<PAGE> 8
contract shall be regarded as terminated. Such an event or circumstance may, for
example, consist of the revelation that normal progress and continuous research
under a given research contract is halted for a minimum of 6 months. All
provisions of the research contract, including the provisions regarding
limitations imposed on co-operation between the relevant employees of the
Hospital and third parties, will then become null and void.
CHAPTER 10
LIABILITY FOR DAMAGES
As it is not a commercial enterprise, the Hospital exempts itself from any kind
of liability for damages that may arise as a result of this Agreement, or
research contracts made on the basis of this Agreement, or any other event that
may arise during co-operation between the parties to the Agreement. This
exemption covers all events and circumstances that may lead to the Hospital
becoming liable for damages. The reasons for such liability, e.g. errors,
defects, information leak, improper use of research data, injuries, actions or
behaviour of employees etc., are irrelevant in this context.
CHAPTER 11
OTHER ITEMS
11.1 This Agreement is non-transferable
This Agreement, or any right thereunder, is non-transferable except by consent
of both parties thereto.
11.2 Scientific and Commercial Responsibility
The Hospital is in no way responsible for the achievement of any scientific or
commercial objectives of individual research projects.
11.3 Court Decisions - Amendments of Legislation
If any amendments to legislation are made or court decisions are passed that in
any way disrupt the premises or basis on which the contracts are made, the
parties thereto shall review the existing contracts for the purpose of bringing
them into conformity as necessary.
11.4 On the Publication of Research Results
Research results shall be published as soon as they comply with academic
requirements and are fit for publication. However, Ie may postpone publication
for a maximum of 90 days in order to ensure that there will be enough time to
secure the property rights relating to any inventions that may be produced by
research. In the event that a third party requests that Ie does not publish
results when ready as described above, publication may be postponed for a
maximum of 90 days.
11.5 Treatment of Samples etc.
This Agreement in no way limits the Hospital's right to send samples or other
data to other places in Iceland or abroad for research etc, or to take normal
action in diagnosing diseases and providing patients with service as necessary
at any time. This shall apply even if a research contract has been made between
Ie and certain employees of the Hospital regarding the same diseases or
comparable disease symptoms, and such contract has been approved by the
Hospital.
7
<PAGE> 9
11.6 Limitations on Co-operation under Research Contracts
Provisions in individual research contracts entered into by individuals or teams
in the employ of the Hospital that stipulate limitations regarding co-operation
with third parties in searching for the genetic factors of diseases under the
relevant research contracts, entail no obligations of any kind for the Hospital.
Provisions in individual research contracts, entered into by individuals or
teams in the employ of the Hospital, that stipulate limitations regarding
co-operation with third parties in circumstances when a contract on the sale of
a research project has been concluded confer no obligations of any kind upon the
Hospital.
The fact that individual research contracts are signed by the Hospital does not
in any way alter the substance of Articles 1 and 2.
CHAPTER 12
SETTLEMENT OF DISPUTES
12.1 Settlement of Disputes
In the event of a dispute between the parties to this Agreement regarding
performance or compliance that cannot be resolved by the surveillance committee,
two persons, one from each party, shall endeavour to reach an agreement on its
settlement. If a settlement is not reached between those two persons within two
weeks of the submission of the dispute, each party to the Agreement shall
appoint one arbitrator and then jointly request the appointment of an impartial
third arbitrator by the District Court of Reykjavik to assist in the resolution
of the dispute, thus forming a tribunal of three arbitrators. The arbitration
tribunal shall reach a decision in the matter within 3 months from the
appointment of the third arbitrator. The cost of the work of the tribunal shall
be determined by the tribunal at each time. The work, procedure and rulings of
the arbitration tribunal shall otherwise be governed, as appropriate at any
time, by Act No. 53/1989 on Contractual Arbitration.
Notwithstanding the above provisions on arbitration, cases involving the
collection of payments under this Agreement which are not in dispute between the
parties may be submitted to the public courts. The same applies to cases of
financial claims made by one party against the other, based on rulings of the
arbitration tribunal regarding non-performance or breach by the latter of this
Agreement. Such cases shall be submitted to the District Court of Reykjavik.
Interim Provisions
Ie undertakes, immediately upon the signing of this Agreement, to initiate a
revision of all research contracts made on individual research projects under
this Agreement for the purpose of bringing their provisions on terms of payment
into conformance with the provisions of Section 7.3 of this Agreement, and in
other ways adapting them to the provisions of this Agreement. This revision
process shall be completed within approximately three months from the signing of
this Agreement. All research contracts shall then be submitted to the Hospital
for approval pursuant to the provisions of chapter 2 hereof.
REYKJAVIK, 15 DECEMBER 1998
For The Icelandic State Hospital For Islensk erfdagreining ehf.
8
<PAGE> 1
EXHIBIT 10.25
OFFICER'S CERTIFICATE
I, the undersigned, do hereby certify and represent that:
1. I am the duly elected Senior Vice President and Chief Business
Officer of deCODE genetics, Inc., a Delaware Corporation.
2. Pursuant to Rule 306(a) of Regulation S-T, the following exhibit
10.25 to deCODE genetics, Inc.'s Registration Statement on Form S-1 is a fair
and accurate English translation of a document prepared in the Icelandic
language.
IN WITNESS WHEREOF, I have signed this Officer's Certificate in my
capacity as Senior Vice President and Chief Business Officer of deCODE genetics,
Inc. on this 7th day of March, 2000.
By: /s/ Hannes T. Smarason
--------------------------
Name: Hannes T. Smarason
Title: Senior Vice President and Chief Business Officer
<PAGE> 2
Islensk erfdagreining ehf., State Reg. No. 691295-3549, (IE) and Sigurdur
Ingibergur Bjornsson, Id. No. 300863-4859, ("the Employee") hereby enter into
the following
EMPLOYMENT CONTRACT
1. JOB TITLE AND FIELD OF WORK
The Employee is hired to work as Vice President and CEO of the Health-Care
Database for IE. The workplace is the Employer's base of operations at Lynghals
1, Reykjavik, but if the Employer's base of operations in Reykjavik changes or
increases in number, the Employee agrees to a change in his workplace.
The field of work covers all aspects in relation to the definition, installation
and operation of the projected centralised Health-Care Database. All deviation
from this definition shall be subject to the approval of the Employee and IE.
The immediate superior of the Employee shall be the President and CEO of IE.
Islensk erfdagreining ehf. plans to establish an independent subsidiary company
for the operation of the centralised Database, upon which the Employee will
become the president of that company.
The Employee shall have the right to serve on boards of directors of other
companies, provided that such membership is not detrimental to the operation of
IE or the Employee's ability to perform his duties.
2. WORKING HOURS
The Employee's working hours shall be determined by the requirements of projects
at any time. The Employee has the right, within reasonable limits, to arrange
his working hours as he sees fit.
3. WAGES AND WAGE TERMS OF EMPLOYEE
The Employee shall receive the following remuneration for his work:
o Fixed monthly wages in the amount of ISK 750,000 or 9,000,000 per
year. No separate payments shall be made for overtime work, and the
above payment shall be a payment in full to the Employee for his work
during the year.
o The Employee shall receive an option to buy to 120,000 shares in
deCODE genetics Inc., the parent company of IE. The purchase price of
each share shall be $4. The Employee shall acquire this right for a
period of four years, so that in each year he shall have the right to
buy 1/4 of the above shares. However, one year shall elapse before he
acquires the above right, after which the right shall accumulate on a
monthly basis.
o The Employee shall be entitled to a performance-related bonus
payment, to be decided by a special Compensation Committee. The amount
of such a bonus shall be variable, but could amount to 20-40% of the
annual wages of the Employee.
<PAGE> 3
o The Employee shall pay a contribution amounting to 4% of his total
wages to a pension fund of his own choice, and the Employer shall pay
6% of the same amount.
o Other fringe benefits shall be in accordance with those enjoyed by
comparable directors of IE.
4. PROVISIONS ON TERMINATION OF EMPLOYMENT
The Agreement may be terminated by either party with six-months' notice.
However, the Agreement shall not be terminated by IE until 31 December 1999,
from which time the termination shall not take effect until 1 July 2000. In the
event that the Employee terminates the Agreement before 31 December 1999, IE
shall, however, only be obligated to fulfil its obligations pursuant to this
Agreement for six months immediately following the date of termination.
5. ACCIDENTS, ILLNESS AND INSURANCE
In the event that the Employee has an accident at work, the Employer shall pay
for the transport of the Employee home or to hospital and, for each instance,
reimburse him for up to four weeks of normal, out-of-pocket medical expenses
which are not covered by district health insurance or Social Security.
In each instance of an accident at work or a work-related illness caused on the
job or by it, or occurring during transport to and from the workplace, the
Employer shall pay up to three months' wages according to the Employee's wage
scale in effect when the accident or illness occurs, provided that per diem
benefits paid for these days by the State Social Security Institute and/or the
district health insurance are paid to the Employer. The provisions of this
paragraph shall not prejudice any additional rights which the Employee may have
under the law.
Wage payments to the Employee during absences due to illness shall be arranged
in the first year so that two days are paid for each month worked. When the
Employee has worked for the Employer for one year or longer, wage payments
during absences due to illness shall be arranged as follows: after one year, two
months for every 12 months; after five years of work for the Employer, four
months for every 12 months; and after 10 years working for the Employer, six
months for every 12 months.
If an Employee becomes ill and for this reason cannot attend work, he shall
immediately notify his superior, who shall decide whether a health certificate
shall be requested. The certificate shall be from a consulting physician if so
requested. The Employer shall pay for the health certificate if the above
conditions are met.
After the first month at work a parent shall, without any deduction from wages,
be entitled to spend a total of seven workdays of every 12-month period in
ministering to his ill children under the age of 13, provided that other care
cannot be procured.
The Employer shall insure the Employee against death and permanent or temporary
disability caused be an accident while at work or while travelling a normal
route between his home and the workplace.
<PAGE> 4
If, because of his work, the Employee has accommodations away from his home, the
accommodations replace his home, but the insurance shall also cover normal trips
between his home and these accommodations.
Compensation for death will be (as of 1 Jan. 1998):
1. If the deceased was not married and is not survived by a child and has
not been supporting an aged parent 67 years of age or older, ISK
342,100.
2. If the deceased was not married but is survived by a child (children)
under 17 and/or has demonstrably supported an aged parent or parents
(aged 67 or older), ISK 1,083,500.
3. If the deceased was married, the compensation to the spouse shall be
ISK 1,479,700.
4. If the deceased is survived by a child (adopted child, foster child)
under 17 years of age, for each child ISK 284,800.
5. Compensation is paid under only one of sub-paragraphs no. 1, 2 or 3.
In addition to sub-paragraphs 2 and 3, compensation may be paid under
sub-paragraph 4.
The beneficiaries of death compensation provisions are:
1) Legal heirs.
2) Relevant parties equally
3) Surviving spouse.
4) Relevant children, but paid to surviving spouse if he/she is one of the
parents, or to an executor and/or trustee.
Compensation for permanent disability is paid in proportion to the insurance
amount of ISK 2,589,000 so that each degree of disability from 26% to 50% is
counted double, and each degree of disability from 51% to 100% works triple.
For temporary disability, per diem benefits of ISK 5,884 are paid per week four
weeks after the accident occurred and until the injured person becomes able to
work, although for no more than 48 weeks. ISK 785 per week are added to the per
diem for each child under the age of 17 that the injured person is supporting.
The amounts of insurance will be reviewed twice a year, 1 January and 1 July,
and increased in correspondence with changes in the cost-of-living index.
The insurance takes effect as soon as the Employee begins work and expires as
soon as he stops working.
The policy terms of the insurance shall be the general policy terms in effect
for wage earner job accident insurance at the Association of Icelandic Insurance
Companies at the time of signature of this Employment Contract.
<PAGE> 5
In the event that the Employer becomes liable for damages in respect of the
Employee, accident compensation and per diem benefits paid to the Employee under
provisions of this Employment Contract shall be fully deductible from any
damages that the Employer may be made to pay. While the payment of wages
continues, per diem benefits shall be paid to the Employer.
6. CONFIDENTIALITY
The Employee fills a job involving responsibility and confidentiality for the
Employer. He shall maintain the utmost confidentiality about whatever he has
become aware of in his job regarding the Employer and the Employer's customers,
and which can damage the interests of these parties. Due to the nature of his
work, the Employee is under obligation to handle all information, documents and
data to which he has access in his work with the utmost confidentiality. This
confidentiality continues in force after termination of employment.
While the Employee works for the Employer and for one (1) year thereafter, the
Employee shall not encourage any of the Employer's Employees to leave the
employment of Employer.
If the Employee quits working for the Employer, he undertakes not to accept work
either directly or indirectly at competing companies or with other competing
parties, or to start up or join such operations for at least two years after
termination of employment.
7. PROPRIETARY INFORMATION AND INVENTIONS
Concurrently with the signing of this Employment Contract, the Employer and
Employee enter into an agreement on proprietary information and inventions. That
agreement is deemed a premise for and part of this Employment Contract.
Reykjavik, 15 January
On behalf of Islensk erfdagreining
Kari Stefansson [sign.] Sigurdur Ingibergur Bjornsson [sign.]
<PAGE> 1
EXHIBIT 10.26
OFFICER'S CERTIFICATE
I, the undersigned, do hereby certify and represent that:
1. I am the duly elected Senior Vice President and Chief Business
Officer of deCODE genetics, Inc., a Delaware Corporation.
2. Pursuant to Rule 306(a) of Regulation S-T, the following exhibit
10.26 to deCODE genetics, Inc.'s Registration Statement on Form S-1 is a fair
and accurate English translation of a document prepared in the Icelandic
language.
IN WITNESS WHEREOF, I have signed this Officer's Certificate in my
capacity as Senior Vice President and Chief Business Officer of deCODE genetics,
Inc. on this 7th day of March, 2000.
By: /s/ Hannes T. Smarason
-------------------------------
Name: Hannes T. Smarason
Title: Senior Vice President and
Chief Business Officer
<PAGE> 2
LEASE
FRIDAR SF., REG. NO. 66.01.99-2929, domiciled at Efstasund 58, Reykjavik, as a
Lessor, and ISLENSK ERFDAGREINING EHF., REG. NO. 691295-3549, domiciled at
Lynghals 1, Reykjavik, as a Lessee, enter into the following
Lease
1. The Lessor leases to the lessee approximately 395 square meters of office
space at Hlidarsmari 19 in Kopavogur, especially marked as storey No: 02-01
in that building, including a share in the common area.
2. Tenancy begins as of such time as the lessor delivers the storey, cf.
description, see attached document Nos. 1 and 2. The tenancy shall,
however, be considered to begin no later than 2 months after the design
drawings for electrical installations and the interior of the house are on
hand and have been approved by respective parties. Tenancy is 5 years.
After that time the agreement may be terminated with at least 6 months'
notice by either party. The Lessee may sublet the premises with the consent
of the Lessor. Following the term of tenancy this lease agreement shall be
extended without a fixed term.
3. The rent is determined at ISK 950 pr. square meter, per month. The rent
will be adjusted based on the consumer price index every 3 months,
calculating as the base price index the month the lessee leases the
premises. Monthly rent is calculated from the first day of each month to
the first day of the following month and shall be paid in advance, one
month at a time. The final due date of payment shall be calculated 15 days
later. Penalty interest is calculated as of the 16th day, if rent has not
been paid by the final due date, at the posted penalty interest rate
current at any time.
Electricity and heating is not included in the rent, considering the
proposed use of the place by the lessee. The lessee shall pay all
electrical and heating costs of the property defined above, No. 02-01, on
the same conditions as above regarding payment of rent with respect to due
dates and final payment dates. The Lessee shall pay a maintenance fee every
month, as decided at each time, based on the proportion between the storey
and the entire building, i.e. 10.99%. The maintenance fee covers the
expense of operating the common area.
4. The Lessee undertakes to treat the leased property with care and
cleanliness. The Lessee shall pay full compensation for any damage that he
may cause with careless treatment of the leased property. In addition, he
shall attend to all indoor maintenance in the leased premises at his own
cost, as of the time that the Lease takes effect and the Lessor has
fulfilled his obligations in relation to the delivery of the storey, cf.
the attached documents Nos. 1 and 2. The Lessor shall attend to and pay the
cost of all ordinary outdoor maintenance and pay all public levies on the
premises.
<PAGE> 3
5. In the event that the Lessee moves from the premises, he shall return it in
good order in every respect other than normal wear. When the tenancy period
has ended or on termination of the tenancy, all fixed appurtenances shall
become the property of the Lessor, whereas all unfixed facilities which the
Lessee uses in the office are his property which he may remove when the
tenancy period has ended. During the tenancy, the Lessee may make changes
to the office at his own cost and in consultation with the Lessor, whose
property such changes shall become as provided for above.
6. In the event of material default on the part of the Lessee, the Lessor may
require that the Lessee vacate the leased property.
7. This Lease shall be subject to the provisions of the Leasehold Act No.
36/1994 in so far as no agreement to the contrary has been made, as
applicable. This Lease is made in two identical copies one to be held by
each of the parties to this Lease.
8. Any dispute arising out of this Lease shall be brought before the District
Court of Reykjavik.
9. In witness whereof, the Lessor and Lessee attach their signatures below in
the presence of witnesses.
Reykjavik, 18 February 1999.
For the Lessor, For the Lessee,
ssorvarour Gunnarsson [sign.] Hannes Smarason [sign.]
Witnesses to the correct date,
the legal competence of the
parties to manage their financial affairs,
and their signatures.
Unreadable [sign.] 300863-4859
Unreadable [sign.] 200564-2279
<PAGE> 1
EXHIBIT 10.27
OFFICER'S CERTIFICATE
I, the undersigned, do hereby certify and represent that:
1. I am the duly elected Senior Vice President and Chief Business
Officer of deCODE genetics, Inc., a Delaware Corporation.
2. Pursuant to Rule 306(a) of Regulation S-T, the following exhibit
10.27 to deCODE genetics, Inc.'s Registration Statement on Form S-1 is a fair
and accurate English translation of a document prepared in the Icelandic
language.
IN WITNESS WHEREOF, I have signed this Officer's Certificate in my
capacity as Senior Vice President and Chief Business Officer of deCODE genetics,
Inc. on this 7th day of March, 2000.
By: /s/ Hannes T. Smarason
---------------------------------
Name: Hannes T. Smarason
Title: Senior Vice President and Chief
Business Officer
<PAGE> 2
[NOTE: CERTAIN PORTIONS OF THIS DOCUMENT HAVE BEEN MARKED TO INDICATE THAT
CONFIDENTIALITY HAS BEEN REQUESTED FOR THIS CONFIDENTIAL INFORMATION. THE
CONFIDENTIAL PORTIONS HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.]
RESEARCH CONTRACT ON THE CO-OPERATION OF
A RESEARCH TEAM FOR AGE-RELATED MACULAR
DEGENERATION
AND
ISLENSK ERFDAGREINING EHF
A research team for age related macular degeneration, on the one hand,
hereinafter referred to as RTARMD, and, on the other hand, Islensk erfdagreining
ehf., hereinafter referred to as IE, enter into the following
Contract
on co-operation in the research of the inheritability of age related macular
degeneration.
CHAPTER 1
THE SUBSTANCE OF THE CO-OPERATION
RTARMD and IE agree to co-operate, on the basis of this Contract, in the search
of genes involved in the genesis of age related macular degeneration,
hereinafter referred to as ARMD. The proposed co-operation between the parties
will hereinafter be referred to as the Research Project.
CHAPTER 2
CONTRIBUTIONS OF THE PARTIES TO THE RESEARCH PROJECT
2.1 Research Materials and their Procurement
RTARMD shall provide biosamples (blood samples), other clinical data and
research materials which RTARMD may possess or have access to, in relation to
patients suffering from ARMD and their relatives who do not suffer from ARMD.
RTARMD shall supervise relations with individuals intended to participate in the
research and/or their legal guardians, e.g. calling them in for blood tests,
diagnoses, examination of disease symptoms and the procurement of the informed
consent of participants.
RTARMD and individuals within the team undertake to do whatever is in their
power so that the procurement of research materials pursuant to this paragraph
shall proceed with expedience and safety. In this respect, account shall be
taken of the Research Plan, which includes milestone dates and is to attached to
this Contract as Annex A ("Research Plan and Cost Estimation for the Research of
IE and RTARMD on ARMD"). Annex A shall specify which research materials are
intended for use in the research and from which health-care institutions or
laboratories of independent health-care workers the materials derive. RTARMD and
individuals within the team declare that it is not intended to use materials
from other health-care institutions or laboratories of independent health-care
workers than specified in Annex A. All clinical research materials delivered to
the IE research laboratory shall first be encrypted at the Genetic Research
Service Centre, a private institution domiciled at Noatun 17, Reykjavik, before
being transported to IE, in accordance with the instructions of the Data
Protection Commission.
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2.2. EXPERTISE, EQUIPMENT AND RESEARCH FACILITIES
RTARMD shall provide expertise and knowledge in relation to the diagnosis of
diseases, the design and organisation of the Research Project, the conduct of
experiments and the interpretation of their results. RTARMD shall also provide
specialised equipment, housing and staff for the part of the research involving
examination of patients and other participants in the research.
IE and RTARMD shall provide expertise for the design and organisation of the
research. IE shall also be responsible for the research and testing of blood
samples and genetic material, the assessment of the inheritance of the disease
and the interpretation of the findings of the research. IE shall provide
equipment, research resources, laboratory reagents and personnel for these
purposes.
2.3. PAYMENT OF RESEARCH EXPENSES
IE shall cover all expenses of the Research Project necessary to achieve the
objectives of the Project, including materials and wage costs in relation to
calling in participants for research and necessary sampling, in accordance with
Section 2.2.
RTARMD and IE shall jointly submit a special budget plan on signature of this
Contract, in which the projected materials and wage costs of the Project are
estimated, see Annex A. Annex A shall also further delineate the itemisation of
individual cost items and the manner in which the procurement of consent and the
payment of bills shall be conducted.
2.4. INTELLECTUAL PROPERTY PROTECTION
RTARMD and individuals within the team undertake to provide IE the assistance
necessary to enable IE to ensure international intellectual property protection
of the findings of the Research Project, including application for patents
together with IE when necessary, provided that IE pays all expenses in relation
to intellectual property protection.
CHAPTER 3
RIGHTS OF THE PARTIES
3.1. FINANCIAL AND COMMERCIAL RIGHTS ATTACHED TO THE FINDINGS OF THE RESEARCH
PROJECT
IE shall be sole owner of all financial and commercial rights attached to the
Research Project and its results. IE shall have the right to sell the results
and findings of the Research Project to a third party, whether this takes place
before or after the completion of the Research Project.
3.2. FIXED PAYMENTS FROM IE FOLLOWING THE SALE OF THE RESEARCH PROJECT TO A
THIRD PARTY
In the event that IE or its parent company, deCODE genetics Inc (hereinafter
referred to as deCODE) enters into a contract with a third party (hereinafter
referred to as the Purchaser) on the sale of the Project, its results or
findings, IE shall pay RTARMD [CONFIDENTIAL TREATMENT REQUESTED] immediately
following the signature of such a contract with the Purchaser and an annual
payment of [CONFIDENTIAL TREATMENT REQUESTED] thereafter until a total of
[CONFIDENTIAL TREATMENT REQUESTED] have been paid including the initial payment.
In the event that the Research
2
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Project ends within five years from the effective date of a contract between
IE/deCODE and the Purchaser, upon achieving the objective of the Research
Project, IE shall pay the remaining amount so that a total of [CONFIDENTIAL
TREATMENT REQUESTED] shall have been paid, pursuant to this Paragraph.
3.3. PERFORMANCE-RELATED PAYMENTS FROM IE FOLLOWING THE SALE OF THE RESEARCH
PROJECT TO THE PURCHASER
If IE/deCODE manage to enter into a contract with a Purchaser on the sale of the
Research Project, its results or findings, cf. Section 3.2., IE/deCODE shall
make an agreement with the Purchaser to the effect that the Purchaser shall pay
special conditional payments to IE/deCODE which shall be totally dependent on
the scientific and/or practical results achieved in the performance of the
Project. The performance-related milestones specified which activate the
Purchaser's obligation to pay shall be further specified in the in the contract
between IE/deCODE and the Purchaser.
IE shall pay RTARMD [CONFIDENTIAL TREATMENT REQUESTED] of the
performance-related payments from the Purchaser to IE, pursuant to Paragraph 1.
All other payments from the Purchaser to IE shall be paid in full to IE/deCODE.
This refers to reimbursements from the Purchaser to IE such as the Purchaser's
financing of cash outlay of IE for the Research Project, as defined in the
contract between IE and the Purchaser, as well as the investment of the
Purchaser in IE or deCODE.
RTARMD shall be entitled to study the provisions of contracts between IE/deCODE
and the Purchaser involving performance-related payments. Also, RTARMD is
authorised by IE/deCODE to seek the confirmation of the companies' auditor,
concurrently with the quarterly statement, of whether and when a milestone
payment was received for the Research Project.
3.4. ARRANGEMENT OF PAYMENTS FROM IE FOLLOWING THE SALE OF THE RESEARCH PROJECT
TO THE PURCHASER
All payments from IE pursuant to Sections 3.2 and 3.3 shall be spent on research
on eye diseases. Funds obtained by RTARMD pursuant to Sections 3.2 and 3.3 shall
be preserved in a Research Fund which shall be established by RTARMD. The Fund
shall operate in accordance with a constitution approved by the Ministry of
Justice and audited in accordance with the current laws on private institutions
at each time. RTARMD shall submit a copy of the constitution to IE when it has
been confirmed.
3.5. PROVISO ON CO-OPERATION WITH RESEARCH PARTIES UNRELATED TO RTARMD
The right of receiving payments pursuant to Sections 3.2 and 3.3 is based on the
assumption that IE is not required to pay other parties than RTARMD and/or
institutions which employ individual parties within RTARMD for materials and
data to which it is necessary to gain access for the achievement of the
objectives of the Research Project. The same applies if it proves necessary for
IE to enter into co-operation with other parties to achieve the objectives of
the Research Project. If it proves necessary for IE to enter into co-operation
with other parties pursuant to the above, the provisions of Chapter 3 shall be
reviewed on the basis that the total payments from IE to RTARMD and/or
institutions related to them, on the one hand, and a third party, on the other
hand, shall remain unchanged from the payments described in Sections 3.2 and
3.3.
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CHAPTER 4
MANAGEMENT AND LIABILITY
Decisions relating to the performance of the Research Project shall be made
jointly by RTARMD and IE. A special Executive Committee shall be established, to
which two representatives shall be appointed from each party to this Contract to
draw up rules on the arrangement, control and performance of the Research
Project. The Chief Supervisor of the Research Project shall be elected from
among the members of the Executive Committee. It is also the responsibility of
the Committee to define the objectives of the Research Project and set forth the
professional requirements which the parties to this Contract agree to be
satisfactory for the performance of the research.
Decisions on incurring expenses in relation to the Research Project shall be
submitted in advance and confirmed by the Executive Committee. In November each
year the Executive Committee shall prepare a budget for the Research Project in
the following calendar year.
The Executive Committee shall supervise the processing of data and the
publication of conclusions in accordance with the rules of Chapter 5.
RTARMD and individuals within the Team shall not be financially responsible to
IE or other parties with interests in the achievement of the commercial or
financial objectives of the research, on the condition that RTARMD has fulfilled
its obligations in relation to the procurement of research materials pursuant to
Chapter 2 and Annex A.
CHAPTER 5
HANDLING, PROCESSING AND COMMUNICATION OF INFORMATION
The parties to this Contract undertake to maintain all personal information in
confidence. The parties to this Contract undertake to comply with the
instructions of the Data Protection Commission and, as applicable, the special
representative (inspector) of the Data Protection Commission on the handling and
processing of such data, as well as with the instructions and conditions of the
Science Ethics Committee, which operates pursuant to the Act on Patients'
Rights.
The findings of the Research Project shall be immediately published as soon as
they fulfil scientific requirements and are fit for publication. However, IE or
the Purchaser of the Project may have the publication of the findings postponed
for 90 days, if necessary to ensure rights of ownership related to the findings
of the Project.
The Executive Committee of the Project shall decide in advance who shall be
Chief Supervisor of the Research Project. As a rule, the first cited author of
scientific articles shall be Chief Supervisor. If the Chief Supervisor is a
member of RTARMD, the last cited author of scientific articles shall be from IE,
and vice versa. In other respects, the order of authors shall be in accordance
with current rules in the international scientific community.
The parties to this Contract promise mutual confidentiality as regards
information in relation to the substance of this Contract, business plans, the
progress of the Project and its conclusions. Information of this kind may not be
communicated to an outside party without the consent of both parties.
4
<PAGE> 6
CHAPTER 6
LIMITATION ON CO-OPERATION WITH OTHER PARTIES
RTARMD and individuals within the Team promise to work neither jointly nor
separately with other parties on research into the inheritability of ARMD during
the Research Project. If IE or deCODE have contracted with a third party on the
sale of the Research Project, its results or findings, and the Research Project
leads to a discovery, RTARMD and individual parties within the Team promise not
to enter into co-operation with other parties on the part of the Research
Project which led to the discovery for five years immediately following the
conclusion of the Project pursuant to this Contract. On the other hand, if the
Research Project does not lead to a discovery, individual parties within the
co-operating team have the right to enter into co-operation with other parties
on research into the inheritability of ARMD after the Research Project has
ended. Thus, the provisions of this Paragraph do not prevent co-operation
between parties within RTARMD and other parties, on the condition that IE shall
be informed of the substance of such co-operation with a third party.
IE promises not to begin collaboration with other parties in the research of the
inheritability of ARMD during the Research Project, unless the Executive
Committee considers such collaboration necessary to achieve the objective of the
Research Project. In the event that the addition of new co-operating parties to
the Research Project is considered necessary, the Executive Committee shall be
in charge of the selection of such a party. In the event of a dispute within the
Executive Committee, RTARMD shall have the final decision on the selection of
additional co-operating parties. The provisions of this Paragraph shall not,
however, prevent IE from collaborating in the field of the Research Project with
parties that have negotiated the purchase of the Research Project, its
conclusions or findings, provided that such actions do not reduce the right to
payments pursuant to Chapter 3.
CHAPTER 7
TERM OF THE CONTRACT AND PROJECT COMPLETION
The Research Project shall have a duration of five years immediately following
signature of this Contract or until it is concluded. If either party has
materially defaulted on the Contract, the other party may terminate the
Contract. In the event of a dispute on the right of the parties to terminate the
Contract, the settlement procedures regarding such dispute shall be pursuant to
Chapter 8.
The return of all original materials of RTARMD (blood samples and clinical data)
shall be returned to RTARMD, unless an agreement to the contrary is made between
RTARMD and IE, e.g. if the materials are used in another research, on the
condition that the approval of the participants and a permit from the public
authorities with the authority to permit such an arrangement have been obtained.
In the event that either or both parties see reason to continue the co-operation
after the agreed period, this shall be considered separately.
CHAPTER 8
SETTLEMENT OF DISPUTES
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In the event of a dispute between the parties to this Contract regarding
performance or compliance that cannot be resolved by the Executive Committee,
two persons, one from each party, shall endeavour to reach an agreement on its
settlement. If a settlement is not reached between those two persons within two
weeks of the submission of the dispute, each party to the Contract shall appoint
one arbitrator and then jointly request the appointment of an impartial third
arbitrator by the District Court of Reykjavik to assist in the resolution of the
dispute, thus forming a tribunal of three arbitrators. The arbitration tribunal
shall reach a decision in the matter within one months from the appointment of
the third arbitrator.
The cost of the work of the tribunal shall be determined by the tribunal at each
time. The work, procedure and rulings of the arbitration tribunal shall
otherwise be governed, as appropriate at any time, by Act No. 53/1989 on
Contractual Arbitration.
Notwithstanding the above provisions on arbitration, cases involving the
collection of payments under this Contract which are not in dispute between the
parties may be submitted to the public courts. The same applies to cases of
financial claims made by one party against the other, based on rulings of the
arbitration tribunal regarding non-performance or breach by the latter of this
Contract. Such cases shall be submitted to the District Court of Reykjavik.
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<PAGE> 8
This Contract, which comprises 8 chapters on 7 pages, in addition to Appendix A,
is made in two identical copies, one copy to be held by each of the parties to
the Contract.
Reykjavik, 27 April 1999.
On behalf of the Research On behalf of Islensk Erfdagreining ehf.
Team forARMD
Einar Stefansson [sign.] Kari Stefansson [sign.]
Opthalmologist President
Fridbert Jonsson [sign.] Kristjan Erlendsson [sign.]
Ophthalmologist VP for Clinical and Academic
Collaborations
Gudmundur Viggoson [sign.]
