<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 10, 2000.
REGISTRATION NO. 333-96351
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PRAECIS PHARMACEUTICALS INCORPORATED
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 2834 04-3200305
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
PRAECIS PHARMACEUTICALS INCORPORATED
ONE HAMPSHIRE STREET
CAMBRIDGE, MASSACHUSETTS 02139-1572
(617) 494-8400
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
------------------------------
MALCOLM L. GEFTER, PH.D.
CHAIRMAN OF THE BOARD,
CHIEF EXECUTIVE OFFICER AND PRESIDENT
ONE HAMPSHIRE STREET
CAMBRIDGE, MASSACHUSETTS 02139-1572
(617) 494-8400
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
STUART M. CABLE, P.C.
KENT A. COIT, ESQ. KATHRYN I. MURTAGH, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP GOODWIN, PROCTER & HOAR LLP
ONE BEACON STREET EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02108 BOSTON, MASSACHUSETTS 02109
(617) 573-4800 (617) 570-1000
</TABLE>
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable 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, as amended, 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. / /
--------------------------
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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
THE INFORMATION IN THIS 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 PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
SUBJECT TO COMPLETION, DATED MARCH 10, 2000
PROSPECTUS
8,000,000 SHARES
[LOGO]
PRAECIS PHARMACEUTICALS INCORPORATED
COMMON STOCK
$ PER SHARE
---------
We are selling all of the shares of common stock in this offering. We have
granted the underwriters a 30-day option to purchase up to an additional
1,200,000 shares of common stock to cover over-allotments.
This is the initial public offering of our common stock. We currently expect
that the initial public offering price to be between $15.00 and $17.00 per
share. We have applied to have our common stock included for quotation of our
common stock on the Nasdaq National Market under the symbol "PRCS."
--------------
INVESTING IN OUR COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 7.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
--------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
----------- -----------
<S> <C> <C>
Public Offering Price $ $
Underwriting Discount $ $
Proceeds to PRAECIS (before expenses) $ $
</TABLE>
The underwriters expect to deliver the shares to purchasers on or about
, 2000.
--------------
SALOMON SMITH BARNEY
CIBC WORLD MARKETS
CREDIT SUISSE FIRST BOSTON
, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Prospectus Summary.......................................... 3
Risk Factors................................................ 7
Information Regarding Forward-Looking Statements............ 17
Use of Proceeds............................................. 18
Dividend Policy............................................. 18
Capitalization.............................................. 19
Dilution.................................................... 20
Selected Financial Data..................................... 21
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 22
Business.................................................... 27
Management.................................................. 46
Relationships and Related Party Transactions................ 56
Principal Stockholders...................................... 57
Description of Capital Stock................................ 61
Shares Eligible For Future Sale............................. 66
Underwriting................................................ 68
Legal Matters............................................... 70
Experts..................................................... 70
Where You Can Find More Information......................... 71
Index to Financial Statements............................... F-1
</TABLE>
Until , 2000, all dealers that buy, sell or trade our common stock,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS.
THIS SUMMARY DOES NOT CONTAIN ALL OF THE INFORMATION YOU SHOULD CONSIDER BEFORE
BUYING SHARES IN THIS OFFERING. THEREFORE, YOU SHOULD READ THIS ENTIRE
PROSPECTUS CAREFULLY, INCLUDING THE "RISK FACTORS" SECTION AND OUR FINANCIAL
STATEMENTS AND THE RELATED NOTES.
OUR COMPANY
We are a drug discovery and development company with a lead product,
abarelix-depot-M, for the treatment of prostate cancer. In our clinical trials
to date, we have treated approximately 1,200 prostate cancer patients with
abarelix-depot-M at more than 100 clinical centers. We expect to file a new drug
application, or NDA, for abarelix-depot-M with the FDA by the end of 2000 and to
commercialize abarelix-depot-M globally with our collaborators, Amgen Inc. and
Sanofi-Synthelabo S.A. We believe that abarelix-depot-M works in a unique way
that will allow this drug to successfully compete in the approximately
$2.0 billion worldwide market for prostate cancer drugs.
In addition to developing abarelix-depot-M, we are developing
abarelix-depot-F for the treatment of women with diseases that respond to a
reduction of the female hormone estrogen. We have demonstrated the potential
usefulness of abarelix-depot-F in a phase I/II study for the treatment of
endometriosis. Endometriosis is a painful, long-lasting condition affecting an
estimated five million women in the United States. We believe that patients
suffering from endometriosis are largely untreated. In our clinical trials to
date, we have treated more than 100 endometriosis patients with abarelix-depot-F
at more than 20 clinical centers. Abarelix-depot-F is now in phase II/III
clinical testing. We believe that abarelix-depot-F will expand the existing
market for drugs to treat endometriosis and fulfill a significant unmet need.
We developed abarelix using our proprietary technology, that we refer to as
Ligand Evolution to Active Pharmaceuticals, or LEAP. Using this technology, we
can rapidly analyze large numbers of molecules and identify those that have
desired properties to be further developed into drugs. In addition, we can
examine in excess of 1,000 times more molecules for drug development with this
technology than conventional technologies would permit, in a fraction of the
time.
We used our LEAP technology to develop Apan, our drug for the treatment of
Alzheimer's Disease, which affects more than four million Americans. We expect
to file an investigational new drug application with the FDA and begin clinical
trials with Apan within the next 12 months. Apan addresses what we and others
believe to be the underlying cause of Alzheimer's Disease, rather than the
symptoms.
To date, LEAP technology has been valuable in the development of our
pipeline of drugs. We believe LEAP's power and usefulness provide us with an
opportunity to realize the potential for new drug targets coming out of the
Human Genome Project, a government sponsored, multi-institutional effort to
determine the entire sequence of the DNA of the genes of human beings.
Our proprietary drug delivery system known as Rel-Ease allows the
administration of our drug on a once-a-month basis. We have demonstrated that
Rel-Ease is useful for producing abarelix-depot-M, abarelix-depot-F and other
drugs in long-acting, or depot forms. We have an issued patent that covers the
general application of this technology for a broad range of drugs.
OUR BUSINESS STRATEGY
Our objective is to combine our skills, expertise and proprietary technology
to develop and commercialize drugs rapidly that address significant clinical
needs. We are pursuing the following strategy to achieve this objective:
- extend the commercial potential of abarelix by expanding into additional
disease areas treatable by lowering male or female hormones;
3
<PAGE>
- use our LEAP technology, together with opportunities that the Human Genome
Project presents, to discover new drugs;
- retain rights to our products until late stages of development to obtain
favorable financial terms with strategic partners; and
- develop drugs licensed from third parties to supplement product
development.
OUR CORPORATE COLLABORATORS
To date, we have entered into a number of corporate collaborations and
licensing arrangements for the discovery, development and commercialization of
drug candidates. We have provided a brief description of these collaborations
and licensing agreements below:
- AMGEN. We entered into an agreement with Amgen for the research,
development and commercialization of abarelix products in the United
States, Canada, Japan and selected other countries. Amgen has agreed to
pay us up to $25 million in signing and performance-based payments. Amgen
will pay all authorized costs and expenses associated with the research,
development and commercialization of abarelix in the United States that we
incur during 1999 and a portion of 2000. Following these expenditures, we
generally will share with Amgen all additional research and development
and sales and marketing costs and expenses, and profits, associated with
the research, development and commercialization of abarelix products in
the United States. In 1999, we recognized $56.8 million of revenues under
the agreement. In addition, Amgen will provide us with a substantial line
of credit, subject to limitations.
- SANOFI-SYNTHELABO. We entered into a license agreement with Synthelabo,
now Sanofi-Synthelabo, for the development and commercialization of
abarelix products in specific geographic areas including Europe, Latin
America, the Middle East and various countries in Africa. Sanofi-
Synthelabo has agreed to pay us up to $64.6 million in signing and
performance-based payments, $5.0 million of the costs and expenses for the
development in the United States of abarelix products for prostate cancer,
and 25% of all United States costs and expenses for the development of
abarelix products for endometriosis and for any future additional
diseases. We will receive a share of the profits from the sale of abarelix
products.
- HUMAN GENOME SCIENCES. We entered into an agreement with Human Genome
Sciences, Inc. for the discovery, development and commercialization of
compounds targeted to proprietary proteins encoded in the genome and
identified by them. Under the agreement, we will use our proprietary LEAP
technology to discover and develop drugs for these targets. We and Human
Genome Sciences will develop these drugs together and share equally in
expenses and revenues.
- PHARMACEUTICAL APPLICATIONS ASSOCIATES. We license the active ingredients
in Latranal, our drug for treating pain associated with muscle and tendon
injury, from Pharmaceutical Applications Associates LLC. We will conduct
preclinical and clinical studies to support the approval of Latranal and
provide for its manufacturing and commercialization. Pharmaceutical
Applications Associates has the right to receive royalties on product
sales.
-------------------
We were incorporated in Delaware in July 1993 under the name Pharmaceutical
Peptides, Inc. In June 1997, we changed our name to PRAECIS PHARMACEUTICALS
INCORPORATED. Our principal executive offices and primary research facilities
are located at One Hampshire Street, Cambridge, Massachusetts 02139, and our
telephone number is (617) 494-8400. Our Web site address is www.praecis.com. We
do not, however, intend that our Web site be part of this prospectus.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common stock offered......................... 8,000,000 shares
Common stock outstanding after this 39,966,545 shares
offering...................................
Use of proceeds.............................. For the production of abarelix drug product,
our new facility and related improvements,
clinical trials, preclinical testing and
other research and development activities,
sales and marketing expenses, the acquisition
of complementary businesses, products or
technologies, working capital and general
corporate purposes.
Proposed Nasdaq National Market symbol....... "PRCS"
</TABLE>
Unless otherwise indicated, all information contained in this prospectus:
- assumes no exercise of the underwriters' option to purchase up to
1,200,000 additional shares of common stock to cover over-allotments;
- reflects a 2-for-1 split of our common stock that we effected on March 8,
2000;
- reflects the automatic conversion of all of our convertible preferred
stock into 25,607,861 shares of our common stock prior to the completion
of this offering; and
- gives effect to the adjustment of certain warrants, so that upon the
closing of this offering the warrants will be exercisable for 111,495
shares of common stock rather than for convertible preferred stock.
The number of shares of common stock to be outstanding immediately after the
offering:
- is based upon 31,966,545 shares outstanding as of December 31, 1999;
- does not take into account 8,211,644 shares of common stock issuable upon
the exercise of options outstanding as of December 31, 1999, at a weighted
average exercise price of $3.35 per share; and
- does not take into account 515,940 shares of common stock issuable upon
the exercise of warrants outstanding as of December 31, 1999, at a
weighted average exercise price of $10.39 per share.
--------------
PRAECIS-TM-, MASTRscreen-TM-, Rel-Ease-TM-, LEAP-TM-, Latranal-TM- and
Apan-TM- are trademarks of our company. This prospectus also contains
trademarks, trade names and service marks of other companies, including
Casodex-TM-, Lupron Depot-TM- and Zoladex-TM-, which are the property of their
respective owners.
5
<PAGE>
SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------
1995 1996 1997 1998 1999
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Corporate collaborations...................... $ -- $ -- $15,118 $37,624 $61,514
Contract services............................. -- 876 2,615 1,943 --
------- ------- ------- ------- -------
Total revenues............................ -- 876 17,733 39,567 61,514
Costs and expenses:
Research and development...................... 3,687 7,947 15,013 33,704 48,764
General and administrative.................... 1,609 2,120 3,780 3,605 6,173
------- ------- ------- ------- -------
Operating income (loss)......................... (5,296) (9,191) (1,060) 2,258 6,577
Net income (loss)............................... $(5,099) $(8,564) $ 204 $ 5,674 $ 9,250
======= ======= ======= ======= =======
Net income (loss) per share:
Basic......................................... $ (1.59) $ (2.62) $ 0.05 $ 0.99 $ 1.51
======= ======= ======= ======= =======
Diluted....................................... $ (1.59) $ (2.62) $ 0.01 $ 0.16 $ 0.24
======= ======= ======= ======= =======
Weighted average number of common shares:
Basic......................................... 3,199 3,263 4,446 5,738 6,106
Diluted....................................... 3,199 3,263 28,270 35,139 37,849
</TABLE>
<TABLE>
<S> <C>
Pro forma net income per share:
Basic..................................................................................... $ 0.29
=======
Diluted................................................................................... $ 0.24
=======
Pro forma weighted average number of common shares:
Basic..................................................................................... 31,714
Diluted................................................................................... 37,849
</TABLE>
Pro forma basic and diluted net income per share have been calculated
assuming the conversion of all previously outstanding shares of convertible
preferred stock into common stock as if the stock had been converted immediately
upon its issuance.
<TABLE>
<CAPTION>
DECEMBER 31, 1999
----------------------
PRO FORMA
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $94,525 $212,565
Working capital............................................. 86,220 204,260
Total assets................................................ 140,331 258,371
Total stockholders' equity.................................. 87,716 205,756
</TABLE>
The pro forma as adjusted balance sheet reflects this offering and issuance
of the related shares of common stock and the automatic conversion into our
common stock of all outstanding shares of convertible preferred stock.
6
<PAGE>
RISK FACTORS
AN INVESTMENT IN OUR COMMON STOCK INVOLVES SIGNIFICANT RISKS. YOU SHOULD
CAREFULLY CONSIDER THE FOLLOWING RISKS BEFORE YOU DECIDE TO BUY OUR COMMON
STOCK.
BECAUSE WE HAVE NOT YET MARKETED OR SOLD ANY OF OUR PRODUCTS AND ANTICIPATE
SIGNIFICANT INCREASES IN OUR OPERATING EXPENSES OVER THE NEXT SEVERAL YEARS, WE
MAY NOT BE PROFITABLE IN THE FUTURE
We cannot assure you that we will be profitable in the future or, if we are
profitable, that it will be sustainable. All of our potential products are in
the research or development stage. We have not yet marketed or sold any of our
products, and we may not succeed in developing and marketing any product in the
future. To date, we have derived all of our revenues from payments under our
collaboration and license agreements and will continue to do so for at least the
next several years. In addition, we expect to continue to spend significant
amounts to continue clinical studies, obtain regulatory approval for our product
candidates and expand our facilities. We also intend to spend substantial
amounts to fund additional research and development for other products, enhance
our core technologies, and for general and administrative purposes. As of
December 31, 1999, we had an accumulated deficit of approximately $1.1 million.
We expect that our operating expenses will increase significantly in the near
term, resulting in significant operating losses for fiscal 2000 and the next
several years.
IF OUR CLINICAL TRIALS ARE NOT SUCCESSFUL, OR IF WE ARE OTHERWISE UNABLE TO
OBTAIN AND MAINTAIN THE REGULATORY APPROVAL REQUIRED TO MARKET AND SELL OUR
PRODUCTS, WE WOULD INCUR INCREASING OPERATING LOSSES
The development and sale of our products is subject to extensive regulation
by governmental authorities. Obtaining and maintaining regulatory approval
typically is costly and takes many years. Regulatory authorities have
substantial discretion to terminate clinical trials, delay or withhold
registration and marketing approval, and mandate product recalls. Failure to
comply with regulatory requirements may result in criminal prosecution, civil
penalties, recall or seizure of products, total or partial suspension of
production or injunction, as well as other action against our potential products
or us. Outside the United States, we can market a product only if we receive a
marketing authorization from the appropriate regulatory authorities. This
foreign regulatory approval process includes all of, and in some cases,
additional, risks associated with the FDA approval process we describe above.
To gain regulatory approval from the FDA and foreign regulatory authorities
for the commercial sale of any product, we must demonstrate the safety and
efficacy of the product in clinical trials. If we develop a product to treat a
long-lasting disease, such as cancer or Alzheimer's Disease, we must gather data
over an extended period of time. There are many risks associated with our
clinical trials. For example, we may be unable to achieve the same level of
success in later trials as we did in earlier ones. Additionally, data we obtain
from preclinical and clinical activities are susceptible to varying
interpretations that could impede regulatory approval. Further, some patients in
our prostate cancer and Alzheimer's Disease programs have a high risk of death,
age-related disease or other adverse medical events not related to our products.
These events may effect the statistical analysis of the safety and efficacy of
our products.
In addition, many factors could delay or terminate our ongoing or future
clinical trials. For example, a clinical trial may experience slow patient
enrollment or lack of sufficient drug supplies. Patients may experience adverse
medical events or side effects, and there may be a real or perceived lack of
effectiveness of the drug we are testing. Future governmental action or changes
in FDA policy may also result in delays or rejection. Accordingly, we may not be
able to obtain product registration or marketing approval for abarelix-depot-M,
abarelix-depot-F, or for any of our other products, based on the results of our
clinical trials.
7
<PAGE>
If we obtain regulatory approval for a product, the approval will be limited
to those diseases for which our clinical trials demonstrate the product is safe
and effective. To date, none of our products have received regulatory approval
for commercial sale. If we are delayed in obtaining or are unable to obtain
regulatory approval to market our products, we may exhaust our available
resources, including the proceeds from this offering, significantly sooner than
we had planned. If this happened, we would need to raise additional funds to
complete commercialization of our lead products and continue our research and
development programs. We cannot assure you that we would be able to obtain these
additional funds on favorable terms, if at all. A more detailed discussion
regarding government regulation of our products is included in this prospectus
under the heading "Business--Government Regulation."
EVEN IF WE RECEIVE APPROVAL FOR THE MARKETING AND SALE OF OUR PRODUCTS, THEY MAY
FAIL TO ACHIEVE MARKET ACCEPTANCE AND, ACCORDINGLY, MAY NEVER BE COMMERCIALLY
SUCCESSFUL
Many factors may affect the market acceptance and commercial success of any
of our potential products, including:
- the timing of market entry as compared to competitive products;
- the effectiveness of our products, including any potential side effects,
as compared to alternative treatment methods;
- the rate of adoption of our products by doctors and nurses and acceptance
by the target population;
- the product labeling or product insert for each of our products;
- the competitive features of our products as compared to other products,
including the frequency of administration of abarelix as compared to other
products, and doctor and patient acceptance of these features;
- the cost-effectiveness of our products and the availability of insurance
or other third-party reimbursement, in particular Medicare, for patients
using our products;
- the extent and success of our marketing efforts and those of our
collaborators; and
- unfavorable publicity concerning our products or any similar products.
If our products are not commercially successful, we may never become profitable.
IF OUR STRATEGIC PARTNERS REDUCE, DELAY OR TERMINATE THEIR FINANCIAL SUPPORT, WE
MAY BE UNABLE TO SUCCESSFULLY DEVELOP, MARKET, DISTRIBUTE OR SELL OUR PRODUCTS
We depend upon our corporate collaborators, in particular Amgen and
Sanofi-Synthelabo, to provide substantial financial support for developing our
products. We also will rely on them in some instances to help us obtain
regulatory approval for our products and to manufacture, market, distribute or
sell our products. Despite our dependence, we have limited control over the
amount and timing of resources that our corporate collaborators devote to our
programs or potential products. Also, our corporate collaborators may terminate
our collaboration agreements in various circumstances. For example, in
December 1998, we and Roche Products Inc. mutually terminated our agreement. We
and each of Amgen and Sanofi-Synthelabo may mutually terminate our agreement,
and, in addition:
- Amgen and Sanofi-Synthelabo each may terminate its agreement with us if
the results of any clinical trial of abarelix materially harms the
product's commercial prospects;
- Amgen may terminate its agreement with us at any time upon 90 days prior
written notice; and
8
<PAGE>
- Sanofi-Synthelabo may terminate its agreement with us if specified adverse
events occur relating to our European patent applications or the related
patents which may be issued covering abarelix or our Rel-Ease technology.
We cannot assure you that any of our present or future collaborators will
meet their obligations to us under the collaboration agreements. If a
collaborator terminates its agreement with us or fails to perform its
obligations, it may delay the development or commercialization of the potential
product or research program. As a result, we could have to devote unforseen
additional resources to development and commercialization or to terminate one or
more of our drug development programs. Due to increased operating costs and lost
revenue associated with the termination of a collaboration agreement, we could
have to seek funds in addition to the net proceeds of this offering to meet our
capital requirements. We cannot assure you that we would be able to raise the
necessary funds or negotiate additional corporate collaborations on acceptable
terms, if at all, and we may have to curtail or cease operations. For instance,
if, following the termination of our agreement with Roche, we had been unable to
enter into an alternative collaboration for the development and
commercialization of our abarelix products in a timely manner, we likely would
have needed to delay or cut back our programs for the development of abarelix or
other drugs and to raise additional funds through one or more equity financings
prior to the time we had planned to do so and possibly on less than favorable
terms.
WE COULD EXPERIENCE DELAYS IN THE RESEARCH, DEVELOPMENT OR COMMERCIALIZATION OF
OUR PRODUCTS AS A RESULT OF CONFLICTS WITH OUR CORPORATE COLLABORATORS OR
COMPETITION FROM THEM
An important part of our strategy involves conducting proprietary research
programs. We may pursue opportunities that conflict with our collaborators'
businesses. Disagreements with our collaborators could develop over rights to
intellectual property, including the ownership of technology co-developed with
our collaborators. Our current or future collaborators could develop products in
the future that compete with our products. This could diminish our
collaborators' commitment to us, and reduce the resources they devote to
developing and commercializing our products. Conflicts or disputes with our
collaborators, and competition from them, could harm our relationships with our
other collaborators, restrict our ability to enter future collaboration
agreements and delay research, development or the commercialization of our
products.
ALTERNATIVE TREATMENTS ARE AVAILABLE WHICH MAY IMPAIR OUR ABILITY TO CAPTURE
MARKET SHARE FOR OUR PRODUCTS
Alternative products exist or are under development to treat the diseases
for which we are developing drugs. For example, the FDA has approved several
drugs for the treatment of prostate cancer that responds to changes in hormone
levels. Even if the FDA approves abarelix-depot-M, our product for the treatment
of prostate cancer, for commercialization, it may not compete favorably with
existing treatments that already have an established market share. If
abarelix-depot-M does not achieve broad market acceptance, we may not become
profitable.
MANY OF OUR COMPETITORS HAVE SUBSTANTIALLY GREATER RESOURCES THAN WE DO AND MAY
BE ABLE TO DEVELOP AND COMMERCIALIZE PRODUCTS THAT MAKE OUR PRODUCTS AND
TECHNOLOGIES OBSOLETE AND NON-COMPETITIVE
A biotechnology company such as ours must keep pace with rapid technological
change and faces intense competition. We compete with biotechnology and
pharmaceutical companies for funding, access to new technology, research
personnel and in product research and development. Many of these companies have
greater financial resources and more experience than we do in developing drugs,
obtaining regulatory approvals, manufacturing and marketing. We also face
competition from academic and research institutions and government agencies
pursuing competitive alternatives to our products
9
<PAGE>
and technologies. We expect that all of our products under development will face
intense competition from existing or future drugs.