Ophthalmologist
Haraldur Sigurdsson [sign.]
Ophthalmologist
Gudleif Helgadottir [sign.]
Registered Nurse
Ingimundur Gislason [sign.]
Ophthalmologist
Pordur Sverrison [sign.]
Ophthalmologist
7
<PAGE> 1
EXHIBIT 10.28
OFFICER'S CERTIFICATE
I, the undersigned, do hereby certify and represent that:
1. I am the duly elected Senior Vice President and Chief Business
Officer of deCODE genetics, Inc., a Delaware Corporation.
2. Pursuant to Rule 306(a) of Regulation S-T, the following exhibit
10.28 to deCODE genetics, Inc.'s Registration Statement on Form S-1 is a fair
and accurate English translation of a document prepared in the Icelandic
language.
IN WITNESS WHEREOF, I have signed this Officer's Certificate in my
capacity as Senior Vice President and Chief Business Officer of deCODE genetics,
Inc. on this 7th day of March, 2000.
By: /s/ Hannes T. Smarason
--------------------------
Name: Hannes T. Smarason
Title: Senior Vice President and
Chief Business Officer
<PAGE> 2
[NOTE: CERTAIN PORTIONS OF THIS DOCUMENT HAVE BEEN MARKED TO INDICATE THAT
CONFIDENTIALITY HAS BEEN REQUESTED FOR THIS CONFIDENTIAL INFORMATION. THE
CONFIDENTIAL PORTIONS HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.]
RESEARCH CONTRACT ON THE CO-OPERATION OF
A RESEARCH TEAM FOR PERIPHERAL ARTERY OCCLUSIVE DISEASE
AND
ISLENSK ERFDAGREINING EHF
A Research Team for Peripheral Artery Occlusive Disease, on the one hand,
hereinafter referred to as the Research Team, and, on the other hand, Islensk
erfdagreining ehf., hereinafter referred to as IE, enter into the following
A g r e e m e n t
on co-operation in the research of the inheritability of Peripheral Artery
Occlusive Disease. This Contract is made on the basis of the Co-Operation
Agreement between the Reykjavik Municipal Hospital and IE of 4 November 1998 and
the Co-Operation Agreement between State Hospitals and IE of 15 December 1998,
both of which shall prevail over this Contract in the event of discrepancy
between individual provisions of the agreements.
CHAPTER 1
THE SUBSTANCE OF THE CO-OPERATION
The Research Team and IE agree to co-operate, on the basis of this Contract, in
the search and isolation of genes involved in the genesis of Peripheral Artery
Occlusive Disease. The proposed co-operation between the parties will
hereinafter be referred to as the Research Project.
In addition, the Research Team and IE enter into a separate agreement on a
additional research into the disease aortic aneurysm. A separate protocol,
attached to this Contract in Annex D, applies to this By-Research and its
relation to the Research Project.
CHAPTER 2
CONTRIBUTIONS OF THE PARTIES TO THE RESEARCH PROJECT
2.1 RESEARCH MATERIALS AND THEIR PROCUREMENT
The Research Team shall provide biological samples (blood samples), other
clinical data and research materials which the Research Team may possess or have
access to, in relation to patients suffering from aortic aneurysm and their
relatives.
The Research Team shall supervise relations with individuals intended to
participate in the research and/or their legal guardians, e.g. calling them in
for blood tests, diagnoses, examination of participants and the procurement of
the informed consent of participants. IE, on the one hand, and the Research Team
and individuals within the Team, on the other hand, undertake to do whatever is
in their power so that the procurement of research materials pursuant to this
paragraph shall proceed with expedience and safety. In this respect, account
shall be taken of the Research Plan, which includes milestone dates and is to
attached to this Contract, as Annex A ("Research Plan and Cost Estimation for
the Research of IE and a Research Team on Peripheral Artery Occlusive
Disease"). Annex A shall specify which research
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<PAGE> 3
materials are intended for use in the research and from which health-care
institutions the materials derive. All research materials delivered to the IE
research laboratory shall first be encrypted at the Genetic Research Service
Centre, a private institution domiciled at Noatun 17, Reykjavik, before being
transported to IE, in accordance with the instructions of the Data Protection
Commission.
2.2. EXPERTISE, EQUIPMENT AND RESEARCH FACILITIES
The Research Team shall provide expertise and knowledge in relation to the
diagnosis of diseases as well as the design and organisation of the Research
Project. IE and the Research Team shall provide expertise for the design and
organisation of the research. IE shall also be responsible for the research and
testing of blood samples and genetic material, the assessment of the inheritance
of the disease and the interpretation of the findings of the research. IE shall
provide equipment, research resources, laboratory reagents and personnel for
these purposes.
2.3. PAYMENT OF RESEARCH EXPENSES
IE shall cover all expenses of the Research Project necessary to achieve the
objectives of the Project, including materials and wage costs in relation to
calling in participants for research and necessary sampling. The Research Team
and IE shall jointly submit a total budget plan on signature of this Contract,
in which the projected materials and wage costs of the Project are estimated,
see Annex A. Annex A shall also further delineate the itemisation of individual
cost items and the manner in which the procurement of consent and the payment of
bills shall be conducted.
The State Hospitals and the Reykjavik Municipal Hospital may request information
on wage payments covered by IE to employees of these institutions working on the
Research project.
CHAPTER 3
RIGHTS OF THE PARTIES
3.1. RIGHTS OF HEALTH-CARE INSTITUTIONS
The parties to this Contract are aware that identical Co-Operation Agreements
(hereinafter the Institutional Agreement(s)) are in force between, on the one
hand, IE and, on the other hand, the State Hospitals and the Reykjavik Municipal
Hospital. The Institutional Agreements are annexed as supporting documents to
this Research Contract, see Annexes B (State Hospitals) and C (Reykjavik
Municipal Hospital). The provisions of the Institutional Agreements shall apply
to this Research Contract, as applicable, in relation to the part of the
research concerning the State Hospitals/the Reykjavik Municipal Hospital and
their staff.
The State Hospitals and the Reykjavik Municipal Hospital, on the one hand, and
the Research Team, on the other hand, have entered into a separate agreement,
dated 28 May 1999, on their own behalf and on behalf of AEdaskurdlaekningafelag
Islands (an Icelandic association for vascular surgery), annexed to this
Contract, see Annex E. The agreement provides for, i.a., the division, custody
and auditing of funds disbursed by IE to the Research Team and the State
Hospitals/the Reykjavik Municipal Hospital, pursuant to Chapters 3.3 and 3.4.,
cf. Chapter 3.6, of this Research Contract.
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<PAGE> 4
IE and its parent company, deCODE genetics Inc. (hereinafter referred to as
deCODE) have entered into an agreement with the Swiss pharmaceutical company
Hoffman La-Roche (hereinafter referred to as the Purchaser) on the sale of the
Research Project, its findings and returns.
3.3. FIXED PAYMENTS FROM IE TO THE RESEARCH TEAM IN RELATION TO THE SALE OF THE
RESEARCH PROJECT IE shall pay the Research Team [CONFIDENTIAL TREATMENT
REQUESTED] on the effective date of this Contract. Subsequently, IE shall pay
[CONFIDENTIAL TREATMENT REQUESTED] per year, until a total of [CONFIDENTIAL
TREATMENT REQUESTED] have been paid, including the initial payment.
Payments from IE to the Research Team pursuant to this Chapter shall be paid on
the following payment dates:
[CONFIDENTIAL TREATMENT REQUESTED]
In the event that the Research Project ends within five years from the effective
date of this Contract, upon achieving the objective of the Research Project, IE
shall immediately pay the remaining amount so that a total of [CONFIDENTIAL
TREATMENT REQUESTED] shall have been paid, pursuant to this Chapter. Payments
pursuant to this Section are additional to and independent of conditional,
performance-related payments pursuant to Section 3.4.
3.4. PERFORMANCE-RELATED PAYMENTS FROM IE IN RELATION TO THE SALE OF THE
RESEARCH PROJECT
IE/deCODE have made an agreement with the Purchaser of the Project that the
Purchaser shall pay special conditional payments to IE/deCODE which shall be
totally dependent on the scientific and practical results achieved in the
performance of the Research Project. The performance-related milestones which
activate the Purchaser's obligation to pay have been further specified in the
agreement between IE/deCODE and the Purchaser. If the above-mentioned milestones
are not achieved, no payments shall be made pursuant to this Section.
IE shall pay the Research Team [CONFIDENTIAL TREATMENT REQUESTED] of the
performance-related payments from the Purchaser to IE/deCODE, pursuant to
Paragraph 1, if success is achieved. Other payments from the Purchaser to
IE/deCODE in relation to the reimbursement of IE's cash outlay for the Research
Project, as specified in the agreement between IE and the Purchaser, as well as
investment in IE or deCODE, shall be paid in full to IE/deCODE.
IE shall report to the Research Team as soon as the Purchaser has confirmed that
a milestone has been achieved which activates his obligation to pay. IE promises
to pay the Research Team its share in the performance-related payment as soon as
such payment has been received by IE/deCODE. The Research Team is authorised by
IE/deCODE to seek the confirmation of the companies' auditor, concurrently with
the quarterly statement, of whether and when a milestone payment was received
for the Research Project.
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<PAGE> 5
3.5. PROVISO ON CO-OPERATION WITH RESEARCH PARTIES UNRELATED TO THE RESEARCH
TEAM
The payments pursuant to Section 3.4. are based on the assumption that
co-operation with research parties outside the Research Team and institutions
related to the Research Team will not prove necessary for the achievement of the
Research Project's objectives. If the Executive Committee of the Project finds
it necessary to begin co-operation with other parties, as defined in the
foregoing, the provisions of Sections 3.4. and 3.6. shall be reviewed on the
basis that the total payments from IE to the Research Team and institutions
related to the Research Team, on the one hand, and, on the other hand, the third
party, as specified in Section 3.4., shall remain unchanged, i.e. the third
party may acquire a claim to a part of the payments pursuant to Section 3.4.,
which would otherwise have been paid in full to the Research Team.
3.6. ARRANGEMENT OF PAYMENTS AND THE DISPOSAL OF PAYMENTS FROM IE PURSUANT TO
SECTION 3.3. AND 3.4., CF. ALSO SECTION 7.3. IN THE INSTITUTIONAL AGREEMENT
All payments from IE to the Research Team pursuant to Sections 3.3. and 3.4. of
this Contract shall be divided and paid as follows, cf. the provisions of
Section 7.3. of the Institutional Agreement as well as other provisions of the
Institutional Agreement. The following division of payments is based on an
understanding between the parties to this Contract and their evaluation of the
importance of each person's contribution to the Research Project. The following
division is also based on the agreement cited in Paragraph 2 of Section 2.1.,
see Appendix E. In accordance with the foregoing, all payments from IE pursuant
to Sections 3.3. and 3.4. shall be divided in the following proportions:
[CONFIDENTIAL TREATMENT REQUESTED]
All funds whose appropriation is in the hands of the Research Team shall be used
for scientific activity in the field of Peripheral Artery Occlusive Disease
conducted by the Scientific Fund of AEdaskurdlaekningafelag Islands. Further
arrangements for the handling of the above-mentioned monies of the Scientific
Fund, as well as the arrangement of the Fund's auditing, shall conform to the
agreement provided for in Appendix E, and is not a concern of IE
CHAPTER 4
MANAGEMENT AND LIABILITY
Decisions relating to the performance of the Research Project shall be made
jointly by the Research Team and IE. A special Executive Committee shall be
established, to which two representatives shall be appointed from each party to
this Contract to draw up rules on the arrangement, control and performance of
the Research Project. The Chief Supervisor of the Research Project shall be
elected from among the members of the Executive Committee.
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<PAGE> 6
Another responsibility of the Committee is to define the objectives of the
Research Project and set forth the professional requirements which the parties
to this Contract agree to be satisfactory for the performance of the Project.
Decisions on incurring expenses in relation to the Research Project shall be
submitted in advance and confirmed by the Executive Committee. As applicable,
the Executive Committee may enter into agreements with health-care institutions
on the use of their manpower and facilities for the performance of certain work
procedures pertaining to the clinical aspect of the Research Project. In
November each year the Executive Committee shall prepare a budget for the
clinical aspect of the Research Project in the following year.
The Executive Committee shall supervise the processing of data and the
publication of conclusions in accordance with the rules of Chapter 5.
The Research Team and individuals within the Team shall not be financially
responsible to IE or parties with which IE has entered into agreements, for the
achievement of the commercial or financial objectives of the research.
In the event that a third party causes the research to be cancelled, or the
Contract is terminated for reasons for which the Research Team is not
responsible, the Research Team and parties within the Research Team shall not be
held financially responsible to IE for such a project ending. The same applies
if the research must be altered as a result of amendments to legislation or
regulations or decisions of public authorities.
IE shall cover the expense of procuring liability insurance for individuals
within the Research Team employed by the State Hospitals or the Reykjavik
Municipal Hospital when this Contract takes effect, as well as for staff working
for them. This shall apply to all work of these parties in the interest of the
Research Project.
CHAPTER 5
HANDLING, PROCESSING AND COMMUNICATION OF INFORMATION
The parties to this Contract undertake to maintain all personal information in
confidence. The parties to this Contract undertake to comply with the
instructions of the Data Protection Commission and, as applicable, the special
representative (inspector) of the Data Protection Commission on the handling and
processing of such data, as well as with the instructions and conditions of the
Science Ethics Committee, which operates pursuant to the Act on Patients'
Rights.
The findings of the Research Project shall be immediately published as soon as
they fulfil scientific requirements and are fit for publication. However, IE or
the Purchaser of the Project may have the publication of the findings postponed
for 90 days, if necessary for the procurement of patents and other rights of
ownership related to the findings of the Project. The Executive Committee of the
Project shall decide in advance who shall be Chief Supervisor of the Research
Project. Otherwise, the first cited author of scientific articles shall be Chief
Supervisor. The order of authors shall be in accordance with current rules in
the international scientific community.
The parties to this Contract promise mutual confidentiality as regards
information in relation to the substance of this Contract, business plans, the
progress of the Project
5
<PAGE> 7
and its conclusions. Information of this kind may not be communicated to an
outside party without the consent of both parties.
CHAPTER 6
LIMITATION ON CO-OPERATION WITH OTHER PARTIES
The Research Team promise to work neither jointly nor separately with other
parties on research into the inheritability of Peripheral Artery Occlusive
Disease during the Research Project. In the event that the Research Project
leads to a discovery of financial significance for IE, the Research Team and
individual parties within the Team promise not to co-operate with other parties
on the part of the Research Project which led to the discovery for five years
immediately following the conclusion of the Project pursuant to this Contract.
On the other hand, if the Research Project does not lead to a discovery,
individual parties within the co-operating team have the right to enter into
co-operation with other parties on the research into the inheritability of
Peripheral Artery Occlusive Disease after the Research Project has ended.
IE promises not to begin collaboration with other parties in the research of the
inheritability of Peripheral Artery Occlusive Disease during the Research
Project, unless the Executive Committee considers such collaboration necessary
to achieve the objective of the Research Project. In the event that the addition
of new co-operative parties to the Research Project is considered necessary, the
Executive Committee shall be in charge of the selection of such a party. In the
event of a dispute within the Executive Committee, the Research Team shall
decide on what basis to select additional co-operative parties. The provisions
of this Paragraph shall, however, not prevent IE from collaborating in the field
of the Research Project with parties that have negotiated the purchase of the
Research Project, its conclusions or returns, on the condition that such actions
do not reduce the right to payments pursuant to Chapter 3.
CHAPTER 7
DURATION OF CONTRACT AND PROJECT COMPLETION
The effective date of this Contract shall be the date (hereinafter the date of
this Contract) on which this Contract has both been signed by the parties to
this Contract and confirmed by the State Hospitals and the Reykjavik Municipal
Hospital, in accordance with Paragraph 2 of Chapter 2 of the Institutional
Agreement.
The Research Project shall have a duration of five years immediately following
this Contract's effective date, unless the Project is concluded earlier in the
view of the Executive Committee. If either party has materially defaulted on the
Contract, the other party may terminate the Contract. In the event of a dispute
on the right of the parties to terminate the Contract, the settlement procedures
regarding such dispute shall be pursuant to Chapter 8.
The return of original data of the State Hospitals/the Reykjavik Municipal
Hospital shall be pursuant to Paragraph 5 of Chapter 6 of the Institutional
Agreements.
In the event that either or both parties are interested in continuing the
co-operation after the Research Project has ended, an agreement shall be made to
this effect.
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<PAGE> 8
Despite a conclusion of the research pursuant to this Contract, whether owing to
the completion of the Project or termination or breach of the Contract, the
obligation of IE/deCODE to cover payments pursuant to Section 3.4. shall remain
in force until IE/deCODE's right of payments from the Purchaser is cancelled at
any time, e.g. when a patent expires.
CHAPTER 8
SETTLEMENT OF DISPUTES
In the event of a dispute between the parties to this Contract regarding
performance or compliance that cannot be resolved by the Executive Committee,
two persons, one from each party, shall endeavour to reach an agreement on its
settlement. If a settlement is not reached between those two persons within two
weeks of the submission of the dispute, each party to the Contract shall appoint
one arbitrator and then jointly request the appointment of an impartial third
arbitrator by the District Court of Reykjavik to assist in the resolution of the
dispute, thus forming a tribunal of three arbitrators. The arbitration tribunal
shall reach a decision in the matter within 3 months from the appointment of the
third arbitrator.
The cost of the work of the tribunal shall be determined by the tribunal at each
time. The work, procedure and rulings of the arbitration tribunal shall
otherwise be governed, as appropriate at any time, by Act No. 53/1989 on
Contractual Arbitration.
Notwithstanding the above provisions on arbitration, cases involving the
collection of payments under this Contract which are not in dispute between the
parties may be submitted to the public courts. The same applies to cases of
financial claims made by one party against the other, based on rulings of the
arbitration tribunal regarding non-performance or breach by the latter of this
Contract. Such cases shall be submitted to the District Court of Reykjavik.
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<PAGE> 9
This Contract, which comprises 8 chapters on 8 pages, in addition to appendices
A, B, C, D and E, is made in two identical copies, one copy to be held by the
parties to the Contract.
Reykjavik, 28 May 1999.
On behalf of the Research Team On behalf of Islensk Erfdagreining ehf.
for Peripheral Artery Occlusive
Disease
Stefan E. Matthiasson [sign.] Kari Stefansson [sign.]
Reykjavik Municipal Hospital President
Halldor Johannsson [sign.] Kristjan Erlendsson [sign.]
The State Hospitals Executive Director of IE Co-operative
Projects
Confirmed on behalf of
the Reykjavik Municipal
Hospital
Reykjavik
___________________________
Magnus Petursson [sign.] Certified that the above
is a faithful English
translation of a signed
Confirmed on behalf of Icelandic document.
the State Hospitals ___________________________
Reykjavik
Magnus Petursson [sign.]
8
<PAGE> 1
EXHIBIT 10.29
OFFICER'S CERTIFICATE
I, the undersigned, do hereby certify and represent that:
1. I am the duly elected Senior Vice President and Chief Business
Officer of deCODE genetics, Inc., a Delaware Corporation.
2. Pursuant to Rule 306(a) of Regulation S-T, the following exhibit
10.29 to deCODE genetics, Inc.'s Registration Statement on Form S-1 is a fair
and accurate English translation of a document prepared in the Icelandic
language.
IN WITNESS WHEREOF, I have signed this Officer's Certificate in my
capacity as Senior Vice President and Chief Business Officer of deCODE genetics,
Inc. on this 7th day of March, 2000.
By: /s/ Hannes T. Smarason
---------------------------
Name: Hannes T. Smarason
Title: Senior Vice President and
Chief Business Officer
<PAGE> 2
[NOTE: CERTAIN PORTIONS OF THIS DOCUMENT HAVE BEEN MARKED TO INDICATE THAT
CONFIDENTIALITY HAS BEEN REQUESTED FOR THIS CONFIDENTIAL INFORMATION. THE
CONFIDENTIAL PORTIONS HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.]
RESEARCH CONTRACT ON THE CO-OPERATION OF
A RESEARCH TEAM FOR ALLERGY AND ASTHMA
AND
ISLENSK ERFDAGREINING EHF
A research team for allergy and asthma, on the one hand, hereinafter referred to
as RTAA, and, on the other hand, Islensk erfdagreining ehf., hereinafter
referred to as IE, enter into the following
Contract
on co-operation on the research of the inheritability of allergy and asthma.
This Contract is made on the basis of the Co-operation Agreement between the
State Hospitals and Islensk erfdagreining [e]hf. from 15 December 1998, which
shall prevail over this Contract in case of any discrepancy between their
individual provisions.
CHAPTER 1
THE SUBSTANCE OF THE CO-OPERATION
RTAA and IE agree to co-operate, on the basis of this Contract, in the search
for genes involved in the genesis of allergy and asthma. The proposed
co-operation between the parties will hereinafter be referred to as the Research
Project.
The part of the co-operation involving RTAA shall be supervised by the senior
physicians David Gislason and Porarinn Gislason and specialist Unnur Steina
Bjornsdottir.
CHAPTER 2
CONTRIBUTIONS OF THE PARTIES TO THE RESEARCH PROJECT
2.1 RESEARCH MATERIALS AND THEIR PROCUREMENT
RTAA shall provide biosamples (including blood samples and tissue samples),
other clinical data and research materials which RTAA may provide, by the permit
of the Data Protection Commission for the research, in relation to patients
suffering from allergy and/or asthma and their relatives who do not suffer from
allergy and/or asthma, cf. Article 5 of this Contract for further details.
The research population shall comprise patients who have been diagnosed as
allergic or asthmatic at the clinics of the physicians David Gislason and Unnur
Steina Bjornsdottir, in addition to patients suffering from the same diseases
who have been treated at the out-patient ward of the National Hospitals' Lung
Clinic.
RTAA shall supervise relations with individuals invited to participate in the
research and/or their legal guardians. This includes procuring the informed
consent of participants, information on health, blood tests or other sampling
and examination of disease symptoms (e.g. further diagnosis). RTAA, on the one
hand, and individuals within the Team, on the other hand, undertake to do
whatever is in their power so that the procurement of research materials
pursuant to this sub-chapter shall proceed with
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<PAGE> 3
expedience and safety. In this respect, account shall be taken of the Research
Plan, which includes milestone dates and will be attached to this Contract as
Annex A (`Research Plan and Cost Estimation for the Research of IE and RTAA on
Allergy and Asthma'). All research materials delivered to the IE research
laboratory shall first be encrypted at the Genetic Research Service Centre, a
private institution domiciled at Noatun 17, Reykjavik, before being transported
to IE, in accordance with the instructions of the Data Protection Commission.
2.2. EXPERTISE, EQUIPMENT AND RESEARCH FACILITIES
RTAA shall provide expertise and knowledge in relation to the diagnosis of
diseases, the design and organisation of the Research Project, the conduct of
experiments and the interpretation of their results.
IE and RTAA shall provide expertise for the design and organisation of the
research. IE shall also be responsible for the research and testing of blood
samples and genetic material, the assessment of the inheritance of the disease
and the interpretation of the findings of the research. IE shall provide
equipment, research resources, laboratory reagents and personnel for these
purposes.
2.3. PAYMENT OF RESEARCH EXPENSES
IE shall cover all expenses of the Research Project necessary to achieve the
objectives of the Project, including materials and wage costs in relation to
calling in participants for research and necessary sampling. RTAA and IE shall
jointly submit a special budget on signature of this Contract, in which the
projected materials and wage costs of the Project are estimated, see Annex A.
Annex A shall also further delineate the itemisation of individual cost items
and the manner in which the procurement of consent and the payment of bills
shall be conducted. In the event of direct cash outlay on the part of the State
Hospitals in relation to the conduct of this Research Project, IE and the State
Hospitals shall make a special agreement on the payment of such cost, cf. the
Co-operation Agreement between the Hospitals and Islensk erfdagreining ehf.
The State Hospitals may request information from IE on wages paid by IE to
individual employees of the State Hospitals working on the Research Project.
2.4. INTELLECTUAL PROPERTY PROTECTION
RTAA and individuals within the team undertake to provide IE with the assistance
necessary to enable IE to ensure international intellectual property protection
of the findings of the Research Project, including application for patents
together with IE when necessary, provided that IE pays all expenses in relation
to intellectual property protection.
CHAPTER 3
RIGHTS OF THE PARTIES
3.1. THE RIGHTS OF HEALTH-CARE INSTITUTIONS AND THE EFFECTIVE DATE OF THIS
CONTRACT
The parties to this Contract are aware that a co-operation agreement
(hereinafter referred to as the Institutions Agreement) between IE and the State
Hospitals (hereinafter referred to as SH) is currently in effect. This agreement
is attached to this Contract as Annex B. The provisions of the Institutions
Agreement shall be valid for
2
<PAGE> 4
this Research Agreement, where applicable. All other payments from IE to RTAA
pursuant to chapters 3.3. and 3.4. of this Contract shall be in accordance with
the provisions of Chapter 7.3 of the Institutions Agreement.
3.2. FINANCIAL AND COMMERCIAL RIGHTS ATTACHED TO THE FINDINGS OF THE RESEARCH
PROJECT
IE shall be sole owner of all financial and commercial rights attached to the
Research Project and its results. IE shall have the right to sell the results
and findings of the Research Project to a third party and utilise the Research
Project financially in any other way consistent with approved ethical standards,
irrespective of whether this takes place before or after the completion of the
Research Project. deCODE shall never be considered the purchaser of the Project
in the understanding of this contract.
3.3. FIXED PAYMENTS FROM IE AFTER THE SALE OF THE RESEARCH PROJECT TO A THIRD
PARTY On the effective date of this Contract, IE shall pay RTAA/SH
[CONFIDENTIAL TREATMENT REQUESTED].
In the event that IE or its parent company, deCODE genetics Inc. (hereinafter
referred to as deCODE), makes a contract with a third party (hereinafter
referred to as the Purchaser) on the sale of the Project, its results or
findings, IE shall pay RTAA/SH [CONFIDENTIAL TREATMENT REQUESTED] immediately
following the signature of such a contract, i.e. on the sale date of the Project
(hereinafter referred to as the date of the sale) and an annual payment of
[CONFIDENTIAL TREATMENT REQUESTED] thereafter until a total of [CONFIDENTIAL
TREATMENT REQUESTED] have been paid including the initial payment.
Thus, payments from IE under this chapter shall take place on the following
payment dates: [CONFIDENTIAL TREATMENT REQUESTED]
In the event that the Research Project ends within five years after IE/deCODE
enters into a contract with a purchaser, upon achieving the objective of the
Research Project, IE shall pay the remaining amount so that a total of
[CONFIDENTIAL TREATMENT REQUESTED] shall have been paid, pursuant to Paragraph 2
of this sub-chapter. Payments pursuant to this chapter are additional and
independent to conditional payments under Chapter 3.4.
In the event that IE/deCODE enters into more than one contract of sale on the
results of the Research Project, IE and RTAA shall negotiate specially on
possible fixed payments from IE to RTAA/SH in response to such an additional
contract or contracts, in addition to payments paid to RTAA pursuant to
Paragraphs 2-3 of this sub-chapter after IE enters into the first contract of
sale with a third party. Such payments shall be based on the net proceeds of
IE/deCODE from the latter sale of research results, the contribution of RTAA and
whether the sale is a total sale of rights attached to the Research Project or
only a partial sale of such rights. Payments under
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<PAGE> 5
this paragraph shall, however, never exceed the total amount of the payments
specified in Paragraph 2 of this sub-chapter.
3.4. PERFORMANCE-RELATED PAYMENTS FROM IE AFTER THE SALE OF THE RESEARCH PROJECT
TO A PURCHASER If IE/deCODE manage to make a contract on the sale of the
Project, cf. Chapter 3.3, IE/deCODE shall negotiate an agreement to the effect
that the Purchaser shall pay special conditional payments to IE/deCODE which
shall be totally dependent on the scientific and/or practical results achieved
in the performance of the Project. The definitions of performance-related
milestones which activate the Purchaser's obligation to pay will be further
specified in the contract between IE/deCODE and the Purchaser. In the event that
the above milestones are not achieved, no payments pursuant to this paragraph
shall be made.
IE shall pay RTAA [CONFIDENTIAL TREATMENT REQUESTED] of the performance-related
payments from the Purchaser to IE pursuant to Paragraph 1 of this sub-chapter.
All other payments from the Purchaser to IE in relation to the repayment of the
cash outlay of IE for the Research Project, as defined in the contract between
IE and the Purchaser, and the Purchaser's investment in IE or deCODE shall be
paid in full to IE/deCODE.
IE shall report to RTAA as soon as the Purchaser has confirmed that a milestone
which activates the Purchaser's obligation to pay has been achieved. The share
of RTAA in the milestone-related payment shall be paid when the milestone
payment from the Purchaser has been delivered to IE/deCODE. RTAA is authorised
by IE/deCODE to seek the confirmation of the companies' auditor, concurrently
with the quarterly statement, of whether and when a milestone payment has been
achieved in relation to the Research Project.
Performance-related payments from IE to RTAA under this sub-chapter shall be
calculated from the performance-related payments from the third party to
IE/deCODE as regards contracts of sale which IE/deCODE may enter into on the
results of the Research Project.
3.5. ARRANGEMENT OF PAYMENTS AND DISPOSAL OF PAYMENTS FROM IE PURSUANT TO
CHAPTERS 3.3 AND 3.4., CF. ALSO CHAPTER 7.3 OF THE INSTITUTIONS AGREEMENT
All payments from IE to RTAA/SH pursuant to Chapters 3.3. and 3.4. shall be paid
into a special fund in the custody of SH, cf. Paragraph 2 of Chapter 7.3. of the
Institutions Agreement, cf. also the provisions of that Agreement in other
respects.
All funds raised by RTCOPD pursuant to the provisions of Chapters 3.3. and 3.4.
of this Contract the application of which will be governed by RTCOPD under the
Institutions Agreement and further agreement between RTCOPD and SH, shall be
allocated by RTCOPD to the research of allergy and asthma. Such moneys may not
be used for any other purposes. All moneys which will be in the custody of
RTCOPD pursuant to the above shall be put into the Research Fund of the Faculty
for Pulmonary Research of the State Hospitals, which operates according to an
organisational charter which has been confirmed by the Ministry of Justice, in
accordance with the Foundations Act, currently Act No. 19/1988. The
organisational charter is attached to this Research Contract as Annex C. The
accounting of the above fund shall be the responsibility of SH. The financial
management of the fund can,
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<PAGE> 6
upon further agreement, be in the hands of its board of directors, according to
the provisions of its articles of association.
3.6. PROVISO ON CO-OPERATION WITH RESEARCH PARTIES UNRELATED TO RTCOPD
The right of receiving payments pursuant to Sub-Chapters 3.3 and 3.4 is based on
the assumption that IE will not pay other parties than RTCOPD and institutions
which employ individual parties within RTCOPD for contribution to the Research
Project and expertise to which it is necessary to gain access for the
achievement of the objectives of the Research Project in the view of the
Executive Committee. If the Executive Committee is of the opinion that it is
necessary to enter into co-operation with more parties pursuant to the above,
the provisions of Sub-Chapters 3.3. and 3.4. shall be reviewed on the basis that
the total payments from IE to RTCOPD and/or institutions related to them, on the
one hand, and a third party, on the other hand, shall remain unchanged from the
payments specified in Chapters 3.3 and 3.4.
CHAPTER 4
MANAGEMENT AND LIABILITY
Decisions relating to the performance of the Research Project shall be made
jointly by RTAA and IE. A special Executive Committee shall be established,
which shall be composed of three members from each party to this Contract. This
Committee shall supervise the performance of the Research Project. The Chief
Supervisor of the Research Project shall be elected from among the members of
the Executive Committee. It is also the responsibility of the Committee to
define the objectives of the Research Project and set forth the professional
requirements which the parties to this Contract agree to be satisfactory for the
performance of the Research Project. The Executive Committee shall also seek a
settlement of disputes which may arise between the parties to the Contract.
Decisions on incurring expenses in relation to the Research Project shall be
submitted in advance and confirmed by the Executive Committee. When applicable,
the Executive Committee may enter into agreements with health-care institutions
on the use of the their manpower and facilities for performing individual tasks
in relation to the clinical part of the research. In November each year the
Executive Committee shall prepare a budget for the Research Project in the
following calendar year.
The Executive Committee shall supervise the processing of data and the
publication of conclusions in accordance with the rules of Chapter 5.
RTAA and individuals within the Team shall not be financially responsible to IE
or other parties with interests in the achievement of the commercial or
financial objectives of the research.
IE shall pay expenses in relation to the procurement of liability insurance for
individuals within RTAA as well as staff employed by them. This applies to all
work undertaken by these parties in the interest of the Research Project.
CHAPTER 5
HANDLING, PROCESSING AND COMMUNICATION OF INFORMATION
The parties to this Contract undertake to maintain all personal information in
confidence. The parties to this Contract undertake to comply with the
instructions of
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<PAGE> 7
the Data Protection Commission and, as applicable, the special representative
(inspector) of the Data Protection Commission on the handling and processing of
such data, as well as with the instructions and conditions of the Science Ethics
Committee, which operates pursuant to the Act on Patients' Rights. This entails
that only information which the Data Protection Commission has authorised access
to may be used.
The results of the Research Project shall be immediately published as soon as
they fulfil scientific requirements and are fit for publication. However, IE or
the Purchaser of the Project may have the publication of the results postponed
for 90 days, if necessary to ensure rights of ownership related to the findings
of the Project.
The Executive Committee of the Project shall decide in advance who shall be
Chief Supervisor of the Research Project. As a rule, the first cited author of
scientific articles shall be Chief Supervisor. The order of authors shall be in
accordance with current rules in the international scientific community.
The parties to this Contract promise mutual confidentiality as regards
information in relation to the substance of this Contract, business plans, the
progress of the Project and its conclusions. Information of this kind may not be
communicated to an outside party without the consent of both parties.
CHAPTER 6
LIMITATION ON CO-OPERATION WITH OTHER PARTIES
RTAA and individuals within the Team promise to work neither jointly nor
separately with other parties on research into the inheritability of allergy and
asthma during the Research Project. If IE or deCODE have contracted with a third
party on the sale of the Research Project, its results or findings, and the
Research Project leads to a discovery which has financial significance for IE,
RTAA and individual parties within the Team promise not to enter into
co-operation with other parties on the part of the Research Project which led to
the discovery for five years immediately following the conclusion of the Project
as defined in this Contract. On the other hand, if the Research Project does not
lead to a discovery, individual parties within the co-operating team have the
right to enter into co-operation with other parties on research into the
inheritability of allergy and asthma after the Research Project has ended.
Notwithstanding the provisions of Paragraph 1, individuals within RTAA shall be
permitted to complete research projects in which they are involved with a third
party which began before the making of this Contract.
IE promises not to begin collaboration with other parties in the research of the
inheritability of allergy and asthma during the Research Project, unless the
Executive Committee considers such collaboration necessary to achieve the
objective of the Research Project. If the addition of new co-operating parties
to the Research Project is considered necessary, the Executive Committee shall
be in charge of the selection of such a party. In the event of a dispute within
the Executive Committee, RTAA shall have the final decision on the selection of
additional co-operating parties. The provisions of this Paragraph shall not,
however, prevent IE from collaborating in the field of the Research Project with
parties that have negotiated the purchase of the
6
<PAGE> 8
Research Project, its conclusions or findings, provided that such actions do not
reduce the right to payments pursuant to Chapter 3.
CHAPTER 7
TERM OF THE CONTRACT AND PROJECT COMPLETION
The effective date of this Contract shall be the date on which this Contract has
been both signed by the parties to the Contract and confirmed in signature by SH
in accordance with Paragraph 2 of Chapter 2 of the Institutions Agreement.
The Research Project shall have a duration of five years immediately following
the effective date of this Contract, unless completed before such time in the
view of the Executive Committee. If either party has materially defaulted on the
Contract, the other party may terminate the Contract. In the event of a dispute
on the right of the parties to terminate the Contract, the settlement procedures
regarding such dispute shall be pursuant to Chapter 8.
On completion of the Project, the return of all original materials of RTAA shall
be returned to RTAA, unless an agreement to the contrary is made between RTAA
and IE, e.g. if the materials are used in another research, on the condition
that the approval of the participants and a permit from the public authorities
with the authority to permit such an arrangement have been obtained. The return
of research materials from SH on completion of the Research Project shall be
conducted in accordance with Paragraph 5 of Chapter 6 of the Institutions
Agreement.
In the event that either or both parties see reason to continue the co-operation
after the agreed period, this shall be considered separately.
Notwithstanding a cessation of the research pursuant to this Contract, whether
as a result of the completion, cancellation or termination of the Project, the
obligation of IE/deCODE to effect payments pursuant to Chapter 3.4. shall remain
intact until the right of IE /deCODE to payments from the Purchaser is cancelled
each time, e.g. when a patent expires.
CHAPTER 8
SETTLEMENT OF DISPUTES
In the event of a dispute between the parties to this Contract regarding
performance or compliance that cannot be resolved by the Executive Committee,
two persons, one from each party, shall endeavour to reach an agreement on its
settlement. If a settlement is not reached between those two persons within two
weeks of the submission of the dispute, each party to the Contract shall appoint
one arbitrator and then jointly request the appointment of an impartial third
arbitrator by the District Court of Reykjavik to assist in the resolution of the
dispute, thus forming a tribunal of three arbitrators. The arbitration tribunal
shall reach a decision in the matter within one month from the appointment of
the third arbitrator.
The cost of the work of the tribunal shall be determined by the tribunal at each
time. The work, procedure and rulings of the arbitration tribunal shall
otherwise be governed, as appropriate at any time, by Act No. 53/1989 on
Contractual Arbitration.
7
<PAGE> 9
Notwithstanding the above provisions on arbitration, cases involving the
collection of payments under this Contract which are not in dispute between the
parties may be submitted to the public courts. The same applies to cases of
financial claims made by one party against the other, based on rulings of the
arbitration tribunal regarding non-performance or breach by the latter of this
Contract. Such cases shall be submitted to the District Court of Reykjavik.
8
<PAGE> 10
This Contract, which comprises 8 chapters on 9 pages, in addition to Appendices
A, B, and C, is made in two identical copies, one copy to be held by each of the
parties to the Contract.
Reykjavik, 1 July 1999.
On behalf of the Research On behalf of Islensk Erfdagreining ehf.
Team for Allergy and Asthma
David Gislason [sign.] Kari Stefansson [sign.]
Senior Physician, SH President of IE
Porarinn Gislason [sign.] Kristjan Erlendsson [sign.]
Senior Physician, SH VP for Clinical and Academic
Collaborations
Unnur S. Bjornsdottir [sign.]
Specialist, SH
SH hereby confirms this
Research Contract on its behalf,
Reykjavik, 20 August 1999
Magnus Petursson [sign.]
9
<PAGE> 1
EXHIBIT 10.30
DECODE GENETICS, INC.
SERIES A PREFERRED STOCK REPURCHASE AGREEMENT
This Series A Preferred Stock Repurchase Agreement ("Agreement") is made
effective as of July 12, 1999 by and between deCODE genetics, Inc., a Delaware
corporation (the "Company"), and the holders of Series A Preferred Stock of the
Company listed on Exhibit A hereto (the "Sellers").
PRELIMINARY STATEMENTS
A. The Sellers are the owners of certain shares of the Company's Series A
Preferred Stock (the "Series A Stock").
B. Each Seller wishes to sell to the Company, and the Company wishes to
purchase from each Seller, the number of shares of Series A Stock set forth
opposite the Seller's name on Exhibit A hereto or such other number as may be
agreed upon by such Seller and the Company (the "Shares").
NOW, THEREFORE, the parties hereto, intending to be legally bound, agree as
follows:
1. SALE AND PURCHASE OF THE SHARES.
1.1 Sale and Purchase. Subject to the terms and conditions hereof,
each Seller agrees to sell, and the Company agrees to purchase, the Shares for a
purchase price of Seven Dollars and Fifty Cents ($7.50) per share.
1.2 Payment for Shares. Following execution and delivery of this
Agreement by the Company and a Seller, the Company shall pay the purchase price
of the Shares to be sold to the Company by such Seller by check or wire transfer
to such account as such Seller shall designate.
1.3 Delivery of Certificates. Upon full payment by the Company of the
purchase price of its Shares, each Seller will deliver to the Company one or
more certificates representing the Shares. In the event that less than all of
the shares represented by a certificate are repurchased, the Company will
deliver to the Seller a new certificate representing the unpurchased shares.
Notwithstanding the foregoing, from and after payment by the Company as provided
in Section 1.2 hereof, all rights of the Seller as a holder of the Shares shall
cease and terminate.
2. REPRESENTATIONS OF THE SELLERS.
Each Seller hereby represents and warrants to the Company as follows:
<PAGE> 2
2.1 Power and Authority. It has full power and authority to sell the
Shares and to enter into and perform this Agreement and any other agreements and
instruments to be executed and delivered herewith, and such sale and such
agreements (i) have been duly authorized, (ii) are legal, valid, binding and
enforceable against such Seller and (iii) are not in contravention of any law,
order or agreement by which such Seller is bound.
2.2 Title. It has made no prior assignment of the Shares or of any
interest therein. It is the sole legal and beneficial owner of the Shares and
has good and marketable title thereto, free and clear of all liens, claims and
encumbrances of any kind, and will transfer to the Company such good and
marketable title, free and clear of any liens, claims and encumbrances of any
kind.
2.3 Company Information. It is a sophisticated seller with respect to
the Shares, has adequate information concerning the business and financial
condition of the Company to make an informed decision regarding the sale of the
Shares, and has independently, without reliance upon the Company (other than
reliance upon the representations and warranties of the Company set forth
herein) and based on such information as it deemed appropriate, made its own
analysis and decision to enter into this Agreement, and such Seller acknowledges
and agrees that the Company may possess material information with respect to the
Company not known to such Seller ("Company Information"), that such Seller has
not requested the Company Information and that the Company shall have no
liability to such Seller with respect to the nondisclosure of the Company
Information and such Seller hereby releases the Company therefrom.
3. REPRESENTATIONS OF THE COMPANY.
The Company hereby represents and warrants to the Sellers that it has
full power and authority to purchase the Shares and to enter into and perform
this Agreement and any other agreements and instruments to be executed and
delivered herewith, and such purchase and such agreements (i) have been duly
authorized, (ii) are legal, valid, binding and enforceable against the Company
and (iii) are not in contravention of any law, order or agreement by which the
Company is bound.
4. MISCELLANEOUS.
4.1 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of Delaware as applied to agreements among Delaware
residents made and to be performed entirely within the State of Delaware.
4.2 Binding Effect; Successors and Assigns. This Agreement shall be
deemed to be an agreement between the Company and each of the Sellers and shall
be binding upon each Seller executing the Agreement without regard to whether
any other Seller shall have executed the Agreement. Except as otherwise
expressly provided herein, the provisions hereof shall inure to the benefit of,
and be binding upon, the successors, assigns, heirs, executors, and
administrators of the parties hereto.
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4.3 Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement among the parties with regard to the subject matter
hereof.
4.4 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
4.5 Further Action. Each party shall, without further consideration,
take such further action and execute and deliver such further documents as may
be reasonably requested by any other party in order to carry out the provisions
and purposes of this Agreement.
* * *
This Series A Preferred Stock Repurchase Agreement is hereby executed as of the
date first above written.
deCODE genetics, Inc.
By: /s/ Kari Stefansson
-----------------------------------
Kari Stefansson, President
3
<PAGE> 4
ALTA CALIFORNIA PARTNERS, L.P.
By: Alta California Management
Partners, L.P.
By: /s/ Guy Nohra
-------------------------------------------------
Name: Guy Nohra
-------------------------------------------------
Title General Partner
-------------------------------------------------
Address:
Attention: Elaine Walker
One Embarcadero Center, Suite 4050
San Francisco, CA 94111
Facsimile: (415) 362-6178
ALTA EMBARCADERO PARTNERS, LLC
By: /s/ Eileen McCarthy
------------------------------------------------
Name: Eileen McCarthy
------------------------------------------------
Title Member
------------------------------------------------
Address:
Attention: Elaine Walker
One Embarcadero Center, Suite 4050
San Francisco, CA 94111
Facsimile: (415) 362-4178
4
<PAGE> 5
ARCH VENTURE FUND II, L.P.
By: ARCH Management Partners II, L.P.,
Its General Partner
By: ARCH Venture Partners, L.P.,
Its General Partner
By: ARCH Venture Corporation,
Its General Partner
By: /s/ Keith Crandell
------------------------------------
Name: Keith Crandell
------------------------------------
Title Managing Director
------------------------------------
Address:
Attention: Melanie Davis
8725 W. Higgins
Suite 290
Chicago, IL 60631
Facsimile: (773) 380-6606
5
<PAGE> 6
ATLAS VENTURE FUND II, L.P.
By: Atlas Venture Associates II, L.P.
By: /s/ Jean-Francois Formela
---------------------------------------------
Name: Jean-Francois Formela
---------------------------------------------
Title General Partner
---------------------------------------------
Address:
222 Berkeley Street, Suite 1950
Boston, MA 02116
Facsimile: (617) 859-9292
ATLAS VENTURE EUROPE FUND B.V.
By: /s/ Johan Gerhard Bosman
--------------------------------------------
Name: J. G. Bosman
--------------------------------------------
Title CFO
--------------------------------------------
Address:
Naarderpoort 1
1411 MA Naarden
The Netherlands
Facsimile: 31 35 695 4888
6
<PAGE> 7
FALCON TECHNOLOGY PARTNERS II, L.P.
A Delaware Limited Partnership
By: Falcon Technology Management Corporation
A Delaware Corporation,
Its General Partner
By: /s/ James Rathman
------------------------------------------------
Name: James L. Rathman
------------------------------------------------
Title President
------------------------------------------------
Address:
600 Dorset Rd.
Devon, PA 19333
7
<PAGE> 8
MEDICAL SCIENCE PARTNERS II, L.P.
By: Medical Science Ventures II, L.P.
By: /s/ Joseph E. Lovett
------------------------------------------------
Name: Joseph E. Lovett
------------------------------------------------
Title General Partner
------------------------------------------------
Address:
Attention: Joseph Lovett
20 William Street, Suite 250
Wellesley, MA 02181
Facsimile: (617) 237-3773
MEDICAL SCIENCE II CO-INVESTMENT, L.P.
By: Medical Science Ventures II, L.P.
By: /s/ Joseph E. Lovett
------------------------------------------------
Name: Joseph E. Lovett
------------------------------------------------
Title General Partner
------------------------------------------------
Address:
Attention: Joseph Lovett
c/o Medical Science Partners
20 William Street, Suite 250
Wellesley, MA 02181
Facsimile: (617) 237-3773
8
<PAGE> 9
UEMCO XI LIMITED PARTNERSHIP
By: /s/ Joseph E. Lovett
------------------------------------------------
Name: Joseph E. Lovett
------------------------------------------------
Title General Partner
------------------------------------------------
Address:
Attention: Joseph Lovett
c/o Medical Science Partners
20 William Street, Suite 250
Wellesley, MA 02181
Facsimile: (617) 237-3773
EAGLE CONSTELLATION FUND LTD.
By: /s/ Joseph E. Lovett
------------------------------------------------
Name: Joseph E. Lovett
------------------------------------------------
Title General Partner
------------------------------------------------
Address:
Attention: Joseph Lovett
c/o Medical Science Partners
20 William Street, Suite 250
Wellesley, MA 02181
Facsimile: (617) 237-3773
9
<PAGE> 10
BEACON HILL FINANCIAL
By: /s/ R.F. Johnston
----------------------------------------------
Name: Robert F. Johnston
----------------------------------------------
Title President
----------------------------------------------
Address:
Attention: Robert Johnson
19 Elm Street
Cohasset, MA 02025
Facsimile: (781) 383-2330
10
<PAGE> 11
NORAM TRUST
By: /s/ James Conroy
---------------------------------------------
Name: James Conroy
---------------------------------------------
Title Trustee
---------------------------------------------
Address:
c/o Windels, Marx, Davies, Ives
Attention: James P. Conroy
156 West 56th Street
New York, NY 10019
Facsimile: (212) 262-1215
11
<PAGE> 12
AL-MIDANI INVESTMENT COMPANY
By: /s/ Mhd. Nabil Al-Midani
------------------------------------------------
Name: Mhd. Nabil Al-Midani
------------------------------------------------
Title Director
------------------------------------------------
Address:
c/o Mhd. Nabil Al-Midani
Al-Kharj Road, Kilo 7
P.O. Box 40761
Riyadh 11511, Saudi Arabia
Facsimile: 011-966-1-495-5488
12
<PAGE> 13
GUTRAFIN LTD.
By: /s/ F.C. Lang
----------------------------------------------
Name: F.C. Lang
----------------------------------------------
Title: Senior Investment Representative
----------------------------------------------
Address:
40 Egerton Crescent
London SW3 26B
Great Britain
13
<PAGE> 14
POLARIS VENTURE PARTNERS, L.P.
By: Polaris Venture Management co., LLC,
Its General Partner
By: /s/ John J. Gannon
------------------------------------------------
Name: John J. Gannon
------------------------------------------------
Title Member
------------------------------------------------
Address:
100 Winter Street
Suite 3550
Waltham, MA 02451
Facsimile: (781) 290-0880
POLARIS VENTURE FOUNDERS' FUND, L.P.
By: Polaris Venture Management co., LLC
Its General Partner
By: /s/ John J. Gannon
------------------------------------------------
Name: John J. Gannon
------------------------------------------------
Title Member
------------------------------------------------
Address:
100 Winter Street
Suite 3550
Waltham, MA 02451
Facsimile: (781) 290-0880
14
<PAGE> 15
ROVENT II LIMITED PARTNERSHIP
By: Advent International Limited Partnership,
General Partner
By: Advent International Corporation, General Partner
By: /s/ Jason Fisherman
------------------------------------------------
Name: Jason Fisherman
------------------------------------------------
Title Vice President
------------------------------------------------
Address:
c/o Advent International Corporation
75 State Street, 29th Floor
Boston, MA 02109
Facsimile: (617) 951-0566
ADVENT PERFORMANCE MATERIALS
LIMITED PARTNERSHIP
By: Advent International Limited Partnership,
General Partner
By: Advent International Corporation, General Partner
By: /s/ Jason Fisherman
------------------------------------------------
Name: Jason Fisherman
------------------------------------------------
Title Vice President
------------------------------------------------
Address:
c/o Advent International Corporation
75 State Street, 29th Floor
Boston, MA 02109
Facsimile: (617) 951-0566
15
<PAGE> 16
ADVENT PARTNERS LIMITED PARTNERSHIP
By: Advent International Corporation, General Partner
By: /s/ Jason Fisherman
----------------------------------------------
Name: Jason Fisherman
----------------------------------------------
Title Vice President
----------------------------------------------
Address:
c/o Advent International Corporation
75 State Street, 29th Floor
Boston, MA 02109
Facsimile: (617) 951-0566
16
<PAGE> 17
<TABLE>
<CAPTION>
EXHIBIT A
SELLING STOCKHOLDERS
SERIES A SHAREHOLDER NUMBER OF %AGE NUMBER OF REDEMPTION TOTAL PROCEEDS
SHARES HELD TO BE SHARES BEING PRICE
REDEEMED REDEEMED
<S> <C> <C> <C> <C> <C>
Advent Partners Ltd 36,972 20% 7,394 U.S.$7.50 $55,455.00
Advent Performance Materials L.L.P 520,750 20% 104,150 U.S.$7.50 $781,125.00
Rovent II Limited Partnership 1,006,088 20% 201,218 U.S.$7.50 $1,509,135.00
Alta Embarcadero Partners, LLC 67,795 20% 13,559 U.S.$7.50 $101,692.50
Alta California Partners, L.P. 2,538,557 20% 507,711 U.S.$7.50 $3,807,832.50
ARCH Venture Fund II, L.P. 781,905 20% 156,381 U.S.$7.50 $1,172,857.50
Atlas Venture Europe Fund B.v. 1,303,176 20% 260,635 U.S.$7.50 $1,954,762.50
Atlas Venture Fund II, L.P. 1,303,176 20% 260,635 U.S.$7.50 $1,954,762.50
Falcon Technology Partners II, L.P. 646,180 20% 129,236 U.S.$7.50 $969,270.00
Medical Science Partners II, L.P. 733,142 20% 146,628 U.S.$7.50 $1,099,710.00
Medical Science II Co-Investment, L.P. 198,431 20% 39,686 U.S.$7.50 $297,645.00
Al-Midani Investment Company 5,834 20% 1,167 U.S.$7.50 $8,752.50
Beacon Hill Financial 24,617 20% 4,923 U.S.$7.50 $36,922.50
Gutrafin Ltd. 500,000 20% 100,000 U.S.$7.50 $750,000.00
Noram Trust 6,666 20% 1,333 U.S.$7.50 $9,997.50
Eagle Constellation Fund Ltd. 11,564 20% 2,313 U.S.$7.50 $17,347.50
UEMCO XI Limited Partnership 11,753 20% 2,351 U.S.$7.50 $17,632.50
Polaris Venture Partners Founders' Fund, 115,201 20% 23,040 U.S.$7.50 $172,800.00
L.P.
Polaris Venture Partners L.P. 1,978,568 20% 395,714 U.S.$7.50 $2,967,855.00
TOTAL OF PREFERRED A-STOCK: 11,790,375 20% 2,358,074 U.S.$7.50 $17,685,555.00
</TABLE>
17
<PAGE> 18
DECODE GENETICS, INC.
ADDENDUM TO
SERIES A PREFERRED STOCK REPURCHASE AGREEMENT
This Addendum to Series A Preferred Stock Repurchase Agreement (this
"Addendum") is made effective as of March 1, 2000 (the "Effective Date") by and
between deCODE genetics, Inc., a Delaware corporation (the "Company"), and the
holders of Series A Preferred Stock of the Company listed on Exhibit A hereto
(the "Sellers").
PRELIMINARY STATEMENTS
A. The Company and the Sellers entered into a Series A Preferred Stock
Repurchase Agreement, dated July 12, 1999 (the "Series A Repurchase Agreement"),
pursuant to which the Corporation repurchased, in the aggregate, 2,358,074
shares (the "Series A Shares") of the Corporation's Series A Preferred Stock
from the Sellers at a closing held on August 11, 1999 (the "Closing Date").
B. It was the understanding among the Company and the Sellers that the
purchase price for the Series A Shares would be equal to the price per share,
net of commissions and other fees payable to the purchaser (the "Purchaser"), at
which the Company sold shares of its Series B Preferred Stock pursuant to a
stock purchase agreement dated as of June 30, 1999 (the "Series B Offering").
C. Contemporaneously with the execution of the Series A Repurchase
Agreement, the Company and the Sellers entered into an oral agreement that if
any contingent portion of the purchase price in the Series B Offering became
payable, the purchase price for the Series A Shares would be adjusted upward
accordingly, with the amount of such adjustment to be paid to the Sellers by the
Company after such contingent portion of the purchase price in the Series B
Offering became payable.
D. The Company and the Purchaser have entered into an Addendum to Stock
Purchase Agreement confirming that on December 28, 1999, they agreed that a
contingent payment of $7.50, less commissions and other fees payable to the
Purchaser in an amount equal to seven percent (7%) of the sum of the original
purchase price and the contingent payment, was due and payable.
NOW, THEREFORE, the parties hereto, intending to be legally bound, agree as
follows:
1. ADJUSTMENT TO PURCHASE PRICE; PAYMENT OF DEFICIENCY. The adjusted
purchase price for the Series A Shares as of the Closing Date is US$13.95 per
share. Within five business days of the Effective Date, the Company shall pay,
by check or wire transfer to such account as such Seller shall designate,
US$6.45 (representing the adjusted purchase price of US$13.95 less the US$7.50
already paid) for each of the Series A Shares sold to the Company by such Seller
under the Series A Repurchase Agreement.
1
<PAGE> 19
2. RATIFICATION OF AMENDMENT OF AMENDED AND RESTATED INVESTORS' RIGHTS
AGREEMENT. The amendment of the Amended and Restated Investors' Rights Agreement
dated as of February 2, 1998, as amended, among the Company and certain of its
stockholders to grant the provisions of Section 2 thereof to the holders of the
Series B Preferred Stock sold in the Series B Offering is hereby ratified,
approved and confirmed.
3. MISCELLANEOUS. This Addendum shall be governed by and construed under
the laws of the State of Delaware as applied to agreements among Delaware
residents made and to be performed entirely within the State of Delaware. Except
as otherwise expressly provided herein, the provisions hereof shall inure to the
benefit of, and be binding upon, the successors, assigns, heirs, executors, and
administrators of the parties hereto. This Addendum, together with the Series A
Repurchase Agreement constitutes the full and entire understanding and agreement
among the parties with regard to the subject matter hereof. This Addendum may be
executed in any number of counterparts, each of which shall be deemed an
original and all of which together shall constitute one instrument. Except as
set forth herein, all terms of the Series A Repurchase Agreement remain
unchanged and in full force and effect.
This Addendum to Series A Preferred Stock Repurchase Agreement is hereby
executed to be effective as of the date first above written.
deCODE genetics, Inc.
Date By: /s/ Kari Stefansson
----------------------------------------
Kari Stefansson, President
2
<PAGE> 20
ALTA CALIFORNIA PARTNERS, L.P.
By: Alta California Management
Partners, L.P.
Date: 2/24/00 By: /s/ Guy Nohra
---------------------------------------------
Name: Guy Nohra
---------------------------------------------
Title General Partner
---------------------------------------------
Address:
Attention: Elaine Walker
One Embarcadero Center, Suite 4050
San Francisco, CA 94111
Facsimile: (415) 362-6178
ALTA EMBARCADERO PARTNERS, LLC
Date: 2/24/00 By: /s/ Jean Deleage
---------------------------------------------
Name: Jean Deleage
---------------------------------------------
Title Member
---------------------------------------------
Address:
Attention: Elaine Walker
One Embarcadero Center, Suite 4050
San Francisco, CA 94111
Facsimile: (415) 362-4178
3
<PAGE> 21
ARCH VENTURE FUND II, L.P.
By: ARCH Management Partners II, L.P.,
Its General Partner
By: ARCH Venture Partners, L.P.,
Its General Partner
By: ARCH Venture Corporation,
Its General Partner
Date: 2.25.00 By: /s/ Robert Nelsen
-------------------------------
Name: Robert Nelsen
-------------------------------
Title Managing Director
-------------------------------
Address:
Attention: Melanie Davis
8725 W. Higgins
Suite 290
Chicago, IL 60631
Facsimile: (773) 380-6606
4
<PAGE> 22
ATLAS VENTURE FUND II, L.P.
By: Atlas Venture Associates II, L.P.
Date: By: /s/ Jean-Francois Formela
-------------------------------------------
Name: Jean-Francois Formela
-------------------------------------------
Title General Partner
-------------------------------------------
Address:
222 Berkeley Street, Suite 1950
Boston, MA 02116
Facsimile: (617) 859-9292
ATLAS VENTURE EUROPE FUND B.V.
Date: By: /s/ Johan Gerhard Bosman
-------------------------------------------
Name: J.G. Bosman
-------------------------------------------
Title: Managing Director
-------------------------------------------
Address:
Naarderpoort 1
1411 MA Naarden
The Netherlands
Facsimile: 31 35 695 4888
5
<PAGE> 23
FALCON TECHNOLOGY PARTNERS II, L.P.
A Delaware Limited Partnership
By: Falcon Technology Management Corporation
A Delaware Corporation,
Its General Partner
Date: 2/24/00 By: /s/ James Rathman
--------------------------------------
Name: James L. Rathman
--------------------------------------
Title President
--------------------------------------
Address:
Greystone 60
15 Highlands.
Avon, CO 81620
6
<PAGE> 24
MEDICAL SCIENCE PARTNERS II, L.P.
By: Medical Science Ventures II, L.P.
Date: 2/24/00 By: /s/ Joseph E. Lovett
----------------------------------------
Name: Joseph E. Lovett
----------------------------------------
Title General Partner
----------------------------------------
Address:
Attention: Joseph Lovett
161 Worcester Rd.
Framingham, MA 01701
Facsimile:
MEDICAL SCIENCE II CO-INVESTMENT, L.P.
By: Medical Science Ventures II, L.P.
Date: By: /s/ Joseph E. Lovett
----------------------------------------
Name: Joseph E. Lovett
----------------------------------------
Title General Partner
----------------------------------------
Address:
Attention: Joseph Lovett
c/o Medical Science Partners
161 Worcester Rd.
Framingham, MA 01701
Facsimile:
7
<PAGE> 25
UEMCO XI LIMITED PARTNERSHIP
Date: 2/24/00 By: /s/ Joseph E. Lovett
-------------------------------------------
Name: Joseph E. Lovett
-------------------------------------------
Title General Partner
-------------------------------------------
Address:
Attention: Joseph Lovett
c/o Medical Science Partners
161 Worcester Rd.
Framingham, MA 01701
Facsimile:
EAGLE CONSTELLATION FUND LTD.
Date: 2/24/00 By: /s/ Joseph E. Lovett
-------------------------------------------
Name: Joseph E. Lovett
-------------------------------------------
Title General Partner
-------------------------------------------
Address:
Attention: Joseph Lovett
c/o Medical Science Partners
161 Worcester Rd.
Framingham, MA 01701
Facsimile:
8
<PAGE> 26
BEACON HILL FINANCIAL
Date: 25/2/00 By: /s/ R.F. Johnston
----------------------------------
Name: Robert F. Johnston
----------------------------------
Title President
----------------------------------
Address:
Attention: Robert Johnston
19 Elm Street
Cohasset, MA 02025
Facsimile: (781) 383-2330
9
<PAGE> 27
NORAM TRUST
Date: By: /s/ James Conroy
----------------------------------
Name: James Conroy
----------------------------------
Title Trustee
----------------------------------
Address:
c/o Windels, Marx, Davies, Ives
Attention: James P. Conroy
156 West 56th Street
New York, NY 10019
Facsimile: (212) 262-1215
10
<PAGE> 28
AL-MIDANI INVESTMENT COMPANY
Date: February 25, 2000 By: /s/ Mhd. Nabil Al-Midani
-------------------------------------
Name: Mhd. Nabil Al-Midani
-------------------------------------
Title Director
-------------------------------------
Address:
c/o Mhd. Nabil Al-Midani
Al-Kharj Road, Kilo 7
P.O. Box 40761
Riyadh 11511, Saudi Arabia
Facsimile: 011-966-1-495-5488
11
<PAGE> 29
GUTRAFIN LTD.
Date: 25 Feb 2000 By: /s/ F.C. Lang
--------------------------------------
Name: F.C. Lang
--------------------------------------
Title: Senior Investment Representative
--------------------------------------
Address:
40 Egerton Crescent
London SW3 26B
Great Britain
12
<PAGE> 30
POLARIS VENTURE PARTNERS, L.P.
By: Polaris Venture Management co., LLC,
Its General Partner
Date: By: /s/ Terrence McGuire
-------------------------------------
Name:
-------------------------------------
Title
-------------------------------------
Address:
100 Winter Street
Suite 3550
Waltham, MA 02451
Facsimile: (781) 290-0880
POLARIS VENTURE FOUNDERS' FUND, L.P.
By: Polaris Venture Management co., LLC
Its General Partner
Date: By: /s/ Terrence McGuire
-------------------------------------
Name:
-------------------------------------
Title
-------------------------------------
Address:
100 Winter Street
Suite 3550
Waltham, MA 02451
Facsimile: (781) 290-0880
13
<PAGE> 31
ROVENT II LIMITED PARTNERSHIP
By: Advent International Limited Partnership,
General Partner
By: Advent International Corporation, General Partner
Date: 2/24/00 By: /s/ Jason Fisherman
-------------------------------------------
Name: Jason Fisherman
-------------------------------------------
Title Vice President
-------------------------------------------
Address:
c/o Advent International Corporation
75 State Street, 29th Floor
Boston, MA 02109
Facsimile: (617) 951-0566
ADVENT PERFORMANCE MATERIALS
LIMITED PARTNERSHIP
By: Advent International Limited Partnership,
General Partner
By: Advent International Corporation, General Partner
Date: 2/24/00 By: /s/ Jason Fisherman
-------------------------------------------
Name: Jason Fisherman
-------------------------------------------
Title Vice President
-------------------------------------------
Address:
c/o Advent International Corporation
75 State Street, 29th Floor
Boston, MA 02109
Facsimile: (617) 951-0566
14
<PAGE> 32
ADVENT PARTNERS LIMITED PARTNERSHIP
By: Advent International Corporation, General Partner
Date: 2/24/00 By: /s/ Jason Fisherman
-------------------------------------------
Name: Jason Fisherman
-------------------------------------------
Title Vice President
-------------------------------------------
Address:
c/o Advent International Corporation
75 State Street, 29th Floor
Boston, MA 02109
Facsimile: (617) 951-0566
15
<PAGE> 1
EXHIBIT 10.31
DECODE GENETICS, INC.
SERIES C PREFERRED STOCK REPURCHASE AGREEMENT
This Series C Preferred Stock Repurchase Agreement ("Agreement") is made
effective as of July 12, 1999 by and between deCODE genetics, Inc., a Delaware
corporation (the "Company"), and Roche Finance Ltd. (the "Seller").