Our competitors may:
- successfully identify drug candidates or develop products earlier than we
do;
- obtain approvals from the FDA or foreign regulatory bodies more rapidly
than we do;
- develop products that are more effective, have fewer side effects or cost
less than our products; or
- successfully market products that compete with our products.
IF WE ARE UNABLE TO OBTAIN AND ENFORCE VALID PATENTS, WE COULD LOSE OUR
COMPETITIVE ADVANTAGE
Our success will depend in part on our ability to obtain patents and
maintain adequate protection of our technologies and products. If we do not
adequately protect our intellectual property, competitors may be able to use our
technologies and erode our competitive advantage. For example, if we lost our
patent protection for abarelix, another party could produce and market abarelix
in direct competition with us. Some foreign countries lack rules and methods for
defending intellectual property rights and do not protect proprietary rights to
the same extent as the United States. Many companies have had difficulty
protecting their proprietary rights in these foreign countries.
Patent positions are sometimes uncertain and usually involve complex legal
and factual questions. We can protect our proprietary rights from unauthorized
use by third parties only to the extent that our proprietary technologies are
covered by valid and enforceable patents or are effectively maintained as trade
secrets. To date, we hold seven issued United States patents. We have applied,
and will continue to apply, for patents covering both our technologies and
products as we deem appropriate. Others may challenge our patent applications or
our patent applications may not result in issued patents. Moreover, any issued
patents on our own inventions, or those licensed from third parties, may not
provide us with adequate protection, or others may challenge, circumvent or
narrow our patents. Third party patents may impair or block our ability to
conduct our business. Additionally, third parties may independently develop
products similar to our products, duplicate our unpatented products, or design
around any patented products we develop.
IF WE ARE UNABLE TO PROTECT OUR TRADE SECRETS AND PROPRIETARY INFORMATION, WE
COULD LOSE OUR COMPETITIVE ADVANTAGE IN THE MARKET
In addition to patents, we rely on a combination of trade secrets,
confidentiality, nondisclosure and other contractual provisions, and security
measures to protect our confidential and proprietary information. These measures
may not adequately protect our trade secrets or other proprietary information.
If they do not adequately protect our rights, third parties could use our
technology, and we could lose any competitive advantage we may have. In
addition, others may independently develop similar proprietary information or
techniques or otherwise gain access to our trade secrets, which could impair any
competitive advantage we may have.
IF OUR POTENTIAL PRODUCTS CONFLICT WITH THE PATENTS OF COMPETITORS, UNIVERSITIES
OR OTHERS, WE COULD HAVE TO ENGAGE IN COSTLY LITIGATION AND BE UNABLE TO
COMMERCIALIZE THOSE PRODUCTS
Our potential products may give rise to claims that they infringe other
patents. A third party could force us to pay damages or to stop our
manufacturing and marketing of the affected products by bringing a legal action
against us for any infringement. In addition, a third party could require us to
obtain a license to continue to manufacture or market the affected products, and
we may not be able to do so. We believe that significant litigation will
continue in our industry regarding patent and other
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<PAGE>
intellectual property rights. If we become involved in litigation, it could
consume a substantial portion of our resources. Even if legal actions were
meritless, defending a lawsuit could take significant time, be expensive and
divert management attention from other business concerns.
IF THIRD PARTIES TERMINATE OUR LICENSES, WE COULD EXPERIENCE DELAYS OR BE UNABLE
TO COMPLETE THE DEVELOPMENT AND COMMERCIALIZATION OF OUR PRODUCTS
We license some of our technology from third parties. Termination of our
licenses could force us to delay or discontinue some of our development and
commercialization programs. For example, if Advanced Research and Technology
Institutes, Inc. terminated our abarelix license, we could have to discontinue
development and commercialization of our abarelix products. We cannot assure you
that we would be able to license substitute technology in the future. Our
inability to do so could impair our ability to conduct our business because we
may lack the technology necessary to develop and commercialize our potential
products.
BECAUSE WE DEPEND ON THIRD PARTIES TO CONDUCT LABORATORY TESTING AND HUMAN
CLINICAL STUDIES AND ASSIST US WITH REGULATORY COMPLIANCE, WE MAY ENCOUNTER
DELAYS IN PRODUCT DEVELOPMENT AND COMMERCIALIZATION
We have contracts with a limited number of research organizations to design
and conduct our laboratory testing and human clinical studies. If we cannot
contract for testing activities on acceptable terms, or at all, we may not
complete our product development efforts in a timely manner. To the extent we
rely on third parties for laboratory testing and human clinical studies, we may
lose some control over these activities. For example, third parties may not
complete testing activities on schedule or when we request. In addition, these
third parties may not conduct our clinical trials in accordance with regulatory
requirements. The failure of these third parties to carry out their contractual
duties could delay or prevent the development and commercialization of our
products.
IF WE FAIL TO DEVELOP OR MAINTAIN OUR RELATIONSHIPS WITH THIRD PARTY
MANUFACTURERS, OR IF THESE MANUFACTURERS FAIL TO PERFORM ADEQUATELY, WE MAY BE
UNABLE TO COMMERCIALIZE OUR PRODUCTS
Our capacity to conduct clinical trials and commercialize our products will
depend in part on our ability to manufacture our products on a large scale, at a
competitive cost and in accordance with regulatory requirements. We must
establish and maintain a commercial scale formulation and manufacturing process
for all of our potential products to complete clinical trials. We, our
collaborators or third party manufacturers may encounter difficulties with these
processes at any time that could result in delays in clinical trials, regulatory
submissions or in the commercialization of potential products.
We have no experience in large-scale product manufacturing, nor do we have
the resources or facilities to manufacture products on a commercial scale. We
will continue to rely upon contract manufacturers to produce abarelix and other
compounds for preclinical, clinical and commercial purposes for a significant
period of time. If our supply agreements are not satisfactory, we may not be
able to develop or commercialize potential products as planned. The manufacture
of our potential products will be subject to current good manufacturing
practices regulations. Third party manufacturers are subject to regulatory
review and may fail to comply with these good manufacturing practices
regulations. If we need to replace our current third party manufacturers, or
contract with additional manufacturers, we must conduct new product testing and
facility compliance inspections. This testing and inspection is costly and
time-consuming. Any of these factors could prevent, or cause delays in,
obtaining regulatory approvals for, and manufacturing, marketing or selling of,
our products and could also result in significantly higher operating expenses.
11
<PAGE>
If we fail to meet our manufacturing and supply obligations under our
agreements with either Amgen or Sanofi-Synthelabo, they may assume manufacturing
responsibility under their agreements. In addition, if this occurs, we must pay
Sanofi-Synthelabo its incremental costs of assuming manufacturing
responsibility.
DUE TO OUR INEXPERIENCE AND OUR LIMITED SALES AND MARKETING STAFF, WE WILL
DEPEND ON THIRD PARTIES TO SELL AND MARKET OUR PRODUCTS
We have no experience in marketing or selling pharmaceutical products and
have a limited marketing and sales staff. To achieve commercial success for any
approved product, we must either develop a marketing and sales force or enter
into arrangements with third parties to market and sell our products. We have
granted Amgen and Sanofi-Synthelabo exclusive commercialization rights for
abarelix products in defined geographic locations. Our marketing and
distribution arrangements with Amgen and Sanofi-Synthelabo may not be successful
and we may not receive any revenues from these arrangements. We cannot assure
you that we will be able to enter into marketing and sales agreements on
acceptable terms, if at all, for any other products.
OUR REVENUES WILL DIMINISH IF WE FAIL TO OBTAIN ACCEPTABLE PRICES OR ADEQUATE
REIMBURSEMENT FOR OUR PRODUCTS FROM THIRD PARTY PAYORS
The continuing efforts of government and third party payors to contain or
reduce the costs of health care may limit our commercial opportunity. If
government and other third party payors do not provide adequate coverage and
reimbursement for our products, physicians may not prescribe them. If we are
unable to offer physicians comparable or superior financial motivation to use
our products, we may not be able to generate significant revenues. For example,
in some foreign markets, pricing and profitability of prescription
pharmaceuticals are subject to government control. In the United States, we
expect that there will continue to be federal and state proposals for similar
controls. In addition, increasing emphasis on managed care in the United States
will continue to put pressure on the pricing of pharmaceutical products. Cost
control initiatives could decrease the price that any of our collaborators or we
receive for any products in the future. Further, cost control initiatives could
impair our collaborators' ability to commercialize our products, and our ability
to earn revenues from this commercialization.
Our ability to commercialize pharmaceutical products, alone or with
collaborators, may depend in part on the availability of reimbursement for our
products from:
- government and health administration authorities;
- private health insurers; and
- other third party payors, including Medicare.
We cannot predict the availability of reimbursement for newly approved
health care products. Third party payors, including Medicare, are challenging
the prices charged for medical products and services. Government and other third
party payors increasingly are limiting both coverage and the level of
reimbursement for new drugs and refusing, in some cases, to provide coverage for
a patient's use of an approved drug for purposes not approved by the FDA. Third
party insurance coverage may not be available to patients for any of our
products.
WE MAY BE UNABLE TO SECURE ADEQUATE DEBT FINANCING FOR THE PURCHASE OF OUR NEW
FACILITY, WHICH COULD FORCE US TO USE MORE OF THE PROCEEDS FROM THIS OFFERING
THAN EXPECTED TO PURCHASE THE NEW FACILITY
We have exceeded the capacity of our current facilities, and recently agreed
to purchase a new facility in the western suburbs of Boston. We will spend
substantial funds to purchase this facility and make necessary improvements. We
may be unable to borrow sufficient funds to do so on a timely basis, or at all.
If we cannot borrow money, we will be required to use more proceeds from this
offering than we currently expect. In addition, we intend to lease part of our
new facility and sub-lease our current
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<PAGE>
facility. We may not be able to find a suitable tenant or sub-tenant to occupy
these spaces in a timely manner, if at all.
IF WE LOSE OUR KEY PERSONNEL OR ARE UNABLE TO ATTRACT AND RETAIN ADDITIONAL
SKILLED PERSONNEL, WE MAY BE UNABLE TO PURSUE OUR PRODUCT DEVELOPMENT AND
COMMERCIALIZATION EFFORTS
We depend substantially on the principal members of our management and
scientific staff, including Malcolm L. Gefter, Ph.D., our Chief Executive
Officer, President and Chairman of the Board. We do not have employment
agreements with any of our officers or key personnel and none of our employees
have signed non-competition agreements. Any officer or employee can terminate
his or her relationship with us at any time and work for one of our competitors.
The loss of these key individuals could result in competitive harm because we
could experience delays in our product research, development and
commercialization efforts without their expertise.
Recruiting and retaining qualified scientific personnel to perform future
research and development work also will be critical to our success. Competition
for skilled personnel is intense and the turnover rate can be high. We compete
with numerous companies and academic and other research institutions for
experienced scientists. This competition may limit our ability to recruit and
retain qualified personnel on acceptable terms. Failure to attract and retain
personnel would prevent us from successfully developing our products or core
technologies and launching our products commercially. Our planned activities may
require the addition of new personnel, including management, and the development
of additional expertise by existing management personnel. The inability to
acquire these services or to develop this expertise could result in delays in
the research, development and commercialization of our products.
WE MAY HAVE SUBSTANTIAL EXPOSURE TO PRODUCT LIABILITY CLAIMS AND MAY NOT HAVE
ADEQUATE INSURANCE TO COVER THOSE CLAIMS
We may be held liable if any product we develop, or any product made by
others using our technologies, causes injury. We have only limited product
liability insurance coverage for our clinical trials. We intend to obtain
product liability insurance to cover our products approved for marketing and
sale. This insurance may be prohibitively expensive or may not fully cover our
potential liabilities. Our inability to obtain adequate insurance coverage and
at an acceptable cost could prevent or inhibit the commercialization of our
products. If a third party sues us for any injury caused by products made by us
or using our technologies, our liability could exceed our total assets.
WE USE HAZARDOUS CHEMICALS AND RADIOACTIVE AND BIOLOGICAL MATERIALS IN OUR
BUSINESS AND POTENTIAL CLAIMS RELATING TO IMPROPER HANDLING, STORAGE OR DISPOSAL
OF THESE MATERIALS COULD BE TIME CONSUMING AND COSTLY
Our research and development processes involve the controlled use of
hazardous materials, including chemicals and radioactive and biological
materials. The health risks associated with accidental exposure to abarelix
include temporary impotence or infertility and harmful effects on pregnant
women. Our operations also produce hazardous waste products. We cannot eliminate
the risk of accidental contamination or discharge from hazardous materials and
any resultant injury. Federal, state and local laws and regulations govern the
use, manufacture, storage, handling and disposal of hazardous materials.
Compliance with environmental laws and regulations may be expensive. Current or
future environmental regulations may impair our research, development or
production efforts. We might have to pay civil damages in the event of an
improper or unauthorized release of, or exposure of individuals to, hazardous
materials.
Some of our collaborators also work with hazardous materials in connection
with our collaborations. We have agreed to indemnify our collaborators in some
circumstances against damages and other liabilities arising out of development
activities or products produced in connection with these collaborations.
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<PAGE>
FLUCTUATIONS IN CURRENCY EXCHANGE RATES COULD INCREASE THE PAYMENTS WE MUST MAKE
UNDER SOME OF OUR SUPPLY AGREEMENTS
We currently conduct all our business transactions in United States dollars.
However, under two of our supply agreements relating to our abarelix products,
the amount we are required to pay our supplier may be adjusted from time to time
if the applicable currency exchange rate varies by more than 10% from the agreed
exchange rate. Accordingly, significant exchange rate fluctuations could
materially increase the required payments under these agreements.
IF WE ENGAGE IN AN ACQUISITION, WE WILL INCUR A VARIETY OF COSTS AND MAY NEVER
REALIZE THE ANTICIPATED BENEFITS OF THE ACQUISITION
If appropriate opportunities become available, we may attempt to acquire
businesses, products or technologies that we believe are a strategic fit with
our business. We currently have no commitments or agreements for any
acquisitions. If we do undertake any transaction of this sort, the process of
integrating an acquired business, product or technology may result in unforeseen
operating difficulties and expenditures and may absorb significant management
attention that would otherwise be available for ongoing development of our
business. Moreover, we may fail to realize the anticipated benefits of any
acquisition. Future acquisitions could dilute your ownership interest in us and
could cause us to incur debt, expose us to future liabilities and result in
amortization expenses related to goodwill and other intangible assets.
OUR OR THIRD PARTIES' COMPUTER SYSTEMS MAY FAIL DURING THE YEAR 2000, WHICH
COULD DELAY DEVELOPMENT AND COMMERCIALIZATION OF OUR PRODUCTS
The year 2000 issue arises from computer programs written using two, rather
than four, digits to define the applicable year. Any computer programs or
hardware that have date-sensitive software or embedded chips may recognize a
date using "00" as the year 1900 rather than the year 2000. If our computer
systems, or the computer systems of the third parties we rely upon, experience
problems because of the year 2000 issue, it could delay development and
commercialization of our products or reduce our ability to cost-effectively
manage our business during the time required to fix these problems. We have
assessed our computer systems and do not expect any residual year 2000-related
problems. However, our systems could experience residual year 2000-related
problems in the future which could harm our operations. We have not assessed the
year 2000 readiness of our suppliers, corporate collaborators or other third
parties with which we conduct transactions. These third parties may encounter
year 2000-related problems in the future which could result in lost data or
increased operating expenses.
THERE HAS BEEN NO PRIOR PUBLIC MARKET FOR OUR COMMON STOCK, AND YOU MAY NOT BE
ABLE TO RESELL SHARES OF OUR COMMON STOCK FOR A PROFIT
Prior to this offering, there has been no public market for our common
stock. We will determine the initial public offering price with the
underwriters. This price may not be the price at which the common stock will
trade after this offering. The market price of our common stock may decline
below the initial public offering price and an active trading market may not
develop after this offering. We cannot assure you of the extent to which an
active trading market will develop or how liquid that market may become.
THE MARKET PRICE OF OUR COMMON STOCK MAY EXPERIENCE EXTREME PRICE AND VOLUME
FLUCTUATIONS
The market price of the common stock may fluctuate substantially due to a
variety of factors, including:
- announcements of technological innovations or new products by us or our
competitors;
- announcement of FDA approval or disapproval of our products;
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<PAGE>
- the success rate of our discovery efforts and clinical trials leading to
performance-based payments and revenues under our collaborations;
- developments or disputes concerning patents or proprietary rights,
including announcements of infringement, interference or other litigation
against us or our licensors;
- the willingness of collaborators to commercialize our products and the
timing of commercialization;
- announcements concerning our competitors, or the biotechnology or
pharmaceutical industry in general;
- public concerns as to the safety of our products or our competitors'
products;
- changes in government regulation of the pharmaceutical or medical
industry;
- changes in the reimbursement policies of third party insurance companies
or government agencies;
- actual or anticipated fluctuations in our operating results;
- changes in financial estimates or recommendations by securities analysts;
- changes in accounting principles; and
- the loss of any of our key scientific or management personnel.
In addition, the stock market has experienced extreme price and volume
fluctuations. The market prices of the securities of biotechnology companies,
particularly companies like ours without consistent product revenues and
earnings, have been highly volatile, and may continue to be highly volatile in
the future. This volatility has often been unrelated to the operating
performance of particular companies. In the past, securities class action
litigation has often been brought against companies that experience volatility
in the market price of their securities. Whether or not meritorious, litigation
brought against us could result in substantial costs and a diversion of
management's attention and resources.
WE EXPECT THAT OUR QUARTERLY RESULTS OF OPERATIONS WILL FLUCTUATE, AND THIS
FLUCTUATION COULD CAUSE OUR STOCK PRICE TO DECLINE
Our quarterly operating results have fluctuated in the past and are likely
to do so in the future. These fluctuations could cause our stock price to
decline. Some of the factors that could cause our operating results to fluctuate
include:
- the failure of any of our corporate collaborators to meet their payment
obligations, or termination of any of our agreements with them;
- the timing of development and commercialization of our abarelix products
leading to performance-based payments and revenues under our agreements
with our corporate collaborators; and
- the timing of our commercialization of other products resulting in
revenues.
Due to the possibility of fluctuations in our revenues and expenses, we
believe that quarter-to-quarter comparisons of our operating results are not a
good indication of our future performance.
IF OUR EXISTING STOCKHOLDERS SELL A SUBSTANTIAL NUMBER OF SHARES OF OUR COMMON
STOCK IN THE PUBLIC MARKET, OUR STOCK PRICE MAY DECLINE
After this offering, we will have outstanding 39,966,545 shares of common
stock. Of these shares, the 8,000,000 shares being offered in this offering will
be freely tradeable. Our directors, executive officers, substantially all of our
stockholders and all of our warrant holders have agreed that they will not sell
or otherwise dispose of any shares of common stock without the prior written
consent of
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<PAGE>
Salomon Smith Barney Inc. for a period of 180 days after the completion of this
offering. Salomon Smith Barney Inc. may waive the restrictions in these lock-up
agreements.
After the completion of this offering, we intend to file a registration
statement covering approximately 9,930,460 shares of common stock issuable under
our stock option plan and our employee stock purchase plan as of December 31,
1999. In addition, holders of 30,652,908 shares of our common stock have
registration rights. In the future, we may issue additional shares to our
employees, directors or consultants, in connection with corporate alliances or
acquisitions, and to raise capital. Due to these factors, sales of a substantial
number of shares of our common stock in the public market could occur at any
time.
OUR OFFICERS AND DIRECTORS WILL CONTROL 45.1% OF OUR COMMON STOCK AND WILL BE
ABLE TO SIGNIFICANTLY INFLUENCE CORPORATE ACTIONS
After this offering, our executive officers, directors and stockholders
affiliated with them will control approximately 45.1% of our common stock, based
on their beneficial ownership as of December 31, 1999 and including options held
by them that are exercisable within 60 days of December 31, 1999. As a result,
these stockholders, acting together, will be able to significantly influence all
matters requiring approval by our stockholders, including the election of
directors and the approval of mergers or other business combination
transactions. The interests of this group of stockholders may not always
coincide with our interests or the interests of other stockholders.
ANTI-TAKEOVER PROVISIONS IN OUR CHARTER, BY-LAWS AND UNDER DELAWARE LAW MAY MAKE
AN ACQUISITION OF US MORE DIFFICULT, EVEN IF AN ACQUISITION WOULD BE BENEFICIAL
TO OUR STOCKHOLDERS
Provisions in our certificate of incorporation and by-laws may delay or
prevent an acquisition of us or a change in our management. In addition, because
we are incorporated in Delaware, we are governed by the provisions of
Section 203 of the Delaware General Corporate Law. These provisions may prohibit
large stockholders, in particular those owning 15% or more of our outstanding
voting stock, from merging or combining with us. These provisions in our
charter, by-laws and under Delaware law could reduce the price that investors
might be willing to pay for shares of our common stock in the future and result
in the market price being lower that it would be without these provisions.
WE MAY SPEND A SUBSTANTIAL PORTION OF THE NET PROCEEDS OF THIS OFFERING IN WAYS
WHICH DO NOT YIELD A FAVORABLE RETURN
We have broad discretion to allocate the net proceeds from this offering. As
a result, investors in this offering will be relying upon our judgment with only
limited information about our specific intentions regarding the use of proceeds.
We cannot assure you that the proceeds will be invested to yield a favorable
return.
INVESTORS IN THIS OFFERING WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION OF
THEIR INVESTMENT
We expect the initial public offering price of our common stock to be
substantially higher than the book value per share of the outstanding common
stock. Investors purchasing shares of common stock in this offering will incur
immediate substantial dilution in the amount of $10.85 per share based upon an
assumed initial public offering price of $16.00 per share. To the extent
outstanding stock options or warrants are exercised, there will be further
dilution to new investors.