PRELIMINARY STATEMENTS
A. The Seller is the owner of certain shares of the Company's Series C
Preferred Stock (the "Series C Stock") .
B. The Seller wishes to sell to the Company, and the Company wishes to
purchase from the Seller, 100,000 shares of Series C Stock (the "Shares").
NOW, THEREFORE, the parties hereto, intending to be legally bound, agree as
follows:
1. SALE AND PURCHASE OF THE SHARES.
1.1 Sale and Purchase. Subject to the terms and conditions hereof, the
Seller agrees to sell , and the Company agrees to purchase, the Shares for a
purchase price of Seven Dollars and Fifty Cents ($7.50) per share.
1.2 Payment for Shares. Following execution and delivery of this
Agreement by the Company and the Seller, the Company shall pay the purchase
price of the Shares by check or wire transfer to such account as the Seller
shall designate.
1.3 Delivery of Certificates. Upon full payment by the Company of the
purchase price of the Shares, the Seller will deliver to the Company one or more
certificates representing the Shares. In the event that less than all of the
shares represented by a certificate are repurchased, the Company will deliver to
the Seller a new certificate representing the unpurchased shares.
Notwithstanding the foregoing, from and after payment by the Company as provided
in Section 1.2 hereof, all rights of the Seller as a holder of the Shares shall
cease and terminate.
2. REPRESENTATIONS OF THE SELLER.
The Seller hereby represents and warrants to the Company as follows:
2.1 Power and Authority. It has full power and authority to sell the
Shares and to enter into and perform this Agreement and any other agreements and
instruments to be executed and delivered herewith, and such sale and such
agreements (i) have been duly authorized, (ii) are legal, valid, binding and
enforceable against the Seller and (iii) are not in contravention of any law,
order or agreement by which the Seller is bound.
<PAGE> 2
2.2 Title. It has made no prior assignment of the Shares or of any
interest therein. It is the sole legal and beneficial owner of the Shares and
has good and marketable title thereto, free and clear of all liens, claims and
encumbrances of any kind, and will transfer to the Company such good and
marketable title, free and clear of any liens, claims and encumbrances of any
kind.
2.3 Company Information. It is a sophisticated seller with respect to
the Shares, has adequate information concerning the business and financial
condition of the Company to make an informed decision regarding the sale of the
Shares, and has independently, without reliance upon the Company (other than
reliance upon the representations and warranties of the Company set forth
herein) and based on such information as it deemed appropriate, made its own
analysis and decision to enter into this Agreement, and the Seller acknowledges
and agrees that the Company may possess material information with respect to the
Company not known to the Seller ("Company Information"), that the Seller has not
requested the Company Information and that the Company shall have no liability
to the Seller with respect to the nondisclosure of the Company Information and
the Seller hereby releases the Company therefrom.
3. REPRESENTATIONS OF THE COMPANY.
The Company hereby represents and warrants to the Seller that it has full
power and authority to purchase the Shares and to enter into and perform this
Agreement and any other agreements and instruments to be executed and delivered
herewith, and such purchase and such agreements (i) have been duly authorized,
(ii) are legal, valid, binding and enforceable against the Company and (iii) are
not in contravention of any law, order or agreement by which the Company is
bound.
4. MISCELLANEOUS.
4.1 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of Delaware as applied to agreements among Delaware
residents made and to be performed entirely within the State of Delaware.
4.2 Binding Effect; Successors and Assigns. Except as otherwise
expressly provided herein, the provisions hereof shall inure to the benefit of,
and be binding upon, the successors, assigns, heirs, executors, and
administrators of the parties hereto.
4.3 Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement among the parties with regard to the subject matter
hereof.
4.4 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
2
<PAGE> 3
4.5 Further Action. Each party shall, without further consideration,
take such further action and execute and deliver such further documents as may
be reasonably requested by the other party in order to carry out the provisions
and purposes of this Agreement.
4.6 Reissuance of Shares. The Company will not sell or otherwise
reissue the Shares without the Seller's written consent.
* * *
This Series C Preferred Stock Repurchase Agreement is hereby executed as of the
date first above written.
deCODE genetics, Inc.
By: /s/ Kari Stefansson
-----------------------------------
Kari Stefansson, President
3
<PAGE> 4
ROCHE FINANCE LTD
By: /s/ Bruno Maier
-----------------------------------
Name: Dr. Bruno Maier
-----------------------------------
Title Director
-----------------------------------
By: /s/ Peter Matter
-----------------------------------
Name Peter Matter
-----------------------------------
Title: Director
-----------------------------------
Address:
124 Grenzacherstrasse
CH-4070 Basel
SWITZERLAND
Attention: CFDV Building 21 Room 292
Facsimile No.: 41-61-688-4169
4
<PAGE> 5
DECODE GENETICS, INC.
ADDENDUM TO
SERIES C PREFERRED STOCK REPURCHASE AGREEMENT
This Addendum to Series C Preferred Stock Repurchase Agreement (this
"Addendum") is made effective as of March 1, 2000 (the "Effective Date") by and
between deCODE genetics, Inc., a Delaware corporation (the "Company"), and Roche
Finance Ltd. (the "Seller").
PRELIMINARY STATEMENTS
A. The Company and the Seller entered into a Series C Preferred Stock
Repurchase Agreement, dated July 12, 1999 (the "Series C Repurchase Agreement"),
pursuant to which the Corporation repurchased 100,000 shares (the "Series C
Shares") of the Corporation's Series C Preferred Stock from the Seller at a
closing held on August 24th, 1999 (the "Closing Date").
B. It was the understanding among the Company and the Sellers that the
purchase price for the Series C Shares would be equal to the price per share,
net of commissions and other fees payable to the purchaser (the "Purchaser"), at
which the Company sold shares of its Series B Preferred Stock pursuant to a
stock purchase agreement dated as of June 30, 1999 (the "Series B Offering").
C. Contemporaneously with the execution of the Series C Repurchase
Agreement, the Company and the Sellers entered into an oral agreement that if
any contingent portion of the purchase price in the Series B Offering became
payable, the purchase price for the Series C Shares would be adjusted upward
accordingly, with the amount of such adjustment to be paid to the Sellers by the
Company after such contingent portion of the purchase price in the Series B
Offering became payable.
D. The Company and the Purchaser have entered into an Addendum to Stock
Purchase Agreement confirming that on December 28, 1999, they agreed that a
contingent payment of $7.50, less commissions and other fees payable to the
Purchaser in an amount equal to seven percent (7%) of the sum of the original
purchase price and the contingent payment, was due and payable.
NOW, THEREFORE, the parties hereto, intending to be legally bound, agree as
follows:
1. ADJUSTMENT TO PURCHASE PRICE; PAYMENT OF DEFICIENCY. The adjusted
purchase price for the Series C Shares as of the Closing Date is US$13.95 per
share. Within five business days of the Effective Date, the Company shall pay,
by check or wire transfer to such account as the Seller shall designate, US$6.45
(representing the adjusted purchase price of US$13.95 less the US$7.50 already
paid) for each of the Series C Shares sold to the Company by the Seller under
the Series C Repurchase Agreement.
2. RATIFICATION OF AMENDMENT OF AMENDED AND RESTATED INVESTORS' RIGHTS
AGREEMENT. The amendment of the Amended and Restated Investors' Rights Agreement
dated as of February 2, 1998, as amended, among the Company and certain of its
stockholders to grant
<PAGE> 6
the provisions of Section 2 thereof to the holders of the Series B Preferred
Stock sold in the Series B Offering is hereby ratified, approved and confirmed.
3. MISCELLANEOUS. This Addendum shall be governed by and construed under
the laws of the State of Delaware as applied to agreements among Delaware
residents made and to be performed entirely within the State of Delaware. Except
as otherwise expressly provided herein, the provisions hereof shall inure to the
benefit of, and be binding upon, the successors, assigns, heirs, executors, and
administrators of the parties hereto. This Addendum, together with the Series C
Repurchase Agreement, constitutes the full and entire understanding and
agreement among the parties with regard to the subject matter hereof. This
Addendum may be executed in any number of counterparts, each of which shall be
deemed an original and all of which together shall constitute one instrument.
Except as set forth herein, all terms of the Series C Repurchase Agreement
remain unchanged and in full force and effect.
This Addendum to Series C Preferred Stock Repurchase Agreement is hereby
executed to be effective as of the date first above written.
<PAGE> 7
DECODE GENETICS, INC.
Dated:_______________________ By: /S/ Kari Stefansson
Kari Stefansson, President
ROCHE FINANCE LTD
Dated: 29 February 2000 By: /s/ Bruno Maier
Name: Dr. Bruno Maier
Title: Director
By: /s/ Beat Krahenmann
Name: Dr. Beat Krahenmann
Title: Deputy Director
Address:
124 Grenzacherstrasse
CH-4070 Basel
SWITZERLAND
Attention: CFDV Building 21 Room 292
<PAGE> 1
EXHIBIT 10.32
DECODE GENETICS, INC.
COMMON STOCK REPURCHASE AGREEMENT
This Common Stock Repurchase Agreement ("Agreement") is made effective
as of July 12, 1999 by and between deCODE genetics, Inc., a Delaware corporation
(the "Company"), and Kari Stefansson (the "Seller").
PRELIMINARY STATEMENTS
A. The Seller is the owner of certain shares of the Company's Common
Stock (the "Common Stock") .
B. The Seller wishes to sell to the Company, and the Company wishes to
purchase from the Seller, 333,333 shares of Common Stock (the "Shares").
NOW, THEREFORE, the parties hereto, intending to be legally bound,
agree as follows:
1. SALE AND PURCHASE OF THE SHARES.
1.1 Sale and Purchase. Subject to the terms and conditions
hereof, the Seller agrees to sell, and the Company agrees to purchase, the
Shares. The consideration for the Shares shall be 5.625/7.50 of a share of the
Company's Series B Preferred Stock for each Share (for a total of 250,000 shares
of Series B Preferred Stock).
1.2 Closing. The closing of the sale and purchase of the
Shares under this Agreement shall be held on July 12, 1999, at the offices of
the Company or at such other time and place as the Company and the Seller may
agree (the "Closing").
1.3 Delivery. At the Closing and upon delivery by the Company
of certificates representing the Series B Preferred Stock to be issued in
exchange for the Shares, the Seller will deliver to the Company one or more
certificates representing the Shares. In the event that less than all of the
shares represented by a certificate are repurchased, the Company will deliver to
the Seller a new certificate representing the unpurchased shares.
2. REPRESENTATIONS OF THE SELLER.
The Seller hereby represents and warrants to the Company as follows:
2.1 Power and Authority. He has full power and authority to
sell the Shares and to enter into and perform this Agreement and any other
agreements and instruments to be executed and delivered herewith, and such sale
and such agreements (i) have been duly authorized, (ii) are legal, valid,
binding and enforceable against him and (iii) are not in contravention of any
law, order or agreement by which he is bound.
1
<PAGE> 2
2.2 Title He has made no prior assignment of the Shares or of
any interest therein. He is the sole legal and beneficial owner of the Shares
and has good and marketable title thereto, free and clear of all liens, claims
and encumbrances of any kind, and will transfer to the Company such good and
marketable title, free and clear of any liens, claims and encumbrances of any
kind.
2.3 Company Information. He is a sophisticated seller with
respect to the Shares, has adequate information concerning the business and
financial condition of the Company to make an informed decision regarding the
sale of the Shares, and has independently, without reliance upon the Company
(other than reliance upon the representations and warranties of the Company set
forth herein) and based on such information as he deemed appropriate, made his
own analysis and decision to enter into this Agreement, and he acknowledges and
agrees that the Company may possess material information with respect to the
Company not known to him ("Company Information"), that he has not requested the
Company Information and that the Company shall have no liability to him with
respect to the nondisclosure of the Company Information and he hereby releases
the Company therefrom.
3. REPRESENTATIONS OF THE COMPANY.
The Company hereby represents and warrants to the Seller that it has
full power and authority to purchase the Shares and to enter into and perform
this Agreement and any other agreements and instruments to be executed and
delivered herewith, and such purchase and such agreements (i) have been duly
authorized, (ii) are legal, valid, binding and enforceable against the Company
and (iii) are not in contravention of any law, order or agreement by which the
Company is bound.
4. MISCELLANEOUS.
4.1 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Delaware as applied to agreements among
Delaware residents made and to be performed entirely within the State of
Delaware.
4.2 Successors and Assigns. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors, and administrators of
the parties hereto.
4.3 Entire Agreement. This Agreement constitutes the full and
entire understanding and agreement among the parties with regard to the subject
matter hereof.
4.4 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
2
<PAGE> 3
4.5 Further Action. Each party shall, without further consideration,
take such further action and execute and deliver such further documents as may
be reasonably requested by any other party in order to carry out the provisions
and purposes of this Agreement.
* * *
This Common Stock Repurchase Agreement is hereby executed as of the date first
above written.
deCODE genetics, Inc.
By: /s/ Hannes Smarason
----------------------------------
Hannes Smarason, Senior Vice President
& Chief Financial Officer
/s/ Kari Stefansson
-----------------------------------
Kari Stefansson
3
<PAGE> 1
EXHIBIT 10.33
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is made effective as of June
30, 1999 by and between deCODE genetics, Inc., a Delaware corporation (the
"Company"), and each of the undersigned.
PRELIMINARY STATEMENT
A. Each of the undersigned wishes to purchase from the Company, and the
Company wishes to sell to each of the undersigned, the number of shares of the
Company's Series B Preferred Stock, par value US$0.001 per share ("Series B
Preferred Stock"), set forth opposite each of the undersigned's signature or
such other number as may be agreed upon by the undersigned and the Company (the
"Shares").
B. The parties wish to provide for the terms and conditions of the
purchase and sale of the Shares.
NOW, THEREFORE, in consideration of the premises and the mutual promises
hereinafter set forth, the parties hereby agree as follows:
1. Sale and Purchase of Shares.
(a) Upon the terms and subject to the conditions set forth in this
Agreement and upon the representations and warranties made herein, the Company
shall sell, grant, convey, assign, transfer and deliver to the undersigned, and
the undersigned shall purchase and acquire from the Company, the Shares. Upon
Closing under this Agreement, all of the Shares shall be fully paid and
nonassessable.
(b) In exchange for issuance of the Shares, each of the undersigned
agrees to pay to the Company $7.50 per share (the "Purchase Price") on the
Closing Date (as defined below). The Purchase Price shall be payable by
certified or bank check or by wire transfer or other immediately available funds
to the Company to such bank accounts as designated by the Company in writing. It
is understood that such payment may come from the undersigned or its affiliates.
(c) The closing of the sale to, and purchase by, the undersigned of
the Shares (the "Closing") shall occur at the offices of the Company on or
before July 31, 1999 or such other date as the parties shall mutually agree (the
"Closing Date").
(d) At the Closing, the Company shall deliver to each of the
undersigned stock certificates representing the Shares, registered in the name
of each of the undersigned, against payment of the amount of the Purchase Price
as set forth above.
2. Representations and Warranties of Undersigned. By executing this
Agreement, each of the undersigned:
<PAGE> 2
(a) acknowledges that it understands that as a condition to the
Company's sale of the Shares to the undersigned, the undersigned must become a
party to that certain Amended and Restated Investor Rights Agreement by and
among the Company and the other parties thereto (the "Investor Rights
Agreement"), dated as of February 2, 1998, a copy of which has been provided to
the undersigned, that execution of this Agreement shall constitute execution of
the Investor Rights Agreement, and that the Shares and the shares (the
"Conversion Shares") of Common Stock of the Company, par value US$0.001 per
share, issued upon conversion of the Shares may be transferred only in
accordance with the provisions of the Investor Rights Agreement;
(b) represents and warrants that the undersigned is able to bear the
economic risk of losing the undersigned's entire investment in the Shares and
has such knowledge and experience in business and financial matters and with
respect to investments in securities to enable the undersigned to understand and
evaluate the risks of ownership of the Shares and to form an investment decision
with respect thereto;
(c) acknowledges that a copy of the Amended and Restated Certificate
of Incorporation of the Company (the "Certificate of Incorporation") which
describes the relative rights and preferences of the Series B Preferred Stock
has been provided to it and that all material documents, records and books
pertaining to this investment have, on request, been made available to the
undersigned's advisors and the undersigned;
(d) acknowledges that the Company has made available to the
undersigned and the undersigned's representatives the opportunity to ask
questions of, and receive answers from, the Company concerning the Company and
the transaction contemplated hereby;
(e) represents and warrants that the undersigned received, executed
and deposited for delivery to the Company this Agreement at the address set
forth on the signature page below;
(f) represents and warrants that the undersigned is not a "U.S.
person," as such term is defined in Regulation S ("Regulation S") promulgated
pursuant to the Securities Act of 1933, as amended (the "Securities Act"), a
copy of which definition has been provided to the undersigned, is not purchasing
the Shares for the account or benefit of a "U.S. person" and if the undersigned
is other than an individual, that the undersigned was not formed by a "U.S.
person" principally for the purpose of investing in securities not registered
under the Securities Act;
(g) understands that the Shares and the Conversion Shares are subject
to substantial restrictions on transfer in the United States and to "U.S.
persons" and that, except as set forth in the Investor Rights Agreement, the
Company has no obligation to take any action to make such transfers possible;
(h) agrees that the undersigned will resell the Shares and Conversion
Shares only in accordance with the provisions of Regulation S, or pursuant to
registration under the Securities Act or to an exemption therefrom, and will not
engage in hedging transactions with regard to the Shares and Conversions Shares
unless in compliance with the Securities Act. Furthermore, the
2
<PAGE> 3
undersigned agrees that the Company shall refuse to register any transfer of the
Shares or Conversion Shares not made in accordance with the provisions of this
subsection 2(h); and
(i) acknowledges that, if the undersigned is purchasing the Shares
subscribed for hereby in a fiduciary capacity, the above representations and
warranties in this Section 2 shall be deemed to have been made on behalf of the
person or persons for whom the undersigned is so purchasing.
3. Indemnification. The undersigned acknowledges that the undersigned
understands the meaning of the representations made by the undersigned in this
Agreement and that the Company will rely upon the truth and accuracy of such
representations. The undersigned hereby agrees to indemnify and hold harmless
the Company and all persons deemed to be in control of the Company from and
against any and all claims, actions, loss, costs, expenses, damages and
liabilities (including, without limitation, court costs and attorneys' fees)
arising out of or due to a breach by the undersigned of any such
representations. All representations shall survive the delivery of this Stock
Purchase Agreement and the purchase by the undersigned of any Shares.
4. Restrictions on Transfer. The undersigned hereby agrees with the
Company as follows:
(a) In addition to the restrictions on transfer imposed by the
Investor Rights Agreement, the undersigned will not transfer the Shares or the
Conversion Shares, or any of them, in the United States or to a "U.S. person"
unless registered under the Securities Act or unless the Company has received an
opinion of counsel satisfactory to the Company and its counsel that such
registration is not required.
(b) In addition to the legend set forth in Section 2.1(b) of the
Investor Rights Agreement, the certificates evidencing the Shares that the
undersigned has agreed to purchase and the Conversion Shares, and each
certificate issued in transfer thereof, will bear legends substantially as
follows:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "1933 ACT") OR THE SECURITIES ACT OF ANY STATE AND
THEY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED
UNLESS AND UNTIL REGISTERED UNDER THE 1933 ACT AND APPLICABLE STATE SECURITIES
ACTS OR, IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE
ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR
HYPOTHECATION IS PURSUANT TO AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION OR IS
IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S UNDER THE ACT. HEDGING
TRANSACTIONS INVOLVING THESE SECURITIES MAY NOT BE CONDUCTED UNLESS IN
COMPLIANCE WITH THE ACT.
5. Pre-Closing Covenants. Prior to the Closing, the Company hereby
covenants and agrees to:
3
<PAGE> 4
(a) Obtain the consent of its Board of Directors to the transactions
contemplated hereby;
(b) Obtain the consent of its stockholders and all other required
consents or approvals of third parties to the transactions contemplated hereby;
(c) File an amendment to the Certificate of Incorporation with the
Secretary of State of Delaware which increases the number of authorized shares
of Series B Preferred Stock from 5,000,000 to 1,000,000; and
(d) Take all other actions which are necessary or proper in connection
with the transactions contemplated hereby.
6. Conditions to Closing. The obligation of the undersigned to purchase
the Shares shall be conditioned on the Company's performance of each of the
covenants set forth in Section 5 hereof. If at the Closing any of such covenants
shall not have been fulfilled to the reasonable satisfaction of any the
undersigned, such undersigned, at its election, shall be relieved of all further
obligations under this Agreement.
7. Miscellaneous.
(a) Should any one or more of the provisions of this Agreement be
determined to be illegal or unenforceable, all other provisions of this
Agreement shall be given effect separately from the provision or provisions
determined to be illegal or unenforceable and shall not be affected thereby.
(b) The internal substantive laws, without regard to the laws of
conflicts, of the State of Delaware shall govern this Agreement. The parties
hereto hereby irrevocably submit to the exclusive jurisdiction of any Delaware
state or federal court sitting in the State of Delaware, for any action or
proceeding arising out of or related to this Agreement, and the parties hereto
hereby irrevocably agree that all claims in respect of any such action or
proceeding may be heard and determined in Delaware state court or, to the extent
permitted by law, in such federal court. The parties hereto hereby irrevocably
waive, to the fullest extent they may effectively do so, the defense of an
inconvenient forum to the maintenance of any such action or proceeding.
(c) This Agreement constitutes the entire agreement between the
parties hereto pertaining to the subject matter hereof and supersedes any and
all prior or contemporaneous agreements or understandings of the parties
relating to the subject matter hereof. All such agreements shall terminate and
be of no further force or effect.
(d) This Agreement may be executed in any number of counterparts and
by different parties hereto in separate counterparts, with the same effect as if
all parties had signed the same document. All such counterparts shall be deemed
an original, shall be construed together and shall constitute one and the same
instrument.
4
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on their behalf.
deCODE genetics, Inc.
By: /S/ Kari Stefansson
---------------------------
Kari Stefansson, President
5
<PAGE> 6
SIGNATURE PAGE
TO
STOCK PURCHASE AGREEMENT
AND
INVESTOR RIGHTS AGREEMENT
PURCHASER:
By: /s/ Yves Schmit /s/ Carine Bittler
---------------------------------------
Name: Biotek Invest S.A.
Title: Director
Date: June 30, 1999
Address: 41 Avenue de La Gare
L-1611 Luxemburg
Number of Shares Being Purchased: 5,000,000
6
<PAGE> 7
DECODE GENETICS, INC.
ADDENDUM TO STOCK PURCHASE AGREEMENT
This Addendum to Stock Purchase Agreement (this "Addendum"), is made as of
February 24, 2000 (the "Effective Date") by and between deCODE genetics, Inc., a
Delaware corporation (the "Company"), and Biotek Invest, S.A. (the "Purchaser").
PRELIMINARY STATEMENTS
A. On June 30, 1999 the Company and the Purchaser entered into a Stock
Purchase Agreement pursuant to which the Purchaser agreed to purchase from the
Company 5,000,000 shares (the "Series B Shares") of the Company's Series B
Preferred Stock (the "Series B") at a price (the "Original Purchase Price") of
US$7.50 per share.
B. Contemporaneously with the execution of the Stock Purchase Agreement,
the Company and the Purchaser entered into an oral agreement pursuant to which
they agreed that the Original Purchase Price would be increased to $15.00 per
share (the "Adjusted Purchase Price"), with the amount in excess of the Original
Purchase Price (the "Contingent Payment") to be payable only if the Purchaser
were able to sell at least 50% of the Series B Shares at or above the Adjusted
Purchase Price and if the trading price in the Icelandic market, as determined
by agreement of the parties, remained at or above the Adjusted Purchase Price
from the time of such resale to the end of 1999.
C. The Company and the Purchaser further agreed that if the Contingent
Payment became payable, the Company would pay the Purchaser a commission of 7%
on the aggregate Adjusted Purchase Price and the Purchaser would pay the Company
interest at the rate of 6% per annum on the Contingent Payment from the date of
closing of the transaction under the Stock Purchase Agreement (the "Closing
Date"), to the date of payment of the Contingent Payment.
D. On August 8, 1999, the Closing Date, the Purchaser advised the Company
that it had arranged for the sale of at least 50% of the Series B Shares at a
price of $15.00.
E. On December 28, 1999, the Company and the Purchaser agreed that the
trading price in the Icelandic market had remained at or above the Adjusted
Purchase Price from August 8, 1999 through December 28, 1999 and that the
Purchaser would pay the Contingent Payment plus interest but net of commission,
on or before February 25, 2000.
NOW, THEREFORE, the parties hereto, intending to be legally bound, agree as
follows:
1. ADJUSTMENT TO PURCHASE PRICE; PAYMENT OF DEFICIENCY. The parties
hereby confirm that the conditions for the Contingent Payment were satisfied.
The Purchaser has paid the Company the sum of US$ 33,476,712 representing the
Contingent Payment, with interest thereon less the Commission (as defined
herein).
<PAGE> 8
2. COMMISSION. The Purchaser has received a credit against the Contingent
Payment in the amount of US$5,250,000 (the "Commission"), representing 7% of the
total aggregate Adjusted Purchase Price for the Series B Shares.
3. MISCELLANEOUS. This Addendum shall be governed by and construed
under the laws of the State of Delaware as applied to agreements among Delaware
residents made and to be performed entirely within the State of Delaware. Except
as otherwise expressly provided herein, the provisions hereof shall inure to the
benefit of, and be binding upon, the successors, assigns, heirs, executors, and
administrators of the parties hereto. This Addendum, together with the Stock
Purchase Agreement, constitutes the full and entire understanding and agreement
among the parties with regard to the subject matter hereof. This Addendum may be
executed in any number of counterparts, each of which shall be deemed an
original and all of which together shall constitute one instrument. Except as
set forth herein, all terms of the Stock Purchase Agreement remain unchanged and
in full force and effect.
*******
<PAGE> 9
This Addendum to Stock Purchase Agreement is hereby executed to be
effective as of the date first above written.
deCODE genetics, Inc.
Dated: 24.02.2000 By: /s/ Hannes Smarason
Name: Hannes Smarason
Title: Senior Vice President
Biotek Invest, S.A.
Dated: 24.02.2000 By: /s/ Yve Schmidt
Name: Yve Schmit
Title: Director
<PAGE> 1
EXHIBIT 10.34
OFFICER'S CERTIFICATE
I, the undersigned, do hereby certify and represent that:
1. I am the duly elected Senior Vice President and Chief Business
Officer of deCODE genetics, Inc., a Delaware Corporation.
2. Pursuant to Rule 306(a) of Regulation S-T, the following exhibit
10.34 to deCODE genetics, Inc.'s Registration Statement on Form S-1 is a fair
and accurate English translation of a document prepared in the Icelandic
language.
IN WITNESS WHEREOF, I have signed this Officer's Certificate in my
capacity as Senior Vice President and Chief Business Officer of deCODE genetics,
Inc. on this 7th day of March, 2000.
By: /s/ Hannes T. Smarason
--------------------------
Name: Hannes T. Smarason
Title: Senior Vice President and Chief Business Officer
<PAGE> 2
CO-OPERATION AGREEMENT
BETWEEN
AKUREYRI CENTRAL HOSPITAL
AND
ISLENSK ERFDAGREINING EHF.
INTRODUCTION
The Act on Patients' Rights stipulates that medical records shall be preserved
in the health institutions where they are recorded. The Data Protection
Commission, appointed by the Minister of Justice, and the Science Ethics
Committee can, however, grant access to information from medical records,
including biosamples, for purposes of scientific research as defined by law.
Islensk erfdagreining ehf. searches, in co-operation with various scientists,
for genes that contribute to the causes of diseases or symptoms of diseases. The
objective of the Co-operation Agreement between the above parties is to ensure
the swift and efficient execution of research projects and facilitate access to
the information necessary for their completion.
The Akureyri Central Hospital, State Reg. No. 580269-2229, (hereafter referred
to as ACH) and Islensk erfdagreining ehf, State Reg. No. 691295-3549, domiciled
at Lynghals 1, Reykjavik, (hereafter referred to as IE) hereby enter into an
agreement on co-operation in the area of research. This Agreement will provide a
framework for individual research contracts which Islensk Erfdagreining ehf. can
enter into with individual employees or teams employed by ACH regarding further
specified research projects. Such research projects shall always be conducted on
the basis of written contracts, and measures shall be taken to ensure that such
contracts conform in all respects to the provisions of this Co-operation
Agreement.
ACH and IE have therefore entered into the following
Co-Operation Agreement
CHAPTER 1
DEFINITIONS
In this Co-operation Agreement, the following concepts shall have the meaning
set out below:
Surveillance Committee: A committee composed of representatives of ACH and IE,
having the task of monitoring the implementation of this Co-operation Agreement.
Executive Committee: A committee composed of representatives of research parties
and IE, having the task of supervising the execution of individual research
projects.
Research Parties:
I) Employees of ACH participating in the conduct of a research project in
co-operation with IE and/or
II) Other parties participating in the conduct of a research project jointly
with the parties specified under I) above.
Neither ACH nor IE are considered research parties in this sense.
<PAGE> 3
Research Materials: Information on health, including biosamples and all other
clinical information, which has a bearing on the specified research project.
Each research contract shall contain a definition of all relevant research
materials.
Research Contract: A contract between the research parties, on the one hand, and
IE, on the other hand, regarding a particular research project.
Research Project: A research or a part of a research with the participation of
IE, the objective of which is to find genetic factors causing a specific
disease, disease symptoms or a response to treatment.
CHAPTER 2
SCOPE
The provisions of this Co-operation Agreement shall apply to all research
projects for which a specific research contract has been made and relating to a
specified research project in which employees of ACH participate and are granted
access to research materials in the custody of ACH.
A special research contract shall be made in writing between the research
parties and IE for each separate research project. Such contracts shall refer to
the Co-operation Agreement between ACH and IE. Such contracts shall also specify
that no contracts shall take effect, as far as ACH is concerned, until such time
as ACH has confirmed its acceptance by signature. IE undertakes vis-a-vis ACH
not to commence work on a research project until such a contract has been
signed. Under normal circumstances it is understood that ACH will have come to a
decision regarding a contract within four weeks after all necessary documents
have been submitted.
The term of research contracts shall be specified and they shall expire without
express termination at the end of the term. In individual research contracts,
the contracting parties may negotiate a specific mutual period of notice of
termination during the term of the contract.
In the event that the research parties are unable to complete a research project
within the specified time limit or wish to continue work on a research project,
the term of the relevant research contract may be extended by one year at a
time, provided ACH approves such extension.
CHAPTER 3
OBTAINING PERMITS
Under this Agreement, access to research materials preserved by ACH shall be
subject to prior approval by the Science Ethics Committee, appointed by the
Minister for Health and Insurance pursuant to State Regulation No. 449/1997 on
scientific research in the health sector, following comments from ACH's Ethics
Committee. Scientific research shall also be subject to the approval of the Data
Protection Commission, appointed by the Minister of Justice.
<PAGE> 4
CHAPTER 4
SUPERVISION, SURVEILLANCE, AND CONFIDENTIALITY
4.1 Supervision of Individual Research Projects:
The supervision of individual research projects shall be jointly in the hands of
the relevant research parties and IE, which will form an Executive Committee.
Further provisions regarding supervision shall be included in the research
contract.
4.2 Surveillance Committee:
ACH and IE shall appoint a Surveillance Committee, composed of four members, to
monitor the execution of this Co-operation Agreement. Two representatives of
each of the parties to the Agreement shall be appointed to the Committee. Each
party shall also appoint two alternate members to replace committee members in
their absence. The Committee shall normally meet once every month, or as often
as the Committee may decide. Should either of the parties to the Agreement think
there is cause for a meeting, such party may instruct his representatives in the
Surveillance Committee to convene such a meeting. Such a meeting shall be
convened with five days' notice.
4.3 Obligation of IE et al. to Inform
IE undertakes to submit to the Surveillance Committee all contracts made between
IE and employees or teams employed by ACH at the time that such a contract is
made or subsequently employed by ACH. The Surveillance Committee shall have full
access to all research materials of any given research project on which a
research contract has been made.
The Surveillance Committee shall have unlimited access to the accounts of IE
relating to research projects covered by a research contract. The accounts of
each research project shall be kept separate from other accounts of IE. IE
further undertakes to submit to the Surveillance Committee complete information
regarding payments under a research contract, such as regards the sale of a
research project, its results or findings to a third party. The access that ACH
has to the accounts of IE under this Article shall have the purpose of enabling
ACH to preserve its financial interests in its dealings with IE.
IE undertakes to submit to ACH all contracts concluded before this Co-operation
Agreement took effect, between IE and individuals or teams employed by ACH at
the time of, or prior to, the conclusion of such contract. Such contracts shall
be subject to the provisions of this Co-operation Agreement.
Where it is stated in this Agreement that the Surveillance Committee may require
information, access to accounts or research data etc., it shall be assumed that
each representative of ACH in the Surveillance Committees shall have such rights
regardless of the view of other committee members.
4.4 Confidentiality
The representatives of ACH on the Surveillance Committee shall be bound by
complete confidentiality regarding all matters of which they may acquire
knowledge in the course of their work. This applies equally to the contents of
contracts, research plans, results from research, business plans and all other
information that should fairly and reasonably remain confidential in the
interest of IE. Under no circumstances may
<PAGE> 5
the substance of such information be divulged to a third party without the
express permission of IE. The confidentiality obligations of an ACH
representative shall remain effective even if he resigns his employment or this
Agreement is terminated. Directors and employees of ACH who, in the course of
their work, must deal with information of a sensitive nature provided to them by
ACH representatives on the Surveillance Committee, are under the same
obligation.
Confidentiality obligations as defined under this Article apply equally to IE
representatives on the Surveillance Committee with respect to ACH.
CHAPTER 5
THE PAYMENT OF EXPENSES
All expenses incurred by each research project shall be paid by IE. IE shall pay
the additional expenses incurred by ACH in connection with the conduct of a
research project after a research contract has taken effect, i.e. material and
wage costs. This does not apply to administrative expenses of ACH. ACH shall
submit to IE a monthly invoice, which IE undertakes to pay within 10 days of
issue. Payments under this Article shall be considered as expense outlay under
Section 7.3 of this Agreement, and be added to fixed payments, variable payments
and other payments under the same Section 7.3.
CHAPTER 6
TREATMENT OF RESEARCH MATERIALS
Research parties shall have access to necessary research materials in the
custody of ACH for use in a specified research project for which a research
contract has been made, the materials having been defined therein, subject to
compliance with the provisions of law, regulations, government stipulations and
the provisions of this Co-operation Agreement.
Exempt from access under Paragraph 1 of this Article are biosamples that ACH has
collected for other use than described in this Agreement or individual research
contracts. IE shall only be granted access to such biosamples if permitted by
the Board of Directors/Director of the biosample bank in question and the
Director/Medical Director of ACH, and then only to the extent permitted by them
at each time.
The custody of research materials shall conform to the provisions of law at each
time, currently the provisions of Articles 14 and 15 of Act No. 74/1997 on
Patients' Rights. Furthermore, the provisions of Act No. 121/1989 on the
Recording and Handling of Personal Data shall be observed.
IE may not remove from Iceland any research materials defined in a research
contract and provided by ACH for a specified research project.
On the completion of a research project, IE shall within four weeks return all
research materials to ACH that were obtained from that institution. ACH is
entitled to copies of any research materials to which ACH has granted access in
respect of the research project in question. The provisions of this Paragraph
shall remain in effect regardless of the cause of termination of the research
project, whether this is caused by the
<PAGE> 6
expiration of the term of the research contract, cancellation or termination
thereof or other reasons.
CHAPTER 7
RIGHTS OF PARTIES
7.1 Financial Rights to Research Results
Unless otherwise agreed, IE shall become the owner of all financial and
commercial rights over research projects under this Agreement and their results
with due regard, however, to Paragraph 2 of Section 7.3 hereof. IE has the right
to sell results or findings from research projects to a third party, and to
utilise them in any other way consistent with accepted ethical criteria both
before and after the research projects are completed.
7.2 Making of Research Contracts
Employees of ACH intending to enter into co-operation with IE should first
consult with the Medical Director of the hospital.
7.3 Payments to ACH
IE shall pay a fixed proportion and/or a fixed payment out of all funds obtained
on the basis of projects in which the employees of ACH participate according to
research contracts made under this Agreement.
The total amount of payments for research projects shall be negotiated for each
research contract. Each research contract shall provide for fixed annual
payments, reimbursement for expense outlay of ACH from the performance of the
research as stated in Chapter 5 hereof, and a variable payment determined by the
outcome of the research project, results or findings thereof being sold to a
third party. The amount of the variable payment negotiated in each research
contract shall never be lower than 5% of all performance-related payments
rendered by the third party to IE. Individual research contracts may depart from
the above provision on variable payment based on the outcome of the sale of a
research project or results or findings thereof to a third party, provided that
a provision is inserted into the research contract in its place to ensure
payment of amounts which are at least equal to the specified minimum. All
payments under research contracts shall accrue to a special fund in the custody
of ACH.
The total amount of fixed payments, variable payments and other payments as
described in Paragraph 2 of this Section 7.3 shall be used to support scientific
activity within ACH. Payments under Paragraph 2 shall be divided as follows: 25%
shall be allocated to general scientific activity as determined by ACH, and 75%
shall be allocated to scientific activity as decided by the employees who
contributed to the work for which the payments were received. The above manner
of dividing payments shall apply unless otherwise agreed between the employees
in question and ACH.
In the event that individuals or teams employed by ACH enter into a research
contract with IE and a third party not connected with ACH, the manner of
division of payments to each party shall be stipulated in the research contract.
The research contract shall specifically define the grounds on which the
division of payments is decided, and state the arguments behind that division.
Employees of ACH shall not be
<PAGE> 7
considered as third parties not connected with ACH, in the sense defined in this
Co-operation Agreement.
7.4 Treatment Methods based on Research Results
IE undertakes to endeavour in its negotiations with third parties on the
purchase of results or findings of all research projects under this Agreement to
ensure that ACH, for the benefit of its patients, is granted free access to any
methods or pharmaceuticals that the third party may develop on the basis of
results from research projects under this Agreement to prevent, diagnose and
treat disease.
CHAPTER 8
TERM OF THIS AGREEMENT AND TERMINATION
This Agreement shall remain in effect for as long as it is not formally
terminated. Either party to the Agreement may terminate the Agreement with one
year's notice. However, termination of the Agreement does not include research
contracts that have already been made regarding specific research projects and
approved by ACH. Such research contracts may be completed even if this Agreement
has been terminated, provided that the term of such contracts does not exceed 5
years. Individual research contracts, however, may be terminated during their
term of effect, provided that the contracts in question contain provisions for
such termination.
In the event that either party to a research contract is of the opinion that the
other party has violated the provisions of the research contract, that party
shall without delay submit his comments. If the other party has not remedied the
fault within four weeks from receiving the comments, the complaining party may
terminate the research contract with three months' notice. This shall apply
whether the research contract contains provisions for termination or not and
irrespective of the length of any notice of termination that may have been
agreed therein, cf. the provisions of Paragraph 3 of Chapter 2.
Payments which IE has already made or have become due prior to termination
pursuant to Paragraphs 1 and 2 shall be non-refundable from ACH.
CHAPTER 9
DEFAULT AND DEFAULT PROVISIONS
If either party to this Co-operation Agreement is guilty of substantial default,
the other party may cancel the Agreement. Substantial default can, for instance,
refer to non-payment of the agreed payments, improper or unauthorised use of
research materials and unreasonable restrictions of the access of research
parties to research materials of ACH pursuant to this Agreement. Should the
Agreement be cancelled by ACH on the basis of this provision, all research
contracts are thereby cancelled, including those that have been approved by ACH.
Payments which IE has already made or have become due prior to cancellation of
the Agreement shall be non-refundable from ACH. The provisions of Chapter 8 of
this Agreement do not apply to cancellation of this kind. In the event of any
dispute regarding a party's right to cancel the Agreement, the settlement
procedure for such disputes shall be in accordance with the provisions of
Chapter 12.
Should IE cease research during the term of a research contract, or events or
circumstances cause research under such contract to halt or cease, the research
<PAGE> 8
contract shall be regarded as terminated. Such an event or circumstance may, for
example, consist of the discovery that normal progress and continuous research
under a given research contract is halted for a minimum of 6 months. All
provisions of the research contract, including the provisions regarding
limitations imposed on co-operation between the relevant employees of ACH and
third parties, will then become null and void.
CHAPTER 10
LIABILITY FOR DAMAGES
As it is not a commercial enterprise, ACH exempts itself from any kind of
liability for damages that may arise as a result of this Agreement, research
contracts made on the basis of this Agreement or any other event that may arise
as a result of co-operation between the parties to this Agreement. This
exemption covers all events and circumstances that may lead to ACH becoming
liable for damages. The reasons for such liability, e.g. errors, defects,
information leak, improper use of research materials, injuries, actions or
behaviour of employees etc., are irrelevant in this context.
CHAPTER 11
OTHER ITEMS
11.1 This Agreement is non-transferable
This Agreement, or any right thereunder, is non-transferable except by consent
of both parties thereto.
11.2 Scientific and Commercial Responsibility
ACH is in no way responsible for the achievement of any scientific or commercial
objectives of individual research projects.
11.3 Court Decisions - Amendments of Legislation
If any amendments to legislation are made or court decisions are passed that in
any way disrupt the premises or basis on which contracts are made, the parties
thereto shall review the existing contracts for the purpose of bringing them
into conformity as necessary.
11.4 On the Publication of Research Results
Research results shall be published as soon as they comply with academic
requirements and are fit for publication. However, IE may postpone publication
for a maximum of 90 days in order to ensure that there will be enough time to
secure the property rights relating to any inventions that may be produced by
research. In the event that a third party requests that IE does not publish
results when ready as described above, publication may be postponed for a
maximum of 90 days.
11.5 Treatment of Samples etc.
This Agreement in no way limits ACH's right to send samples or other materials,
within Iceland or abroad, for research etc, or to take normal action to diagnose
diseases and provide patients with service as necessary at each time. This shall
apply even if a research contract has been made between IE and certain employees
of ACH regarding the same diseases or comparable disease symptoms, and such
contract has been approved by ACH.
<PAGE> 9
11.6 Limitations on Co-operation under Research Contracts
Provisions in individual research contracts entered into by individuals or teams
employed by ACH that stipulate limitations regarding co-operation with third
parties in searching for the genetic factors of diseases under the relevant
research contracts entail no obligations of any kind for ACH.
Provisions in individual research contracts, entered into by individuals or
teams employed by ACH, that stipulate limitations regarding co-operation with
third parties in circumstances when a contract on the sale of a research project
has been concluded confer no obligations of any kind upon ACH.
The fact that individual research contracts are signed by ACH does not in any
way alter the substance of Paragraphs 1 and 2.
CHAPTER 12
SETTLEMENT OF DISPUTES
12.1 Settlement of Disputes
In the event of a dispute between the parties to this Agreement regarding
performance or compliance of the Agreement that cannot be resolved by the
Surveillance Committee, two persons, one from each party, shall endeavour to
reach a settlement. If a settlement is not reached between those two persons
within two weeks of the submission of the dispute, each party to the Agreement
shall appoint one arbitrator and then jointly request the appointment of an
impartial third arbitrator by the District Court of Reykjavik to assist in the
resolution of the dispute, thus forming a tribunal of three arbitrators. The
arbitration tribunal shall reach a decision in the matter within three months
from the full appointment of the tribunal. The tribunal shall determine the cost
of the work of the tribunal at each time. The work, procedure and rulings of the
arbitration tribunal shall otherwise be governed, as appropriate at any time, by
Act No. 53/1989 on Contractual Arbitration.
Notwithstanding the above provisions on arbitration, cases involving the
collection of payments under this Agreement which are not in dispute between the
parties may be submitted to the public courts. The same applies to cases of
financial claims made by one party against the other, based on rulings of the
arbitration tribunal regarding default or breach by the latter of this
Agreement. Such cases shall be submitted to the District Court of Reykjavik.
Interim Provisions
IE undertakes, immediately upon the signing of this Agreement, to initiate a
revision of all research contracts made on individual research projects under
this Agreement for the purpose of bringing their provisions on terms of payment
into conformance with the provisions of Section 7.3 of this Agreement, and in
other ways adapting them to the provisions of this Agreement. This revision
process shall be completed within approximately three months from the signing of
this Agreement. All research contracts shall then be submitted to ACH for
approval pursuant to the provisions of Chapter 2 hereof.
<PAGE> 10
REYKJAVIK, 26 OCTOBER 1999
For Akureyri Central Hospital For Islensk erfdagreining ehf.
Halldor Jonsson [sign.], Director Kari Stefansson [sign.], President
Thorvaldur Ingvarsson [sign.], Kristjan Erlendsson [sign.],
Medical Director VP for Clinical and Academic
Collaborations
<PAGE> 11
DECLARATION
The Akureyri Central Hospital and Islensk erfdagreining ehf. hereby confirm the
following understanding of the provision of Clause 3 of Paragraph 2 of Section
7.3. in the Contract between the parties:
The provision of the above Clause on variable payment to the Akureyri Central
Hospital in relation to the sale of a research project, results or findings
thereof to a third party shall be based on performance-related payments from a
project purchaser to Islensk erfdagreining ehf. Performance-related payments
shall be paid when milestones, as further specified in the contract between
Islensk erfdagreining and the project purchaser, are achieved.
Reykjavik, 26 October 1999
HALLDOR JONSSON [SIGN.] KARI STEFANSSON [SIGN.]
For Akureyri Central Hospital For Islensk erfdagreining ehf.
<PAGE> 1
EXHIBIT 10.35
NONRECOURSE PROMISSORY NOTE
$1,462,240 Reykjavik, Iceland
15 September 1999
FOR VALUE RECEIVED, the undersigned hereby unconditionally promises to
pay to the order of deCODE genetics, Inc., a Delaware corporation (the
"Company"), at the Company's principal office or at such other place as the
holder hereof may designate in writing, on 1 November 2003, in lawful money of
the United States of America and in immediately available funds, the total price
of $1,462,240 Dollars, together with interest, compounded annually, from the
date hereof on the unpaid principal at the rate of 6% per annum.
This Note may not be prepaid.
The full amount of this Note is secured by a pledge of shares of Common
Stock of the Company, and is subject to all of the terms and provisions of the
Early Exercise Stock Purchase Agreement and the Pledge Agreement, each of even
date herewith between the undersigned and the Company. The Company's recovery
against the undersigned for failure to pay any amount owing hereunder when due
shall be limited solely to the shares of Common Stock or other collateral of the
undersigned pledged to the Company in the Pledge Agreement. The undersigned
shall not be liable or have any personal liability in any other respect for the
payment of any amount due under this Note.
The undersigned hereby represents and agrees that the amounts due under
this Note are not consumer debt, and are not incurred primarily for personal,
family or household purposes, but are for business and commercial purposes only.
The undersigned hereby waives presentment, protest and notice of
protest, demand for payment, notice of dishonor and all other notices or demands
in connection with the delivery, acceptance, performance, default or endorsement
of this Note.
-1-
<PAGE> 2
This Note shall be governed by, and construed, enforced and interpreted
in accordance with, the laws of the State of Delaware, excluding conflict of
laws principles that would cause the application of laws of any other
jurisdiction.
/s/ Hannes Smarason
----------------------------------------------
(signature)
Hannes T. Smarason
----------------------------------------------
(print name)
-2-
<PAGE> 1
EXHIBIT 10.36
OFFICER'S CERTIFICATE
I, the undersigned, do hereby certify and represent that:
1. I am the duly elected Senior Vice President and Chief Business
Officer of deCODE genetics, Inc., a Delaware Corporation.
2. Pursuant to Rule 306(a) of Regulation S-T, the following exhibit
10.36 to deCODE genetics, Inc.'s Registration Statement on Form S-1 is a fair
and accurate English translation of a document prepared in the Icelandic
language.
IN WITNESS WHEREOF, I have signed this Officer's Certificate in my
capacity as Senior Vice President and Chief Business Officer of deCODE genetics,
Inc. on this 7th day of March, 2000.
By: /s/ Hannes T. Smarason
--------------------------
Name: Hannes T. Smarason
Title: Senior Vice President and Chief Business Officer
<PAGE> 2
[NOTE: CERTAIN PORTIONS OF THIS DOCUMENT HAVE BEEN MARKED TO INDICATE THAT
CONFIDENTIALITY HAS BEEN REQUESTED FOR THIS CONFIDENTIAL INFORMATION. THE
CONFIDENTIAL PORTIONS HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.]
RESEARCH CONTRACT ON THE CO-OPERATION OF
A RESEARCH TEAM FOR CEREBRAL HAEMORRHAGE
AND
ISLENSK ERFDAGREINING EHF
A research team for cerebral haemorrhage, on the one hand, hereinafter referred
to as the Research Team, and, on the other hand, Islensk erfdagreining ehf.,
hereinafter referred to as IE, enter into the following
Contract
on co-operation on the research of the inheritability of cerebral haemorrhage.
This Contract is made on the basis of the Co-operation Agreement between the
Reykjavik Municipal Hospital and IE from 4 November 1998 and the Co-operation
Agreement between the State Hospitals and IE from 15 December 1998, the two of
which shall prevail over this Contract in case of any discrepancy between their
individual provisions.
CHAPTER 1
THE SUBSTANCE OF THE CO-OPERATION
The Research Team and IE agree to co-operate, on the basis of this Contract, in
the search and isolation of genes involved in the genesis of cerebral
haemorrhage. The co-operation between the parties will hereinafter be referred
to as the Research Project.
CHAPTER 2
CONTRIBUTIONS OF THE PARTIES TO THE RESEARCH PROJECT
2.1 RESEARCH MATERIALS AND THEIR PROCUREMENT
The Research Team shall provide biosamples (blood samples), other clinical data
and research materials which the Research Team may already possess or have
access to, in relation to patients suffering from cerebral haemorrhage and their
relatives. These materials derive from the National Association for the
Prevention of Heart Diseases, Hjartavernd, (hereinafter referred to as NAPHDH),
the State Hospitals (hereinafter referred to as SH) and the Reykjavik Municipal
Hospital (hereinafter referred to as RMH). The Research Team and IE agree that
expertise and other contributions from the above institutions are equally
important in terms of quality and significance for the Research Project.
The Research Team shall supervise relations with individuals intended to
participate in the research and/or their legal guardians, including calling in
participants for blood testing, diagnoses, examination of participants and the
procurement of the informed consent of participants. IE, on the one hand, and
the Research Team and individuals within the Team, on the other hand, undertake
to do whatever is in their power so that the procurement of research materials
pursuant to this paragraph shall proceed with expedience and safety. In this
respect, account shall be taken of the Research Plan, which includes milestone
dates and is attached to this Contract as Annex A ("Research Plan and Cost
Estimation for the Research of IE and the Research Team on Cerebral
Haemorrhage"). Annex A shall specify which research materials are
<PAGE> 3
intended for use in the research and from which health-care institutions these
materials derive. All research materials delivered to the IE research laboratory
shall first be encrypted at the Genetic Research Service Centre, a private
institution domiciled at Noatun 17, Reykjavik, before being transported to IE,
in accordance with the instructions of the Data Protection Commission.
2.2. EXPERTISE, EQUIPMENT AND RESEARCH FACILITIES
The Research Team shall provide expertise and knowledge in relation to the
diagnosis of diseases as well as the design and organisation of the Research
Project.
IE and the Research Team shall provide expertise for the design and organisation
of the research. IE shall also be responsible for the research and testing of
blood samples and genetic material, the assessment of the inheritance of the
disease and the interpretation of the findings of the research. IE shall provide
equipment, research resources, laboratory reagents and personnel for these
purposes.
2.3. PAYMENT OF RESEARCH EXPENSES
IE shall cover all expenses of the Research Project necessary to achieve the
objectives of the Project, including materials and wage costs in relation to
calling in participants for research, necessary sampling and the procurement of
clinical materials. The Research Team and IE shall jointly submit a
comprehensive budget on signature of this Contract, in which the projected
materials and wage costs of the Project are estimated, see Annex A. Annex A
shall also further delineate the itemisation of individual cost items and the
manner in which the procurement of consent and the payment of bills shall be
conducted. In the event of direct cash outlay on the part of SH/RMH in relation
to the conduct of this Research Project, IE and SH/RMH shall make a special
agreement on the payment of such cost, cf. the Institutions Agreement.
SH and RMH may request information from IE on wages paid by IE to individual
employees of these institutions working on the Research Project.
2.4. ASSISTANCE WITH THE PROCUREMENT OF A PATENT
The Research Team and individuals within the Team undertake to provide IE with
the assistance necessary to enable IE to ensure international patent protection
of the findings of the Research Project, by signing applications for patents
together with IE when necessary, provided that IE pays all expenses in relation
to patent protection.
CHAPTER 3
RIGHTS OF THE PARTIES
3.1. THE RIGHTS OF HEALTH-CARE INSTITUTIONS
The parties to this Contract are aware that a framework agreement on
co-operation between NAPHDH and IE on research on the inheritability of certain
diseased is currently in effect. The provisions of the framework agreement
between NAPHDH and IE are valid for the part of the Research Project involving
NAPHDH. The parties to this Contract are also aware that identical co-operation
agreements between, IE, on the one hand, and SH and RMH, on the other hand,
(hereinafter referred to as the Institutions Agreement(s)) are currently in
effect. The Institutions Agreements are attached to this Research Contract as
Annex B (SH) and C (RMH). The provisions of
2
<PAGE> 4
the Institutions Agreements shall be valid for this Research Agreement, where
applicable, as regards the part of the research involving SH/RMH and their
staff.
3.2. FINANCIAL AND COMMERCIAL RIGHTS ATTACHED TO THE FINDINGS OF THE RESEARCH
PROJECT
IE shall be sole owner of all financial and commercial rights attached to the
Research Project and its results. IE shall have the right to sell the results
and findings of the Research Project to a third party and utilise it financially
in any other way consistent with approved ethical standards, irrespective of
whether this takes place before or after the completion of the Research Project.
deCODE shall never be considered the purchaser of the Project in the
understanding of this Contract.
IE and its parent company, deCODE genetics Inc. (herinafter referred to as
deCODE) have made a contract with the Swiss pharmaceutical company Hoffman
La-Roche (hereinafter referred to as the Purchaser) on the sale of the Research
Project, its results and findings.
3.3. FIXED PAYMENTS FROM IE TO THE RESEARCH TEAM IN RELATION TO THE SALE OF THE
RESEARCH PROJECT
IE shall pay the Research Team [CONFIDENTIAL TREATMENT REQUESTED] on the
effective date of this Contract. Also, IE shall pay [CONFIDENTIAL TREATMENT
REQUESTED] on 1 July 1999, the same amount on 15 March 2000 and annually
thereafter until a total of [CONFIDENTIAL TREATMENT REQUESTED] have been paid
including the initial payment.
Thus, payments from IE to the Research Team under this chapter shall take place
on the following payment dates:
[CONFIDENTIAL TREATMENT REQUESTED]
In the event that the Research Project ends before 15 March 2002, upon achieving
its objective, IE shall pay the remaining amount so that a total of
[CONFIDENTIAL TREATMENT REQUESTED] shall have been paid pursuant to this
chapter. Payments pursuant to this chapter are additional and independent to
conditional, performance-related payments under Chapter 3.4.
3.4. PERFORMANCE-RELATED PAYMENTS FROM IE IN RELATION TO THE SALE OF THE
RESEARCH PROJECT
IE/deCODE have made an agreement with the Purchaser of the Project to the effect
that the Purchaser shall pay special conditional payments to IE/deCODE which
shall be totally dependent on the scientific and practical results achieved in
the performance of the Research Project. The performance-related milestones
which activate the Purchaser's obligation to pay have been further specified in
the contract between IE/deCODE and the Purchaser. In the event that the above
milestones are not achieved, no payments pursuant to this chapter shall be made.
3
<PAGE> 5
IE will pay the Research Team [CONFIDENTIAL TREATMENT REQUESTED] of the
performance-related payments from the Purchaser to IE/deCODE pursuant to
Paragraph 1 if success is achieved. Other payments from the Purchaser to
IE/deCODE in relation to the repayment of the cash outlay of IE for the Research
Project, as defined in the contract between IE and the Purchaser, and the
Purchaser's investment in IE or deCODE shall be paid in full to IE/deCODE.
IE shall report to the Research Team as soon as the Purchaser has confirmed that
a milestone which activates the Purchaser's obligation to pay has been achieved.
IE promises to pay the share of the Research Team in the performance-related
payment as soon as such payment has been delivered to IE/deCODE. The Research
Team may appoint a special auditor who has access to the accounts of IE/deCODE
regarding milestone payments concurrently with the quarterly statement of the
companies, in order to seek confirmation whether and when a milestone payment
was obtained for the Research Project as well as of the amount of that payment.
3.5. PROVISO ON CO-OPERATION WITH RESEARCH PARTIES UNRELATED TO THE RESEARCH
TEAM
The Research Team's right of receiving payments pursuant to Chapters 3.3 and 3.4
is based on the assumption that IE will not pay other parties than the Research
Team and its related institutions which employ individual parties within the
Research Team for contribution to the Research Project and expertise to which it
is necessary to gain access for the achievement of the objectives of the
Research Project in the view of the Executive Committee of the Project. If the
Executive Committee is of the opinion that it is necessary to enter into
co-operation with other parties pursuant to the above, the provisions of
Chapters 3.3. and 3.4. shall be reviewed on the basis that the total payments
from IE to the Research Team and/or institutions related to them, on the one
hand, and a third party, on the other hand, shall remain unchanged from the
payments described in Chapters 3.3 and 3.4.
3.6. THE ARRANGEMENT OF PAYMENTS FROM IE AND THE INTERNAL DIVISION OF PAYMENTS
BETWEEN PARTIES WITHIN THE RESEARCH TEAM
All payments from IE to the Research Team pursuant to Chapter 3.3. and 3.4. of
this Contract shall be divided and paid as follows, cf. the provisions of
Chapter 7.3. of the Institutions Agreement and the provisions of the
Institutions Agreement in other respects, cf. also the framework agreement
between IE and NAPHDH. The following division of payments is based on an
agreement between the parties to this Contract and their evaluation of the
importance of each party's contribution to the Research Project. According to
the above, the division of payments shall be proportioned as follows:
[CONFIDENTIAL TREATMENT REQUESTED]
The above division of payments shall not be binding for IE until such time as
all health-care institutions which contribute materials for the research have
confirmed this Contract in signature, cf. Paragraph 2 of Chapter 2 of the
Institutions Agreement as regards SH and RMH. The institutions in question shall
invoice IE for payments
4
<PAGE> 6
pursuant to Chapter 3.3. which shall be paid in accordance with the provisions
of the Institutions Agreements which have been made between IE/deCODE, on the
one hand, and SH/RMH, on the other hand. The same rules shall apply in relation
to payments to NAPHDH.
The following paragraph only applies to the allocation of funds raised by
parties within the Research Team who are employed by SH/RMH when this Contract
is made.
All funds raised by SH/RMH staff within the Research Team pursuant to the
provisions of Chapters 3.3. and 3.4. of this Contract the application of which
is governed by such staff pursuant to the Institutions Agreement and further
agreement with the institution in question shall be utilised for the research of
cerebral haemorrhage and other nervous diseases. Further arrangement of the
custody and application of the above funds within the scope of the Institutions
Agreement shall be pursuant to a further agreement between the institution and
staff in question and is of no consequence to IE. All funds raised by SH/RMH
staff pursuant to the above shall be preserved in a research fund. The
accounting and financial matters of the fund shall be supervised by SH/RMH each
of which shall have one member on the board of directors of the fund.
CHAPTER 4
MANAGEMENT AND LIABILITY
Decisions relating to the performance of the Research Project shall be made
jointly by the Research Team and IE. A special Executive Committee shall be
established, which shall be composed of an equal number of members from each
party to this Contract, to draw up rules on the arrangement, surveillance and
performance of the Research Project. The Chief Supervisor of the Research
Project shall be elected from among the members of the Executive Committee.
It shall also be the responsibility of this Committee to define the objectives
of the Research Project and set forth the professional requirements which the
parties to this Contract agree to be satisfactory for the performance of the
Research Project.
Decisions on incurring expenses in relation to the Research Project shall be
submitted in advance and confirmed by the Executive Committee. When applicable,
the Executive Committee may enter into agreements with health-care institutions
on the use of the their manpower and facilities for performing individual tasks
in relation to the clinical part of the Research Project. In November each year
the Executive Committee shall prepare a budget for the clinical part of the
Research Project in the following calendar year.
The Executive Committee shall supervise the processing of data and the
publication of conclusions in accordance with the rules of Chapter 5.
The Research Team and individuals within the Team shall not be financially
responsible to IE or parties with which IE has entered into an agreement as
regards the achievement of the scientific, commercial or financial objectives of
the research.
5
<PAGE> 7
In the event that a third party causes a cancellation of the research or the
Contract is terminated for reasons for which the Research Team is not
responsible, the Research Team and individual parties within the Team shall not
be financially responsible to IE for such cancellation of the project. The same
applies if the research or research plan needs to be altered owing to legal
amendments, regulations or the decisions of public authorities.
IE shall pay the cost of procuring liability insurance for individuals within
the Research Team who are employed by SH/RMH when this Contract takes effect as
well as the Research Team staff. This applies to all work undertaken by these
parties in the interest of the Research Project.
CHAPTER 5
HANDLING, PROCESSING AND COMMUNICATION OF INFORMATION
The parties to this Contract undertake to maintain all personal information in
confidence. The parties to this Contract undertake to comply with the
instructions of the Data Protection Commission and, as applicable, the special
representative (inspector) of the Data Protection Commission on the handling and
processing of such data, as well as with the instructions and conditions of the
Science Ethics Committee, which operates pursuant to the Act on Patients'
Rights.
When individual participants are elected for participation in two or more
research projects undertaken by IE, original research materials (i.e.
biosamples) may be used for the benefit of all projects, on the condition that
the permits of the Data Protection Commission and the Science Ethics Committee
have been obtained for such shared use.
The approval of the Executive Committee is a prerequisite, in addition to the
permits of the Data Protection Commission and the Science Ethics Committee, if
the original research materials are to be used in their entirety or to a
considerable extent in other research projects of IE, e.g. if the material of
two or more research projects is merged into a new research.
The results of the Research Project shall be immediately published as soon as
they fulfil scientific requirements and are fit for publication. However, IE or
the Purchaser of the Project may have the publication of the results postponed
for 90 days, if necessary to ensure patents and other rights of ownership
related to the findings of the Project. However, an effort shall be made at all
times to preserve the value of the findings by way of other measures than a
postponement of publication for 90 days.
The Executive Committee of the Research Project shall decide in advance who
shall be Chief Supervisor of the Project. As a rule, the first cited author of
scientific articles shall be Chief Supervisor. The order of authors shall be in
accordance with current rules in the international scientific community.
The parties to this Contract promise mutual confidentiality as regards
information in relation to the substance of this Contract, business plans, the
progress of the Project and its conclusions. Information of this kind may not be
communicated to an outside party without the consent of both parties.
6
<PAGE> 8
CHAPTER 6
LIMITATION ON CO-OPERATION WITH OTHER PARTIES
The Research Team and individuals within the Team promise to work neither
jointly nor separately with other parties on research into the inheritability of
cerebral haemorrhage during the Research Project. In the event that the Research
Project leads to a discovery which has financial significance for IE, the
Research Team and individual parties within the Team promise not to enter into
co-operation with other parties on the part of the Research Project which led to
the discovery for four years and six months immediately following the conclusion
of the Project pursuant to this Contract. On the other hand, if the Research
Project does not lead to a discovery, the Team and individual parties within it
have the right to enter into co-operation with other parties on research into
the inheritability of cerebral haemorrhage after the Research Project has ended.
IE promises not to begin collaboration with other parties in the research of the
inheritability of cerebral haemorrhage during the Research Project, unless the
Executive Committee considers such collaboration necessary to achieve the
objective of the Research Project. In the event that the addition of new
co-operating parties to the Research Project is considered necessary, the
Executive Committee shall be in charge of the selection of such a party. In the
event of a dispute within the Executive Committee, the Research Team shall have
the final decision on the selection of additional co-operating parties. The
provisions of this Paragraph shall not, however, prevent IE from collaborating
in the field of the Research Project with parties that have negotiated the
purchase of the Research Project, its conclusions or findings, provided that
such actions do not reduce the right to payments pursuant to Chapter 3.
CHAPTER 7
TERM OF THE CONTRACT AND PROJECT COMPLETION
The effective date of this Contract shall be the date (referred to herein as the
effective date) on which this Contract has been both signed by the parties to
the Contract and confirmed by SH and RMH in accordance with Paragraph 2 of
Chapter 2 of the Institutions Agreement, in addition to NAPHDH.
The Research Project shall have a duration of five years and six months
immediately following 15 March 1998, unless completed before such time. Pursuant
to the above, the termination of the project shall be 15 September 2003. If
either party has materially defaulted on the Contract, the other party may
terminate the Contract. In the event of a dispute on the right of the parties to
terminate the Contract, the settlement procedures regarding such dispute shall
be pursuant to Chapter 8.