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INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. The forward-looking
statements are contained principally in the sections entitled "Prospectus
Summary," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business." These statements involve known and
unknown risks, uncertainties and other factors which may cause our actual
results, performance or achievements to be materially different from any future
results, performances or achievements expressed or implied by the
forward-looking statements. Forward-looking statements include, but are not
limited to, statements about:
- the progress of our product development programs;
- the status of our clinical development of potential drugs, clinical trials
and the regulatory approval process;
- our estimates for future revenues and profitability;
- our estimates regarding our capital requirements and our needs for
additional financing;
- developments relating to our selection and licensing of drug targets;
- our ability to attract partners with acceptable development, regulatory
and commercialization expertise;
- the benefits to be derived from corporate collaborations, including
collaborations relating to the development and commercialization of
abarelix products;
- the benefits to be derived from license agreements and other collaborative
efforts for the development and commercialization of products; and
- sources of revenues and/or anticipated revenues, including contributions
from corporate collaborations, license agreements and other collaborative
efforts for the development and commercialization of products, and the
continued viability and duration of those agreements and efforts.
In some cases, you can identify forward-looking statements by terms such as
"may," "will," "should," "could," "would," "expects," "plans," "anticipates,"
"believes," "estimates," "projects," "predicts," "potential" and similar
expressions intended to identify forward-looking statements. These statements
reflect our current views with respect to future events and are based on
assumptions and subject to risks and uncertainties. Given these uncertainties,
you should not place undue reliance on these forward-looking statements. We
discuss many of these risks in this prospectus in greater detail under the
heading "Risk Factors." Also, these forward-looking statements represent our
estimates and assumptions only as of the date of this prospectus.
You should read this prospectus and the documents that we reference in this
prospectus and have filed as exhibits to the registration statement, of which
this prospectus is a part, completely and with the understanding that our actual
future results may be materially different from what we expect. We qualify all
of our forward-looking statements by these cautionary statements.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT
MAKING AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT
PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION PROVIDED BY THIS
PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THIS
PROSPECTUS.
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USE OF PROCEEDS
We expect that we will receive net proceeds of approximately $118,040,000
from the sale of the 8,000,000 shares of common stock we are offering, based on
an assumed initial public offering price of $16.00 per share, and after
deducting underwriting discounts and commissions and estimated offering expenses
that we will pay. If the underwriters exercise their over-allotment option in
full, we will receive net proceeds of approximately $135,896,000. We currently
intend to use the net proceeds of this offering as follows:
- approximately $30.0 million to fund the production of abarelix drug
product;
- approximately $30.0 million towards the purchase of our new facility and
related improvements;
- an undetermined amount for clinical trial expenses related to abarelix and
other preclinical testing and expansion of research and development
activities;
- an undetermined amount for sales and marketing expenses associated with
the commercial launch of abarelix; and
- for working capital and general corporate purposes.
In addition, we also may use a portion of the net proceeds of this offering
for the acquisition of complementary businesses, products or technologies. While
we evaluate these types of opportunities from time to time, there are currently
no agreements or negotiations with respect to any specific transaction.
We have not yet determined all of our expected expenditures, and we cannot
estimate the amounts to be used for each purpose set forth above. Accordingly,
our management will have significant flexibility in applying a significant
portion of the net proceeds of this offering. Pending use of the net proceeds as
described above, we intend to invest the net proceeds of this offering in
short-term, interest-bearing, investment-grade securities.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock, and
we do not currently intend to pay any cash dividends on the common stock in the
foreseeable future. We expect to retain future earnings, if any, to fund the
development and growth of our business. Our board of directors will determine
future dividends, if any.
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CAPITALIZATION
The following table describes our capitalization as of December 31, 1999:
- on an actual basis;
- on a pro forma basis after giving effect to the automatic conversion of
all of our outstanding shares of convertible preferred stock into common
stock; and
- on a pro forma as adjusted basis to give effect to this offering and
issuance of the related shares of common stock and the automatic
conversion of all of our outstanding shares of convertible preferred stock
into common stock.
You should read this table together with the section of this prospectus with
the heading "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and our financial statements and the related notes
appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1999
-----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- ------------
(IN THOUSANDS, EXCEPT SHARE AND
PER SHARE DATA)
<S> <C> <C> <C>
Stockholders' equity:
Preferred stock--unallocated, $0.01 par value: 312,700
shares authorized, actual and pro forma; 10,000,000
shares authorized, pro forma as adjusted; none issued
and outstanding, actual, pro forma and pro forma as
adjusted.............................................. $ -- $ -- $ --
Series A, B, C, D and E convertible preferred stock,
$0.01 par value: 3,437,300 shares authorized, actual
and pro forma; none authorized, pro forma as adjusted;
3,417,300 shares issued and outstanding, actual; none
issued and outstanding, pro forma and pro forma as
adjusted.............................................. 35 -- --
Common stock, $0.01 par value: 60,000,000 shares
authorized, actual and pro forma; 200,000,000 shares
authorized, pro forma as adjusted; 6,358,684 shares
issued and outstanding, actual; 31,966,545 shares
issued and outstanding, pro forma; 39,966,545 shares
issued and outstanding, pro forma as adjusted......... 64 320 400
Additional paid-in capital.............................. 88,710 88,489 206,449
Accumulated deficit..................................... (1,093) (1,093) (1,093)
------- ------- --------
Total stockholders' equity............................ 87,716 87,716 205,756
------- ------- --------
Total capitalization................................ $87,716 $87,716 $205,756
======= ======= ========
</TABLE>
The actual, pro forma and pro forma as adjusted information set forth in the
table excludes:
- 1,200,000 shares of common stock issuable upon the exercise of the
underwriters' over-allotment option;
- 8,211,644 shares of common stock issuable upon the exercise of stock
options outstanding as of December 31, 1999, at a weighted average
exercise price of $3.35 per share;
- 515,940 shares reserved for issuance upon the exercise of warrants
outstanding as of December 31, 1999, at a weighted average exercise price
of $10.39 per share;
- an additional 1,558,816 shares of common stock reserved for issuance under
our Amended and Restated 1995 Stock Plan as of December 31, 1999; and
- an additional 160,000 shares of common stock reserved for issuance under
our Employee Stock Purchase Plan.
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DILUTION
Our pro forma net tangible book value as of December 31, 1999 was
approximately $87,716,000, or $2.74 per share of common stock. Pro forma net
tangible book value per share represents the amount of our pro forma total
tangible assets less total liabilities, divided by the pro forma number of
shares of common stock outstanding assuming the conversion of all shares of
convertible preferred stock outstanding as of December 31, 1999 into 25,607,861
shares of common stock. Pro forma net tangible book value dilution per share
represents the difference between the amount per share paid by purchasers of
shares of common stock in this offering and the pro forma net tangible book
value per share of common stock immediately after completion of this offering on
a pro forma as adjusted basis. After giving effect to the sale of the
8,000,000 shares of common stock by us at an assumed initial public offering
price of $16.00 per share, and after deducting the underwriting discounts and
commissions and estimated offering expenses payable by us, our pro forma net
tangible book value as of December 31, 1999 would have been $205,756,000, or
$5.15 per share of common stock. This represents an immediate increase in net
tangible book value of $2.41 per share of common stock to existing common
stockholders and an immediate dilution in pro forma net tangible book value of
$10.85 per share to new investors purchasing shares of common stock in this
offering. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $16.00
Pro forma net tangible book value per share before this
offering................................................ $2.74
Increase in pro forma net tangible book value per share
attributable to this offering........................... 2.41
-----
Pro forma net tangible book value per share after this
offering.................................................. 5.15
------
Dilution per share to new investors......................... $10.85
======
</TABLE>
The following table summarizes, on a pro forma basis as of December 31,
1999, the number of shares of common stock purchased from us, the total
consideration paid and the average price per share paid by existing and new
investors purchasing shares of common stock in this offering, before deducting
underwriting discounts and commissions and offering expenses payable by us.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
---------------------- ----------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- -------- ------------ -------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders........ 31,966,545 80% $ 89,315,621 41% $ 2.79
New investors................ 8,000,000 20 128,000,000 59 16.00
----------- ----- ------------ -----
Total.................... 39,966,545 100% $217,315,621 100%
=========== ===== ============ =====
</TABLE>
The tables and calculations above assume no exercise of the underwriters'
over-allotment option to purchase up to an additional 1,200,000 shares of common
stock. This information also assumes no exercise of options outstanding under
our 1995 Stock Plan or of outstanding warrants. As of December 31, 1999, there
were 8,211,644 shares of common stock reserved for issuance upon the exercise of
outstanding options at a weighted average exercise price of $3.35 per share and
515,940 shares of common stock reserved for issuance upon the exercise of
outstanding warrants at a weighted average exercise price of $10.39 per share.
To the extent that any of these options or warrants are exercised, there will be
further dilution to new investors.
20
<PAGE>
SELECTED FINANCIAL DATA
You should read the following selected financial data in conjunction with
our financial statements and the related notes and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" appearing elsewhere
in this prospectus. We have derived our statement of operations for each of the
three years in the period ended December 31, 1999, and our balance sheet data at
December 31, 1998 and 1999, from our financial statements that have been audited
by Ernst & Young LLP, independent auditors, and which we include elsewhere in
this prospectus. We have derived our statement of operations data for the years
ended December 31, 1995 and 1996 and the balance sheet data at December 31,
1995, 1996 and 1997 from our audited financial statements which we do not
include in this prospectus. We have presented pro forma net income per share
information to give effect to the assumed conversion of all outstanding shares
of our convertible preferred stock into a total of 25,607,861 shares of common
stock as of their original dates of issuance. We computed pro forma net income
per share on the basis described in Note 2 of the notes to the financial
statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1996 1997 1998 1999
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Corporate collaborations.............................. $ -- $ -- $15,118 $37,624 $61,514
Contract services..................................... -- 876 2,615 1,943 --
------- ------- ------- ------- -------
Total revenues...................................... -- 876 17,733 39,567 61,514
Costs and expenses:
Research and development.............................. 3,687 7,947 15,013 33,704 48,764
General and administrative............................ 1,609 2,120 3,780 3,605 6,173
------- ------- ------- ------- -------
Total costs and expenses............................ 5,296 10,067 18,793 37,309 54,937
------- ------- ------- ------- -------
Operating income (loss)................................. (5,296) (9,191) (1,060) 2,258 6,577
Interest income (net)................................... 197 627 1,364 3,516 4,473
------- ------- ------- ------- -------
Income (loss) before income taxes....................... (5,099) (8,564) 304 5,774 11,050
Provision for income taxes.............................. -- -- 100 100 1,800
------- ------- ------- ------- -------
Net income (loss)....................................... $(5,099) $(8,564) $ 204 $ 5,674 $ 9,250
======= ======= ======= ======= =======
Net income (loss) per share:
Basic................................................. $ (1.59) $ (2.62) $ 0.05 $ 0.99 $ 1.51
======= ======= ======= ======= =======
Diluted............................................... $ (1.59) $ (2.62) $ 0.01 $ 0.16 $ 0.24
======= ======= ======= ======= =======
Weighted average number of common shares:
Basic................................................. 3,199 3,263 4,446 5,738 6,106
Diluted............................................... 3,199 3,263 28,270 35,139 37,849
Pro forma net income per share:
</TABLE>
<TABLE>
<S> <C>
Basic................................................................................................. $ 0.29
=======
Diluted............................................................................................... $ 0.24
=======
Pro forma weighted average number of common shares:
Basic................................................................................................. 31,714
Diluted............................................................................................... 37,849
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------------------
1995 1996 1997 1998 1999
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term
investments.................................... $2,595 $15,220 $40,190 $85,298 $ 94,525
Working capital.................................. 1,727 13,092 31,802 76,626 86,220
Total assets..................................... 5,250 18,213 47,361 90,625 140,331
Capital lease obligations, net of current
portion........................................ 864 717 249 59 --
Total stockholders' equity....................... 3,486 14,761 34,907 78,373 87,716
</TABLE>
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
YOU SHOULD READ THE FOLLOWING DISCUSSION AND ANALYSIS IN CONJUNCTION WITH
"SELECTED FINANCIAL DATA" AND OUR FINANCIAL STATEMENTS AND THE RELATED NOTES
INCLUDED ELSEWHERE IN THIS PROSPECTUS.
OVERVIEW
We were incorporated in July 1993 as Pharmaceutical Peptides, Inc. and began
operations in January 1994. In June 1997, we changed our name to PRAECIS
PHARMACEUTICALS INCORPORATED. Since our inception, we have developed drugs for
the treatment of a variety of human diseases. Our lead program is the
development of abarelix, a drug to treat diseases that respond to the lowering
of hormone levels. We have entered into collaborations with Amgen and Sanofi-
Synthelabo to further develop and commercialize our abarelix products.
Since our inception, we have had no revenues from product sales. We have
received revenues in the form of signing, performance-based, cost sharing and
contract services payments from corporate collaborations. These revenues enabled
us to achieve profitability and positive cash flow before any financing activity
for fiscal 1997, 1998 and 1999. Through December 31, 1999, we recognized
approximately $119.7 million in revenues under these collaboration agreements.
Under these agreements, we could receive additional non-refundable
performance-based payments and reimbursement for ongoing development costs, as
well as a percentage of future product profits. For the next several years, we
expect that our sources of revenue, if any, will consist primarily of interest
income and payments from our corporate collaborators.
Our accumulated deficit as of December 31, 1999 was approximately
$1.1 million. Substantially all of our expenditures to date have been for drug
development activities and for general and administrative expenses.
Due to the high costs associated with preparing to launch our first product,
as well as other research and development and general and administrative
expenses, we expect to have net operating losses for fiscal 2000 and the
following several years. We do not expect to generate operating income until
several years after the FDA approves abarelix-depot-M for marketing. We will
require regulatory approval to market all of our future products.
In August 1996, we entered into a collaboration and license agreement with
Boehringer Ingelheim International GmbH. Under this agreement, Boehringer paid
us approximately $5.4 million over approximately two years. These payments
consisted of an initial signing payment and additional payments for the
screening of Boehringer compounds and reimbursement of personnel and related
materials expenses. We also are entitled to receive royalties on the net sales
of any product containing a Boehringer compound which was screened by us if
Boehringer develops and commercializes the product.
In May 1997, we entered into an agreement with Sanofi-Synthelabo for the
development and commercialization of abarelix products in Europe, Latin America,
the Middle East and various countries in Africa. Under our agreement with
Sanofi-Synthelabo, we could receive up to approximately $69.6 million in
non-refundable fees and performance-based payments. For supply of product to
Sanofi-Synthelabo, we receive a transfer price which represents our cost of
goods sold plus a profit margin that varies based on sales price and volume.
Additionally, we are entitled to receive reimbursement for ongoing development
costs. To date, we have received a total of approximately $30.3 million in
non-refundable fees, performance-based payments and reimbursement for ongoing
development costs under the Sanofi-Synthelabo agreement.
In 1997 and 1998, we entered into agreements with Roche Products for the
research, development and commercialization of abarelix products in all
countries outside of the Sanofi-Synthelabo territory. In December 1998, we and
Roche mutually terminated the agreement. During the term of the
22
<PAGE>
agreement, Roche paid to us approximately $28.2 million in performance-based and
cost-sharing payments. Roche retains no rights to the abarelix program and has
no equity interest in us.
Effective March 1999, we entered into an agreement with Amgen for the
development and commercialization of abarelix products in the countries not
covered by the Sanofi-Synthelabo agreement. Under the agreement, we could
receive up to $25.0 million in signing and performance-based fees. We have
received $10.0 million to date, which is the minimum amount payable under the
agreement. Amgen will pay all authorized costs and expenses associated with the
research, development and commercialization of abarelix products in the United
States that we incur during 1999 and a portion of 2000. Following these
expenditures, in general we will share with Amgen all subsequent United States
research and development costs for abarelix products through the launch period
and we will reimburse Amgen for a share of costs associated with establishing a
sales and marketing infrastructure in the United States. In general, we will
receive a transfer price and royalty based on a sharing of the resulting profits
on sales of abarelix products in the United States. All program expenses in
Amgen's licensed territory outside the United States will be borne by Amgen, and
we will receive a royalty on net sales of abarelix products in those
territories.
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999 AND 1998
Revenues for the year ended December 31, 1999 were $61.5 million as compared
to $39.6 million for the corresponding period in 1998. The increase in revenues
was due to significantly increased cost-sharing payments under our collaboration
agreements, principally our agreement with Amgen.
Research and development expenses for the year ended December 31, 1999 were
$48.8 million as compared to $33.7 million for the corresponding period in 1998.
The increase in research and development expenses was attributable primarily to
increased expenses related to two pivotal phase III clinical trials for the use
of abarelix to treat prostate cancer and phase I and II/III clinical trials for
the use of abarelix to treat endometriosis. Additional spending increases were
related to our Apan program, our Latranal program and core research and
development activities.
General and administrative expenses for the year ended December 31, 1999
were $6.2 million as compared to $3.6 million for the corresponding period in
1998. The increase in expenses reflects our participation in professional
forums, costs associated with marketing consultants and the purchase of market
data.
Net interest income for the year ended December 31, 1999 was $4.5 million as
compared to $3.5 million for the corresponding period in 1998. This increase was
attributable to an increase in the amount of cash available for investment
following our sale of $37.7 million of equity securities in April 1998.
The provision for income taxes for year ended December 31, 1999 was
$1.8 million as compared to $0.1 million for the corresponding period in 1998.
The provision increased because prior to 1999, we utilized net operating loss
carryforwards to offset substantially all of our taxable income.
YEARS ENDED DECEMBER 31, 1998 AND 1997
Revenues for the year ended December 31, 1998 were $39.6 million as compared
to $17.7 million for the corresponding period in 1997. Revenues for the year
ended December 31, 1998 included approximately $37.6 million earned under our
collaboration agreements and $2.0 million earned under the Boehringer agreement.
Revenues for the year ended December 31, 1997 included approximately
$15.1 million earned under our collaboration agreements and $2.6 million earned
under the Boehringer agreement.
23
<PAGE>
Research and development expenses for the year ended December 31, 1998 were
$33.7 million as compared to $15.0 million for the corresponding period in 1997.
The increase in expenses was attributable to the expansion of clinical trials
relating to abarelix, the hiring of additional research and development
personnel, including the commencement of the Provid Research division's
operations in New Jersey, and increased expenditures relating to the Alzheimer's
Disease program and core research and technologies.
General and administrative expenses for the year ended December 31, 1998
were $3.6 million as compared to $3.8 million for the corresponding period in
1997. The decrease in expenses was attributable to reduced legal expenses
related to collaboration efforts and reduced expenses related to trademark and
patent activities.
Net interest income for the year ended December 31, 1998 was $3.5 million as
compared to $1.4 million for the corresponding period in 1997. The increase in
interest income was attributable to an increase in the amount of cash available
for investment resulting from the net proceeds of our sale of Series E
convertible preferred stock, as well as payments received pursuant to
collaboration agreements.
The provision for income taxes for the year ended December 31, 1998 was
$0.1 million which was consistent with the corresponding period in 1997. The
provision for income taxes during both years reflects our use of net operating
loss carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
We have financed our operations since inception principally through private
placements of equity securities. We have received net proceeds of approximately
$9.5 million from the sale of our common stock, $0.5 million from the sale of
warrants to purchase common stock and $78.5 million from the sale of convertible
preferred stock. Additionally, we have received a total of approximately
$138.4 million for one-time signing payments and performance-based payments,
cost reimbursements and contract service payments under our collaboration
agreements. We also have received $10.9 million from interest on invested cash
balances and paid $0.4 million in interest expense associated with equipment
leasing. As of December 31, 1999, we had cash and cash equivalents of
$94.5 million and working capital of $86.2 million. Based upon our existing
capital resources, together with the net proceeds of this offering, interest
income and payments under our collaboration agreements, we anticipate that we
will be able to maintain currently planned operations for at least the next
several years.
For the year ended December 31, 1999, net cash of $12.9 million was provided
by operating activities principally due to net income and an increase in current
liabilities, partially offset by an increase in accounts receivable and unbilled
revenues. Our investing activities for the year ended December 31, 1999 were
limited to the purchase of property and equipment in the amount of
$3.6 million. Our financing activities for the year ended December 31, 1999 were
minimal since we completed our last equity financing in 1998.
In January 2000, we signed an agreement to purchase, for $41.5 million, land
and a building of approximately 175,000 square feet located in the western
suburbs of Boston, Massachusetts, which we will use as our principal
headquarters and research facility. In connection with our signing this
agreement, we made deposits of $1.2 million. We currently expect to use
approximately $30.0 million of the net proceeds of this offering towards the
purchase of this facility and related improvements, subject to our obtaining
adequate financing for this purchase. We expect to close the transaction in the
second quarter of 2000.
Subject to various limitations and conditions, Amgen will also provide us
with a substantial line of credit through 2002. Borrowings will bear interest at
market rates and will be secured by various receivables relating to abarelix
products. In addition, all borrowings under the line of credit must be repaid by
2008.
24
<PAGE>
We expect our funding requirements to increase over the next several years
as we continue with current clinical trials for abarelix, initiate clinical
trials for additional products, prepare for a potential commercial launch of
abarelix products, purchase, improve and move into our new facility and continue
to expand our research and development efforts. Our expenditure requirements
will depend on numerous factors, including:
- the progress of our research and development activities;
- the scope and results of preclinical testing and clinical trials;
- the cost, timing and outcomes of regulatory reviews;
- the rate of technological advances;
- determinations as to the commercial potential of our products under
development;
- the status of competitive products;
- our ability to defend and enforce our intellectual property rights;
- the establishment, continuation or termination of third party
manufacturing or sales and marketing arrangements;
- the development of sales and marketing resources;
- the establishment of additional strategic or licensing arrangements with
other companies or acquisitions;
- the availability of financing for the purchase of our new facility;
- our ability to sublease our current facility and part of our new facility;
and
- the availability of other financing.
At December 31, 1999, we had provided a valuation allowance of $3.6 million
for our deferred tax assets. The valuation allowance represents the excess of
the deferred tax asset over the benefit from future losses that could be carried
back if, and when, they occur. The valuation allowance decreased by
$2.7 million in 1999 due to the use of previously unbenefitted tax credit
carryforwards. Due to anticipated operating losses in the future, we believe
that it is more likely than not that we will not realize a portion of the net
deferred tax assets in the future and we have provided an appropriate valuation
allowance.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The primary objective of our investment activities is to preserve principal
while at the same time maximizing the income we receive from our investments
without significantly increasing risk. Some of the securities that we invest in
may have market risk. This means that a change in prevailing interest rates may
cause the principal amount of the investment to fluctuate. For example, if we
hold a security that was issued with an interest rate fixed at the
then-prevailing rate and the prevailing interest rate later rises, the principal
amount of our investment will probably decline. We believe that a 10% decline in
the average yield of our investments would adversely impact our net interest
income. We do not believe, however, that a 10% decline would have a material
adverse effect on our overall results of operations or cash flows. 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. The
average duration of all of our investments in 1999 was less than one year. Due
to the short-term nature of these investments, we believe we have no material
exposure to interest rate risk arising from our investments. Therefore, no
quantitative tabular disclosure is required.