The return of original materials from SH/RMH/NAPHDH on completion of the
Research Project shall be pursuant to Paragraph 5 of Chapter 6 of the
Institutions Agreement or comparable provisions of the framework agreement
between IE and NAPHDH.
In the event that either or both parties see reason to continue the co-operation
after the completion of the Research Project, an agreement shall be made to this
effect.
7
<PAGE> 9
Notwithstanding the cessation of the research pursuant to this Contract, whether
as a result of the completion, cancellation or termination of the Project, the
obligation of IE/deCODE to effect payments pursuant to Chapter 3.4. shall remain
intact until the right of IE /deCODE to payments from the Purchaser is cancelled
each time, e.g. when a patent expires.
CHAPTER 8
SETTLEMENT OF DISPUTES
In the event of a dispute between the parties to this Contract regarding
performance or compliance that cannot be resolved by the Executive Committee,
two persons, one from each party, shall endeavour to reach an agreement on its
settlement. If a settlement is not reached between those two persons within two
weeks of the submission of the dispute, each party to the Contract shall appoint
one arbitrator and then jointly request the appointment of an impartial third
arbitrator by the District Court of Reykjavik to assist in the resolution of the
dispute, thus forming a tribunal of three arbitrators. The arbitration tribunal
shall reach a decision in the matter within one months from the appointment of
the third arbitrator.
The cost of the work of the tribunal shall be determined by the tribunal at each
time. The work, procedure and rulings of the arbitration tribunal shall
otherwise be governed, as appropriate at any time, by Act No. 53/1989 on
Contractual Arbitration.
Notwithstanding the above provisions on arbitration, cases involving the
collection of payments under this Contract which are not in dispute between the
parties may be submitted to the public courts. The same applies to cases of
financial claims made by one party against the other, based on rulings of the
arbitration tribunal regarding non-performance or breach by the latter of this
Contract. Such cases shall be submitted to the District Court of Reykjavik.
TEMPORARY PROVISION
This Contract shall not take effect until it has been confirmed in signature by
SH and RMH, in accordance with the provisions of Paragraph 2 of Chapter 2 of the
Institutions Agreement, in addition to NAPHDH.
8
<PAGE> 10
This Contract, which comprises 8 chapters on 9 pages, in addition to appendices
A-D, is made in two identical copies, one copy to be held by each of the parties
to the Contract.
Reykjavik, 3 November 1999.
On behalf of the Research On behalf of Islensk Erfdagreining ehf.
Team for Cerebral Haemorrhage
<TABLE>
<CAPTION>
<S> <C>
Einar Mar Valdimarsson [sign.] Kari Stefansson [sign.]
Physician, RMH CEO, IE
Finnbogi Jakobsson [sign.] Kristjan Erlendsson [sign.]
Physician, RMH VP for Clinical and Academic Collaborations
Gisli Einarsson [sign.]
Physician, SH
Gudmundur Porgeirsson [sign.]
Physician NAPHDH
Sigurlaug Sveinbjornsdottir [sign.] Approved on behalf of the National
Physician, SH Association for the Prevention of Heart
Diseases, Hjartavernd
Uggi Agnarsson [sign.] Reykjavik, 4/11/99
Physician, NAPHDH
Gunnar Sigurdsson [sign.]
Vilmundur Gudnason [sign.]
Physician, NAPHDH Approved on behalf of SH
- --------------------------------- Reykjavik,
Certified that the above is a Magnus Petursson [sign.]
faithful English translation of
a signed Icelandic document
- ---------------------------------
Approved on behalf of RMH
Reykjavik,
Magnus Petursson [sign.]
</TABLE>
9
<PAGE> 1
EXHIBIT 10.37
OFFICER'S CERTIFICATE
I, the undersigned, do hereby certify and represent that:
1. I am the duly elected Senior Vice President and Chief Business
Officer of deCODE genetics, Inc., a Delaware Corporation.
2. Pursuant to Rule 306(a) of Regulation S-T, the following exhibit
10.37 to deCODE genetics, Inc.'s Registration Statement on Form S-1 is a fair
and accurate English translation of a document prepared in the Icelandic
language.
IN WITNESS WHEREOF, I have signed this Officer's Certificate in my
capacity as Senior Vice President and Chief Business Officer of deCODE genetics,
Inc. on this 7th day of March, 2000.
By: /s/ Hannes T. Smarason
---------------------------
Name: Hannes T. Smarason
Title: Senior Vice President and Chief Business Officer
<PAGE> 2
LEASE
1. MAIN ITEMS OF THE LEASE
1.01. Lessor: the Computer Centre of the Icelandic Savings Banks, State Reg.
No. 700389-1119, domiciled at Hlidarsmari 19, Kopavogur.
1.02. Lessee: Islensk erfdagreining ehf., State Reg. No. 691295-3549,
domiciled at Lynghals 1, Reykjavik.
1.03. Leased property: office space at Hlidarsmari 19, Kopavogur. The leased
property is 138.5 square metres on a mezzanine floor over the third
storey, marked as 03-03. The leased property is 148.3 square metres,
but a 10-square metre ventilation room is excluded.
1.04. Activities: development work.
1.05. Period of lease: 18 months.
1.06. First date of Lease: 1 December 1999.
1.07. Final date of Lease: 1 June 2001.
1.08. Type of Lease: temporary.
1.09. Terms of Lease: Monthly payments of ISK 800 per square metre.
1.10. Share in common cost: 4.95% of the total cost of the building. The cost
of electricity is collected according to estimated use (a certified
electrical contractor of the building is preparing a plan for this
purpose).
1.11. Place of lease and other payments: to the account of the Computer
Centre of the Icelandic Savings Banks No. 1100-26-2600 at Icebank Ltd.
1.12. Surety for lease payments and the payment of shared costs: a surety
bond in the amount of ISK 330,000.
2. TYPE OF LEASE
2.1 By this Lease, which constitutes a temporary lease pursuant to the
Leasehold Act No. 36/1994, the Lessee leases the leased property under
the conditions and terms further specified herein. The period of lease
shall begin on 24 November 1999 and end without specific termination or
notice on 24 May 2001. Following this period, the parties may extend
the Lease by three months at a time.
<PAGE> 3
3. LEASE AMOUNT AND PAYMENT
The rent for the leased property is ISK 110,800 per month. The rent
shall be adjusted in accordance with changes in the consumer price
index, on the basis of the base index of November 1999, i.e. 193.3
points.
Payments on the lease shall be effected on the first date of each
month, and are payable one month in advance at each time. In the event
that the Lessee does not effect payment on the rent within seven days
from the due date, he shall pay the maximum punitive interest permitted
by law for the amount outstanding until the date on which payment is
made.
4. SURETY TO THE LESSOR
For the surety of payments of the lease, cost or possible damage caused
to the premises by the Lessee or persons representing the Lessee, the
Lessee shall submit a bill of exchange as a surety bond in the amount
of ISK 330,000. The bill of exchange shall be issued and accepted by
Islensk erfdagreining ehf.
5. OPERATING COSTS
5.1 The Lessee shall pay the cost of the leased property as regards the use
of hot and cold water as well as electricity. The Lessee shall pay the
cost of cleaning the leased property and a share in the cost of
cleaning the common area, cf. Article 1.10. Also, the Lessee shall pay
costs in relation to the clearing of snow, in proportion with the share
of the leased property in the area surrounding the premises.
5.2 The Lessee shall pay all real property charges on the leased property,
including sewage charges and special tax on business premises, outdoor
space rent, fire insurance and home-owner's insurance.
5.3 Operating costs which the Lessor pays for the Lessee shall be paid by
the Lessee on his receipt of an invoice from the Lessor. In the event
that the Lessee pays operating cost which should be paid by the Lessor,
the Lessee may deduct such cost from the next lease payment.
6. ALTERATIONS OF THE LEASED PROPERTY
6.1 The Lessee may not make changes to the premises, except with the
written approval of the Lessor. The Lessor shall oppose alterations by
the Lessee only with good reason. Such reasons include effect of the
alterations on the appearance, carrying capacity, common area or use of
the building.
Minor repairs of the leased property, such as in relation to detachable
fixtures, partition walls, wall ornaments etc. do not require the
approval of the Lessor.
All of the above alterations by the Lessee shall be at his own expense,
including costs which may fall on the Lessor, other owners or lessees
as a result of such alterations or their approval.
2
<PAGE> 4
6.2 All fixtures resulting from alterations shall become the property of
the Lessor at the end of the lease period, unless the Lessor requests
that the Lessee restore the leased property, in its entirety or in
part, to its former condition.
7. MAINTENANCE OF THE LEASED PROPERTY
7.1 The Lessee has inspected the leased property thoroughly and made no
comments. The premises are clean, window panes are intact, and locks,
switches, lavatory facilities, water pipes and drainage pipes are in
good order. The Lessor is not under any obligation to make any changes
to the premises, nor paint or repair it. No inspection of the leased
property shall be carried out, unless such inspection is requested by
either party within one week, at the latest, of the first day of this
Lease. On receipt of the leased property, the Lessee acknowledges that
the leased property is suitable for the activities for which it is
leased, and that it is in a good condition and well maintained.
7.2 The Lessee undertakes to treat the leased property with care and in
accordance with its agreed use.
The Lessee shall at his own cost perform all maintenance of the
specified leased property, including paintwork and repair of locks,
faucets, electrical connections, fixtures etc.
In the event that the leased property or its appurtenances are damaged
by the Lessee, staff or other persons which the Lessee has granted use
of or access to the premises, the Lessee shall make arrangements to
compensate for the damage as soon as possible. If the Lessee neglects
his obligations in this respect, the Lessor may request repair of the
damage at the expense of the Lessee. The Lessor shall seek the opinion
of the municipal building inspector before having the repair carried
out, and obtain the inspector's approval of the cost when the repair
has been completed.
7.3 When the lease period has ended, the Lessee shall return the leased
property to the Lessor together with its appurtenances in the same
condition as he received it. The Lessee bears unlimited liability for
the compensation of all deterioration and damage to the premises, in so
far as such deterioration or damage is not a normal consequence of its
agreed or ordinary use.
7.4 Both parties may request inspection of the leased property at the
beginning and end of the lease period. The parties shall pay equal
shares in the cost of the inspection, unless either party is obviously
the cause of the dispute according to the arbitrator's claims.
7.5 The Lessee shall be responsible for outdoor maintenance as well as the
maintenance of the common area, including the lift; furthermore, the
maintenance of windows from the outside, electrical installations and
pipes to the premises used by the Lessee alone. In the event that the
Lessee is responsible for the need for repairs to any of the above, he
shall pay the cost of such repair.
3
<PAGE> 5
7.6 In the event that the Lessee considers the maintenance by the Lessor
inadequate, the Lessee shall request that the Lessor make improvements
and outline in which respect improvements are needed in his opinion.
7.7 Maintenance personnel of the Lessor shall be granted the necessary
access to the leased property during repair work. The Lessor shall take
measures to minimise the disturbance caused to the Lessee by the
repair.
8. USE OF THE LEASED PROPERTY
8.1 The Lessee may use the leased property as an office. He may not use the
leased property in any other manner, except with the approval of the
Lessor. However, the Lessor shall not obstruct other use of the
premises by the Lessee if such use affects neither the Lessor nor other
parties operating in the building.
8.2 The Lessee may not engage in any activities or store any such items in
the leased property which may cause damage to the Lessor or other
parties, or contravenes law or regulations.
8.3 The Lessee shall at all times treat the leased property with due care
and tidiness observe generally accepted practises and rules of conduct
regarding cleanliness, hygiene and healthiness.
The Lessee shall observe generally accepted rules of courtesy, and
ensure that habitual use of the building by others is not disturbed and
that other occupants are not subjected to discomfort or annoyance. The
Lessee shall observe any rules of conduct in the building which have
been or may be established. The Lessor shall ensure that the Lessee
enjoys the rights resulting from such rules of conduct.
9. ACCESS OF THE LESSOR TO THE LEASED PROPERTY
9.1 The Lessor shall have the right of access to the leased property with a
reasonable prior notice and in consultation with the Lessee in the
presence of the Lessee or his representative, to carry out improvements
of the leased property, and for the inspection of its condition and
treatment. Also, the Lessor may exhibit the leased property to
potential purchasers or lessees, provided that he informs the Lessee
with at least 24 hours' notice.
9.2 The Lessor reserves the right to keep in his possession a key at all
times to the leased property, so that he can at any time enter the
ventilation room which is situated within the leased space. The
ventilation room shall be the responsibility of the Lessor in all
respects, and the Lessee shall have no access to the room. For routine
inspection and maintenance of equipment in the ventilation room, the
Lessor shall consult the Lessee on the time for such work to be carried
out.
4
<PAGE> 6
10. TRANSFER OF RENTAL RIGHTS
10.1 The Lessee may not transfer his rental rights or sub-lease the leased
property without the consent of the Lessor.
11. CANCELLATION OF LEASE
11.1 This Lease shall be subject to the rules on termination of Chapter III
of the Leasehold Act No. 36/1994.
12. OTHER
12.1 Any dispute arising out of this Lease shall be brought before the
District Court of Reykjavik.
12.2 Any issues which the provisions of this Lease do not cover shall be
subject to the Leasehold Act No. 36/1994.
In witness whereof, the Lessor and Lessee attach their signatures to this Lease
in the presence of witnesses.
Reykjavik, 24 November 1999.
On behalf of On behalf of
the Computer Centre of Islensk erfdagreining ehf.
the Icelandic Savings Banks
[Company signature] Kari Stefansson [sign.]
Witnesses:
Helga Stefansdottir [sign.]
Elin Poroardottir [sign.], Id. No. 060763-4969
5
<PAGE> 1
EXHIBIT 10.38
RESEARCH COLLABORATION AGREEMENT
between Islenskar hveraorverur ehf., Keldnaholti 112, Reykjavik, Iceland,
National ID No 620698-2379, and Islensk erfdagreining ehf, National ID No
691295-3549, Lynghalsi 1, 110 Reykjavik, Iceland, both companies incorporated
under the laws of Iceland.
1. PRELIMINARY STATEMENTS
1.1. Islensk erfdagreining (IE) operates an advanced, high-throughput genotyping
laboratory and DNA sequencing facility and possesses the infrastructure and
expertise necessary to generate, store and analyze vast amounts of genetic
information,
1.2. Islenskar hveraorverur ehf. (IH) has an extensive experience in thermophile
research.
1.3. For the past 2 years IH and deCODE have been jointly engaged in research
collaboration ("Collaboration") in the field of discovery of novel enzymes and
other useful compounds derived from thermophilic organisms. Specifically, the
focus of the work has been on 2 research projects, i.e. long-range thermostable
DNA polymerases and resolvases for enzymatic mutation detection, which are
described in Appendix A in more detail.
1.4. The company Islensk natturuefni ehf. (IN) and IE have collaborated to
discover new and useful compounds from lichens for therapeutic purposes. By the
decision of shareholders of IH and IN, these companies will merge under the name
of IH.
1.5. In 1999 a provisional patent application was filed with the United States
Patent and Trademark Office, claiming novel nucleic acids and polypeptides from
a thermophilic bacteriophage, and uses thereof, invented jointly by employees of
IH and IE.
2. RESEARCH FUNDING AND PROJECTS.
As of year end 1999, IE had provided a total of USD 593.955 in research funding
for both IH and IN. IE will continue to provide USD 100.000 in research funding
per quarter for the Collaboration, according to quarterly operating and finance
plans that must be accepted in advance by IE. The parties have decided to expand
the Collaboration to include research on lichens and may decide to expand it to
other research projects.
3. INTELLECTUAL PROPERTY RIGHTS AND OWNERSHIP.
The parties agree that IE will own all patents, research data and other
intellectual property rights relating to the Collaboration, that have been
created and will be created during the term of this agreement. IH undertakes to
assign and have its employees assign all patent rights to IE.
<PAGE> 2
4. TERM AND GOVERNING LAW.
This agreement will remain in force until terminated by either party. Either
party may terminate this Agreement upon 90 days written notice to the other
party. This agreement shall be construed and governed by Icelandic law.
Reykjavik, December 28, 1999.
On behalf of Islensk erfdagreining ehf.
Kari Stefansson [SIGN]
Kari Stefansson
On behalf of Islenskar hveraorverur ehf.
Jakob Kristjansson [SIGN]
Jakob Kristjansson
<PAGE> 3
Appendix A.
AIM OF PROJECT 1: LONG-RANGE THERMOSTABLE DNA POLYMERASES
A major possibility lies in the development of thermophilic DNA polymerases for
accurate long-range PCR and long-range sequencing. Accurate in vitro synthesis
of long tracts of DNA as templates for sequencing and diagnosis is also an
attractive technique which is likely to gain wide acceptance. Thermophilic
counterparts of phage T7 DNA polymerase are likely to exhibit greater
processivity and fidelity than Taq DNA polymerase and other currently available
PCR enzymes. Through specific PCR-based gene fishing methods IT will discover a
range of new DNA polymerases that will be tested by deCODE for their in-house
applications.
AIM OF PROJECT 2: RESOLVASES FOR ENZYMATIC MUTATION DETECTION
Resolvases from mesophilic bacteriophages can recognize a single base mismatch
and subsequently cut one DNA strand. This property could be used as a basis for
improved and rapid mutation detection. Thermostable resolvases would allow more
stringent conditions and therefore more accurate recognition of the mismatches.
Currently no thermostable resolvase is known but thermophilic bacteriophages
such as those IT is working on are the most likely source. IT will select such
thermophilic bacteriophages and sequence their genomes (totally or in part) to
seek enzymes that can be used for mutation and SNP detection. The enzymes will
be cloned, produced and handed over to deCODE for testing in their in-house
applications.
<PAGE> 1
EXHIBIT 10.39
OFFICER'S CERTIFICATE
I, the undersigned, do hereby certify and represent that:
1. I am the duly elected Senior Vice President and Chief Business
Officer of deCODE genetics, Inc., a Delaware Corporation.
2. Pursuant to Rule 306(a) of Regulation S-T, the following exhibit
10.39 to deCODE genetics, Inc.'s Registration Statement on Form S-1 is a fair
and accurate English translation of a document prepared in the Icelandic
language.
IN WITNESS WHEREOF, I have signed this Officer's Certificate in my
capacity as Senior Vice President and Chief Business Officer of deCODE genetics,
Inc. on this 7th day of March, 2000.
By: /s/ Hannes T. Smarason
--------------------------
Name: Hannes T. Smarason
Title: Senior Vice President and Chief Business Officer
<PAGE> 2
AGREEMENT
BETWEEN
THE MINISTER FOR HEALTH AND SOCIAL SECURITY
AND
ISLENSK ERFDAGREINING EHF.
RELATING TO THE ISSUE
OF AN OPERATING LICENCE
FOR THE CREATION AND OPERATION
OF A HEALTH SECTOR DATABASE
The Minister for Health and Social Security, representing the Icelandic
Government, hereinafter referred to as "the Issuer" and Islensk erfdagreining
ehf., State Reg. No. 691295-3549, of Lynghals 1, Reykjavik, hereinafter referred
to as "the Licensee", both parties hereinafter referred to as "the Parties",
hereby enter into the following
AGREEMENT
ARTICLE 1
BASIS
The Issuer will, on Saturday 22 January 2000, issue to the Licensee a temporary
Operating Licence for the creation and operation of a Centralised Health Sector
Database, hereinafter referred to as the "OPERATING LICENCE". With reference,
i.a. to Paragraph 5 of Article 4 and Sub-Paragraph 11 of Paragraph 2 of Article
5 in Act No. 139/1998 on a Health Sector Database, and Sections 9.5 and 10.6 of
the Operating Licence, the Parties have come to a consensus on conclusion of the
present Agreement and the provisions thereof.
ARTICLE 2
ACTIVITIES OUTSIDE THE REYKJAVIK METROPOLITAN AREA
The Licensee declares that in the operation of the Database during the term of
the Operating Licence, he will seek, and take measures, to ensure that part of
his activities, the activities of his subsidiaries, and/or partner companies
will be conducted outside the Reykjavik Metropolitan Area. This refers, i.a., to
software programming, data transfer and other related activities. On the part of
the Licensee, measures will be taken to establish working facilities outside the
Reykjavik Metropolitan Area where such measures are in the interests of the
Company and/or seek co-operation or collaboration with service providers outside
the Reykjavik Metropolitan Area who are capable of performing such a role in a
comparable manner.
1
<PAGE> 3
ARTICLE 3
ANNUAL FIXED PAYMENT
In addition to the payments stipulated in Act No. 139/1998, the Government
Regulation on the Health Sector Database and the Operating Licence itself, the
Licensee shall pay a separate annual fee to the Icelandic Government as further
stipulated hereinafter in Articles 4, 5, and 6. The fee shall be used by the
Issuer to promote health care and for research and development pursuant to
Paragraph 5 of Article 4 of Act No. 139/1998.
ARTICLE 4
AMOUNT OF THE ANNUAL FEE
During the term of the Licence, over the years 2000 through 2011, the Licensee
shall pay an annual fee to the Icelandic Government in the amount of ISK
70,000,000 - seventy million Icelandic kronur -. The fee shall from the start
and throughout the term of the Licence be adjusted based on changes in the
consumer price index for the indexation of savings and loans, based initially on
the base index of the month of January, 2000, i.e. 194.0 points.
ARTICLE 5
REVISION OF THE ANNUAL FEE
As of the time that 6 years have passed from the issue of the Operating Licence,
the Licensee may request a review of the Annual Fee pursuant to Article 4 for
the remainder of the licence term, provided that the basis of operations and
business plans of the Licensee have changed substantially and it is foreseeable
that the company will not return a profit over the next 2 to 3 years. Such a
review shall, however, at no time have the effect that the licence fee pursuant
to Article 4 falls below the amount of ISK 50,000,000 -fifty million Icelandic
kronur -, indexed as stipulated in Article 4, for the remainder of the Licence
term. If and when such a review is conducted pursuant to the provisions of this
Article 5, any payments due shall not be subjected to review.
ARTICLE 6
PROFIT SHARE
In addition to the Annual Fee pursuant to Article 4, cf. Article 5, the Licensee
shall, in respect of the years 2000-2011, inclusive, pay an additional fee to
the Icelandic Government amounting to 6% of the profits of Islensk erfdagreining
ehf before taxes for the year in question. Profit in this context refers to the
income tax base of the Licensee pursuant to Sub-Paragraph 2 of Article 62 on
Income Tax and Net Worth Tax No. 75/1981. Notwithstanding the above, the
additional fee pursuant to this Article 6 shall never exceed the amount of ISK
70,000,000 - seventy million Icelandic kronur - index-adjusted pursuant to the
provisions of Article 4.
ARTICLE 7
PAYMENT OF FEES
Payment of the Annual Fee pursuant to Article 4, cf. Article 5, shall take place
in a single payment on 1 July of each year for the year in question, first on 1
July 2000 for that year, cf., however, Paragraph 2 of Article 9.
Payment of the additional fee pursuant to Article 4, cf. Articles 5 and 6
hereof, shall never exceed the amount of ISK 140,000,000 - one hundred and forty
million Icelandic kronur - index-adjusted pursuant to the provisions of Article
4.
2
<PAGE> 4
ARTICLE 8
PLACE OF PAYMENT
The Licensee shall make all his payments to the Icelandic Government pursuant to
this Agreement in the office of the State Treasury.
ARTICLE 9
AGREEMENTS WITH HEALTH INSTITUTIONS
On the initiative of the Licensee, the Parties will make joint efforts to ensure
that agreements of the Licensee with health institutions and self-employed
health service workers on access to data from medical records and the handling
of such data can be concluded as soon as possible. The intention is for the
conclusion and signature of such agreements to be accomplished at the end of the
year 2000.
Notwithstanding the provisions of Paragraph 1 of Article 7, the first payment of
the Annual Fee shall not take place until the Licensee has succeeded in
concluding agreements with the Reykjavik Hospitals and/or the Icelandic State
Hospital, the Regional Hospital in Akureyri and two other health institutions in
other districts of Iceland pursuant to the terms of the Operating Licence, in
particular Article 4, cf. Article 5 thereof, regarding agreements of the
Licensee with health institutions and self-employed health service workers on
access to data from medical records and the handling of such data. In the event
of a delay in the conclusion of such agreements, the Annual Fee pursuant to
Article 4, cf. Article 5 hereof, as accrued and index adjusted pursuant to the
guidelines of Article 4, shall be paid as a lump sum when the agreements with
the said institutions have been reached. In the event that it proves impossible
for unforeseeable reasons to conclude agreements with more institutions than the
institutions referred to above within two years from the issue of the Operating
Licence, the Parties agree to subject the Annual Fee pursuant to Article 4 to
review.
ARTICLE 10
OPERATION FOR MAXIMUM PERIOD OF 9 MONTHS
For a period of a maximum of 9 months following the expiration of the Operating
Licence or its termination for other reasons, the Licensee is under obligation,
without special remuneration, to provide the Issuer or the Monitoring Committee
pursuant to Article 6 of Act No. 139/1998, with access to all hardware necessary
for the creation and operation of the Health Sector Database and "Software" and
"Intellectual Property Rights" as such terms are defined in Section 8.1 of the
Operating Licence. The Issuer shall during the course of this period pay service
fees and other comparable fees for the necessary rights provided by the Licensee
to the Issuer, including any licence fees for patents and registration fees
relating to the necessary rights of the Licensee which may be payable during the
period.
ARTICLE 11
OPERATION FOR NON-BUSINESS PURPOSES
In the event that the Issuer or the Monitoring Committee or any party in their
place continues the operation and creation of the Database after the expiration
of the Operating Licence and/or in continuation of the maximum 9-month period
pursuant to Article 10 of this Agreement, and if the Database is operated only
in the service of the health care system, the general public and public
entities, for non-business purposes, the Licensee shall not be entitled to
remuneration for "Software" and "Intellectual Property Rights" as such terms are
defined in Section 8.1 of the Operating Licence, which are delivered to the
Issuer and which he has at his future disposal. The Issuer, Monitoring Committee
or any party in their place shall, following the end of the maximum
3
<PAGE> 5
9-month period, pay service fees and other comparable fees for the necessary
rights provided by the Licensee to the Issuer, including any licence fees for
patents and registration fees relating to the necessary rights.
ARTICLE 12
OPERATION FOR BUSINESS PURPOSES
In the event that the Issuer or the Monitoring Committee or any party in their
place continues the operation and creation of the Database for business purposes
after the expiration of the Operating Licence in continuation of the maximum
9-month period pursuant to Article 10 of this Agreement, or if the operation of
the Database for business purposes is recommenced within 5 years of the end of
the term of the Licence pursuant to Section 15.1 of the Operating Licence, the
Licensee shall be entitled to remuneration for "Software" and "Intellectual
Property Rights" as such terms are defined in Section 8.1 of the Operating
Licence, and which are delivered to the Issuer and which he has at his future
disposal. The Issuer, Monitoring Committee or any party in their place shall,
following the end of the maximum 9-month period pay service fees and other
comparable fees for the necessary rights provided by the Licensee to the Issuer,
including any licence fees for patents and registration fees relating to the
necessary rights.
ARTICLE 13
ASSESSMENT OF REMUNERATION
The assessment of the remuneration for the software and/or rights delivered by
the Licensee and in respect of which the Licensee is entitled to remuneration
for pursuant to Article 12 shall be based on the future use of the Issuer, the
Monitoring Committee or any party in their place of the software and/or rights
for business purposes. Furthermore, account shall be taken of the future
usefulness of the software and rights and their market price on the date of
delivery. Each of the Parties shall appoint one party to assess the financial
value and payment arrangements. There shall be no further payment to the
Licensee for the future use of the items which are delivered and which are of
permanent future use.
ARTICLE 14
ARBITRATION
In the event that an agreement cannot be reached between the Parties regarding
the review of the Annual Fee pursuant to Article 5 or the amount of remuneration
pursuant to Article 13, the decision shall be referred to an arbitration
tribunal which shall conduct its activities pursuant to Act No. 53/1989 on
Contractual Arbitration. Each of the Parties shall then appoint one arbitrator
and the Parties then jointly request the court appointment of a neutral third
arbitrator by the District Court of Reykjavik to participate in the process of
the dispute, such arbitrators to form an arbitration tribunal of three
arbitrators. The arbitration tribunal shall conclude its conduct of proceedings
within three months from the time that the tribunal has been fully constituted.
The decision of the arbitration shall be final as regards the dispute of the
Parties and cannot be referred to the public courts.
ARTICLE 15
INDEMNITY
The Licensee declares that he will not during the effective term of the
Operating Licence, or later with reference thereto, make any claims of any kind
against the Issuer, representing the Icelandic Government, in respect of any
amendments made to legislation or rules relating to the Database on the grounds
that such legislation or rules are regarded as inconsistent with the rules of
the European Economic Area or other international rules and agreements to which
Iceland is a party
4
<PAGE> 6
or to which Iceland may later accede. The Issuer declares, furthermore, that in
the event that the Issuer or the Icelandic State by final judgement for any
reason, alone or together with the Licensee, is regarded as liable or subject to
payment to any third party as a result of legislation and/or the issue of the
Operating Licence, the Licensee undertakes to assume all the obligations of the
Issuer and the Icelandic Government, to the extent possible, and furthermore to
reimburse the Icelandic Government for any compensation for which the Icelandic
Government may be required to pay in respect of such liability together with all
interest and all cost of the Icelandic Government rising from such liability and
obligation to pay, provided always that the Icelandic Government has maintained
a full defence in the issues in question. In the event that the Icelandic
Government enters into negotiations with a third party regarding payment of
compensation on the basis of the liability of the Icelandic Government arising
from legislation on the Database and its operation and/or the issue of the
Operating Licence, the Licensee undertakes to pay such compensation and to
reimburse the Icelandic Government for any compensation which the Icelandic
Government may have paid for such reasons together with accrued costs, provided
that the Icelandic Government demonstrates that the Icelandic Government was
justified and under obligation to make the payments or pay the compensation in
question.
ARTICLE 16
PROVISIONS OF CONTRACTUAL LAW
The Parties have agreed and approved the provisions of Articles 3, 4, 5, 6, 10,
11, 12, 13, 14 and 15 above in full knowledge of the termination provisions of
Chapter III, particularly Article 36, of Act No. 7/1936 on contracts,
authorisation and invalid legal instruments, as amended by Act No. 11/1986 and
Act No. 14/1995.
ARTICLE 17
TERM OF EFFECT
This Agreement shall remain in effect during the term of the Operating Licence.
However, the Agreement may be subjected to review and amended during the term of
the Operating Licence by an Annex provided that both Parties so agree.
ARTICLE 18
DISCUSSIONS ON AN OPERATING LICENCE
The Parties declare that during the course of the review of the Operating
Licence pursuant to Section 15.3 of the Operating Licence, the Parties will
enter into discussions on the renewal of the Operating Licence, provided that
the Licensee at that time meets all the general requirements of current
legislation on the Health Sector Database, regulation on the Health Sector
Database and the Operating Licence. Such discussion shall be based on objective
principles and conform to current law, rules and international agreements to
which Iceland is a party. The renewal of the Operating Licence is furthermore
subject to a new or supplementary agreement being reached in place of this
Agreement.
ARTICLE 19
CONDITIONS AND REVOCATION OF LICENCE
Since this Agreement is one of the conditions for the issue of an Operating
Licence to the Licensee, cf. Sections 9.5 and 10.6 of the Operating Licence, as
well as its performance by the Licensee during the term of the Operating
Licence, the Licensee is fully aware that any non-performance of the provisions
of this Agreement and delays in payment on his part could result in revocation
of the Operating Licence.
5
<PAGE> 7
This Agreement is signed by the Parties in the presence of witnesses confirming
the correct signatures and date.
Reykjavik, 21 January 2000
For the Government of Iceland For Islensk erfdagreining ehf.
Ingibjorg Palmadottir Kari Stefansson
Minister for Health and Social Security Managing Director
Witnesses:
David B. Gunnarsson, Id. No. 090744-3219
Baldur Gudlaugsson, Id. No. 081246-2629
6
<PAGE> 1
EXHIBIT 10.40
OFFICER'S CERTIFICATE
I, the undersigned, do hereby certify and represent that:
1. I am the duly elected Senior Vice President and Chief Business
Officer of deCODE genetics, Inc., a Delaware Corporation.
2. Pursuant to Rule 306(a) of Regulation S-T, the following exhibit
10.40 to deCODE genetics, Inc.'s Registration Statement on Form S-1 is a fair
and accurate English translation of a document prepared in the Icelandic
language.
IN WITNESS WHEREOF, I have signed this Officer's Certificate in my
capacity as Senior Vice President and Chief Business Officer of deCODE genetics,
Inc. on this 7th day of March, 2000.
By: /s/ Hannes T. Smarason
---------------------------
Name: Hannes T. Smarason
Title: Senior Vice President and Chief Business Officer
<PAGE> 2
THE MINISTER FOR HEALTH AND SOCIAL SECURITY
MAKES KNOWN:
that pursuant to Act No. 139/1998
on a Health Sector Database
ISLENSK ERFDAGREINING EHF
STATE REG. NO. 691295-3549
LYNGHALS 1
REYKJAVIK
has on this day been granted an exclusive Operating Licence for the creation
and operation of a Health Sector Database
The Operating Licence is issued with the objective of creating and operating in
Iceland a Centralised Health Sector Database with non-personally identifiable
health data for the purpose of increasing knowledge for the improvement of
health and the promotion of health services. The creation and operation of the
Database is intended to result in an integrated collection of data with records
of numerical data from the majority of the medical records already existing and
which will exist during the term of the Operating Licence in Iceland. The data
shall be processed with a view to serving the health system as a whole,
individual health institutions, self-employed health service workers and the
nation as a whole.
The Operating Licence is issued with all the conditions, rights and obligations
contained in the Operating Licence itself, Act No. 139/1998 on a Health Sector
Database, as current at any time, and regulations issued on the basis of the
said act during the term of the Licence
The Ministry of Health and Social Security
22 January 2000
Ingibjorg Palmadottir [sign.]
David R. Gunnarsson [sign.]
OPERATING LICENCE 1
<PAGE> 3
OPERATING LICENCE
ISSUED TO
ISLENSK ERFDAGREINING EHF.
STATE REG. NO. 691295-3549
LYNGHALS 1
REYKJAVIK
FOR
THE CREATION AND OPERATION
OF
A HEALTH SECTOR DATABASE
MINISTRY OF HEALTH AND SOCIAL SECURITY
JANUARY 2000
OPERATING LICENCE 2
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
Article 1: Preamble......................................................................3
Article 2: Definitions...................................................................4
Article 3: General and Financial Conditions..............................................6
Article 4: Transfer of Data..............................................................7
Article 5: Role of the Monitoring Committee..............................................9
Article 6: Role of the Data Protection Commission.......................................10
Article 7: Conditions for Processing and Handling of Data...............................11
Article 8: Intellectual Property Rights.................................................13
Article 9: Process on the Revocation of the Operating Licence...........................15
Article 10: Payment of Costs Etc........................................................16
Article 11: Surveillance................................................................17
Article 12: Assignment and Enforcement..................................................18
Article 13: Disputes....................................................................18
Article 14: Revocation of Licence, Sanctions, Penalties and Compensation................18
Article 15: Term, Review and Issue of Licence...........................................18
</TABLE>
LIST OF ANNEXES
ANNEX A: GENERAL SPECIFICATIONS
ANNEX B: TRANSFER OF DATA TO THE HEALTH SECTOR DATABASE
ANNEX C: THE MAIN FORMAL AND SUBSTANTIVE CONTENTS OF AGREEMENTS
ANNEX D: STATUS REPORT ON HEALTH DATA
ANNEX E: TERMS OF FINANCIAL SEGREGATION
ANNEX F: REGISTER OF HEALTH PROFESSIONS
ANNEX G: TECHNOLOGY, SECURITY AND ORGANISATION TERMS OF THE DATA
PROTECTION COMMISSION
OPERATING LICENCE 3
<PAGE> 5
OPERATING LICENCE
ISSUED TO
ISLENSK ERFDAGREINING EHF.
STATE REG. NO. 691295-3549
LYNGHALS 1
REYKJAVIK
FOR
THE CREATION AND OPERATION
OF
A HEALTH SECTOR DATABASE
ARTICLE 1
PREAMBLE
1.1 This Operating Licence is issued with the objective of creating and
operating in Iceland a Centralised Health Sector Database, in the
Operating Licence also referred to as "the Health Sector Database" or
"the Database", with non-personally identifiable health data for the
purpose of increasing knowledge for the improvement of health and the
promotion of health services.
1.2 The creation and operation of the Database is intended to result in an
integrated collection of data with records of numerical and encoded
data from the majority of the medical records already existing and
which will exist during the term of the Operating Licence in Iceland
and to which access is not restricted pursuant to the provisions of
this Operating Licence. The data shall be processed with a view to
serving the health system as a whole, individual health institutions,
self-employed health service workers and the nation as a whole.
1.3 The Operating Licence is issued by the Minister for Health and Social
Security, who in this Licence is referred to as the "Issuer," pursuant
to Act No. 139/1998 on a Health Sector Database.
1.4 The Operating Licence is issued to Islensk erfdagreining ehf., State
Reg. No. 691295-3549, of Lynghals 1, Reykjavik, referred to in this
Operating Licence as the Licensee, with all the conditions, rights and
obligations contained in this Operating Licence, Act No. 139/1998 on a
Health Sector Database and regulations issued on the basis of the said
act on the effective date of the Operating Licence and during the term
of its effect.
1.5 This Operating Licence is issued on the basis of information on the
scope of activities, projects and work plan of the Licensee, which have
been submitted by the Licensee, and on the basis of Technology,
Security and Organisation Terms of the Data Protection Commission,
which are attached to this Operating Licence as ANNEX G.
OPERATING LICENCE 4
<PAGE> 6
1.6 The Operating Licence extends to the creation and operation of a
centralised Health Sector Database pursuant to Act No. 139/1998, on a
Health Sector Database, as current at any time, and regulations issued
pursuant to that Act.
1.7 The Operating Licence, the operation of the Database and the operation
of a Centralised Health Sector Database, and the handling of data from
the Database shall at all times be consistent with Icelandic law and
regulations, as current at any time, international agreements and any
international commitments to which Iceland is or becomes a party.
1.8 All data that enters the Health Sector Database is the common property
of the Icelandic nation and in the care and under the responsibility of
the Minister for Health and Social Security, acting for the Icelandic
Government. This applies both during the time that the Operating
Licence is in effect and after its expiration.
1.9 The Operating Licence provides for the conditions which form the
original basis for the issue of an Operating Licence for the creation
and operation of a Health Sector Database. During the term of the
Operating Licence these conditions may change in the light of
experience and further requirements by surveillance authorities, the
Issuer and the Licensee.
1.10 Individual provisions of the Operating Licence refer to Annexes
attached to the Operating Licence and all bear the identification of
the Ministry for Health and Social Security, and they are all
inseparable parts of the Operating Licence. The Annexes, seven in
number, are identified with the letters A-G, as shown in the list of
annexes attached to the Operating Licence on p. 22 [page no. of
original Icel. document].
ARTICLE 2
DEFINITIONS
2.1 The following terms, wherever they appear in this Operating Licence,
shall have the meaning specified below:
a) "General Specifications" means the general specifications for medical
records systems, as current and as updated by the Ministry of Health
and Social Security at any time, currently the updated report of the
Ministry of January 2000, attached to this Operating Licence as ANNEX
A.
b) "Direct access" means access to the primary data in the Database or
copies thereof, cf. Paragraph 3 of Article 10 of the Act.
c) "Encryption" means the transformation of words or numbers into an
unintelligible sequence of symbols.
d) "One-way encryption" means the transformation of words or numbers into
an unintelligible sequence of symbols which cannot be traced back using
a decryption key.
e) "Genetic data" means any data pertaining to the inheritable features of
an individual or the hereditary pattern of such features within a group
of related individuals, and furthermore all data pertaining to the
transfer of genetic information (genes) pertaining to features which
determine the diseases and health of individuals and groups of related
individuals, regardless of whether such features can be identified or
not.
f) "Transfer of data to the Database" means the summary of the handling
and transfer of data to the Health Sector Database attached to this
Operating Licence as Annex B.
OPERATING LICENCE 5
<PAGE> 7
g) "Query layer" means the software intended to process research or
queries in the Health Sector Database.
h) "Health Sector Database" means a collection of data containing the
medical data registered in a co-ordinated systematic manner in a single
centralised database intended for processing and dissemination of
information as further provided for in Act No. 139/1998, on a Health
Sector Database, the regulation on a Health Sector Database and this
Operating Licence.
i) "Medical data" means data pertaining to the health of individuals,
including genetic data.
j) "The Main Formal and Substantive Contents of Agreements" means a
summary of formal and substantive contents of agreements between the
Licensee and health institutions and self-employed health service
workers and attached to the Operating Licence as ANNEX C.
k) "Intellectual property rights" means the following rights: i.) Any
rights in the area of intellectual property rights to software which is
necessary for the creation and operation of the Database, i.e.
copyright, trade mark rights, patent rights, design rights, business
and technical know-how or other rights. Software in this context refers
to computer programmes, any systems descriptions and related documents
and any handbooks and other accompanying documents. ii.) Any rights in
the area of intellectual property rights to the Database, i.e.
copyrights, sui generis rights pursuant to EU Directive No. 96/9 of 11
March 1996 on the legal protection of databases, trade mark rights,
patent rights, design rights, business and technical know-how or other
rights. iii.) Any rights in the area of intellectual property rights,
i.e. copyright, trademarks, patents, design rights, business and
technical know-how or other rights, even if they extend directly
neither to software or a database, if the rights are necessary for the
creation or the operation of the Database. In all cases, this is a
reference to rights, whether they are presently known or established
later, and both to the rights in their entirety and licences to use
such rights.
l) "Centralised Health Sector Database" and "Database" means the Health
Sector Database pursuant to Act No. 139/1998, on a Health Sector
Database, the Regulation on a Health Sector Database and this Operating
Licence.
m) "Non-personally identifiable data" means data on an individual which
are not identifiable according to the definition of Subsection (n)
below.
n) "Personal data" means all data on an identified or identifiable
individual. An individual is regarded as identifiable if he can be
identified, directly or indirectly, e.g. by reference to an identity
number or one or more features specific to his physical, physiological,
mental, economic, cultural or social identity.
o) "Regulation" means the Regulation on a Health Sector Database.
p) "Operating Licence" means this Operating Licence.
q) "The Terms on Financial Segregation" means further conditions and terms
on the financial segregation of the operation by the Licensee of the
Database and other operations of the Licensee, attached to this
Operating Licence as ANNEX E.
r) "Register of Health Professions" means a separate register of certified
health professions, attached to this Operating Licence as ANNEX F.
OPERATING LICENCE 6
<PAGE> 8
s) "The Monitoring Committee" means the Committee on the Creation and
Operation of a Health Sector Database pursuant to Article 6 of Act No.
139/1998, and Chapter V of the Regulation.
t) "Status Report on Health Data" means the Status Report on Health Data
as current at any time and as updated by the Ministry of Health and
Social Security, currently the updated report of the Ministry of
January 2000, attached to this Operating Licence as ANNEX D.
u) "Query classes" means specific classes of queries which are comparable
and processed using software in the query layer of the Health Sector
Database.
v) "Data Protection Commission" means the Data Protection Commission
pursuant to Act No. 121/1989 on the registration and handling of
personal data, cf. also Sub-Section 2 of Article 5 and Paragraph 1 of
Article 12 in Act No. 139/1998, and Chapter VII of the Regulation on a
Health Sector Database.
w) "Science Ethics Committee" means the Science Ethics Committee pursuant
to Article 1 of Regulation No. 552/1999, on Scientific Research in the
Health Sector, cf. Paragraph 4 of Article 2 in Act No. 74/1998 on
Patients' Rights.
x) "Interdisciplinary Ethics Committee" means the Interdisciplinary Ethics
Committee pursuant to Article 12 of Act No. 139/1998 and Chapter VI of
the Regulation.
y) "Security Terms of the Data Protection Commission" means the conditions
and security requirements in the Technology, Security and Organisation
Terms of the Health Sector Database, as well as the main security
requirements and conditions of the Data Protection Commission for the
operation of the Database as current at any time, currently in the
second edition of the Data Protection Commission dated 19 January 2000,
attached to this Operating Licence as ANNEX G.
ARTICLE 3
GENERAL AND FINANCIAL CONDITIONS
3.1 The Licensee shall without exception meet all the conditions laid down
in this Operating Licence.
3.2 The Licensee shall endeavour to maintain at all times good co-operation
with the Ministry of Health and Social Security, the Directorate of
Public Health, health institutions and self-employed health service
workers, the Monitoring Committee, the Data Protection Commission, the
Interdisciplinary Ethics Committee and the National Audit Bureau.
3.3 The Licensee shall in all respects observe applicable and current legal
provisions on health services, currently Act No. 97/1990, as amended.
The Directorate of Public Health is responsible for monitoring of the
Licensee's observance of the provisions of legislation and regulations
regarding health in general and the security of patients and the
public.
3.4 The Health Sector Database shall be located exclusively in Iceland.
Processing from the Database shall take place exclusively in Iceland.
The Licensee shall not transfer any data to which he is granted access
to other databases or merge them or connect with activities taking
place elsewhere, unless the consent of the surveillance authorities has
been obtained pursuant to the instructions laid down in the Act,
Regulation or Operating Licence.
3.5 The Licensee shall not begin processing in the Health Sector Database
until an assessment has been conducted by an independent expert in the
field of information
OPERATING LICENCE 7
<PAGE> 9
systems security. The Operating Committee is responsible for the
conduct of such an assessment.
3.6 The Licensee is, in his business transactions with third parties in
respect of the creation and operation of a Health Sector Database,
bound by the provisions of the Competition Act, No. 8/1993, and the
provisions of the EEA Agreement, cf. Act No. 2/1993, as applicable, cf.
in particular the provisions of Chapter IV of the EEA Agreement. The
Licensee shall in the creation and operation of the Health Sector
Database refrain from abusing his position as Licensee in his business
with parties purchasing his services, e.g. through unreasonable fees
for the services, by refusing business with competitors or by
discriminating among his business partners through the use of
dissimilar business terms or other onerous business terms. Special
business terms, such as discounts for extensive business, shall be
based on general and transparent business terms.
3.7 The operation of the Health Sector Database shall be financially
segregated from other activities of the Licensee, cf. Paragraph 2 of
Article 14 in the Competition Act No. 8/1993. The operation of the
Health Sector Database shall be conducted within a separate operating
unit or department, and keep separate accounts. Accounting shall be
conducted in conformance with rules of law on accounting. A separate
Initial Balance Sheet shall be established. Assets regarded as
pertaining to the activities covered by the Operating Licence shall be
appraised at market value where possible, or at replacement value
following reasonable depreciation. Liabilities of the activities
covered by the Operating Licence shall include only liabilities
connected with such activities alone.
3.8 All joint use of the operation subject to the Operating Licence and the
competitive operations of the Licensee, such as use of real estate,
machinery and human resources, shall be valued at market price on an
arm's length basis. In the event that market price is not available,
the value shall be based on cost price plus a reasonable mark-up.
Similarly, business between the operation subject to the Operating
Licence and other departments shall be conducted on an arm's length
basis. When the utilisation of the Health Sector Database has begun,
the party responsible for the day-to-day administration of the
operation subject to the Operating Licence shall not be responsible for
the administration of the departments of the Licensee engaged in
competitive activities.
3.9 The Licensee shall meet the further conditions on the arrangement of
financial segregation of the Licensee contained in the Annex "Terms of
Financial Segregation", attached to the Operating Licence as ANNEX E.
ARTICLE 4
TRANSFER OF DATA
4.1 The Licensee shall observe directions on the collection, transfer,
preservation and processing of data pursuant to recognised
international rules on science ethics and rules established on the
basis of such international rules and current in Iceland at any time.
4.2 The Licensee is aware of the fact that a patient may at any time
request that information concerning him should not be transferred to
the Health Sector Database. A patient's request to such effect may
involve all information already available on the patient in medical
records or which may be recorded, or further specified information.
Such a request from a patient shall also be observed after his death.
In the event that a patient wishes to have information on him
transferred to the Health Sector Database, despite the fact that a
health institution or self-employed health service worker has not
entered into an agreement on such transfer of information, the patient
shall submit a request to this
OPERATING LICENCE 8
<PAGE> 10
effect to the Directorate of Public Health. The Directorate of Public
Health shall ensure that such a request from a patient is carried out.
4.3 Information may be delivered to the Licensee which has been processed
from medical records, for transfer into the Health Sector Database with
the approval of health institutions or self-employed health service
workers. The transfer of information shall conform to the security
requirements of the Data Protection Commission.
4.4 Before the commencement of transfer of data into the Database, the
Licensee shall enter into written agreements with the health
institutions in question or self-employed health service workers on
access to information from medical records and the handling of such
information, containing, at a minimum, the items specified in ANNEX C
"Main Formal and Substantive Contents of Agreements".
4.5 Medical information shall be recorded so as to form an integrated data
collection where information is recorded from the medical records
currently available and becoming available during the term of the
Operating Licence in Iceland and to which access is not limited
pursuant to the terms of this Operating Licence.
4.6 The recording of health data for transfer to the Health Sector Database
specified in ANNEX B shall proceed in stages. First, medical data
reaching back to 1986 shall be processed. During the second stage, the
intention is to process data from medical information before 1986. The
Monitoring Committee shall, on the recommendation of the Ministry of
Health and Social Security and the Directorate of Public Health, take
responsibility for co-ordination in this regard in the conclusion of
agreements with health institutions and self-employed health service
workers.
4.7 Information processed pursuant to Section 4.6 may be transferred to the
Licensee through the Encryption Agency of the Data Protection
Commission, cf. the Security Terms of the Data Protection Commission.
Such information consists on the one hand of data from the National
Register and on the other hand encoded and other numerical data. ANNEX
B, "Transfer of Data to the Database" lists the categories of data on
which the Licensee may negotiate for transfer with health institutions
and self-employed health service workers.
4.8 After a co-ordinated medical record has been taken into use, medical
data will be recorded in accordance with the structure of an electronic
medical file. Encoded and other numerical data defined in ANNEX B
"Transfer of Data to the Database" may be transferred from electronic
patient records to the Licensee through the Encryption Agency of the
Data Protection Commission.
4.9 Data from specific systems created for scientific research may not be
transferred to the Health Sector Database unless an agreement has been
made with the originators and owners of such systems and the transfer
is consistent with the Security Terms of the Data Protection
Commission. Furthermore, data from specific systems set up for
experimental or development purposes may not be transferred to the
Health Sector Database unless a separate agreement to such effect has
been concluded. No data which is not specified in ANNEX B, "Transfer of
Data to the Database" may be transferred to the Database without
special permission of the Data Protection Commission, as further
provided in ANNEX B.
4.10 Health institutions and self-employed health service workers shall
notify the Data Protection Commission and the Operating Company
immediately if the security of data and personal privacy are
endangered.
OPERATING LICENCE 9
<PAGE> 11
ARTICLE 5
ROLE OF THE MONITORING COMMITTEE
5.1 The Monitoring Committee shall supervise the making of agreements of
the Licensee with health institutions, on the one hand, and
self-employed health service workers, on the other hand, in order to
ensure the necessary consistency. The Monitoring Committee shall
protect the interests of the public health authorities, health
institutions, self-employed health service workers and scientists in
the making of agreements.
5.2 Agreements between parties pursuant to Section 5.1 shall provide for
remuneration payable by the Licensee pursuant to Paragraph 2 of Article
6 of Act No. 139/1998, and other substantive items contained in the
Annex "Main Formal and Substantive Contents of Agreements", attached to
this Operating Licence as ANNEX C.
5.3 The Licensee shall keep the Monitoring Committee informed on the
position of negotiations at any time. Confirmation by the Monitoring
Committee of an agreement between the Licensee and individual health
institutions or self-employed health service workers is a prerequisite
for the validity of the agreement. The parties shall be notified of the
Committee's conclusion within two weeks from the time that the
agreement was submitted to the Committee for confirmation.
5.4 The Licensee shall provide the Monitoring Committee with all
information which may be relevant to the work and duties of the
Committee.
5.5 The Licensee shall ensure that the Monitoring Committee always has
access to information on all research or queries or classes of queries
submitted to the Licensee for processing and information on the
research parties and parties submitting queries.
5.6 The Licensee shall deliver to the Monitoring Committee for safe-keeping
backup copies of the Database. A representative of the Monitoring
Committee shall be present at the making of the backup copies. The
backup copies shall be designed to enable the Monitoring Committee to
take over the operation of the Database in the event that the Licensee
discontinues its operation for any reason. The Committee shall be
delivered equipment or provided access to equipment to verify whether
the backup copies are adequate. The backup copies shall be transported
by an employee of the Monitoring Committee and deposited in fireproof
and guarded premises controlled by the Committee or in a Bank safety
deposit box. The Monitoring Committee shall perform tests of the backup
procedure at regular intervals.
5.7 Before processing in the Database begins, the Licensee shall submit to
the Monitoring Committee for approval a detailed description of the
process of making backup copies, which shall include the following
information:
- A general description of the backup process
- The process of making a backup copy
- The input and output of the backup process
- Description of the type of backup medium being used (what operating
system, software and hardware) and whether, and if so how, it is
re-used and what the lifetime of the backup medium is.
- What the source of the backup is, i.e. software and hardware.
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- When the backup takes place according to a backup schedule, i.e. how
often a full backup is made, how often incremental backups are made
and how far back in time backup copies are preserved.
- Who performs the backup.
- Whether any errors have been reported.
- How backup copies are destroyed.
- What backup copies are in existence and their dates.
- The method of ascertaining whether a backup has been successful
- That configuration control is used.
5.8 When the Monitoring Committee has approved the description by the
Licensee of the process of making backup copies, the Committee shall
deliver the description to the Data Protection Commission which shall
establish security requirements and terms which shall be used in
making, transporting, and safe-keeping backup copies.
ARTICLE 6
ROLE OF THE DATA PROTECTION COMMISSION
6.1 The Licensee shall meet the current Technology, Security and
Organisation Terms of the Data Protection Commission at any time in the
creation and operation of the Database in conformity with the terms set
out in APPENDIX G.
6.2 The Data Protection Commission may review the Technology, Security and
Organisation Terms to be met by the Licensee in the light of new
technology, experience or changed circumstances, and establish a
deadline for the Licensee to comply with the new requirements.
6.3 The Licensee shall not make any alterations in matters of technology,
security and Organization, including changes in software or hardware,
except pursuant to rules established by the Data Protection Commission.
6.4 In the event of circumstances where the security of data may be at
risk, the Data Protection Commission may prohibit further processing in
the Database until such time as the Data Protection Commission is
satisfied that data security is adequate.
6.5 The Data Protection Commission shall operate an Encryption Agency which
shall carry out the transfer of all data to the Health Sector Database.
The Encryption Agency of the Data Protection Commission shall take
delivery of encrypted health data from health institutions and
self-employed health service workers which have concluded agreements
with the Licensee.
6.6 The Licensee shall establish rules of procedure and work processes
which meet the conditions of the Data Protection Commission in order to
ensure privacy protection in the cross-referencing of data from the
Health Sector Database, a genealogical database and a database
containing genetic data. The Data Protection Commission shall attach
such conditions to its approval of the rules of procedure and work
processes of the Licensee as it considers necessary at any time to
ensure privacy protection and data security in the Health Sector
Database. Among the conditions for the approval of the Data Protection
Commission is that the results should be non-personally identifiable.
6.7 If it becomes evident that results obtained from cross-referencing of
data are personally identifiable, the Data Protection Commission may
order the destruction of such results in
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their entirety or in part and revoke its approval. During the course of
investigation, the Data Protection Commission may prohibit further
cross-referencing of data on the basis of its approval and take custody
of the results. In the event that the Licensee does not observe the
conditions of the Data Protection Commission on the cross-referencing
of data, the Data Protection Commission may revoke its approval
pursuant to Section 6.6.
6.8 In order to preserve the security of personal data, the Data Protection
Commission may establish rules to be observed during the collection,
registration and processing of medical data in the medical records
system in preparation for their transfer to the Encryption Agency of
the Data Protection Commission. Those employees of Health Institutions
and self-employed health service workers who are directly employed in
the transfer of health data to the Health Sector Database shall not be
involved in the Licensee's operation of the Database. Health
Institutions and self-employed health service workers are responsible
for the delivery of health data to the Encryption Agency of the Data
Protection Commission.
6.9 The Data Protection Commission is responsible for monitoring the
creation and operation of the Health Sector Database as regards the
recording and processing of medical data and the security of data in
the Health Sector Database. The Data Protection Commission shall take
measures to monitor observance of the conditions established by the
Commission.
6.10 The Data Protection Commission may inspect the technology, security and
organisation aspects of the Health Sector Database whenever necessary.
The Data Protection Commission may conduct any tests or inspection or
take any surveillance action it may regard as necessary and demand the
required assistance of the personnel of the Licensee in taking such
action.
6.11 The Data Protection Commission may require from the Licensee and any of
the Licensee's employees any information necessary for the Commission
to perform its tasks, including information to determine whether a
particular activity falls under the provisions of regulations and
legislation on the Health Sector Database. The Data Protection
Commission may also summon personnel of the Licensee and persons
employed by the Licensee to appear before the Commission and provide
oral information and explanations.
6.12 In the course of its surveillance duties, the Data Protection
Commission shall have free access to the premises where the Health
Sector Database is preserved and processing takes place. The Data
Protection Commission may, by a special resolution, entrust specific
employees and consultants with certain aspects of the work entrusted to
the Data Protection Commission pursuant to Act No. 139/1998, on a
Health Sector Database and the Regulation issued on the basis of the
Act.
ARTICLE 7
CONDITIONS FOR PROCESSING AND HANDLING OF DATA
7.1 The recording and processing of medical data for transfer to the Health
Sector Database shall be performed or controlled by employees who are
licensed health-care professionals in order to ensure accurate
recording and confidentiality. The "Register of Health-Care
Professions" attached to this Operating Licence in ANNEX F is a list of
licensed health-care professions.
7.2 The Ministry of Health and Social Security and the Directorate of
Public Health shall at all times have access to statistical data from
the Database. The data shall be in accessible
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form and meet the specifications of the health authorities as current
at any time. The data shall be prepared so as to be directly usable for
the preparation of health reports, plans, policies and projects of the
Ministry and the Directorate of Public Health. The data shall be
supplied to the above parties free of charge. The access of the above
parties is subject to the approval and surveillance of the Data
Protection Commission.
7.3 The Licensee shall meet the conditions and requirements contained in
the Annex "Status Report on Health Data", attached to the Operating
Licence as ANNEX D, and all subsequent amendments, whether in place of
or in addition to the said "Status Report on Health Data". In other
respects, the parties shall consult on changes resulting from special
needs and requests in individual fields and developments and
innovations which may emerge during the term of the Operating Licence.
7.4 Data shall be prepared for transfer to the Health Sector Database in
such a way as to meet the needs of the institutions or self-employed
health service workers for a co-ordinated information system, the needs
of specialist fields and the needs of public health authorities, and in
such a way as to be of use in scientific research.
7.5 The Executive Boards of health institutions shall take the initiative
in consulting with the relevant professional associations, head
physicians of institutions, head physicians of divisions and nursing
supervisors in order to ensure that the data is as useful as possible
for administration and research. Furthermore, consultations shall be
held with the above parties regarding what information should be
processed from medical files and whether any information is of such a
nature that it should not be transferred to the centralised Database.
7.6 The Licensee shall meet the conditions and requirements laid down in
the Annex "General Specifications" attached to the Operating Licence as
ANNEX A and all subsequent amendments, whether in place of or in
addition to the said "General Specifications". The Licensee shall
furthermore meet the guidelines laid out in the appendix "Transfer of
Data to the Database" attached to the Operating Licence as ANNEX B. In
other respects the parties shall consult on additions or alterations
with respects to the specialised part of electronic patient records,
special needs and requests in individual fields and developments and
innovations which may emerge during the term of the Operating Licence.
7.7 In the handling of files, other data and information, the conditions
regarded as necessary by the Data Protection Commission at any time
shall be observed. Personal identifiers shall be encrypted prior to
transfer to the Database in order to ensure that the employees of the
Licensee work only with non-personally identifiable data. The employees
of the health institutions in questions or self-employed health service
workers shall prepare data for transfer to the Health Sector Database.
Medical data shall be transferred in encrypted form in order to
preserve their security. Personal identifiers shall be one-way
encrypted, i.e. using encryption which cannot be traced back using an
identifying key. Access to data in medical records is in other respects
governed by the Act on Patients' Rights, the Act on Health Service and
the Act on the Recording and Handling of Personal Data.
7.8 Data which are recorded or obtained by processing in the Health Sector
Database may be utilised to develop new or improved methods of
promoting health, prognosis, diagnosis and treatment of diseases, to
seek the most efficient methods in the operation of health systems and
in the interests of reporting in the area of health. The Licensee is
authorised to process data in the Health Sector Database from the
medical data of medical records recorded in the Database provided that
measures are taken to ensure that in the course of
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processing and cross-referencing of data, no information can be linked
to personally identifiable individuals.
7.9 The Licensee may not grant direct access to the Database.
7.10 Before processing is begun in the Database, the Licensee shall inform
the Monitoring Committee which parties in his employ work with the
Database, its operation and development of software and which parties
in his employ have access to the query layer. Furthermore, their roles
and responsibilities shall be defined, as well as their access
authorisation. The Licensee shall notify the Monitoring Committee of
any intentions to confer responsibilities on new parties pursuant to
this provision and ensure that the Security Terms of the Data
Protection Commission are strictly observed.
7.11 Providing information on individuals from the Health Sector Database is
prohibited. Only statistical information involving groups of
individuals may be provided.
ARTICLE 8
INTELLECTUAL PROPERTY RIGHTS
8.1 In Articles 8 and 9 of this Operating Licence, the terms "software" and
"intellectual property rights", as intellectual property rights are
defined in the Operating Licence, refer to software and intellectual
property rights which are necessary following the expiration or
termination of the term of this Operating Licence for the creation,
operation and maintenance of the Health Sector Database in the
interests of public health authorities, health institutions and
self-employed health service workers, including for scientific
research, cf. Articles 6 and 9, and Paragraph 1 of Article 10 in Act
No. 139/1998. Software and intellectual property rights include
software and rights utilised in the interests of the above parties
during the term of the Operating Licence. Software and intellectual
property rights pursuant to Articles 8 and 9 of this Operating Licence
do not include the software and rights which, during the term of this
Operating Licence are used only in the interests of the Licensee
himself, or for commercial purposes pursuant to agreements with third
parties.
8.2 Article 8 hereof applies to all agreements concluded by the Licensee
for the purpose of obtaining intellectual property rights, cf. Sections
2.1(k) and 8.1, including but not limited to the contracts concluded by
the Licensee with contractors on the creation of the Database, custom
software, and on the adaptation of solutions with special reference to
the Database, any agreements on the acquisition of utility
licenses/utilisation rights, development of software or software
solutions and any contracts on the purchase of or licences to
components for software. Article 8 also extends to contracts of the
Licensee with his employees and contracts with registration parties
which the Licensee may conclude for the transfer of data to the
Database.
8.3 The Licensee shall, on the expiration of the Licence pursuant to its
provisions, ensure that the Issuer, or the party entrusted by the
Issuer with the operation of the Database, receives without time
limits, based on the term of the Licence, all use of intellectual
property rights necessary for the creation and operation of the
Database. This refers to any party which the Issuer may unilaterally
decide to entrust with the operation of the Database following the
expiration of the term of the Licence, whether this is an individual,
legal entity, company or institution.
8.4 The Licensee shall ensure that utilisation, on his part, of
intellectual property rights in respect of operating the Database is
not subject to time limits which are based on the term of the Operating
Licence. In cases where there are no rights of ownership, steps shall
be
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taken to ensure that licences or comparable rights are not restricted
by such time limits, and the Issuer or such party as the Issuer may
entrust with the operation of the Database shall have the option of
renewing such contracts, at least on an equal basis with the Licensee,
to the extent necessary for the utilisation of the rights.
8.5 The Licensee shall ensure, and take full responsibility, that the
software used by him for the creation and operation of the Database is
not in violation of any third-party rights. The same applies to the
Database and other intellectual property rights.
8.6 In the event that the Licensee obtains a copyright on software, whether
through contracts with a third party or through his own software
design, the Licensee shall ensure that following the expiration of the
Licence, he shall be capable of delivering to the Issuer all data
necessary for the Issuer or such party as the Issuer may entrust with
the operation of the Database, to continue the development and
maintenance of the Software. Such data may only be used to develop
software for the operation of the Health Sector Database. The Licensee
shall ensure, e.g., that he acquires rights to the software
contemporaneously with the creation of such rights by the other
contracting party and that the Issuer, or such party as the Issuer may
entrust with the operation of the Database, is permitted to accept
delivery of the said data notwithstanding the fact that such data is in
the possession of a party other than the Licensee, in the event that
the estate of the contracting party is subjected to bankruptcy
proceedings or if the other party is for some other reasons incapable
of performing the contract. Furthermore, the Licensee shall ensure that
he is authorised to transfer the rights to the software to the Issuer
or subsequent licensees.