25
<PAGE>
We have two supply agreements with vendors located outside the United
States. We currently conduct all transactions under these agreements in United
States dollars, but these transactions are subject to adjustment based upon
significant fluctuations in currency exchange rates. If the exchange rate
undergoes a change of 10%, we do not believe that it would not have a material
impact on our results of operations or cash flows.
YEAR 2000 ISSUES
The year 2000 issue arises from computer programs written using two digits
rather than four to define the applicable year. Any computer programs or
hardware that have date-sensitive software or embedded chips may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result in
system failures or miscalculations following December 31, 1999, causing
disruptions of operations for companies using these computer programs or
hardware. Many companies' computer systems may still need to be upgraded or
replaced in order to avoid year 2000-related issues.
We, our corporate collaborators, suppliers and other third parties we rely
upon use a wide variety of information technologies, computer systems and
scientific equipment containing computer chips dedicated to a specific task. As
of March 1, 2000, neither we, nor to our knowledge, any of the third parties we
depend upon, have experienced any material problems associated with the year
2000 issue. If we or these third parties experience problems in the future as a
result of any year 2000-related issues, we could experience an interruption of
our research programs. We currently are unable to estimate the duration and
extent of any potential interruption, or estimate the effect that any
interruption may have on our future revenue. However, we believe that the impact
of any residual year 2000-related issues on our research operations will be
limited to the ongoing execution of new experiments, and we do not expect that
any historical data would be affected. Costs to ensure that our systems and
networks are year 2000 compliant have not been and nor do we expect them to be
material.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Financial
Instruments and Hedging Activities," which will be effective for 2001. This
statement establishes accounting and reporting standards requiring that every
derivative instrument, including various derivative instruments embedded in
other contracts, be recorded on the balance sheet as either an asset or
liability measured at its fair value. The statement also requires that changes
in the derivative's fair value be recognized in earnings unless specific hedge
accounting criteria are met. We do not anticipate that Statement of Financial
Accounting Standards No. 133 will have a significant impact on our operating
results or financial condition when adopted, since we currently do not engage in
hedging activities.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, which clarified the Securities and Exchange
Commission's views concerning revenue recognition policies and is effective no
later than the quarter ended March 31, 2000. We believe that our revenue
recognition policies comply with the Staff Accounting Bulletin.
26
<PAGE>
BUSINESS
OVERVIEW
We are a drug discovery and development company. Our product pipeline
includes abarelix-depot-M, which we have tested in two pivotal phase III
clinical trials for the treatment of hormonally responsive prostate cancer, and
abarelix-depot-F, currently in phase II/III clinical trials for the treatment of
endometriosis. We are also developing Latranal, a locally-acting,
topically-applied pain reliever in preclinical development for the treatment of
acute and chronic muscle and tendon related pain, and Apan, our drug for the
treatment of Alzheimer's Disease. Other product candidates are in the research
phase.
We believe that we have established, and that our product pipeline
demonstrates the usefulness of, a new proprietary technology for the rapid and
cost-effective discovery and development of drugs. We developed our technology
to overcome the limitations of existing drug discovery methods. Our technology
combines the biological selection of natural peptide molecules, also known as
ligands, with a chemical modification process that gives the peptides the
pharmacological properties of useful drugs. Ligands can come either from natural
genes or large pools of synthetic genes known as gene libraries. Using our
technology, we can rapidly produce and analyze large numbers of molecules and
identify those that have desired properties for further development into drugs.
We can examine in excess of 1,000 times more molecules for drug development with
this technology than conventional technologies would permit, in a fraction of
the time. We believe that we are the leader in this technological field that we
refer to as Ligand Evolution to Active Pharmaceuticals, or LEAP.
In addition to demonstrating that LEAP is a useful technical approach for
discovering and developing new drugs, we have also demonstrated that it is
cost-effective and practical. Using our private equity capital, we were able to
develop abarelix-depot-M and abarelix-depot-F sufficiently so that we could
satisfactorily demonstrate their clinical and commercial usefulness to potential
sales and marketing partners. We have generated adequate revenues through our
corporate collaborations to allow us to operate at a profit for the last three
years and have an accumulated deficit of only $1.1 million as of December 31,
1999. We intend to market our initial products through our arrangements with
Amgen and Sanofi-Synthelabo.
We have successfully employed LEAP to develop abarelix-depot-M, a drug for
the treatment of prostate cancer. An estimated 180,400 men in the United States
develop prostate cancer each year. We expect to file an NDA for abarelix-depot-M
with the FDA by the end of 2000. We believe that abarelix-depot-M works in a
unique way which will allow this drug to successfully compete in the
approximately $2.0 billion worldwide market for prostate cancer drugs.
We have also developed a unique form of abarelix, called abarelix-depot-F,
for the treatment of women with diseases that respond to a reduction of the
female hormone estrogen. We have demonstrated the potential usefulness of
abarelix-depot-F in a phase I/II study for the treatment of endometriosis.
Endometriosis is a painful, long-lasting condition affecting an estimated five
million women in the United States. We believe that existing medicine does not
adequately serve patients suffering from endometriosis. Due to its unique
composition and the way in which it works in the body, we believe that
abarelix-depot-F will expand the existing market for drugs to treat
endometriosis and fulfill a significant unmet need.
Our LEAP technology was also instrumental in the development of Apan, a drug
candidate for the treatment of Alzheimer's Disease. According to estimates, more
than four-million Americans suffer from Alzheimer's Disease. We expect to begin
clinical trials with Apan within the next 12 months. Apan addresses what we and
others believe to be the underlying cause of Alzheimer's Disease, rather than
the symptoms.
27
<PAGE>
We intend to commercialize both abarelix-depot-M and abarelix-depot-F as
once-a-month injectable drugs. Production of abarelix-depot-M and
abarelix-depot-F in our proprietary drug delivery system, known as Rel-Ease,
makes this possible. We have demonstrated that Rel-Ease also is useful for
formulating other drugs in long-acting, or depot forms, and believe that it may
have significant commercial potential. We have a patent that covers the
application of this technology for a broad range of drugs.
Since our proprietary LEAP technology readily produces drug-like molecules,
we can use it to test and validate potential drug targets much more efficiently
than conventional drug discovery and development methods can. LEAP's usefulness
in drug discovery is comparable to an Internet search engine. Search engines are
essential in the location and selection of useful information from a vast amount
of data, most of which is useless in isolation. We believe that LEAP can
identify useful drug targets imbedded within the sequence of the human genome by
showing which ones, when targeted by a drug, show potential for clinical use.
LEAP selects protein sequences that we can modify into drugs directly and
identifies drug targets against which we can deploy LEAP technology to produce
drugs that treat human diseases.
We have entered into an alliance with one of the world leaders in genomics,
Human Genome Sciences. Through this alliance, we will have access to potential
drug targets that Human Genome Sciences has identified from the genes of humans
and will seek to use LEAP technology to develop drugs for the treatment of
various medical conditions based on these proprietary genomic targets.
We have assembled an experienced and multi-disciplined team of senior
executives and trained scientists and technicians. Our staff, totaling about 100
persons, has the necessary expertise to discover and develop commercially viable
drugs from inception through preclinical and clinical testing and to obtain
regulatory approval. Our areas of expertise include proteomics, chemistry and
medicinal chemistry, molecular biology, biochemistry, cell biology,
pharmacology, toxicology, formulation, manufacturing, quality assurance and
control, medical and regulatory. This collective expertise allows us to license
drug opportunities from third parties to supplement our internal product
development. For example, we have obtained rights to Latranal, that we expect to
test this year in patients with acute and chronic muscle and tendon related
pain. We believe that if successful, this drug will address a market of several
million patients and fulfill an unmet medical need.
In the future, we may enter into alliances for global commercialization
following successful clinical trials of our products, as we have done with Amgen
and Sanofi-Synthelabo, while retaining significant profit sharing potential.
Alternatively, we may choose to sell our products directly and retain 100% of
the profit potential.
OUR BUSINESS STRATEGY
Our objective is to combine our skills, expertise and proprietary technology
to develop and commercialize drugs rapidly that address significant clinical
needs. We are pursuing the following strategy to achieve this objective:
- EXTEND THE COMMERCIAL POTENTIAL OF ABARELIX BY EXPANDING INTO ADDITIONAL
DISEASE AREAS. We believe that abarelix may provide a therapeutic benefit
for the treatment of other diseases which respond to the reduction of
testosterone or estrogen hormone levels, such as benign prostatic
hypertrophy, breast cancer, uterine fibroids, polycystic ovarian disease,
precocious puberty and infertility. We intend to explore new and expanded
product opportunities with our corporate collaborators.
- USE OUR LEAP TECHNOLOGY, TOGETHER WITH OPPORTUNITIES THAT THE HUMAN GENOME
PROJECT PRESENTS, TO DISCOVER NEW DRUG CANDIDATES. Our proprietary LEAP
technology is a powerful tool for the rapid discovery of lead drug
compounds. The Human Genome Project provides us with a database of
28
<PAGE>
newly-identified genes from which we can define new drug targets through
the application of LEAP. We believe that using this database, we will be
able to accelerate the identification of new drug targets and drug
candidates. To this end, we have established a collaboration with Human
Genome Sciences and have identified promising genomic targets to pursue.
- RETAIN SIGNIFICANT RIGHTS TO OUR PRODUCTS UNTIL LATE STAGES OF DEVELOPMENT
TO OBTAIN FAVORABLE FINANCIAL TERMS WITH STRATEGIC PARTNERS. We believe
that we can retain significant product value by developing products to a
late stage before seeking commercialization partners, or by entering into
partnerships where we share the cost of development equally with our
partners. Because of our developmental capabilities and financial
resources, we are able to assume both significant financial and
operational product responsibility and, as a result, we are able to retain
significant profit potential from the sale of our products.
- DEVELOP LICENSED DRUGS FROM THIRD PARTIES TO SUPPLEMENT PRODUCT
DEVELOPMENT. We have gained significant experience in applying our LEAP
technology for the discovery and development of both abarelix and Apan. We
have used this experience to establish the necessary infrastructure to
expand our product base, capture and develop new third party licensing
opportunities, and rapidly and cost-effectively develop internally
discovered compounds.
OUR PRODUCT PIPELINE
We focus our drug development efforts on conditions or diseases where there
are significant unmet needs creating a potential for large product revenues. We
have four programs that have moved beyond the research phase into late
preclinical or clinical testing. We have outlined our development programs and
the clinical indications they address in the following table:
<TABLE>
<S> <C> <C> <C>
<S> <C> <C> <C>
COMPOUND DISEASE STATUS PARTNERS
- ------------------------------- ----------------------------- -------------------- -----------------------
Abarelix-Depot-M Hormonally Responsive Phase III Amgen;
Prostate Cancer Sanofi-Synthelabo
Abarelix-Depot-F Endometriosis Phase II/III Amgen;
Sanofi-Synthelabo
Latranal Acute and Chronic Muscle Preclinical --
and Tendon Related Pain
Apan Alzheimer's Disease Preclinical --
</TABLE>
ABARELIX PROGRAM
Abarelix has potential use in diseases that respond to the reduction of
testosterone, a male hormone, and estrogen, a female hormone. Examples of these
diseases include prostate cancer, endometriosis, uterine fibroids, breast
cancer, benign prostatic hypertrophy, polycystic ovarian disease, infertility
and precocious puberty. Treatments that reduce testosterone or estrogen through
the use of drugs, known as hormonal therapy, result in a therapeutic benefit to
the patient.
Currently available hormonal therapies overstimulate the GnRH receptor,
located on the pituitary gland, a small gland in the center of the brain.
Overstimulation of the pituitary GnRH receptor leads to increased production of
a second hormone, luteinizing hormone, or LH. The increased levels of LH then
cause a surge of testosterone from the testes in males and a surge of estrogen
from the ovaries in females. The temporary surge in hormone levels may result in
a worsening, or flare, of the disease for which the patient takes the therapy.
Only after several weeks following administration of these hormonal therapies
does the desired reduction of hormonal levels occur. Accordingly, current
hormonal
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therapies, such as Lupron Depot, that TAP Pharmaceuticals Inc. markets, and
Zoladex, that AstraZeneca Pharmaceuticals markets, have precautionary labeling
about the hormone-induced flare. The FDA mandates this precautionary labeling
and the drug labels and packaging for these currently available drugs must
prominently include the precautionary labeling to protect patients and avoid the
use of the drugs in patients who are at risk for developing a disease flare.
In contrast, abarelix has a blocking, or antagonist, effect on the GnRH
receptor. Abarelix immediately shuts off the production of LH and consequently,
immediately reduces the patient's levels of testosterone or estrogen. With
abarelix, unlike commercially available hormonal therapies, there is no increase
in hormonal levels before achieving the desired hormone level reduction. Results
of our prostate cancer and endometriosis clinical trials demonstrate that
abarelix rapidly inhibits hormone production without the initial surge in
hormone levels.
Our most advanced programs involve the development of abarelix-depot-M and
abarelix-depot-F for the treatment of diseases worsened by testosterone in men
or estrogen in women. We believe abarelix-depot-M and abarelix-depot-F represent
the first sustained release formulations of an important class of compounds
known as GnRH antagonists.
ABARELIX-DEPOT-M
BACKGROUND. Prostate cancer is one of the most commonly diagnosed cancers
in men. According to the American Cancer Society, approximately 180,400 new
diagnoses of, and 31,900 deaths from, prostate cancer will occur in the United
States in 2000. Approximately 40% of these newly diagnosed patients have
prostate cancer that has spread beyond the prostate gland, referred to as
non-localized prostate cancer. These patients generally receive long-term
hormonal therapy. The remaining 60% of patients, whose prostate cancer is
localized, are increasingly receiving hormonal therapy in addition to other
therapies, such as radiation therapy, including radioactive seed implantation to
the prostate gland. Hormonally responsive prostate cancer, accounting for
approximately 85% of all initially diagnosed prostate cancer, is a condition
where the cancerous cells require androgens, including testosterone and its
derivatives. Androgens stimulate the growth of the cancerous cells in hormonally
responsive prostate cancer. The goal of therapy is to reduce testosterone to low
levels, leading to inhibition of prostate cancer cell growth. The market for
hormonal treatment of prostate cancer was approximately $2.0 billion worldwide
in 1998, the majority of which was related to treatment for non-localized
prostate cancer.
To date, we have focused primarily on the development of abarelix-depot-M as
a treatment for hormonally responsive prostate cancer. Abarelix-depot-M is a
sustained release formulation of abarelix that enables once-per-month
administration. Our pivotal phase III studies demonstrate that abarelix-depot-M
reduces the time required to achieve therapeutically low testosterone levels
without the testosterone surge and the resulting associated symptoms.
Abarelix-depot-M, if approved for marketing, will be the first commercially
available GnRH antagonist in a sustained delivery formulation for the acute and
chronic management of patients with prostate cancer.
The surge of testosterone associated with available hormonal therapies may
last as long as three weeks before the intended medical effect of reduced
testosterone levels take place. In an attempt to mitigate the flare, many
practicing physicians prescribe additional drugs, known as anti-androgens.
Anti-androgens, such as Casodex, that AstraZeneca Pharmaceuticals markets, are
oral drugs given one-to-three times a day. Anti-androgens function by
interfering with the effect of testosterone at the cellular level but do not
reduce circulating testosterone levels. This additional therapy may be only
partially effective in reducing some of the undesirable effects of the flare. In
addition, anti-androgen therapy has side effects, including liver damage, breast
enlargement, lung dysfunction and gastrointestinal distress. Finally,
anti-androgens are expensive and Medicare generally does not
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reimburse their costs. This means that many patients may not receive the
potential benefit of anti-androgens.
In our pivotal phase III studies of over 500 patients, none of the patients
treated with abarelix-depot-M experienced a testosterone surge. In contrast, 85%
of patients treated with Lupron Depot alone or in combination with Casodex
experienced a sustained testosterone surge. A major reason for using
anti-androgens in clinical practice is to avoid the surge and subsequent flare.
We believe that the results of our clinical studies may lessen the perceived
need to use anti-androgens because the use of abarelix-depot-M alone avoids the
surge.
Some patients with advanced stage hormonally responsive prostate cancer are
at higher risk of serious harm resulting from the testosterone surge. Based upon
our studies, these patients constitute approximately 15% of all non-localized
prostate cancer patients. In these patients, the testosterone surge may lead to
urinary blockage, worsening pain, paralysis and nerve damage due to spinal cord
compression, kidney failure and even death. FDA mandated drug product labels
specifically warn against the use of available hormonal therapy in patients with
confirmed spinal metastases. In these cases, patients may require immediate
surgical removal of the testes to both rapidly reduce testosterone levels and
avoid the testosterone surge. Based upon our analysis of our clinical studies,
we believe that abarelix-depot-M may have the potential to provide a
non-surgical alternative for these patients. A significant portion of patients
who do not have confirmed spinal tumors are still at risk for clinical flare.
Approximately 50-60% of all non-localized prostate cancer patients fall into
this group. We believe that both physicians and patients will prefer a treatment
option that eliminates the potential risks of a clinical flare response.
ABARELIX-DEPOT-M CLINICAL STUDIES. We intend to submit comprehensive safety
and efficacy data to the FDA in 2000 to support market approval of
abarelix-depot-M. Our submission will include data from two recently completed
pivotal phase III studies for the treatment of hormonally responsive prostate
cancer, a phase III patient exposure study, an ongoing phase III study in
advanced metastatic prostate cancer patients, as well as previously completed
phase I and phase I/II studies with abarelix-depot-M.
In November 1999, we completed two pivotal phase III clinical trials of
abarelix-depot-M for the treatment of hormonally responsive prostate cancer. The
first phase III clinical trial was a 271 patient study comparing
abarelix-depot-M to Lupron Depot. This study compared the safety of both drugs
and the ability of both drugs to reduce testosterone levels. The second phase
III clinical trial was a 255 patient study comparing the safety and efficacy of
abarelix-depot-M to the combination therapy of Lupron Depot plus Casodex.
In addition to well-defined safety parameters, these studies had three
performance goals:
- the demonstration of the benefit of abarelix-depot-M compared to Lupron
Depot and Lupron Depot plus Casodex in avoiding or eliminating the
testosterone surge;
- the demonstration of the benefit of abarelix-depot-M compared to Lupron
Depot and Lupron Depot plus Casodex in rapidly achieving therapeutically
low testosterone levels, based on a measurement of testosterone levels on
the eighth day following treatment; and
- the demonstration of the similarities of abarelix-depot-M to Lupron Depot
and Lupron Depot plus Casodex in achieving and maintaining therapeutically
low testosterone levels through 85 days of treatment.
To demonstrate the benefit of abarelix-depot-M compared to Lupron Depot and
Lupron Depot plus Casodex in avoiding or eliminating the testosterone surge, we
measured testosterone levels prior to and throughout the first week of
treatment. In our clinical studies, we define testosterone surge as a ten
percent or greater increase in testosterone levels above pre-treatment levels.
None of the abarelix-
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depot-M treated patients demonstrated a testosterone surge based on two
measurements during the first week of treatment. In contrast, more than 80% of
patients treated with Lupron Depot and Lupron Depot plus Casodex experienced
elevations in testosterone levels greater than ten percent.
To demonstrate the benefit of abarelix-depot-M compared to Lupron Depot and
Lupron Depot plus Casodex in rapidly achieving therapeutically low testosterone
levels, we measured testosterone levels on the eighth day of treatment. We
observed that greater than 65% of the abarelix-depot-M treated patients achieved
therapeutically low testosterone levels by the eighth day of treatment. In
contrast, none of the patients treated with either Lupron Depot or Lupron Depot
plus Casodex had achieved therapeutically low testosterone levels on the eighth
day.
To demonstrate the similarity of abarelix-depot-M to Lupron Depot and Lupron
Depot plus Casodex in achieving and maintaining therapeutically low testosterone
levels through 85 days of treatment, we measured serum testosterone levels
frequently throughout the 85 days of treatment. We observed that greater than
85% of the patients, regardless of the treatment that we administered, were able
to achieve and maintain therapeutically low testosterone levels.
From a safety perspective, patients have tolerated treatment with
abarelix-depot-M well to date. We observed some adverse reactions in patients
during our abarelix-depot-M studies, including allergic reactions and temporary
and reversible elevation of some liver enzymes. We expected these reactions and
observed them with similar frequency in patients taking Lupron Depot and Lupron
Depot plus Casodex in our clinical studies.
We believe that the collective data from all of our clinical studies will
support the goals we summarized above. In addition, we believe that these
findings will result in product labeling that is consistent with the absence of
an initial testosterone surge.
In further support of the safety of abarelix-depot-M, we and our partner,
Amgen, are conducting a separate phase III 500 patient exposure study comparing
abarelix-depot-M to Lupron Depot. The primary objective of this study is to gain
more patient exposure to confirm the safety and efficacy performance over a six
month course of therapy. The results of this study will supplement existing
patient drug exposure data and we will include these results in our NDA.
In addition, we are testing abarelix-depot-M in an ongoing phase III
clinical trial to evaluate its use in patients with advanced prostate cancer
where the use of current hormonal therapies could result in a life-threatening
disease flare. The goal of this study is to demonstrate that abarelix-depot-M
provides a medical alternative to immediate surgical removal of the testes for
this high risk population. We have been monitoring these patients' prostate
specific antigen, or PSA, levels as part of our evaluation. PSA is a widely used
screen for identification of patients with prostate cancer. Although the FDA
does not accept PSA levels for its approval purposes, physicians monitor a
patient's progress based on PSA levels over time. We observed an immediate
decrease in median PSA levels in patients with advanced prostate cancer that we
treated with abarelix-depot-M. The graph below depicts the decrease in median
PSA levels that we observed in 42 patients participating in this study:
[Bar graph depicting reduction in PSA levels in response to abarelix-depot-M
therapy over a twelve week period.]
Our partner Sanofi-Synthelabo is conducting a 150 person study in Europe
comparing the safety and efficacy of abarelix-depot-M to Zoladex plus Casodex.
Initial analysis of the results of this study are consistent with the safety and
efficacy results we observed in our two pivotal phase III studies.