8.7 In the event that the Licensee, by contract, becomes the holder of
licence rights, utilisation rights or other comparable rights to use
software, the Licensee shall ensure that following the end of the term
of the Operating Licence the Licensee will be capable of delivering or
transferring to the Issuer, or such party as the Issuer may entrust
with the operation of the Database, the number of user licenses
pursuant to licensing and service contracts which are necessary to
continue the creation and operation of the Database. The Licensee
shall, in the event that the contracting party ceases to issue licenses
or provide service for the software, or if the estate of the
contracting party is subjected to bankruptcy proceedings, or if such
party is for some other reasons incapable of performing the contract,
attempt to ensure that the Issuer, Ministry of Health and Social
Security, or the party to which the Minister may decide to entrust with
the operation of the Database, shall be entitled to receive delivery of
the information which may be necessary to maintain and develop the
software notwithstanding the fact that such information is in the
possession of a party other than the Licensee. The Licensee shall
ensure the aforesaid in all contracts on custom manufacture, adaptation
or development of software.
8.8 The Licensee shall ensure that all employees in his service, permanent
or part-time, who participate or have participated in the engenderment
of intellectual property rights, including the creation of the Database
and the development, design or maintenance of software, undertakes in
his employment contract, or through some other written undertaking,
provisions to the effect that the software and intellectual property
rights are wholly and fully the possession of the Licensee, and that
the Licensee is authorised to utilise and transfer such rights in
Iceland and in other countries by any method currently known or later
practised, to any third party, in part or in full, and modify and
continue to develop such work as the rights may extend to.
8.9 The employment contract or undertaking pursuant to Section 8.7 shall
include a declaration by the employee to the effect that he may not
provide access to any third
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party to information or data pertaining to the software or intellectual
property rights or use such data or information in his own interests or
in the interests of others.
8.10 The Licensee shall not transfer to any third party or grant to any
third party the rights to software, Database or other intellectual
property rights which would prevent the Issuer, or such party as the
Issuer may entrust with the operation of the Database, from utilising
the software, database or rights in the operation of the Database,
following the expiration of the Operating Licence. The Licensee shall
ensure that the provisions of this Section are enforced, e.g. in any
agreements on delivery of data from the Database.
8.11 At the end of the term of the Operating Licence, the Licensee is under
obligation to take whatever steps necessary to enable the Issuer, or
such party as the Issuer may entrust with the operation of the
Database, to utilise intellectual property rights, e.g. to execute
certain agreements with the Issuer, issue confirmations to any third
party or for the registration of any rights if necessary in Iceland or
abroad.
8.12 In the event that the Licensee, at the time that the Operating Licence
expires or is terminated, is the owner of copyrights to software or the
owner of other intellectual property rights which are used in the
creation and operation of the Database, he shall for two years
following the expiration of the Licence, provide the Issuer, or such
party as the Issuer may entrust with the operation of the Database,
with access to new versions which he may develop of the software.
8.13 The Licensee shall ensure that all data relating to software, including
manuals, systems descriptions, and source programs, and data relating
to the Database and other intellectual property rights are preserved in
a secure and organised manner. The handling of such data during the
term of the Operating Licence shall at all times be such as to ensure
that, in the event of the revocation of the Operating Licence, the data
may be delivered to the Issuer, or such party as the Issuer may entrust
with the operation of the Database, and that the creation or operation
of the Database can be taken over immediately.
8.14 One year from the time of issue of this Operating Licence, and annually
thereafter during the term of the Operating Licence, the Monitoring
Committee may order the performance of an inspection of the data of the
Licensee in order to verify that the provisions of Article 8 of the
Operating Licence and the provisions of Annex G on the Technology,
Security and Organisation Terms of the Data Protection Commission on
the handling of data are observed. The Licensee is under obligation to
provide access to his premises and data for this purpose.
ARTICLE 9
PROCESS ON THE REVOCATION OF THE OPERATING LICENCE
9.1 When the Operating Licence expires pursuant to the provisions of
Section 15.1 or in the event that the Operating Licence is revoked or
the Licensee deprived of the License pursuant to the provisions of law,
regulations or provisions of the Licence itself, the Issuer shall make
a decision on the disposal and operation of the Database. The
Monitoring Committee shall operate the Database until a final decision
has been made on its future operation.
9.2 The Licensee shall, on the expiration or termination of the Operating
Licence, deliver to the Issuer or such party as the Minster may entrust
with the operation of the Database, the Database and all data relating
to the software to which the Licensee has proprietary rights and which
are necessary for the creation and operation of the Database, including
systems descriptions and source programs. Furthermore, the Licensee
shall deliver all necessary
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documents for the transfer or provision of rights to other software
which is necessary for the creation and operation of the Database.
Delivery of data shall comply with the instructions of Annex G on the
Technology, Security and Organisation Terms of the Data Protection
Commission on the handling of data or, as applicable, the document
which replaces it on the review of the terms.
9.3 On the expiration of the Operating Licence, the Licensee shall in the
nine months immediately following the expiration provide the Issuer and
the Monitoring Committee, without special remuneration, with the use of
all hardware and software which may be necessary for the creation and
operation of the Databse. The Issuer shall, during the course of this
period, pay service fees and comparable fees in respect of the
software, including license fees on patents and registration fees in
respect of ther rights which may be due during the period.
9.4 During the nine month period immediately following the expiration of
the Operation Licence pursuant to Section 15.1 or for other reasons,
the Licensee shall ensure that intellectual property rights do not
lapse or become lost for other reasons. The Licensee, in consultation
with the Issuer and the Operaing Committee, take any necessary measures
in this respect, e.g. pursuant to agreements of the Licensee with a
third party, to register rights as well as any other measures which may
be provided for by law.
9.5 An independent agreement between the Licensee and Issuer, signed on the
issue of the Operating Licence, stipulates how the established rights
of the Licensee shall be transferred to the Issuer on the expiration or
termination of the Operating Licence. One of the conditions for the
issue of the Operating Licence is the existence and validity of such an
agreement. Breach of the agreement may result in loss of the Operating
Licence.
ARTICLE 10
PAYMENT OF COSTS ETC.
10.1 The Licensee shall during the term of the Operating Licence pay to the
Icelandic government costs and fees as further provided hereinbelow in
Sections 10.2 - 10.8 and in the Regulation on the Health Sector
Database.
10.2 The Licensee shall pay all costs of the preparation and issue of the
Operating Licence, the payment of such cost to be provided for in a
Government Regulation on the Health Sector Database.
10.3 The Licensee shall pay all costs of the work of the Monitoring
Committee. Following the end of each month the Licensee shall be
invoiced for the cost of the work of the Committee in the preceding
month. The invoice shall be paid within 15 days of its issue.
10.4 The Licensee shall pay all costs relating to service and monitoring of
the operation of the Database, including the monitoring of the Data
Protection Commission and the Cost of the Directorate of Public Health
of publishing and promoting information on patients' rights, cf.
Article 8 of the Act on a Health Sector Database. Following the end of
each month the Licensee shall be invoiced for costs pursuant to Section
10.4 in the preceding month. The invoice shall be paid within 15 days
of its issue.
10.5 The Licensee shall pay all costs incurred in the processing of data for
transfer to the Health Sector Database, i.e. all costs of processing
the data of health institutions and self-employed health service
workers for transfer to the Database, and the costs of producing an
integrated information system, cf. Section 4.8, as further provided in
agreements of the Licensee with the parties in question.
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10.6 In addition to costs pursuant to Sections 10.1 to 10.5, the Licensee
shall, on the basis of an independent agreement with the Issuer which
has been signed on the issue of the Operating Licence and constitutes
one of the conditions for the issue of the Licence, pay a fixed
remuneration to the Icelandic government and a share of the profit from
the operation of Islensk erfdagreining ehf, such share to be used to
promote health services, research and development.
10.7 The Licensee shall effect all payments pursuant to Sections 10.2, 10.3
and 10.4 in the office of the State Treasury. Payments pursuant to
Sections 10.5 and 10.6 are subject to further agreement.
10.8 In the event of default by the Licensee as regards the payments due
during the term of the Operating Licence pursuant to this Article or
pursuant to the Agreement referred to in Section 10.6, the Minister for
Health and Social Security may revoke the Operating Licence.
ARTICLE 11
SURVEILLANCE
11.1 The Monitoring Committee shall ensure the observance of all provisions
of the Act, government regulations issued on the basis of the Act and
the conditions of the Operating Licence in the operation of the Health
Sector Database. The Committee shall monitor all queries and processing
from the Database and report regularly to the Science Ethics Committee
on all queries made to the Database, including information on the
parties submitting the queries. The Committee shall inform the Minister
and the Data Protection Commission without delay if the Committee has
reason to believe that there is any impropriety in the operation of the
Database. The Committee shall also advise the Ministry of Health and
Social Security and the Directorate of Public Health regarding the
utilisation of information from the Database.
11.2 The Data Protection Commission is responsible for monitoring the
creation and operation of the Health Sector Database with regard to the
recording and handling of personal data and the security of data in the
Database as well as monitoring adherence to its terms.
11.3 The Interdisciplinary Ethics Committee is responsible for assessing
research conducted within the company of the Licensee and queries
received. The assessment of the Committee shall reveal that there are
no scientific or ethical objections to the performance of research or
processing of queries.
11.4 The auditor of the annual financial statement of the Licensee shall
annually, immediately following approval of the Licensee's annual
financial statement, send to the Issuer confirmation of the fact that
the provisions of the Operating Licence on financial segregation have
been observed. The National Audit Bureau is responsible for monitoring
that payments and statements of the Licensee proceed in conformance
with the provisions of the Operating Licence and applicable
legislation. The Licensee shall provide the National Audit Bureau with
access to all relevant documents and information.
11.5 The Licensee shall not begin transfer of data to the Database and
processing in the Database until such time as all conditions of the
Operating Licence are met in the opinion of the parties responsible for
monitoring the operation of the Database.
11.6 In the event of violation by the Licensee of provisions of the
Operating Licence or the Act, the Minister shall issue a written
warning with a reasonable deadline for amends. Inaction on the part of
the Licensee, intent and gross negligence are subject to revocation of
the Licence.
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ARTICLE 12
ASSIGNMENT AND ENFORCEMENT
12.1 The Operating Licence and the Health Sector Database are neither
assignable nor subject to enforcement of claims. The Operating Licence
and the Database may not be pledged against any financial liability.
ARTICLE 13
DISPUTES
13.1 In the event of any dispute regarding performance pursuant to the
Operating Licence or on the interpretation of the Operating Licence in
other respects, such disputes shall be settled before the Icelandic
courts. However, the parties may refer such disputes to arbitration if
they so agree.
ARTICLE 14
REVOCATION OF LICENCE, SANCTIONS, PENALTIES AND COMPENSATION
14.1 As regards withdrawal and revocation of the Operating Licence,
penalties and compensation, reference is made to Chapter VI of the Act
on a Health Sector Database, cf. Articles 13-17 of the said Act.
ARTICLE 15
TERM, REVIEW AND ISSUE OF LICENCE
15.1 The Operating Licence shall take effect on its date of issue with all
the conditions, rights and obligations contained in the Licence. The
Operating Licence is effective until and including 21 January 2012.
15.2 Processing in the Database shall not begin until such time as all the
conditions of the Operating Licence have been met according to the
assessment of surveillance authorities.
15.3 The Operating Licence shall be subjected to review no later than 1
October 2008. The Operating Licence may be subjected to review
following a request to such effect from the Licensee or the Minister
for Health and Social Security.
15.4 The Operating Licence is entirely subject to the provisions of Act No.
139/1998, on a Health Sector Database and government regulations issued
on the basis of the Act. The Licence shall be subjected to review on
the part of the Minister for Health and Social Security if amendments
are made to the Act or regulations issued on the basis of the Act. The
Operating Licence shall also be subjected to review if it is
inconsistent with Icelandic law or rules or international agreements,
conventions and covenants to which Iceland is a party at any time.
Ministry of Health and Social Security
22 January 2000
Ingibjorg Palmadottir [sign.]
David A. Gunnarsson [sign.]
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EXHIBIT 10.41
DECODE GENETICS, INC.
SERIES B PREFERRED STOCK AGREEMENT
This Series B Preferred Stock Agreement (this "Agreement") is made as of
March 1, 2000 (the "Effective Date") by and between deCODE genetics, Inc., a
Delaware corporation (the "Company"), and Kari Stefansson (the "Seller").
PRELIMINARY STATEMENTS
A. The Company and the Seller entered into a Common Stock Repurchase
Agreement, dated July 12, 1999 (the "Common Repurchase Agreement"), pursuant to
which the Company purchased 333,333 shares of Common Stock from the Seller in
exchange for 250,000 shares of Series B Preferred Stock (the "Series B Shares").
B. The Company repurchased the Series B Shares, at a closing held on
August 8, 1999 (the "Closing Date"), for a purchase price per share which the
parties agreed would be equal to the price per share, net of commissions and
other fees payable to the purchaser (the "Purchaser"), at which the Company sold
shares of its Series B Preferred Stock pursuant to a stock purchase agreement
dated as of June 30, 1999 (the "Series B Offering").
C. On the Closing Date, the Company and the Seller entered into an oral
agreement that if any contingent portion of the purchase price in the Series B
Offering became payable, the purchase price for the Series B Shares would be
adjusted upward accordingly, with the amount of such adjustment to be paid to
the Seller by the Company after such contingent portion of the purchase price in
the Series B Offering became payable.
D. The Company and the Purchaser have entered into an Addendum to Stock
Purchase Agreement confirming that on December 28, 1999, they agreed that a
contingent payment of $7.50, less commissions and other fees payable to the
Purchaser in an amount equal to seven percent (7%) of the sum of the original
purchase price and the contingent payment, was due and payable.
NOW, THEREFORE, the parties hereto, intending to be legally bound, agree as
follows:
1. ADJUSTMENT TO PURCHASE PRICE; PAYMENT OF DEFICIENCY. The adjusted
purchase price for the Series B Shares as of the Closing Date is US$13.95 per
share. Within five business days of the Effective Date, the Company shall pay to
the Seller, by check or wire transfer to such account as the Seller shall
designate, US$6.45 (representing the adjusted purchase price of US$13.95 less
the US$7.50 already paid) for each of the Series B Shares sold to the Company by
the Seller on the Closing Date.
2. MISCELLANEOUS. This Agreement shall be governed by and construed under
the laws of the State of Delaware as applied to agreements among Delaware
residents made and to be performed entirely within the State of Delaware. Except
as otherwise expressly provided herein, the provisions hereof shall inure to the
benefit of, and be binding upon, the successors, assigns, heirs, executors,
1
<PAGE> 2
and administrators of the parties hereto. This Agreement constitutes the full
and entire understanding and agreement among the parties with regard to the
subject matter hereof. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
*****
2
<PAGE> 3
This Agreement is hereby executed to be effective as of the date first
above written.
deCODE genetics, Inc.
Dated: 1/3/00 By: /S/ Hannes T. Smarason
Hannes T. Smarason, Senior Vice President
& Chief Business Officer
Dated: /s/ Kari Stefansson
Kari Stefansson
3
<PAGE> 1
EXHIBIT 10.42
OFFICER'S CERTIFICATE
I, the undersigned, do hereby certify and represent that:
1. I am the duly elected Senior Vice President and Chief Business
Officer of deCODE genetics, Inc., a Delaware Corporation.
2. Pursuant to Rule 306(a) of Regulation S-T, the following exhibit
10.42 to deCODE genetics, Inc.'s Registration Statement on Form S-1 is a fair
and accurate English translation of a document prepared in the Icelandic
language.
IN WITNESS WHEREOF, I have signed this Officer's Certificate in my
capacity as Senior Vice President and Chief Business Officer of deCODE genetics,
Inc. on this 7th day of March, 2000.
By: /s/ Hannes T. Smarason
--------------------------
Name: Hannes T. Smarason
Title: Senior Vice President and Chief Business Officer
<PAGE> 2
AGREEMENT
The University of Iceland, Islensk Erfdagreining ehf., and the City of Reykjavik
hereby enter into the following Agreement, with the aim of promoting
co-operation and encouraging the development of vigorous scientific and
professional activities in the field of health science in the University
District for the benefit of all the parties hereto:
1. The City of Reykjavik undertakes, in co-operation with the University of
Iceland, to amend the land use plan of the University District so as to
permit the construction of a building which will house the operations of
Islensk Erfdagreining ehf., on the site marked with the letter H on the
design plan of the District. Permission shall be granted for a building of
approximately of 10,000 square metres.
2. Provisions of the land use plan regarding the maximum size of buildings
permitted in the University District shall not change, notwithstanding the
permission granted for the construction of a larger building on site H than
the maximum currently allowed by the plan.
3. Amendment of the land use plan shall be completed as soon as possible, and
shall be fully completed within three months from the date of signature of
this Agreement.
4. The City of Reykjavik will allocate the site in question to Islensk
erfdagrreining ehf. as soon as the land use plan has been amended. For the
site and accompanying construction rights, Islensk erfdagreining ehf. shall
pay to the City of Reykjavik the amount of ISK 104,180,000, based on a
building of 10,000 square metres in size. The payment shall be divided into
two equal halves, one half to be used in the interests of the University of
Iceland. The land use plan shall include provisions stipulating that the
only activities permitted in the building shall be high-technology,
research and university-level teaching. The site lease agreement shall
provide for rights of first refusal of the University regarding the
purchase of any facilities on the site. Should the University be offered
first refusal rights at a price which the institution regards as
unacceptable, the University may then purchase the aforesaid facilities at
assessed value, i.e. the real estate itself, not including interior
fixtures and other chattels. Price and terms of payment will be decided by
two court-appointed appraisers and based on the replacement value of the
buildings with due consideration to their condition.
5. All parties to this Agreement agree that the site forms a part of the
University District. By the allocation of the site to Islensk erfdagreining
ehf. the University of Iceland will develop closer ties to the Icelandic
industries, especially to the growing sector involved in the creation of
knowledge and high technology. Should Islensk erfdagrreining ehf. cease its
operations on the site, the purchasing rights of the University shall enter
into effect, as described in item 4 above.
6. Islensk erfdagreining ehf. undertakes to construct the building on the site
within two years after the amendments to the land use plan have been made
and the formal allotment of the site has taken place.
7. Islensk erfdagreining ehf. shall arrange a closed competition for the
design of the building, i.e. purchase at least three proposals from as many
independent architect firms, and select the one it considers of the
greatest merit after giving the University an opportunity to express its
opinions of the proposals. Specifications of the project assigned to the
architects shall include a requirement that it must be possible to connect
the building by an enclosed walkway to other buildings that the University
may subsequently
<PAGE> 3
construct to the west of the site. The University shall be consulted on
this part of the project description.
8. The University of Iceland shall be granted limited use of a lecture hall,
conference room, and teaching and student facilities in the building of
Islensk erfdagreining ehf. to the extent permitted by the operations of the
company. A separate agreement shall be made between the University and
Islensk erfdagreining ehf. regarding the former party's use of the building
owned by the Company.
9. Islensk erfdagreining ehf. shall have the right to assign construction
rights or buildings on the site to a third party, with the terms,
obligations and undertakings described in this Agreement. For example,
Islensk erfdagreining ehf. may arrange for a leasing firm to construct,
own, or operate a building on the site, provided that this in no way
diminishes or curtails the rights or interests of the University of
Iceland. Islensk erfdagreining ehf. may purchase construction rights or
buildings on the site from a third party without giving rise to a right of
first refusal by the University as described in item 4 above.
10. This Agreement is made in three identical copies and signed in the presence
of witnesses. Each party shall retain one copy of the Agreement.
REYKJAVIK, 15 FEBRUARY 2000
ON BEHALF OF THE UNIVERSITY OF
ICELAND
Pall Skulason [sign.]
ON BEHALF OF ISLENSK
ERFDAGREINING EHF.
Kari Stefansson [sign.]
ON BEHALF OF THE CITY OF REYKJAVIK
Ingibjorg Solrun Gisladottir [sign.]
Witnessed by: Kristin A. Arnadottir [sign.]
<PAGE> 1
Exhibit 10.44
EMPLOYEE
CONFIDENTIALITY, INVENTION ASSIGNMENT
AND NON-COMPETE AGREEMENT
THIS EMPLOYEE CONFIDENTIALITY, INVENTION ASSIGNMENT AND NON-COMPETE
AGREEMENT ("Agreement") is made as of _________________________________________,
between deCODE genetics, Inc. (the "Company"), and _____________________________
("Employee").
In consideration of the Employee's employment or continued employment
by the Company, with the intention that this Agreement shall apply to the entire
period of Employee's employment with Inspire (including the period prior to the
date of this Agreement), the Employee hereby agrees as follows:
1. CONFIDENTIAL INFORMATION DEFINED. "Confidential Information" means trade
secrets, proprietary information, and confidential knowledge and information
which includes, but is not limited to, matters of a technical nature (such as
discoveries, ideas, concepts, designs, drawings, specifications, techniques,
models, diagrams, test data, scientific methods and know-how), and matters of a
business nature (such as the identity of customers and prospective customers,
the nature of work being done for or discussed with customers or prospective
customers, suppliers, marketing techniques and materials, marketing and
development plans, pricing or pricing policies, financial information, plans for
further development, and any other information of a similar nature not available
to the public).
2. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION OF THE COMPANY. Employee
acknowledges that, during the period of Employee's employment with the Company,
Employee has had or will have access to Confidential Information of the Company.
Therefore, Employee agrees that both during and after the period of Employee's
employment with the Company, Employee shall not, without the prior written
approval of the Company, directly or indirectly (a) reveal, report, publish,
disclose or transfer any Confidential Information the Company to any person or
entity, or (b) use any Confidential Information of the Company for any purpose
or for the benefit of any person or entity, except as may be necessary in the
performance of Employee's work for the Company.
3. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION OF OTHERS. Employee acknowledges
that, during the period of Employee's employment with the Company, Employee may
have had or will have access to Confidential Information of third parties who
have given the Company the right to use such Confidential Information, subject
to a non-disclosure agreement between the Company and such third party.
Therefore, Employee agrees that both during and after the period of Employee's
employment with the Company, Employee shall not, without the prior written
approval of the Company, directly or indirectly (a) reveal, report, publish,
disclose or transfer any Confidential Information of such third parties to any
person or entity, or (b) use any Confidential Information of such third parties
for any purpose or for the benefit of any person or entity, except as may be
1
<PAGE> 2
necessary in the performance of Employee's work for the Company.
4. PROPERTY OF THE COMPANY. Employee acknowledges and agrees that all
Confidential Information of the Company and all reports, drawings, blueprints,
data, notes, and other documents and records, whether printed, typed,
handwritten, videotaped, transmitted or transcribed on data files or on any
other type of media, made or compiled by Employee, or made available to
Employee, during the period of Employee's employment with the Company (including
the period prior to the date of this Agreement) concerning the Company's
Confidential Information are and shall remain the Company's property and shall
be delivered to the Company within five (5) business days after the termination
of such employment with the Company or at any earlier time on request of the
Company. Employee shall not retain copies of such Confidential Information,
documents and records.
5. PROPRIETARY NOTICES. Employee shall not, and shall not permit any other
person to, remove any proprietary or other legends or restrictive notices
contained in or included in any Confidential Information.
6. INVENTIONS.
(a) Employee shall promptly, from time to time, fully inform and
disclose to the Company in writing all inventions, copyrightable material,
designs, improvements and discoveries of any kind which Employee now has made,
conceived or developed (including prior to the date of this Agreement), or which
Employee may later make, conceive or develop, during the period of Employee's
employment with the Company, which pertain to or relate to the Company's
business or any of the work or businesses carried on by the Company
("Inventions"). This covenant applies to all such Inventions, whether or not
they are eligible for patent, copyright, trademark, trade secret or other legal
protection; and whether or not they are conceived and/or developed by Employee
alone or with others; and whether or not they are conceived and/or developed
during regular working hours; and whether or not they are conceived and/or
developed at the Company's facility or not.
(b) All Inventions shall be the sole and exclusive property of the
Company, and shall be deemed part of the Confidential Information of the Company
for purposes of this Agreement, whether or not fixed in a tangible medium of
expression. Employee hereby assigns all Employee's rights in all Inventions and
in all related patents, copyrights and trademarks, trade secrets and other
proprietary rights therein to the Company. Without limiting the foregoing,
Employee agrees that any copyrightable material shall be deemed to be "works
made for hire" and that the Company shall be deemed the author of such works
under the United States Copyright Act, provided that in the event and to the
extent such works are determined not to constitute "works made for hire",
Employee hereby irrevocably assigns and transfers to the Company all right,
title and interest in such works.
(c) Employee shall assist and cooperate with the Company, both during
and after the period of Employee's employment with the Company, at the Company's
sole expense, to allow the Company to obtain, maintain and enforce patent,
copyright, trademark, trade secret and other legal protection for the
Inventions. Employee shall sign
2
<PAGE> 3
such documents, and do such things necessary, to obtain such protection and to
vest the Company with full and exclusive title in all Inventions against
infringement by others. Employee hereby appoints the Secretary of the Company as
Employee's attorney-in-fact to execute documents on Employee's behalf for this
purpose.
(d) Employee shall not be entitled to any additional compensation for
any and all Inventions made during the period of Employee's employment with the
Company.
7. COVENANT NOT TO COMPETE. Employee and the Company agree that the services
rendered by the Employee are unique and irreplaceable, and that competitive use
and knowledge of any Confidential Information would substantially and
irreparably injure the Company's business, prospects and good will. Employee and
the Company also agree that the Company's business is global in nature due to
the type of products and/or services being provided. Therefore, Employee agrees
that during the period of Employee's employment with the Company and for a
period of two (2) years thereafter, Employee shall not, directly or indirectly,
through any other person, firm, corporation or other entity (whether as an
officer, director, employee, partner, consultant, holder of equity or debt
investment, lender or in any other manner or capacity):
(a) develop, sell, market, offer to sell products and/or services
anywhere in the world similar to that being developed, offered or sold by the
Company on the date of the termination of Employee's employment with the Company
for any reason;
(b) solicit, induce, encourage or attempt to induce or encourage any
employee or consultant of the Company to terminate his or her employment or
consulting relationship with the Company, or to breach any other obligation to
the Company;
(c) solicit, interfere with, disrupt, alter or attempt to disrupt or
alter the relationship, contractual or otherwise, between the Company and any
other person including, without limitation, any consultant, contractor,
customer, potential customer, or supplier of the Company; or
(d) engage in or participate in any business conducted under any name
that shall be the same as or similar to the name of the Company or any trade
name used by the Company.
Employee acknowledges that the foregoing geographic, activity and time
limitations contained in this Section 7 are reasonable and properly required for
the adequate protection of the Company's business. In the event that any such
geographic, activity or time limitation is deemed to be unreasonable by a court,
Employee shall submit to the reduction of either said activity or time
limitation to such activity or period as the court shall deem reasonable. In the
event that Employee is in violation of the aforementioned restrictive covenants,
then the time limitation thereof shall be extended for a period of time equal to
the pendency of such proceedings, including appeals.
3
<PAGE> 4
8. REPRESENTATIONS. Employee represents that Employee has the right to enter
into this Agreement, and that Employee's performance of all the terms of this
Agreement and his duties as an employee of the Company will not breach any
confidential information agreement, non-competition agreement or other agreement
with any former employer of his services, either as an employee, consultant,
contractor or independent contractor, or with any other party. Employee
represents that Employee will not disclose to the Company any trade secrets or
confidential or proprietary information of any third party that are not
generally available to the public.
9. DISCLOSURE OF THIS AGREEMENT. Employee hereby authorizes the Company to
notify others, including but not limited to customers of the Company and any of
Employee's future employers, of the terms of this Agreement and Employee's
responsibilities under this Agreement.
10. SPECIFIC PERFORMANCE. Employee acknowledges that money damages alone would
not adequately compensate the Company in the event of a breach or threatened
breach by Employee of this Agreement, and that, in addition to all other
remedies available to the Company at law or in equity, the Company shall be
entitled to injunctive relief for the enforcement of its rights and to an
accounting of profits made during the period of such breach.
11. NO RIGHTS GRANTED. Employee understands that nothing in this Agreement shall
be deemed to constitute, by implication or otherwise, the grant by the Company
to the employee of any license or other right under any patent, patent
application or other intellectual property right or interest belonging to the
Company.
12. SEVERABILITY.
(a) Each of the covenants provided in this Agreement are separate and
independent covenants. If any provision of this Agreement shall be determined to
be invalid or unenforceable, the remainder of this Agreement shall not be
affected thereby and any such invalid or unenforceable provision shall be
reformed so as to be valid and enforceable to the fullest extent permitted by
law.
(b) It is not a defense to the enforcement of any provision of this
Agreement that the Company has breached or failed to perform any obligation or
covenant hereunder or under any other agreement or understanding between
Employee and the Company.
13. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to conflict of
law rules.
14. SUPERSEDES OTHER AGREEMENTS. This Agreement contains the entire agreement of
the parties with respect to subject matter hereof and supersedes all previous
agreements and understandings between the parties with respect to its subject
matter.
4
<PAGE> 5
15. AMENDMENTS. This Agreement may not be changed, modified, released,
discharged, abandoned or otherwise terminated in whole or in part except by an
instrument in writing, agreed to and signed by the Employee and a duly
authorized officer of the Company.
16. ACKNOWLEDGEMENTS. THE EMPLOYEE ACKNOWLEDGES THAT (i) THE EMPLOYEE HAS READ
AND FULLY UNDERSTANDS THIS AGREEMENT; (ii) THE EMPLOYEE HAS BEEN GIVEN THE
OPPORTUNITY TO ASK QUESTIONS; (iii) THE EMPLOYEE HAS RECEIVED A COPY OF THIS
AGREEMENT, THE ORIGINAL OF WHICH WILL BE RETAINED IN THE EMPLOYEE'S PERSONNEL
FILE; AND (iv) THE EMPLOYEE'S OBLIGATIONS UNDER THIS AGREEMENT SURVIVE THE
TERMINATION OF THE EMPLOYEE'S EMPLOYMENT WITH THE COMPANY FOR ANY REASON.
* * *
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
deCODE genetics, Inc.
By: _____________________________________
Name: ___________________________________
Title: __________________________________
WITNESS OR ATTEST: EMPLOYEE: _______________________________
__________________________________ Name: ___________________________________
Address: ________________________________
5
<PAGE> 1
EXHIBIT 21.1
Subsidiaries of the deCODE genetics, Inc.
Islensk erfdagreining ehf., an Icelandic private limited company
<PAGE> 1
[EXHIBIT 23.1]
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on form S-1 of our
report dated March 8, 2000 relating to the consolidated financial statements of
deCODE genetics, Inc., which appears in such Registration Statement. We also
consent to the references to us under the headings "Experts" and "Selected
Consolidated Financial Data" in such Registration Statement.
PricewaterhouseCoopers ehf.
Reykjavik, Iceland
March 8, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27.1
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM OUR DECEMBER
31, 1997, 1998 AND 1999 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1998 DEC-31-1998
<PERIOD-START> JAN-01-1997 JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1997 DEC-31-1998 DEC-31-1999
<CASH> 2,714,225 25,075,844 29,668,249
<SECURITIES> 0 0 0
<RECEIVABLES> 226,984 979,998 35,695,960
<ALLOWANCES> 0 0 0
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 2,941,209 26,055,842 65,364,209
<PP&E> 2,824,824 14,528,695 17,802,672
<DEPRECIATION> 590,810 2,044,422 4,794,035
<TOTAL-ASSETS> 6,770,492 38,540,115 79,130,186
<CURRENT-LIABILITIES> 2,743,285 6,657,829 26,071,030
<BONDS> 1,331,156 6,946,330 4,874,291
0 0 0
12,603,990 42,044,519 116,209,595
<COMMON> 6,035 9,382 9,604
<OTHER-SE> (9,907,939) (17,117,945) (68,034,334)
<TOTAL-LIABILITY-AND-EQUITY> 6,770,492 38,540,115 79,130,186
<SALES> 0 12,705,000 16,444,075
<TOTAL-REVENUES> 0 12,705,000 16,444,075
<CGS> 0 0 0
<TOTAL-COSTS> 8,047,780 24,175,566 39,687,249
<OTHER-EXPENSES> 0 0 1,484,081
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 8,461 (562,336) 1,549,481
<INCOME-PRETAX> 8,056,241 10,908,230 23,177,774
<INCOME-TAX> 0 0 0
<INCOME-CONTINUING> 8,056,241 10,908,230 23,177,774
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> (620,385) (2,571,523) 38,429,831
<CHANGES> 0 0 0
<NET-INCOME> (8,676,626) (13,479,753) (61,607,605)
<EPS-BASIC> (3.85) (3.06) (9.56)
<EPS-DILUTED> (3.85) (3.06) (9.56)
</TABLE>