In further support of our abarelix-depot-M NDA filing, we will submit data
from earlier clinical trials. In June 1999, we completed a three-month, 236
patient phase I/II clinical study of abarelix-depot-M for the treatment of
hormonally responsive prostate cancer. The study also included patients who
received Lupron Depot or Zoladex with or without anti-androgens. This study
evaluated safety and
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<PAGE>
efficacy parameters similar to those measured in our pivotal phase III studies.
We believe that the results of this study are consistent with and further
support the conclusions and interpretations of our pivotal phase III studies.
In addition, in December 1998, we concluded a 36 patient phase I/II clinical
trial of abarelix in patients with locally confined prostate cancer prior to
radiation therapy or surgical removal of the prostate. In this study we
administered abarelix continuously in an injectable liquid formulation rather
than a depot formulation. This clinical trial evaluated safety parameters, the
rate of prostate gland volume reduction and reduction of testosterone levels. We
believe, based upon analysis of the data from this study, that abarelix
substantially reduces the volume of the prostate gland within one to three
months of commencing treatment and reduces testosterone levels within several
days. These safety results are also consistent with our pivotal phase III
studies.
The cumulative worldwide experience of our clinical studies of approximately
1,200 patients demonstrates that patients tolerate abarelix-depot-M well and
supports our intent to file an NDA for abarelix-depot-M prior to the end of
2000.
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<PAGE>
ABARELIX-DEPOT-F
BACKGROUND. We also are developing abarelix-depot-F for the treatment of
endometriosis. We believe that abarelix-depot-F, if it receives FDA approval for
marketing, will be the first commercially available GnRH antagonist in a
sustained delivery formulation for the rapid and sustained reduction of pain
associated with endometriosis through estrogen suppression. We are currently
evaluating abarelix-depot-F in a phase II/III study for the treatment of pain
and painful symptoms associated with endometriosis.
Endometriosis is a condition where endometrial tissue grows beyond the
uterine lining, most often to the surfaces of organs in the pelvic cavity.
Endometrial tissues, regardless of location in the body, respond to the normal
menstrual cycling of women. When the location of the endometrial tissue prevents
the appropriate sloughing of tissue that normally occurs during menstruation,
inflammation, gastrointestinal symptoms and internal scarring occurs. This
causes, among other things, pain, fatigue, heavy menstrual bleeding, painful
sexual intercourse and infertility. On rare occasions, these displaced
endometrial tissues may even cause bleeding in distant organs, such as the
lungs. Each year, approximately 300,000 women are diagnosed with endometriosis
in the United States. An estimated five million women in the United States
suffer from endometriosis. In addition, as a result of increased awareness of
female health, we believe that the number of patients diagnosed with and treated
for endometriosis will increase.
Existing treatments for endometriosis include the use of pain management
medications, birth control pills and hormonal therapies, of which Lupron Depot
and Zoladex are the most commonly used. The use of current hormonal therapies to
suppress estrogen production causes an initial estrogen surge in women. Lupron
Depot, Zoladex and other drugs that act in a similar way include FDA mandated
drug product labels warning against the adverse effects associated with an
estrogen surge. These labels can include warnings for the worsening in the signs
and symptoms of endometriosis, which include pain, cramping and excessive
bleeding, the risk of tumor flare in breast cancer and the development of
ovarian cysts. Our initial studies show that abarelix-depot-F causes a more
rapid reduction of estrogen levels and associated relief of pain compared to
Lupron Depot, without the estrogen surge.
ABARELIX-DEPOT-F CLINICAL STUDIES. To date, we have completed a phase I/II
study of 40 women with confirmed endometriosis using abarelix-depot-F and are
conducting a phase II/III study of abarelix-depot-F. In these studies, we
administered abarelix-depot-F in a once-per-month injection. In the phase I/II
study, we compared various doses of abarelix-depot-F to the standard dose of
Lupron Depot. Patients receiving Lupron Depot therapy experienced estrogen
surges that required several weeks to reach therapeutically low levels.
Furthermore, patients receiving Lupron Depot therapy had more frequent episodes
of endometriosis-associated menstrual pain during the first month of treatment
compared to patients receiving abarelix-depot-F. Patients have tolerated
treatment with abarelix-depot-F well in this study. To date, the safety profile
for abarelix-depot-F is consistent with the safety profile that we have observed
in the clinical studies of abarelix-depot-M that we have described in detail
above. As expected, we observed some adverse reactions in patients during our
studies of abarelix-depot-F and Lupron Depot, including temporary and reversible
irritation at the injection site and temporary and reversible elevation of some
liver enzymes.
The graphs below illustrate the results of patients treated with either
abarelix-depot-F at a dose of 120 milligrams or Lupron Depot through four weeks
of treatment. In contrast to the Lupron Depot patients, who experienced an
estrogen surge following injection and a resulting increase in pelvic area pain
associated with menstrual bleeding during the third and fourth weeks of
treatment, patients treated with abarelix-depot-F experienced a rapid reduction
of estrogen levels without the initial surge, and a rapid elimination of pelvic
area pain associated with menstrual bleeding during the third and fourth weeks
of treatment.
34
<PAGE>
ESTROGEN LEVELS AND PELVIC PAIN IN ENDOMETRIOSIS PATIENTS
TREATED WITH ABARELIX-DEPOT-F OR LUPRON DEPOT
[Four Graphs depicting estrogen levels and pelvic pain in endometriosis
patients treated with abarelix-depot-F compared to patients treated with Lupron
- -REGISTERED TRADEMARK- Depot over time.]
Our phase II/III study, begun in June 1999, compares the safety and efficacy
of abarelix-depot-F to Lupron Depot with respect to the ability to provide pain
relief and rapid estrogen suppression. This study includes a 24-week treatment
period and a 12-month follow-up period. We expect to conduct an interim analysis
within the next 12 months after treating approximately 100 patients for 24
weeks.
ADDITIONAL INDICATIONS FOR ABARELIX
We believe that abarelix can treat other diseases where hormone reduction is
a goal of therapy, including benign prostatic hypertrophy, breast cancer and
uterine fibroids. We have not begun clinical trials of abarelix for these
diseases.
35
<PAGE>
An estimated ten million men over the age of 50 in the United States have
benign prostatic hypertrophy, symptoms of which include impaired urinary flow
and, in the most severe cases, urinary retention. These symptoms are in part
related to the fact that the prostate gland continues to enlarge with age. We
believe that approximately 25% of patients with this disease could benefit from
a reduction in the size of the prostate gland. Based on data from our phase I/II
clinical trial of abarelix-depot-M, in which urinary problems in prostate cancer
patients were assessed, we believe that abarelix may be useful in treating
urinary symptoms associated with diseases of the prostate gland.
The American Cancer Society estimates that there will be approximately
184,200 newly diagnosed cases of, and 41,200 deaths from, female breast cancer
in the United States in 2000. Approximately one-third of all newly diagnosed
patients are pre-menopausal, and in many of these cases, estrogen stimulates the
breast cancer. Studies of patients taking current hormonal therapies, such as
Zoladex, suggest that these therapies are beneficial due to their ability to
suppress estrogen. The FDA has approved the marketing of Zoladex for this use.
We believe abarelix has the potential to treat female breast cancer and reduce
estrogen levels rapidly and without an estrogen surge.
Other conditions in which hormone reduction is an accepted goal of therapy
include uterine fibroids, polycystic ovarian disease, infertility and precocious
puberty. Approximately ten million women in the United States suffer from
uterine fibroids, which are benign enlargements of the uterus. In addition, an
estimated three million women in the United States suffer from polycystic
ovarian disease, a disease characterized by excessive hormonal production caused
by ovarian cysts.
LATRANAL
We are developing Latranal, a drug preparation applied to the skin over an
area of local muscle or tendon pain for pain relief. Pain, whether associated
with injury, illnesses or the general aging process, remains one of the most
serious and poorly treated afflictions. Worldwide, consumers spend approximately
$9.5 billion annually on all medications for pain management. The cost of pain
related issues to society is significant. For example, in the United States,
back pain is the single largest reason for lost days of work. The needs of pain
sufferers, especially those suffering from chronic pain conditions, are
generally poorly met. We estimate that there are several million individuals
suffering from chronic pain in the United States who are experiencing minimal to
no relief from currently available treatment options, including prescription
pain medications.
Latranal is our proprietary topical formulation made from two generically
available compounds. Both of these compounds have been in use as oral
formulations for extended periods of time and have demonstrated acceptable
safety profiles. One of these compounds affects nerve action and the other has
muscle relaxant properties. Pharmaceutical Applications Associates discovered
that the combination of these two compounds, when applied to the skin, may
result in pain relief. To date, the clinical observations by Pharmaceutical
Applications Associates of over 100 patients suggest that relief of acute and
chronic muscle and tendon related pain can occur with the use of this drug
combination.
Through a license from Pharmaceutical Applications Associates, we obtained
rights to the patents filed on this drug formulation and its use as a treatment
for pain.
An academic investigator filed an investigator-sponsored investigational new
drug application with the FDA in July of 1999 for Latranal. Following the
request by the FDA for standard preclinical toxicology studies, ownership of the
application was transferred to us. We are conducting the preclinical toxicology
studies that the FDA requested. Following the satisfactory completion of these
studies, we intend to initiate a phase I clinical trial for Latranal during
2000.
APAN
We are developing Apan for the treatment of Alzheimer's Disease. Alzheimer's
Disease affects an estimated four million people in the United States according
to a 1998 report issued by the National
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Institute of Aging. According to the Alzheimer's Association, Alzheimer's
Disease is expected to become increasingly prevalent as the population ages.
Current therapies provide temporary relief for some of the symptoms of
Alzheimer's Disease, but do not affect the progression of the disease itself.
The hallmark of Alzheimer's Disease is the accumulation of plaque-like
deposits in brain tissue. A major component of this plaque is a small peptide
called beta-amyloid. Over the past several years, a large body of clinical,
biochemical and genetic evidence has emerged indicating that the aggregation of
beta-amyloid peptide is the underlying cause of Alzheimer's Disease. This body
of evidence has led to the widely held theory that when single beta-amyloid
molecules aggregate they become toxic to nerve cells, and that this toxicity
leads to the development and progression of Alzheimer's Disease. We used our
LEAP technology to select Apan to interfere with this aggregation process.
We have shown that Apan specifically inhibits the aggregation of
beta-amyloid and its associated nerve cell toxicity in preclinical experiments.
In addition, we have shown in rats and mice that Apan reaches the brain in
quantities that we believe are sufficient to block the aggregation of
beta-amyloid molecules and alter the course of the disease.
Apan is currently undergoing good laboratory practice toxicology studies to
support our investigational new drug application. We anticipate filing an
application for Apan in 2000 and initiating a phase I clinical trial within the
next 12 months.
OUR TECHNOLOGY
We developed our technology to overcome the limitations of existing drug
discovery methods. We envisioned a technology that combines the biological
selection of natural peptide molecules, also known as ligands, which can come
either from natural genes or large pools of synthetic genes known as gene
libraries, with a chemical modification process that gives peptides the
pharmacological properties of useful drugs.
LEAP
Our proprietary method for discovering drugs is based on a unique system
that combines the power and diversity of biological selection with the favorable
drug-like properties added using medicinal chemistry. We call this process
Ligand Evolution to Active Pharmaceuticals, or LEAP. We believe LEAP is superior
to traditional methods of drug discovery that are limited by the number of
compounds that the traditional methods can make and test mechanically. In a
typical LEAP selection process, we can examine more than a trillion molecules in
a few months. By contrast, conventional screening and medicinal chemistry permit
the examination of fewer than one million molecules with equivalent resources
and require more time.
As in the case of abarelix, LEAP allows us to take a peptide encoded in the
human genome and convert that peptide into a drug. GnRH is a natural peptide
that binds to its receptor target and triggers a biological response. We used
LEAP to convert GnRH into abarelix, a drug that binds to the same receptor
target but blocks the biological response.
If a ligand from the human genome is not available, we can select one
encoded in a synthetic gene library using a process we call biological
evolution. This process involves the natural selection of the best ligand from a
pool containing billions of natural peptides in a biological system. We can
carry out this process in repeated cycles, selecting ligands based on their
functions. We then modify the selected ligand using a unique process that we
call chemical evolution. Chemical evolution is powerful because we can make
pools of thousands of diverse molecules based on the structure of the selected
ligand and composed of synthetic building blocks. We then select the best
molecules from these pools and identify them through our unique application of
the technology called mass spectrometry. These molecules can behave like drugs
because they bind to their target like natural peptides and have the
characteristics of an effective drug.
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DRUG DELIVERY TECHNOLOGY
We can further enhance the clinical utility of our drug candidates by
formulating the drugs with our proprietary sustained release technology,
Rel-Ease. For example, using Rel-Ease technology, we are able to make abarelix
in such a way that a physician only needs to administer it once-per-month,
because Rel-Ease continuously releases the drug in the body over the next
30 days. In many cases, infrequent injections of a drug in a sustained release
formulation are more desirable than oral administration due to patient
compliance, convenience or reimbursement issues. We have formulated a broad
spectrum of molecules with Rel-Ease technology and believe that we can use this
technology to produce sustained release formulations of drugs discovered and
developed in our other disease programs.
PROVID RESEARCH
While we have already demonstrated the clinical utility of LEAP in our
abarelix program, we also have other powerful technologies that can enhance the
value of modified peptides. We established the Provid Research division to
further extend our drug development technologies. Provid's approach to drug
discovery uses the potential of medicinal chemistry and structure-based design
to improve the features of peptides and optimize molecular interactions. This
process facilitates the modification of peptides into small molecules with
enhanced drug-like properties.
MASTRSCREEN
MASTRscreen is our proprietary, rapid and efficient screening procedure that
identifies and evaluates ligands for the most successful class of drug targets,
known as G-protein coupled receptors. The GnRH receptor is a member of this
class of receptors. We developed MASTRscreen in connection with our abarelix
program and it was instrumental in the selection of abarelix from pools of
modified peptides. MASTRscreen is useful because of its sensitivity to low
concentrations of screened material, easily measurable endpoints and
adaptability to various screening systems.
ALZHEIMER'S DISEASE DRUG TESTS
Our proprietary procedures for testing beta-amyloid aggregation measure the
aggregation of beta-amyloid and the ability of candidate molecules to prevent
the aggregation process. We used these testing procedures in the identification
of Apan. In addition, these testing procedures formed the basis of our
collaboration with Boehringer, which was aimed at developing orally administered
drugs to treat Alzheimer's Disease.
RESEARCH AND DEVELOPMENT
As of December 31, 1999, we had a total of 76 employees dedicated to
research and development for abarelix and our other products. In 1998, we
established the Provid Research division to further extend our drug development
technologies. Our Provid Research division currently has 14 employees. We have
spent substantial funds over the past three years to develop abarelix and our
other potential drug candidates and expect to continue to do so in the future.
We spent approximately $15.0 million in 1997, $33.7 million in 1998 and
$48.8 million in 1999 on research and development activities.
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CORPORATE COLLABORATIONS
AMGEN INC.
Effective March 1999, we entered into an agreement with Amgen for the
research, development and commercialization of abarelix products in the United
States, Canada, Japan and other countries the Sanofi-Synthelabo collaboration
does not cover. Under the terms of the Amgen agreement:
- We could receive from Amgen up to $25.0 million in signing and
performance-based payments. We have received $10.0 million to date,
representing the minimum amount payable under the Amgen agreement.
- Amgen will pay all authorized costs and expenses associated with the
research, development and commercialization of abarelix products in the
United States that we incur during 1999 and a portion of 2000. Following
these expenditures, in general we will share with Amgen all subsequent
United States research and development costs for abarelix products through
the launch period and we will reimburse Amgen for a share of costs
associated with establishing a sales and marketing infrastructure in the
United States. In general, we will receive a transfer price and royalty
based on a sharing of the resulting profits on sales of abarelix products
in the United States.
- All program expenses in Amgen's licensed territory outside the United
States will be borne by Amgen, and we will receive a royalty on net sales
of abarelix products in those territories.
- Amgen will provide us with a substantial line of credit through 2002,
subject to limitations and conditions specified in the agreement. The loan
will be interest-bearing, secured by receivables relating to the abarelix
products and must be repaid by 2008.
In 1999, we recognized $56.8 million of revenues under the Amgen agreement.
We have granted Amgen exclusive manufacturing and commercialization rights
for abarelix products for all indications in the licensed territories.
Initially, we are responsible for supplying Amgen with its requirements for
abarelix products in the licensed territory. We are transferring manufacturing
responsibility to Amgen and expect the transfer to be complete later this year.
In addition, we are transferring the final decision making authority for the
abarelix endometriosis indication to Amgen later this year.
The agreement, and Amgen's payment obligations under the agreement,
terminate when the last patent right included in the abarelix technology
expires. Following the expiration of the agreement, Amgen will have a fully
paid, compensation free, perpetual, exclusive license under the abarelix
technology to manufacture and commercialize the abarelix products resulting from
the collaboration in the licensed territories. We or Amgen may terminate the
agreement for material breach by the other. Amgen may also terminate the
agreement on 90 days notice or if the results of any clinical trial of abarelix
materially harms its commercial prospects. If Amgen terminates the agreement for
material breach by us, then Amgen retains all licenses granted under the
agreement, subject to continued payment to us of all costs and royalty payments
due under the agreement.
SANOFI-SYNTHELABO
In May 1997, we entered into a license agreement with Sanofi-Synthelabo, one
of the largest pharmaceutical companies in Europe with a significant urological
franchise, for the development and commercialization of abarelix products in
specific territories including Europe, Latin America, the Middle East and
various countries in Africa.
Sanofi-Synthelabo agreed to pay us up to $64.6 million in signing and
performance-based payments, approximately $5.0 million of the costs and expenses
for the development in the United States of abarelix products for prostate
cancer, and 25% of all United States costs and expenses for the
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development of abarelix products for endometriosis and for any future additional
indications. Sanofi-Synthelabo will pay all costs and expenses associated with
obtaining regulatory approvals in their territory. To date, we have received a
total of $30.3 million under the agreement. In addition, in connection with the
agreement, Sanofi-Synthelabo purchased $10.0 million of common stock and
warrants to purchase common stock.
Under the agreement, Sanofi-Synthelabo has co-development rights with us,
and exclusive marketing and distribution rights, for abarelix products for all
indications in the licensed territories. We retain manufacturing rights and must
supply Sanofi-Synthelabo with abarelix products in the licensed territories.
Sanofi-Synthelabo pays us a transfer price for abarelix products equal to our
cost of goods sold plus a profit margin that varies based on sales price and
sales volumes.
The agreement expires, and the licenses we granted to Sanofi-Synthelabo
become fully paid, perpetual and royalty free, on a country by country basis,
when the last patent licensed in that country expires. If no licensed patents
cover an abarelix product in the country, the license becomes fully paid up,
perpetual and royalty free, ten years after the date of regulatory approval for
the marketing and sale of the abarelix product in the country.
We or Sanofi-Synthelabo may terminate the agreement for material breach by
the other. If Sanofi-Synthelabo terminates the agreement for material breach or
default by us, other than a breach of our supply obligations, the license
granted to Sanofi-Synthelabo would become fully paid, perpetual and royalty free
and Sanofi-Synthelabo would have a fully paid, perpetual and royalty free
license of all manufacturing protocols, know-how and related information and
data necessary to enable it to develop and make licensed products in the
licensed territory from and after the effective date of the termination.
Sanofi-Synthelabo also may terminate the agreement as to an abarelix product for
the treatment of a particular disease in any country within the licensed
territories if the results of clinical trials of the product for that disease in
that country materially impair the product's commercial prospects for that
disease application. In addition, Sanofi-Synthelabo may terminate if annual
sales in that country of a competitor's product containing the same GnRH
antagonist as the abarelix product in a delivery system exceeds more than a
specified percentage of annual sales of the abarelix product in that country.
Sanofi-Synthelabo also may terminate the agreement within nine months after
first becoming aware of any of various specified adverse circumstances or events
relating to the patentability of abarelix products or the Rel-Ease formulation.
The right to terminate in this situation includes a reasonable determination by
Sanofi-Synthelabo that it is not reasonably likely that a European patent will
issue covering abarelix or Rel-Ease.
HUMAN GENOME SCIENCES
In January 2000, we entered into an agreement with Human Genome Sciences for
the discovery, development and commercialization of compounds targeted to two
proprietary genomic targets that Human Genome Sciences has identified. Under the
agreement, we will use LEAP to make drugs targeted to these molecules. We will
jointly develop clinical drug candidates with Human Genome Sciences on an equal
cost and profit sharing basis, unless a pre-existing option that Human Genome
Sciences granted to SmithKline Beecham applies to the drug candidate and
SmithKline Beecham exercises the option. In that case, we will have no
obligation to participate in any development costs, and we will be entitled to
royalties and performance-based payments instead of a profit share.
BOEHRINGER INGELHEIM INTERNATIONAL GMBH
In August 1996, we entered into a collaboration and license agreement with
Boehringer. Under the agreement, we used various proprietary procedures to
screen compounds that Boehringer supplied to us for beta-amyloid aggregation
inhibition activity, and received screening services payments totaling
$5.4 million. The screening portion of the collaboration ended in August 1998.
Boehringer would be responsible for all development, marketing and other costs
for, and we would be entitled to receive
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royalties on net sales of, any product containing any Boehringer compound which
we screened, if Boehringer develops and commercializes the product.
ROCHE PRODUCTS INC.
In August 1997 and June 1998, we granted Roche exclusive co-development
rights with us, and exclusive marketing rights, for abarelix products outside of
the Sanofi-Synthelabo territory. In December 1998, we and Roche mutually
terminated the agreement. Prior to termination, we received $16.0 million in
signing and performance-based payments and approximately $12.2 million in cost
sharing payments from Roche. Roche retains no rights of any kind to abarelix or
any abarelix product.
TECHNOLOGY LICENSES
PHARMACEUTICAL APPLICATIONS ASSOCIATES
In April 1999, we entered into a license agreement with Pharmaceutical
Applications Associates. Under the agreement, we have exclusive worldwide rights
to develop and commercialize Latranal for the treatment of acute and chronic
muscle and tendon related pain. Under the agreement, we will pay for all costs
associated with the development and commercialization of Latranal, and will pay
a $50,000 fee if we proceed with a second clinical efficacy study. We pay a
royalty on net sales of Latranal products to Pharmaceutical Applications
Associates. The license agreement remains in effect until the later of ten years
or the date the last licensed patent expires. We have the right to terminate the
agreement at any time.
INDIANA UNIVERSITY FOUNDATION
In October 1996, we entered into a license agreement with Indiana University
Foundation. We and Indiana University Foundation amended the license in
June 1998 and Indiana University Foundation assigned it to Indiana University's
Advanced Research and Technology Institutes, Inc. Under the agreement, we have
an exclusive worldwide license under patent applications, future patents and
technology of Indiana University Foundation relating to GnRH antagonist
compounds, including abarelix and methods of use for abarelix. We have paid
non-refundable fees of $305,000 and a performance-based payment of $250,000
under this agreement. We have agreed to make performance-based payments of up to
an additional $4.0 million, and to pay royalties on our net sales of products
covered by the license grant. The license agreement remains in effect until the
last licensed patent expires. Expiration of the license will not preclude us
from continuing to develop and market the licensed products and use the licensed
technology. We must request a continuation of the license and Advanced Research
and Technology may not unreasonably withhold its consent. We can terminate the
agreement at any time upon 90 days notice. Advanced Research and Technology may
terminate upon 90 days notice if we materially breach the agreement or fail to
make required payments.
MASSACHUSETTS INSTITUTE OF TECHNOLOGY
In December 1993, in connection with our initial financing, we entered into
a license agreement with the Massachusetts Institute of Technology. Under this
agreement, MIT granted us an exclusive worldwide license under specified
technology and related patent rights regarding biological screening techniques
and related methodologies developed at MIT by Malcolm L. Gefter, Ph.D. and
another founder of our company. In the agreement, MIT acknowledged that it has
no rights with respect to any intellectual property generated by us, including
any and all enhancements, modifications or additions regarding the licensed
technology or any product or process covered by the licensed future patents.
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MANUFACTURING
We generally manufacture the drug supply required to support our preclinical
studies in-house. External contractors provide all of our clinical supplies and
manufacture them in accordance with FDA and European regulations. We currently
have long-term contracts with third-party manufacturers for the commercial
manufacture of abarelix products. We have a supply agreement with each of UCB
Bioproducts S.A., Salsbury Chemicals, Inc. and Oread Pharmaceuticals
Manufacturing, Inc.
Under the UCB Bioproducts agreement, UCB has agreed to supply us with
commercial volumes of abarelix compound and we have committed to purchase
$56.0 million of pharmaceutical grade peptide between February 1999 and
February 2001. As of December 31, 1999, we had purchased approximately
$25.5 million of peptide. In addition, under the Salsbury agreement, Salsbury
has agreed to supply us with the commercial depot formulations. We contributed
approximately $6.0 million toward Salsbury's construction and outfitting of a
dedicated manufacturing facility, to which we will retain manufacturing process
rights. Under the Oread agreement, Oread has agreed to supply us with
abarelix-depot products in vials. In order to effect a favorable pricing
environment, we have secured a second source of supply of abarelix compound. We
intend to secure a second source for abarelix-depot products and abarelix-depot
products in vials.
If we fail to meet our manufacturing and supply obligations, Amgen or
Sanofi-Synthelabo may assume manufacturing responsibility under each company's
agreement with us. If this occurs, we must pay Sanofi-Synthelabo its incremental
costs of assuming manufacturing responsibility. We are transferring
manufacturing responsibility to Amgen and expect the transfer to be complete
later this year.
PATENTS AND PROPRIETARY RIGHTS
Proprietary protection for our products, technology and processes is
essential to our business. We seek proprietary protection predominantly in the
form of patents on our products and the processes which we use to discover them.
With respect to a particular product, we seek patent protection on the compound
itself, its commercial formulation, its range of applications and its
production. Where possible, we also seek patent coverage that could prevent the
marketing of, or restrict the commercial threat of, competitive products.
We have seven United States patents and an exclusive license to one United
States patent. These patents have expiration dates from 2012 through 2017. In
addition, as of January 20, 2000, we had filed or held exclusive licenses to 34
United States patent applications, as well as 80 related foreign patent
applications, including both Patent Cooperation Treaty filings and national
filings. We also have non-exclusive licenses to four United States patents and
four issued foreign patents, and related United States and foreign applications,
directed to technologies embodied in LEAP.
In particular, we have United States patents that cover both the abarelix
compound and the sustained release formulation enabling its once-per-month
administration. We also have a patent covering the use of abarelix and any other
GnRH antagonist in a variety of therapeutic settings, including in combination
with surgery or radiation therapy. We intend to file additional United States
and foreign patent applications, where appropriate, relating to new product
discoveries or improvements.
We also rely on trade secrets, know-how and continuing technological
advances to protect various aspects of our core technology. We require our
employees, consultants and scientific collaborators to execute confidentiality
and invention assignment agreements with us to maintain the confidentiality of
our trade secrets and proprietary information. Our confidentiality agreements
generally provide that the employee, consultant or scientific collaborator will
not disclose our confidential information to third parties, compete with us or
solicit our employees during the course of their employment with us. These
agreements also provide that inventions conceived by the employee, consultant or
scientific collaborator
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in the course of working for us will be our exclusive property. Additionally,
our employees also agree not to compete with us or solicit our employees for one
year following termination of their employment with us.
COMPETITION
A biotechnology company such as ours must keep pace with rapid technological
change and faces intense competition. Many companies, both public and private,
including large pharmaceutical companies, chemical companies and biotechnology
companies, develop products or technologies competitive with our products or
technologies. In addition, academic, government and industry-based research is
intense, resulting in considerable competition in obtaining qualified research
personnel, submitting patent filings for protection of intellectual property
rights and establishing strategic corporate alliances.
Each of our potential products in research or development will face
competition from other products. If approved for marketing and sale, our
products will compete with numerous established or newly introduced products on
the market, including:
- Lupron Depot, Zoladex and other pharmaceuticals approved and marketed for
the treatment of hormonally responsive prostate cancer or endometriosis in
the United States and Europe; and
- Cetrotide, manufactured by ASTA Medica, and Antagon, manufactured by
Organon, are approved GnRH antagonists for use in infertility and are only
available as daily injectable formulations.
For each of our products, we will face increasing competition from generic
formulations of existing drugs whose active components are no longer covered by
patents. Specifically, we are aware of various formulations of leuprorelin, the
active ingredient of Lupron Depot, including Viadur, manufactured by Crescendo,
which the FDA has recently granted marketing approval.
We believe that our product candidates will compete favorably in the market
with these and other products on the basis of a combination of superior
efficacy, decreased side effects and overall cost-benefit considerations.
GOVERNMENT REGULATION
The manufacture and marketing of pharmaceutical products and our ongoing
research and development activities in the United States require the approval of
numerous governmental authorities, including the FDA. We also must obtain
similar approvals from comparable agencies in most foreign countries. The FDA
has established mandatory procedures and safety standards which apply to the
preclinical testing and clinical trials, as well as to the manufacture and
marketing, of pharmaceutical products. State, local and other authorities also
regulate pharmaceutical manufacturing facilities.
As an initial step in the FDA regulatory approval process, an applicant
typically conducts preclinical studies in animals to assess a drug's efficacy
and to identify potential safety problems. An applicant must conduct specified
preclinical laboratory and animal studies in compliance with the FDA's good
laboratory practice regulations. An applicant must conduct the results of these
studies to the FDA as part of an investigational new drug application, which
must receive clearance from the FDA before proposed clinical testing can begin.
We can make no assurance that our submission of an investigational new drug
application will result in FDA authorization to conduct a clinical trial.
Clinical testing must meet requirements for Institutional Review Board
oversight and informed consent, as well as FDA prior review, oversight and good
clinical practice requirements. Typically, clinical testing involves a
three-phase process. Phase I clinical trials involve a small number of subjects
and are designed to provide information about both product safety and the
expected dose of the drug. Phase II clinical trials generally provide additional
information on dosing and safety in a limited patient
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population. Occasionally, phase II trials may provide preliminary evidence of
product efficacy. Phase III clinical trials are large-scale, well-controlled
studies. The goal of Phase III clinical trials generally is to provide
statistically valid proof of efficacy as well as safety in the target patient
population. The company performing the preclinical testing and clinical trials
of a pharmaceutical product then submits the results to the FDA in the form of
an NDA, for approval to commence commercial sales. Preparing NDA applications
involves considerable data collection, verification, analysis and expense. In
responding to an NDA, the FDA may grant marketing approval, request additional
information or deny the application if it determines that the application does
not satisfy its regulatory approval criteria. After approval for the initial
indications, further clinical trials would be necessary to gain approval for the
use of the product for any additional diseases.
Among the conditions for NDA approval is the requirement that the
prospective manufacturer's quality control and manufacturing procedures conform
on an ongoing basis with good manufacturing practices. In complying with good
manufacturing practices, manufacturers must continue to spend time, money and
effort in the areas of production and quality control to ensure full technical
compliance. Manufacturing facilities are subject to periodic inspections by the
FDA.
The FDA must grant approval of our products, which involves a review of the
manufacturing processes and facilities used to produce these products before we
can market these products in the United States. The process of obtaining
approvals from the FDA can be costly, time consuming and subject to
unanticipated delays. The FDA may refuse to approve an application if it
believes the product does not meet applicable regulatory criteria. The FDA also
may require additional testing for safety and efficacy of the drug. If the FDA
grants approval of a drug product, the approval will be limited to specific
indications.
If we receive marketing approval, we must comply with FDA requirements for
manufacturing, labeling, advertising, record keeping and reporting of adverse
experiences and other information. In addition, we must comply with federal and
state anti-kickback and other health care fraud and abuse laws that pertain to
the marketing of drugs. For all drugs, failure to comply with applicable
regulatory requirements after obtaining regulatory approval could, among other
things result in suspension of regulatory approval, as well as possible recalls,
product seizures, injunctions and civil and criminal sanctions.
In addition to regulations enforced by the FDA, we also are subject to
various laws and regulations relating to safe working conditions, laboratory and
manufacturing practices, the experimental use of animals and the use and
disposal of hazardous or potentially hazardous substances, including chemicals,
micro-organisms and various radioactive compounds used in connection with our
research and development activities. Although we believe that our safety
procedures for handling and disposing of these materials comply with the
standards prescribed by state and federal regulations, we cannot assure you that
accidental contamination or injury from these materials will not occur.
Compliance with laws and regulations relating to the protection of the
environment has not had a material effect on our capital expenditures or our
competitive position. However, we cannot accurately predict the extent of
government regulation, and the cost, and effect thereof on our competitive
position, which might result from any legislative or administrative action.
Additionally, we may have to obtain approval of a product from comparable
regulatory authorities in foreign countries prior to the commencement of
marketing of the product in those countries. The approval procedure varies among
countries, may involve additional testing and the time required may differ from
that required for FDA approval. Although there is now a centralized European
Union approval mechanism in place, each European country may nonetheless impose
its own procedures and requirements, many of which could be time consuming and
expensive. Thus, substantial delays could occur in obtaining required approvals
from both the FDA and foreign regulatory authorities after the relevant
applications are filed. We expect to rely on corporate partners and licensees,
along with our expertise, to obtain governmental approval in foreign countries
of drug formulations utilizing our drug
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candidates. Under the Sanofi-Synthelabo agreement, Sanofi-Synthelabo is
responsible for filing and obtaining necessary governmental marketing
reimbursement and pricing approvals for any abarelix product in each country in
the Sanofi-Synthelabo territory where the abarelix product will be
commercialized pursuant to that agreement.
PRODUCT LIABILITY INSURANCE
We maintain product liability insurance for clinical trials in the amount of
$15.0 million per occurrence and $15.0 million in the aggregate. We intend to
expand our insurance coverage to include the manufacture, marketing and sale of
commercial products if marketing approval is obtained for products in
development. However, insurance coverage is becoming increasingly expensive, and
we may be unable to maintain insurance coverage at a reasonable cost or in
sufficient amounts to protect us against losses due to liability. In addition,
we may be unable to obtain commercially reasonable product liability insurance
for any products approved for marketing. A successful product liability claim or
series of claims brought against us could result in substantial setbacks for our
business.
EMPLOYEES
As of December 31, 1999, we had 94 full-time employees, 80 of whom were
employed at our headquarters in Cambridge, Massachusetts and 14 of whom were
employed with our Provid Research division at our facility in Piscataway, New
Jersey. We also employ consultants and independent contractors on a regular
basis to assist in the development of our products. None of our employees are
party to a collective bargaining agreement. We believe our relationship with our
employees is good.
FACILITIES
Our headquarters and primary research facilities are located in Cambridge,
Massachusetts, where we lease and occupy a total of approximately 25,000 square
feet. The lease for these facilities expires in September 2004. In August 1998,
we executed a lease for a total of approximately 15,000 square feet of space in
Piscataway, New Jersey for the operations of our Provid Research division. The
lease for this facility expires in 2008.
In January 2000, we signed an agreement to purchase a building of
approximately 175,000 square feet located in the western suburbs of Boston,
Massachusetts. We expect to complete the acquisition of this facility in
June 2000 and, following additional laboratory and office improvements, to
occupy the new facility by the end of 2000. We intend to occupy approximately
100,000 square feet at this facility and expect to lease a portion of the
remaining space for at least the next five years, although we have not yet found
a tenant. We expect to vacate and sublease our current Cambridge, Massachusetts
premises upon our move to the new facility. Upon completion of our new facility,
we believe that our facilities will be adequate for at least the next seven
years and that we will be able to obtain additional space as needed on
commercially reasonable terms.
LEGAL PROCEEDINGS
We are not currently a party to any material legal proceedings.
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MANAGEMENT
OFFICERS AND DIRECTORS
The following table shows information about our executive officers,
directors and other officers as of December 31, 1999:
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- -------------------------------- -------- --------------------------------------------------------
<S> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS
Malcolm L. Gefter, Ph.D......... 57 Chairman of the Board, Chief Executive Officer and
President
Kevin F. McLaughlin............. 43 Chief Financial Officer, Senior Vice President,
Treasurer and Secretary
Marc B. Garnick, M.D............ 53 Executive Vice President and Chief Medical Officer
G. Leonard Baker, Jr............ 57 Director
William Laverack, Jr............ 42 Director
Henry F. McCance................ 56 Director
David B. Sharrock............... 63 Director
Damion E. Wicker, M.D........... 39 Director
Albert L. Zesiger............... 70 Director
OTHER OFFICERS
Nicholas P. Barker, Ph.D........ 44 Vice President of Development
Lena M. Bergfors................ 53 Vice President, Human Resources
Dean A. Falb, Ph.D.............. 39 Senior Vice President, Research
William L. Kubasek, Ph.D........ 40 Senior Director of Project Management
Paul M. Martha, M.D............. 46 Vice President, Endocrinology
Gary L. Olson, Ph.D............. 54 Senior Vice President, Chemistry Research and
Development and President of Provid Research division
Marc A. Silver.................. 42 Vice President, Corporate Development
Janice M. Swirski............... 38 Vice President, Operations
</TABLE>
Messrs. Baker, Laverack and Wicker are members of our audit committee.
Messrs. McCance, Sharrock and Zesiger are members of our compensation committee.
MALCOLM L. GEFTER, PH.D. is our founder and has served as a director since
July 1993, as Chairman of the Board since February 1994, as our Chief Executive
Officer since July 1996 and as our President since July 1998. From July 1993 to
July 1998, Dr. Gefter was our Treasurer. Dr. Gefter has been a Professor of
Biology at MIT and is now professor emeritus. He has authored more than 200
original scientific papers. Dr. Gefter was a founder of ImmuLogic Pharmaceutical
Corporation and from 1987 to March 1997, served as Chairman of the Board of
Directors at ImmuLogic. Dr. Gefter received his B.S. in Chemistry from the
University of Maryland and his Ph.D. in Molecular Biology from Albert Einstein
College of Medicine.
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KEVIN F. MCLAUGHLIN has been our Chief Financial Officer since joining us in
September 1996. Since January 1997, he has also been our Secretary and since
July 1998, he has been a Senior Vice President and our Treasurer. From
September 1996 to July 1998, Mr. McLaughlin was one of our Vice Presidents. From
March 1996 to August 1996, he was Vice President and Chief Financial Officer of
Advanced Techcom, Inc., a privately-held communications company. From 1980 to
1996, he held senior level financial positions at Computervision Corporation and
its predecessor Prime Computer, Inc., including Vice President, Treasurer and
Director of Corporate Planning, where he was directly involved with financial,
accounting and investor relations management, as well as public and private
financing. Mr. McLaughlin received his B.S. in Accounting from Northeastern
University and his MBA from Babson College.
MARC B. GARNICK, M.D. joined us in April 1994 as Executive Vice President
and Chief Medical Officer. From 1987 to 1994, he was Vice President, Clinical
Development at Genetics Institute, Inc., a biotechnology company. Dr. Garnick
was a leader in the clinical development of Lupron Depot as a treatment for
hormonally responsive prostate cancer. He is on the faculty of the Harvard
Medical School as a clinical professor of medicine and maintains a clinical
practice at the Beth Israel Deaconess Medical Center, a teaching hospital of the
Harvard Medical School. Dr. Garnick has written over 300 papers, four books and
numerous articles. Dr. Garnick received his A.B. in Biology from Bowdoin College
and his M.D. from the University of Pennsylvania School of Medicine.
Dr. Garnick also is a director of Genome Therapeutics Corporation.
G. LEONARD BAKER, JR. has served as a member of our board of directors since
March 1994. Since 1974, Mr. Baker has been a Managing Director or General
Partner of Sutter Hill Ventures, a venture capital firm. Mr. Baker also is a
director of ThermaWave Inc. and a number of private companies.
WILLIAM LAVERACK, JR. has served as a member of our board of directors since
December 1993. Since 1993, Mr. Laverack has been a General Partner of J.H.
Whitney & Co., a private investment firm. From 1991 to 1993, Mr. Laverack was
employed at Gleacher & Co., Inc. and from 1985 to 1991, Mr. Laverack was
employed at Morgan Stanley & Co. Incorporated, each of which are investment
banking firms. Mr. Laverack also is a director of Steel Dynamics, Inc. and a
number of private companies.
HENRY F. MCCANCE has served as a member of our board of directors since
December 1993. Mr. McCance has been employed at Greylock Management Corporation,
a private venture capital group, since 1969, where he has been Treasurer since
1969, President since 1990 and Chairman of the Board since 1997. Mr. McCance is
a general partner of several venture capital funds affiliated with Greylock.
Mr. McCance also is a director of Peritus Software Services, Inc.
DAVID B. SHARROCK has served as a member of our board of directors since
February 1994. Since 1994, Mr. Sharrock has been a privately employed business
consultant. From 1990 to 1994, Mr. Sharrock was Executive Vice President and
Chief Operating Officer of Marion Merrell Dow Inc. and from 1988 to 1989, he was
President and Chief Operating Officer of Merrell Dow Pharmaceuticals, Inc.
Mr. Sharrock also serves as a director of Broadwing Inc., Interneuron
Pharmaceuticals, Inc., Intercardia, Inc. and Progenitor, Inc.
DAMION E. WICKER, M.D. has served as a member of our board of directors
since April 1998. Dr. Wicker has been a General Partner of Chase Capital
Partners, a private equity and mezzanine capital group, since January 1997 and
was a principal of Chase Capital Partners from April 1993 to December 1996.
Previously, Dr. Wicker was President of Adams Scientific from July 1991 to
December 1992, and, prior to that, held positions with MBW Venture Partners and
Alexon, Inc. Dr. Wicker also was a Commonwealth Fund Medical Fellow for the
National Institute of Health. He currently is a director of Landec Corporation,
V.I. Technologies, Inc. and several privately-held health care companies.
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ALBERT L. ZESIGER has served as a member of our board of directors since
July 1996. Mr. Zesinger is a founding Principal of Zesiger Capital Group LLC, a
global investment advisory firm started in 1995. Mr. Zesiger previously was with
BEA Associates, an investment advisory firm where he started in 1968 and most
recently was Managing Director from December 1990 to September 1995. He
currently is a director of Durect Corporation, Eos Biotechnology, Inc., Hayes
Medical Inc. and Virologic Inc. and is the Co-chair of Asphalt Green, Inc., a
non-profit corporation in New York City.
NICHOLAS P. BARKER, PH.D. joined us in June 1996 as Vice President of
Development. From July 1991 to May 1996, Dr. Barker was employed at
Rhone-Poulenc Rorer Inc., where from July 1991 until September 1994, he was
Director, Pharmaceutical Sciences and thereafter, Worldwide Director, Product
Development. He also has held senior level positions with Fisons Pharmaceuticals
and Smith, Kline & French (U.K.). Dr. Barker received his Bachelor of Pharmacy
from the University of Bath (U.K.) and his Ph.D. in Transdermal Drug Delivery/
Pharmaceutics from Nottingham University (U.K.). Dr. Barker is a licensed U.K.
pharmacist with membership in the Royal Pharmaceutical Society of Great Britain.
LENA M. BERGFORS joined us in June 1999 as Vice President of Human
Resources. From December 1980 to May 1999, Ms. Bergfors was employed by Serono
Laboratories, Inc., the United States affiliate of the Ares-Serono Group. While
at Serono, Ms. Bergfors held a variety of positions in human resources, most
recently as Director of Human Resources.
DEAN A. FALB, PH.D. joined us in January 1998 as Senior Vice President,
Research. Dr. Falb was a founding employee of Millennium Pharmaceuticals, Inc.,
a biotechnology company formed in 1993, and was responsible for establishing its
genomics program in cardiovascular diseases. At Millennium, he held the position
of Director of Cardiovascular Diseases and served on the Millennium/Eli Lilly
Joint Management Team. Prior to joining Millennium, Dr. Falb was a scientist at
ImmuLogic. Dr. Falb received his B.S. in Chemistry from Purdue University and
his Ph.D. in Biochemistry and Molecular Biology from Harvard University.
WILLIAM L. KUBASEK, PH.D. joined us in March 1994 as a founding scientist
and has served as our Senior Director of Project Management since July 1999.
From July 1989 to February 1994, Dr. Kubasek was a research fellow at the
Massachusetts General Hospital and the Harvard Medical School. Dr. Kubasek
received his B.S. in Biochemistry from the University of California, Davis and
his Ph.D. in Molecular Biology from the University of Oregon.
PAUL M. MARTHA, M.D. joined us in February 1998 as Vice President,
Endocrinology. From September 1993 to January 1998, Dr. Martha was employed at
Genentech, Inc. in a variety of positions, most recently as Director of
Endocrinology. Previously, Dr. Martha was Assistant Professor of Pediatrics and
Director and Principal Investigator, Laboratory for Neuroendocrine Research at
BayState Medical Center/Tufts University School of Medicine and Tufts New
England Medical Center. Dr. Martha received his B.S. in biology from Trinity
College and his M.D. from the University of Connecticut School of Medicine.
GARY L. OLSON, PH.D. joined us in March 1998 as Senior Vice President,
Chemistry Research and Development and President of our Provid Research
division. From 1971 to February 1998, Dr. Olson held a series of research
positions at Hoffmann-La Roche, including Research Director for chemistry in the
Inflamation/Autoimmune Diseases and the Oncology departments. Dr. Olson has
published over 30 papers in scientific journals and holds 24 United States
patents. He is a member of the board of the Residential School on Medicinal
Chemistry at Drew University, holds the position of Editor-in-Chief of DRUG
DESIGN AND DISCOVERY and is a member of the editorial boards of several
scientific journals. Dr. Olson received his A.B. in Chemistry from Columbia
University and his Ph.D. from Stanford University.
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MARC A. SILVER joined us in October 1994. Since September 1996, he has
served as Vice President of Corporate Development and from October 1994 to
September 1996, as Vice President. From 1992 to 1994, Mr. Silver was Vice
President at Harvard Management Corp., an investment management company. Prior
to that time, he was involved in the founding and successful development of a
number of companies, including Arris Pharmaceutical Corporation,
Envirogen, Inc. and TargeTech, Inc. Mr. Silver received his B.S. in Biochemistry
from Carnegie Mellon University and his MBA from MIT Sloan School of Management.
JANICE M. SWIRSKI joined us in May 1998 as Vice President, Operations. From
May 1985 to April 1998, Ms. Swirski served in a variety of management positions
at TAP Pharmaceuticals Inc., a joint venture between Abbott Laboratories and
Takeda Chemical Industries Ltd., involved in Managed Care, Hospital Markets and
Sales Training. Her most recent role was as Regional Business Unit Manager for a
Lupron Depot and Prevacid Sales Team in the mid-Atlantic Region. Ms. Swirski
received her B.S. in Pharmacy from the Massachusetts College of Pharmacy and
Allied Health Sciences.
Under the terms of the amended and restated stockholders agreement dated as
of April 30, 1998, as amended, by and among us and some of our stockholders,
Messrs. Gefter, Laverack, McCance, Baker and Wicker were designated as directors
and were elected to our board of directors. The stockholders agreement provides
that we will use our best efforts to cause these individuals or any other
persons designated in accordance with the stockholders agreement to be nominated
for election and elected as our directors and that the stockholders who are
parties to the stockholders agreement will vote their shares in favor of these
designees. Upon completion of this offering, these obligations will terminate.
All of our directors hold office until the first annual meeting of
stockholders following this offering and until their successors are duly elected
and qualified or their earlier resignation, retirement, disqualification or
removal from office. After election at the annual meeting following this
offering, the directors will then serve for succeeding terms expiring at each
successive annual meeting of stockholders and until they or their successors are
duly elected and qualified.
Our officers serve at the discretion of the board of directors. There are no
family relationships among our directors and officers.
BOARD OF DIRECTORS COMMITTEES AND OTHER INFORMATION
Our board of directors has an audit committee and a compensation committee.
The audit committee, currently comprised of Messrs. Baker, Laverack and Wicker,
determines our accounting policies and practices and financial reporting and
internal control structures, recommends to the board of directors the
appointment of independent auditors to audit our financial statements each year
and confers with the auditors and our officers for purposes of reviewing our
internal controls, accounting practices, financial structure and financial
reporting.
The compensation committee, currently comprised of Messrs. McCance, Sharrock
and Zesiger, determines salaries, incentives and other forms of compensation for
our executive officers and administers our incentive compensation plans.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No interlocking relationship exists between our board of directors or
compensation committee and the board of directors or compensation committee of
any other entity, nor has any interlocking relationship existed in the past.
49
<PAGE>
DIRECTOR COMPENSATION
Except as we otherwise describe below, we have not paid any cash
compensation to members of our board of directors for their services as
directors. David B. Sharrock has received $10,000 each year in connection with
his services as a member of our board of directors. In addition, in
January 1997, we granted to Mr. Sharrock options to purchase 22,500 shares of
common stock at an exercise price of $1.60 per share as additional compensation
for his services as a director. Mr. Sharrock also received $20,000 during 1997
in connection with a consulting service provided to us during 1997.
We reimburse the directors for reasonable expenses in connection with
attendance at board and committee meetings. Directors also are eligible to
receive stock options under our Second Amended and Restated 1995 Stock Plan. In
November 1999, we granted each non-employee director options under the 1995
Stock Plan to purchase 30,000 shares of common stock at an exercise price of
$7.00 per share for services they performed as directors. Each option grant will
vest and become exercisable in equal monthly installments over a three-year
period so long as the individual continues to be a member of our board of
directors. Albert L. Zesiger subsequently declined this option grant and the
shares subject to his grant resumed the status of shares available for grant
under the 1995 Stock Plan.
Upon the closing of this offering, non-employee directors will each receive,
to the extent the internal policies of their respective organizations permit, an
annual director's fee of $12,000, plus $1,000 for each board meeting.
50
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth all compensation earned, including salary,
bonuses, stock options and other compensation during the fiscal year ended
December 31, 1999 by Malcolm L. Gefter, Ph.D., our Chief Executive Officer, and
our other two executive officers, each of whose total annual compensation
exceeded $100,000 in 1999. We may refer to these officers as our named executive
officers in other parts of this prospectus.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES
------------------- UNDERLYING
NAME AND POSITION(S) SALARY BONUS OPTIONS
- ------------------------------------------------------------ -------- -------- ------------
<S> <C> <C> <C>
Malcolm L. Gefter, Ph.D..................................... $297,675 $104,177 153,080(1)
Chairman of the Board,
Chief Executive Officer
and President
Kevin F. McLaughlin......................................... 187,425 32,785 146,970(2)
Chief Financial Officer,
Senior Vice President,
Treasurer and Secretary
Marc B. Garnick, M.D........................................ 250,000 26,190 60,780(3)
Executive Vice President
and Chief Medical Officer
</TABLE>
- ------------------------
(1) Includes options to purchase 3,080 shares of common stock granted on
January 13, 2000 in connection with a bonus earned in 1999 and excludes
options to purchase 10,400 shares of common stock granted on January 6, 1999
in connection with a bonus earned in 1998, in each case awarded under our
Executive Management Bonus Plan.
(2) Includes options to purchase 970 shares of common stock granted on
January 13, 2000 in connection with a bonus earned in 1999 and excludes
options to purchase 2,900 shares of common stock granted January 6, 1999 in
connection with a bonus earned in 1998, in each case awarded under our
Executive Management Bonus Plan.
(3) Includes options to purchase 780 shares of common stock granted on
January 13, 2000 in connection with a bonus earned in 1999 under our
Executive Management Bonus Plan.
51
<PAGE>
STOCK OPTION GRANTS
The following table shows information regarding options we granted to the
named executive officers under our 1995 Stock Plan during the year ended
December 31, 1999. We have never granted any stock appreciation rights. The
maximum term of each option granted is ten years from the date of grant, subject
to earlier termination in the event of resignation or termination of employment.
The percentage of the total options granted to employees in 1999 shown in the
table below is based on options to purchase an aggregate of 2,220,742 shares of
common stock granted to our employees, directors and consultants during the year
ended December 31, 1999. The exercise price of each option is equal to the fair
market value of the common stock on the date of grant as determined by the board
of directors.
The potential realizable values are net of the exercise prices and before
taxes associated with the exercise, and we have based them on an assumed initial
public offering price of $16.00 per share and the assumption that our common
stock appreciates at the annual rate shown from the date of the grant until the
expiration of the ten-year option term. We have calculated these numbers based
on the rules of the Securities and Exchange Commission and they do not represent
our estimate or projection of future common stock prices. The amounts reflected
in the table may not necessarily be achieved. The actual amount the executive
officer may realize will depend upon the extent to which the stock price exceeds
the exercise price of the options on the exercise date.
OPTION GRANTS IN FISCAL 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------- POTENTIAL REALIZABLE VALUE
PERCENT OF AT ASSUMED ANNUAL RATES OF
NUMBER OF TOTAL STOCK PRICE APPRECIATION
SECURITIES OPTIONS FOR OPTION TERM
UNDERLYING GRANTED TO EXERCISE --------------------------
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION
NAME GRANTED(1) FISCAL YEAR SHARE DATE 5% 10%
- ------------------------------- ---------- ------------ --------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Malcolm L. Gefter, Ph.D........ 150,000(2) 6.9% $ 6.38 07/08/09 $2,952,347 $ 5,267,982
3,080(3) 14.50 01/13/10 35,612 83,160
Kevin F. McLaughlin............ 80,000(2) 6.6 6.38 07/08/09 1,574,585 2,809,590
66,000(4) 6.38 07/08/09 1,299,033 2,317,912
970(3) 14.50 01/13/10 11,215 26,190
Marc B. Garnick, M.D........... 60,000(2) 2.7 6.38 07/08/09 1,180,939 2,107,193
780(3) 14.50 01/13/10 9,019 21,060
</TABLE>
- ------------------------
(1) Excludes options granted in January 1999 in connection with bonus awards
earned in 1998 under our Executive Management Bonus Plan.
(2) These options will vest and become exercisable as to 16 2/3% of the shares
on July 1, 2001. Thereafter, options with respect to an additional 33 1/3%
of the shares will vest in equal monthly installments through July 1, 2004.
Options with respect to the remaining 50% of the shares vest in equal
monthly installments after July 1, 2004 through July 1, 2007.
(3) Represents options granted in January 2000 in connection with bonus awards
earned in 1999 under our Executive Management Bonus Plan. These options were
fully vested and immediately exercisable on the date of grant.
(4) These options vest and become exercisable in equal monthly installments over
a 33 month period beginning on October 31, 2001.
52
<PAGE>
The following table provides information concerning the number and value of
unexercised options held by the named executive officers at December 31, 1999.
None of the named executive officers exercised any options in 1999.
The value of unexercised in-the-money options held at December 31, 1999
represents the total gain which an option holder would realize if he or she
exercised all of the in-the-money options held at December 31, 1999, and is
determined by multiplying the number of shares of common stock underlying the
options by the difference between an assumed initial public offering price of
$16.00 per share and the per share option exercise price. An option is
in-the-money if the fair market value of the underlying shares exceeds the
exercise price of the option.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
OPTION VALUES AT DECEMBER 31, 1999
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1999 DECEMBER 31, 1999
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Malcolm L. Gefter, Ph.D...................... 571,540 843,862 $8,788,512 $12,285,363
Kevin F. McLaughlin.......................... 182,840 281,060 2,800,382 3,490,114
Marc B. Garnick, M.D......................... 183,422 692,596 2,497,587 8,728,491
</TABLE>
EMPLOYMENT AGREEMENTS
None of our named executive officers has an employment agreement, although
all of our executive officers have entered into agreements that contain
non-disclosure and non-solicitation restrictions and covenants.
INCENTIVE PLANS
SECOND AMENDED AND RESTATED 1995 STOCK PLAN
Our board of directors and our stockholders approved and adopted our Second
Amended and Restated 1995 Stock Plan in February 2000. The 1995 Stock Plan, as
amended and restated, will be effective upon the closing of this offering. We
have reserved a total of 11,375,000 shares of common stock for issuance under
the 1995 Stock Plan. Under the terms of the 1995 Stock Plan, our board of
directors may grant incentive stock options, non-qualified stock options, awards
of common stock and opportunities to make direct purchases of common stock, to
our employees, directors and consultants, provided that the board may only grant
incentive stock options to persons who are employees at the time of the grant.
The board of directors and the compensation committee administer the 1995 Stock
Plan. The plan must be administered by a committee consisting of at least two
non-employee directors following the closing of this offering.
The exercise price per share of common stock for:
- non-qualified options must be no less than par value per share of common
stock on the date of grant;
- incentive stock options must be no less than the fair market value per
share of common stock on the date of the grant; and
- incentive stock options granted to an employee owning more than 10% of the
total combined voting power of all classes of our capital stock, or of any
related company, must not be less than 110% of the fair market value per
share of the common stock on the date of the grant.
53
<PAGE>
Initially, each incentive stock option granted is exercisable over a period
determined by the board of directors in its discretion, not to exceed ten years
from the date of grant as required by the Internal Revenue Code of 1986, as
amended. In addition, the exercise period for an incentive stock option may not
exceed five years from the date of grant if the option is granted to an
individual who, at the time of the grant, owns more than 10% of the total
combined voting power of all classes of our stock. The board of directors or the
compensation committee generally has the right to accelerate the exercisability
of any options granted under the 1995 Stock Plan which would otherwise be
unexercisable. Upon consolidations or mergers, the board of directors of any
entity assuming our obligations may make equitable adjustments to the options,
accelerate the exercisability of options or terminate them in exchange for a
cash payment.
The 1995 Stock Plan expires on January 5, 2005, except as to options or
awards outstanding on that date. Subject to the terms of the 1995 Stock Plan,
the board of directors may terminate or amend the Plan at any time.
As of December 31, 1999, options for the purchase of an aggregate of
8,211,644 shares of common stock at a weighted average exercise price of $3.35
were outstanding under the 1995 Stock Plan.
EXECUTIVE MANAGEMENT BONUS PLAN
In November 1997, the board of directors adopted the Executive Management
Bonus Plan, which became effective in 1998 and will continue from year to year
unless terminated by the board of directors. We established the Bonus Plan as a
means to attract and retain senior level executives. Pursuant to the Bonus Plan,
individuals holding executive management positions, including our president and
chief executive officer, chief financial officer and our executive vice
presidents, are entitled to annual bonus payments linking performance oriented
objectives, which are defined and approved annually by the board, to a variable
compensation award based upon a percentage of the annual base salary of each
eligible participant. The board of directors has the right to review and
recommend other positions for inclusion as participants in the Bonus Plan.
Under the terms of the Bonus Plan, we will pay bonus awards granted to
participants as follows:
- a minimum of 30% of the total value of the award will be in the form of
stock options, with a value equal to the option exercise price multiplied
by the number of shares of common stock subject to the option; and
- the remaining 70% of the total value will be in the form of cash or stock
options, to the extent elected by the participant.
Each year, prior to the time we grant the bonus awards, each participant
must make an election as to the form of payment of his or her bonus award. The
board of directors will grant stock options in accordance with the Bonus Plan
under our 1995 Stock Plan. The options awarded will be incentive stock options
to the extent possible and will fully vest immediately upon grant. The board of
directors has the sole discretion to grant awards under the Bonus Plan and may
terminate or amend the Bonus Plan at any time, in any manner, without the
consent of any participant.
EMPLOYEE STOCK PURCHASE PLAN
In February 2000, our board of directors and our stockholders approved and
adopted the Employee Stock Purchase Plan, subject to the completion of this
offering. The Employee Stock Purchase Plan will be effective July 3, 2000 and
provides that 40,000 shares of common stock will be available for purchase
during a six month period commencing on the effective date. We will make
available an additional 40,000 shares of common stock, as well as any shares not
purchased during the prior six month period, in each subsequent six month period
until the Employee Stock Purchase Plan terminates. All of our employees or
employees of our affiliates who have completed six months of
54
<PAGE>
service and whose customary employment is at least 20 hours per week and for
more than five months in any calendar year are eligible to participate in the
Employee Stock Purchase Plan. Employees who would own 5% or more of the total
combined voting power or value of our stock immediately after having subscribed
for shares under the Employee Stock Purchase Plan may not participate in the
Plan.
Each eligible employee may purchase shares of common stock through regular
payroll deductions in an amount not less than 1% nor more than 10% of the
employee's compensation for each payroll period. At the end of each six month
period, we will issue shares of common stock on behalf of participating
employees, using the employees' payroll deductions, at a purchase price equal to
85% of the lesser of the last reported sale price of the common stock on the
first or last business day of the six month period. Under the Employee Stock
Purchase Plan, no employee may purchase shares of common stock during any
calendar year with a fair market value in excess of $25,000.
The board of directors may amend or terminate the Employee Stock Purchase
Plan, provided that:
- no amendment or termination may affect shares purchased under the Stock
Purchase Plan or the right of a participant to acquire shares during the
current six month period semiannual cycle without the consent of that
participant; and
- to the extent required by Rule 16b-3 of the Securities Exchange Act of
1934, as amended, or any other law, regulation or stock exchange rule, the
stockholders will have the right to approve amendments prior to their
effectiveness.
In addition, the Employee Stock Purchase Plan provides that our stockholders
must approve any amendment which increases the aggregate number of shares of
common stock which may be issued under the Plan or which expands the class of
persons entitled to participate under the Plan as of the effective date of the
Employee Stock Purchase Plan within twelve months after the adoption of the
amendment.
401(k) PLAN
Effective January 1, 1997, we amended and restated our July 1, 1994
Pharmaceutical Peptides, Inc. 401(k) Plan in its entirety by adopting a 401(k)
Trust Plan and Trust Agreement. This currently existing plan is known as the
PRAECIS Pharmaceutical, Inc. 401(k) Plan. The amended plan does not reduce the
benefits or lessen the rights of any employee with respect to those benefits
accrued prior to January 1, 1997. Employees who are at least 21 years of age and
have satisfied various service eligibility requirements, except for nonresident
aliens with no United States source of income, are eligible to make tax-deferred
contributions. Participants in the 401(k) plan may contribute up to 15% of their
total annual compensation, not to exceed the specified statutory limit, which
was $10,000 in 1999. Under our prior 401(k) plan, our participants received full
and immediate vesting of their contributions. Under our current 401(k) plan,
participants are vested in their non-matching and matching contributions, if
any, on a graded vesting schedule based on years of credited service.
The 401(k) plan permits, but does not require, us to make contributions to
the 401(k) plan on behalf of our employees. To date, we have not made any
matching contributions. All contributions to the 401(k) plan by or on behalf of
employees are subject to aggregate annual limits prescribed by the Internal
Revenue Service.
55
<PAGE>
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
We believe that we have executed all of the transactions set forth below on
terms no less favorable to us than terms we could have obtained from
unaffiliated third parties. It is our intention to ensure that all future
transactions, including loans, between us and our officers, directors, principal
stockholders and their affiliates, are approved by a majority of the board of
directors, including a majority of the independent and disinterested members of
the board of directors, and are on terms no less favorable to us than those that
we could obtain from unaffiliated third parties.
PRIVATE PLACEMENTS OF SECURITIES
Since January 1997, we have issued and sold common stock, warrants and
convertible preferred stock to the following persons and/or entities that are
our principal stockholders or directors.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK ISSUABLE UPON
-------------------------------------------
EXERCISE OF CONVERSION OF CONVERSION OF
WARRANT TO SERIES D SERIES E
SHARES OF PURCHASE CONVERTIBLE CONVERTIBLE
COMMON COMMON PREFERRED PREFERRED
INVESTOR STOCK STOCK STOCK STOCK
- ----------------------------------------------- --------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Sanofi-Synthelabo Inc. (formerly Sylamerica,
Inc.)........................................ 1,617,772 404,445 -- --
Quantum Industrial Partners LDC................ -- -- 2,695,414 --
Chase Venture Capital Associates, L.P.......... -- -- -- 5,357,145
Entities affiliated with Sutter Hill
Ventures..................................... -- -- -- 86,804
J.H. Whitney & Co. and an affiliated entity.... -- -- -- 535,717
Greylock Limited Partnership................... -- -- -- 89,287
Entities affiliated with Zesiger Capital Group
LLC.......................................... -- -- -- 267,855
</TABLE>
Shares held by all affiliated persons and entities have been aggregated. For
additional details on the shares held by each of these purchasers, please refer
to the information in this prospectus under the heading "Principal Stockholders
and Management." The aggregate purchase price for the common stock and the
warrant was $10.0 million in May 1997. The aggregate purchase price for the
Series D convertible preferred stock was $10.0 million, or $3.71 per share, in
June 1997. The per share purchase price for the Series E convertible preferred
stock was $5.60 per share in April 1998.
Damion E. Wicker, M.D., one of our directors, is General Partner of Chase
Capital Partners, a private equity and mezzanine capital group affiliated with
Chase Venture Capital Associates, L.P., G. Leonard Baker, Jr., one of our
directors, is a Managing Director of Sutter Hill Ventures, William Laverack,
Jr., one of our directors, is a General Partner of J.H. Whitney & Co., Henry F.
McCance, one of our directors, is a Managing Partner of Greylock Limited
Partnership and Albert L. Zesiger, one of our directors, is a Principal of
Zesiger Capital Group LLC.
INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS
Our certificate of incorporation and by-laws provide that we will indemnify
each of our directors and officers to the fullest extent permitted by the
Delaware General Corporation Law.
56
<PAGE>
PRINCIPAL STOCKHOLDERS
The following tables set forth information about the beneficial ownership of
our common stock on December 31, 1999, and as adjusted to reflect the sale of
the shares of common stock in this offering, by:
- each named executive officer;
- each of our directors;
- each person known to us to be the beneficial owner of more than 5% of our
common stock; and
- all of our executive officers and directors as a group.
Unless otherwise noted below, the address of each beneficial owner listed on
the tables is c/o PRAECIS PHARMACEUTICALS INCORPORATED, One Hampshire Street,
Cambridge, Massachusetts 02139.
We have determined beneficial ownership in accordance with the rules of the
Securities and Exchange Commission. Except as indicated by the footnotes below,
we believe, based on the information furnished to us, that the persons and
entities named in the tables below have sole voting and investment power with
respect to all shares of common stock that they beneficially own, subject to
applicable community property laws. We have based our calculation of the
percentage of beneficial ownership on 31,966,545 shares of common stock
outstanding on December 31, 1999 and 39,966,545 shares of common stock
outstanding upon completion of this offering.
In computing the number of shares of common stock beneficially owned by a
person and the percentage ownership of that person, we deemed outstanding shares
of common stock subject to options held by that person that are currently
exercisable or exercisable within 60 days of December 31, 1999. We did not deem
these shares outstanding, however, for the purpose of computing the percentage
ownership of any other person. Asterisks represent beneficial ownership of less
than one percent.
57
<PAGE>
EXECUTIVE OFFICERS AND DIRECTORS
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF COMMON STOCK
SHARES OF NUMBER OF BENEFICIALLY OWNED
COMMON STOCK SHARES -------------------
BENEFICIALLY SUBJECT TO BEFORE AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED OPTIONS(1) OFFERING OFFERING
- ---------------------------------------------------- ------------ ---------- -------- --------
<S> <C> <C> <C> <C>
Malcolm L. Gefter, Ph.D............................. 877,500 612,158 4.66% 3.73%
Kevin F. McLaughlin................................. 50,000 203,830 * *
Marc B. Garnick, M.D. (2)........................... 458,654 213,608 2.10 1.68
G. Leonard Baker, Jr. (3)........................... 1,965,017 2,499 6.15 4.92
c/o Sutter Hill Ventures
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
William Laverack, Jr. (4)........................... 3,406,194 2,499 10.66 8.53
c/o J. H. Whitney & Co.
177 Broad Street
Stamford, CT 06901
Henry F. McCance (5)................................ 1,793,296 2,499 5.62 4.49
c/o Greylock Limited Partnership
One Federal Street, 26th Floor
Boston, MA 02110
David B. Sharrock................................... 31,875 13,749 * *
1011 Barcamil Way
Naples, FL 34110
Damion E. Wicker, M.D. (6).......................... 7,339,004 2,499 22.97 18.37
c/o Chase Capital Partners
380 Madison Avenue,
12(th) Floor
New York, NY 10017
Albert L. Zesiger (7)............................... 1,529,506 0 4.78 3.83
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
All current directors and executive officers
as a group (9 persons)............................ 17,451,046 1,053,341 56.04 45.11
</TABLE>
- ------------------------
58
<PAGE>
(1) Represents the number of shares issuable upon the exercise of options
exercisable within 60 days of December 31, 1999.
(2) Includes 36,000 shares of common stock held by the Garnick Family 1999
Grantor Retained Annuity Trust, of which Mr. Garnick is the trustee.
(3) Consists of 1,288,372 shares of common stock held by Sutter Hill Ventures,
over which Mr. Baker, a member of our board of directors and a managing
director of the general partner of Sutter Hill Ventures, shares voting and
investment power with four other managing directors of the general partner
of Sutter Hill Ventures; 463,842 shares of common stock held by three other
managing directors, one retired managing director and their related family
entities; and shares of common stock held by Mr. Baker and his related
family entities. Mr. Baker disclaims beneficial ownership of the shares of
common stock held by Sutter Hill Ventures and the other persons or entities,
except to the extent of his proportionate partnership interest therein.
(4) Consists of 859,804 shares of common stock held by J. H. Whitney & Co. and
2,546,390 shares of common stock held by Whitney 1990 Equity Fund, L.P., an
affiliated entity of J. H. Whitney & Co. Mr. Laverack is a member of our
board of directors and a general partner of each entity and shares voting
and investment power with respect to these shares. Mr. Laverack disclaims
beneficial ownership of these shares, except to the extent of his
proportionate partnership interest therein.
(5) Consists of 1,793,296 shares of common stock held by Greylock Limited
Partnership, a private venture capital firm of which Mr. McCance is a
Managing Partner. Mr. McCance disclaims beneficial ownership of these
shares, except as to his proportionate partnership interest therein.
(6) Consists of 7,339,004 shares of common stock held by Chase Venture Capital
Associates, L.P., a private equity and mezzanine capital group of which
Dr. Wicker is a general partner. Dr. Wicker disclaims beneficial ownership
of the shares held by Chase Capital Partners, except to the extent of his
pecuniary interest in these shares.
(7) Consists of 1,529,506 shares of common stock held in accounts managed for
various parties by Zesiger Capital Group LLC, an investment advisor, for
which Albert L. Zesiger is a Principal. Excludes 2,499 shares of common
stock subject to vested options granted to Mr. Zesiger, which he
subsequently declined. Mr. Zesiger, in his capacity as Managing Director,
has voting and investment power with respect to these shares but disclaims
beneficial ownership with respect thereto.
59
<PAGE>
5% STOCKHOLDERS
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF COMMON STOCK
SHARES OF BENEFICIALLY OWNED
COMMON STOCK -------------------
BENEFICIALLY BEFORE AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED OFFERING OFFERING
- ------------------------------------------------------------ ------------ -------- --------
<S> <C> <C> <C>
Chase Venture Capital Associates, L.P....................... 7,339,004 22.96% 18.36%
c/o Chase Capital Partners
380 Madison Avenue, 12(th) Floor
New York, NY 10017
J. H. Whitney & Co. (1)..................................... 3,406,194 10.66 8.52
177 Broad Street
Stamford, CT 06901
Quantum Industrial Partners LDC............................. 2,695,414 8.43 6.74
888 Seventh Avenue
New York, NY 10106
Sanofi-Synthelabo Inc. (2).................................. 2,022,217 6.33 5.06
90 Park Avenue
New York, NY 10019
Sutter Hill Ventures (3).................................... 1,965,017 6.15 4.92
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
Greylock Limited Partnership................................ 1,793,296 5.61 4.49
One Federal Street, 26(th) Floor
Boston, MA 02110
Vulcan Ventures, Inc........................................ 1,641,026 5.13 4.11
110-110th Avenue Northeast
Suite 550
Bellevue, WA 98004
</TABLE>
- ------------------------
(1) Consists of 859,804 shares of common stock held by J. H. Whitney & Co. and
2,546,390 shares of common stock held by Whitney 1990 Equity Fund, L.P., an
affiliated entity of J. H. Whitney & Co.
(2) Includes 404,445 shares of common stock subject to currently exercisable
warrants.
(3) Consists of 1,288,372 shares of common stock held by Sutter Hill Ventures,
over which Mr. Baker, Jr., a member of our board of directors and a managing
director of the general partner of Sutter Hill Ventures, shares voting and
investment power with four other managing directors of the general partner
of Sutter Hill Ventures; 463,842 shares of common stock held by the three
other managing directors, one retired managing director and their related
family entities; and shares of common stock held by Mr. Baker and his
related family entities.
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DESCRIPTION OF CAPITAL STOCK
The following description of our capital stock and provisions of our amended
and restated certificate of incorporation and our amended and restated by-laws
is a summary. Statements contained elsewhere in this prospectus relating to
these provisions are not necessarily complete, and we refer you to the amended
and restated certificate of incorporation and the amended and restated by-laws
that will be in effect upon the completion of this offering. We have filed
copies of these documents with the Securities and Exchange Commission as
exhibits to our registration statement, of which this prospectus is a part. The
amended and restated certificate of incorporation and the amended and restated
by-laws described below will become effective at the time of completion of this
offering.
Our authorized capital stock will consist of 200,000,000 shares of common
stock, par value $.01 per share, and 10,000,000 shares of preferred stock, par
value $.01 per share, upon the closing of this offering.
COMMON STOCK
As of December 31, 1999, there were 31,966,545 shares of common stock
outstanding and held of record by 118 stockholders. Upon completion of this
offering, there will be 39,966,545 shares of common stock outstanding. In
addition, as of December 31, 1999, there were outstanding stock options for the
purchase of a total of 8,211,644 shares of common stock and outstanding warrants
to purchase of 515,940 shares of common stock. Shares of common stock have the
following rights, preferences and privileges:
VOTING RIGHTS. Each outstanding share of common stock is entitled to one
vote on all matters submitted to a vote of our stockholders, including the
election of directors. There are no cumulative voting rights, and therefore, the
holders of a plurality of the shares of common stock voting for the election of
directors may elect all of our directors standing for election.
DIVIDENDS. Holders of common stock are entitled to receive dividends if and
when dividends are declared by our board of directors out of assets legally
available for the payment of dividends, subject to preferential rights of
outstanding shares of preferred stock, if any.
LIQUIDATION. In the event of a liquidation, dissolution or winding up of
the affairs of PRAECIS, whether voluntary or involuntary, after payment of our
debts and other liabilities of and making provision for the holders of
outstanding shares of preferred stock, if any, we will distribute the remainder
of our assets ratably among the holders of shares of common stock.
RIGHTS AND PREFERENCES. The common stock has no preemptive, redemption,
conversion or subscription rights. The rights, powers, preferences and
privileges of holders of common stock are subject to, and may be impaired by,
the rights of the holders of shares of any series of preferred stock that we may
designate and issue in the future.
FULLY PAID AND NONASSESSABLE. All outstanding shares of common stock are,
and the shares of common stock to be issued pursuant to this offering will be,
fully paid and nonassessable.
PREFERRED STOCK
Upon the closing of this offering, all outstanding shares of preferred stock
will be converted into common stock. Pursuant to the terms of our amended and
restated certificate of incorporation, the board of directors will be
authorized, subject to any limitations prescribed by Delaware law, without
further stockholder approval, to issue from time to time up to an aggregate of
10,000,000 shares of preferred stock, in one or more classes or series, and to
fix the voting powers, if any, and the distinctive designations, preferences and
relative, participating, optional or other special rights and the
qualifications, limitations or restrictions of these rights, of the shares of
each class or series. The board
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of directors is authorized to issue preferred stock with voting, conversion and
other rights and preferences that could impair the voting power or other rights
of the holders of common stock.
We have no current plans to issue any preferred stock. However, the issuance
of preferred stock or of rights to purchase preferred stock could make it more
difficult or less desirable for third party to acquire a majority of our
outstanding common stock.
WARRANTS
In connection with a Master Lease Agreement dated March 29, 1995, as
amended, between us and Comdisco, Inc., we agreed to issue Comdisco warrants to
purchase shares of our Series A convertible preferred stock. All of these
warrants are subject to adjustment in accordance with their terms and expire on
March 29, 2005. Upon the closing of this offering, these warrants will convert
to warrants to purchase common stock at an exercise price of $1.35 per share.
The warrants issued to Comdisco were exercisable for a total of 111,495 shares
of common stock. In August 1998, Comdisco transferred to a third party warrants
to purchase 12,722 shares of common stock. Comdisco currently holds warrants to
purchase 98,773 shares of common stock. All of these warrants are currently
exercisable.
Pursuant to a Stock and Warrant Purchase Agreement dated as of May 13, 1997,
we issued to Sanofi-Synthelabo Inc., formerly Sylamerica, Inc., warrants which
are currently exercisable for 404,445 shares of common stock at an exercise
price of $12.88 per share. These warrants are subject to adjustment in
accordance with their terms and expire on May 13, 2002.
REGISTRATION RIGHTS
Pursuant to the amended and restated stockholders agreement dated as of
April 30, 1998, as amended, among some of our stockholders and us, and the stock
and warrant purchase agreement between Sanofi-Synthelabo and us, the holders of
30,652,908 shares of common stock have rights to have their shares of common
stock registered under the Securities Act of 1933, as amended. Under the
stockholders agreement and the stock and warrant purchase agreement, if we
propose to register any of our securities under the Securities Act, subject to
various conditions, we must give notice to the parties to these agreements of
the registration and allow those parties to include their shares of common stock
in the registration statement. We have the right, however, to cut back or
completely exclude shares proposed to be registered in an underwritten public
offering to the extent the managing underwriter advises us to do so due to
market conditions.
In addition, the holders of at least 66 2/3% of the outstanding securities
issued upon conversion of the Series A convertible preferred stock, Series C
convertible preferred stock, Series D convertible preferred stock and Series E
convertible preferred stock may demand, at any time, and up to three times, that
we file a registration statement under the Securities Act covering some or all
of their shares. Under these demand registration rights, we must use our
reasonable best efforts to cause the shares requested, and all other shares held
by holders of securities entitled to registration rights under the stockholders
agreement requested, to be included in the registration statement, subject to
customary conditions and limitations.
In addition, at any time after the first anniversary of the closing of this
offering, holders of at least a majority of the outstanding securities issued
upon conversion of the Series E convertible preferred stock may demand, on one
occasion, that we file a registration statement to register their shares. We
must use our reasonable best efforts to cause those shares requested and all
other shares held by the stockholders entitled to demand registration rights
requested to be included in the registration statement to be registered, subject
to customary conditions and limitations.
Once we become eligible to file a registration statement on Form S-3, the
holders of 10% of the outstanding securities entitled to registration rights
under the stockholders agreement may require us to
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register, on up to three occasions, all or a portion of their securities on a
registration statement on Form S-3 and may participate in a Form S-3
registration by us, subject to conditions and limitations described in the
stockholders agreement. These holders may not request a Form S-3 registration on
more than one occasion in any twelve month period. In addition, the Series E
convertible preferred stockholders may require us, on one occasion, to register
all or a portion of their securities on a registration statement on Form S-3 and
may participate in a similar registration by us, subject to conditions and
limitations described in the stockholders agreement.
The exercise of any of the registration rights described above may hinder
our efforts to arrange future financing and may lower the market price of the
common stock.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE CHARTER AND BY-LAWS AND OF DELAWARE
LAW
Our amended and restated certificate of incorporation and by-laws, effective
upon completion of this offering, contain provisions that could discourage,
delay or prevent a tender offer or takeover attempt at a price which many
stockholders may find attractive. The existence of these provisions could limit
the price that investors might otherwise pay in the future for shares of common
stock.
CERTIFICATE OF INCORPORATION AND BY-LAWS
BLANK CHECK PREFERRED STOCK. As noted above, our board of directors,
without stockholder approval, will have the authority under our certificate of
incorporation to issue preferred stock with rights superior to the rights of the
holders of common stock. As a result, preferred stock could be issued quickly
and easily, could impair the rights of holders of common stock and could be
issued with terms calculated to delay or prevent a change of control or make
removal of management more difficult.
ELECTION OF DIRECTORS. Our amended and restated certificate of
incorporation provides that only a majority of directors then in office may fill
newly created directorships, provided that a quorum is present. Only a majority
of directors then in office may fill any other vacancy occuring on the board of
directors, even though less than a quorum may then be in office. These
provisions may discourage a third party from voting to remove incumbent
directors and simultaneously gaining control of the board of directors by
filling the vacancies created by that removal with its own nominees.
STOCKHOLDER ACTION. Our certificate of incorporation provides that
stockholders may only act at meetings of stockholders and not by written consent
in lieu of a stockholders' meeting.
STOCKHOLDER MEETINGS. Our certificate of incorporation and by-laws provide
that stockholders may not call a special meeting of the stockholders. Rather,
only the chairman of the board, the president, any vice president, the
secretary, or any assistant secretary, acting pursuant to a resolution of a
majority of the board of directors, will be able to call special meetings of
stockholders. Our by-laws also provide that stockholders may only conduct
business at special meetings of stockholders that was specified in the notice of
the meeting. These provisions may discourage another person or entity from
making a tender offer, even if it acquired a majority of our outstanding voting
stock, because the person or entity could only take action at a duly called
stockholders' meeting relating to the business specified in the notice of
meeting and not by written consent.
REQUIREMENTS FOR ADVANCE NOTIFICATION OF STOCKHOLDER NOMINATIONS AND
PROPOSALS. Our by-laws provide that a stockholder seeking to bring business
before an annual meeting of stockholders, or to nominate candidates for election
as directors at an annual meeting of stockholders, must provide timely notice of
this intention in writing. To be timely, a stockholder must deliver or mail the
notice and we must receive the notice at our principal executive offices not
less than 90 days nor more than 120 days prior to the anniversary date of the
immediately preceding annual meeting of stockholders. However, if we change the
date of the annual meeting of stockholders to a date that is not within 30 days
before or
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after the anniversary of our previous annual meeting of stockholders, then we
must receive the stockholder's notice no later than the close of business on the
later of the 90(th) day before the date of the annual meeting and the 10(th) day
after the date on which we mail notice of the date of the meeting or we make a
public announcement, whichever first occurs. The by-laws also include a similar
requirement for making nominations at special meetings and specify requirements
as to the form and content of the stockholder's notice. These provisions could
delay stockholder actions that are favored by the holders of a majority of our
outstanding stock until the next stockholders' meeting.
SUPER-MAJORITY VOTING. Delaware law generally provides that the affirmative
vote of a majority of the shares entitled to vote on any matter is required to
amend a corporation's certificate of incorporation, unless a corporation's
certificate of incorporation requires a greater percentage. We have provisions
in our certificate of incorporation which require a vote of at least 85% of the
stockholders entitled to vote in the election of directors to amend, alter,
change or repeal the anti-takeover provisions of our certificate of
incorporation.
DELAWARE ANTI-TAKEOVER STATUTE
We are a Delaware corporation subject to Section 203 of the Delaware General
Corporation Law. Under Section 203, some business combinations between a
Delaware corporation whose stock generally is publicly traded or held of record
by more than 2,000 stockholders and an interested stockholder are prohibited for
a three-year period following the date that the stockholder became an interested
stockholder, unless:
- the corporation has elected in its certificate of incorporation not to be
governed by Section 203;
- the board of directors of the corporation approved the transaction which
resulted in the stockholder becoming an interested stockholder before the
stockholder became an interested stockholder;
- upon consummation of the transaction which resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the
commencement of the transaction, excluding voting stock owned by directors
who are also officers or held in employee benefit plans in which the
employees do not have a confidential right to tender stock held by the
plan in a tender or exchange offer; or
- the board of directors approves the business combination and holders of
two-thirds of the voting stock which the interested stockholder did not
own authorize the business combination at a meeting.
We have not made an election in our amended and restated certificate of
incorporation to opt-out of Section 203.
In addition to the above exceptions to Section 203, the three-year
prohibition does not apply to some business combinations proposed by an
interested stockholder following the announcement or notification of an
extraordinary transaction involving the corporation and a person who was not an
interested stockholder during the previous three years or who became an
interested stockholder with the approval of a majority of the corporation's
directors. For the purposes of Section 203, a business combination generally
includes mergers or consolidations, transactions involving the assets or stock
of the corporation or its majority-owned subsidiaries and transactions which
increase an interested stockholder's percentage ownership of stock. Also, an
interested stockholder generally includes a stockholder who becomes beneficial
owner of 15% or more of a Delaware corporation's voting stock, together with the
affiliates or associates of that stockholder.
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LIMITATION OF LIABILITY AND INDEMNIFICATION
Our certificate of incorporation limits the liability of our directors to
the maximum extent permitted by Delaware law. Delaware law provides that
directors will not be personally liable for monetary damages for breach of their
fiduciary duties as directors, except liability for:
- any breach of their duty of loyalty to the corporation or its
stockholders;
- acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- unlawful payments of dividends or unlawful stock repurchases or
redemptions; or
- any transaction from which the director derived an improper personal
benefit.
This provision has no effect on any non-monetary remedies that may be
available to us or our stockholders, nor does it relieve us or our officers or
directors from compliance with federal or state securities laws.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling us under the
provisions that we describe above or otherwise, we have been informed that in
the opinion of the Securities and Exchange Commission, this indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
Our by-laws also permit us to purchase and maintain insurance on behalf of
any officer or director for any liability arising out of his or her actions in
that capacity, regardless of whether our by-laws would otherwise permit
indemnification for that liability. We are in the process of obtaining liability
insurance for our officers and directors.
At the present time, there is no pending litigation or proceeding involving
any director, officer, employee or agent of PRAECIS in which indemnification
will be required or permitted. We are not aware of any threatened litigation or
proceeding which may result in a claim for indemnification.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is American Stock
Transfer and Trust Company.
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SHARES ELIGIBLE FOR FUTURE SALE
SALE OF RESTRICTED SHARES
Upon completion of this offering, based upon the number of shares
outstanding as of December 31, 1999, we will have an aggregate of 39,966,545
outstanding shares of common stock, or 41,166,545 shares if the underwriters
exercise the over-allotment option in full, excluding 8,211,644 shares
underlying outstanding options and 515,940 underlying outstanding warrants. Of
these shares, all of the 8,000,000 shares sold in this offering, or 9,200,000
shares if the underwriters over-allotment option is exercised in full, will be
freely tradable without restriction or further registration under the Securities
Act, except that any shares purchased by our affiliates, as that term is defined
in Rule 144 under the Securities Act, may generally only be sold in compliance
with the limitations of Rule 144 described below. As defined in Rule 144, an
affiliate of an issuer is a person that directly, or indirectly through one or
more intermediaries, controls, is controlled by or is under common control with
the issuer. The remaining outstanding shares of common stock will be deemed
"restricted securities" as that term is defined under Rule 144. Restricted
securities may be sold in the public market only if they qualify for an
exemption from registration under Rule 144, including Rule 144(k), or Rule 701
under the Securities Act.
LOCK-UP AGREEMENTS
We, our directors, executive officers, warrant holders and substantially all
of our other stockholders, holding shares in the aggregate upon completion
of this offering, have agreed not to offer, sell, contract to sell or, with
limited exception, otherwise dispose of any shares of common stock or any
security convertible into or exchangeable for common stock for a period of
180 days from the date of this prospectus without the prior written consent of
Salomon Smith Barney. People who have agreed to these restrictions may dispose
of shares as a gift or distribution, provided that the recipients of those
shares agree to the same restrictions. Immediately following this offering, our
existing stockholders will own 31,966,545 restricted shares, representing
approximately 80% of the then outstanding shares of common stock, or
approximately 78% if the underwriters' over-allotment option is exercised in
full. Our executive officers and directors will own 18,504,387 shares, based
upon their beneficial ownership as of December 31, 1999 and including options
held by them that are exercisable within 60 days of December 31, 1999. Upon
expiration of the lock-up period, 180 days after the date of this prospectus,
30,348,754 shares will be available for resale to the public in accordance with
Rule 144.
RULE 144
In general, under Rule 144 as currently in effect, commencing 90 days after
the date of this prospectus, a person who has beneficially owned shares of our
common stock for at least one year, including persons who are affiliates, is
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 common stock then outstanding, which is
expected to be approximately 399,665 shares upon completion of this
offering; or
- the average weekly trading volume of the common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to a sale, subject to restrictions
specified in Rule 144.
Sales under Rule 144 are also subject to manner of sale provisions and notice
requirements and to the availability of current public information about us.
Commencing 90 days after the date of this prospectus, shares of common stock
not subject to a lock-up agreement will be available for resale to the public in
accordance with Rule 144.
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RULE 144(k)
Under Rule 144(k), a person who has not 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, is entitled to sell those
shares without regard to the volume, manner-of-sale or other limitations
contained in Rule 144.
RULE 701
In general, under Rule 701 of the Securities Act as currently in effect, any
of our employees, consultants or advisors who purchases shares from us in
connection with a compensatory stock plan or other written agreement is eligible
to resell the shares 90 days after the effective date of this offering in
reliance on Rule 144, but without compliance with various restrictions,
including the holding period, contained in Rule 144.
STOCK OPTIONS
As of December 31, 1999, options to purchase a total of 8,211,644 shares of
common stock were outstanding, of which 2,776,546 were then exercisable. Upon
completion of this offering, we intend to file a registration statement to
register for resale an aggregate of approximately 9,770,460 shares of common
stock reserved for issuance under our Second Amended and Restated 1995 Stock
Plan as of December 31, 1999 and 160,000 shares of common stock reserved for
issuance under our Employee Stock Purchase Plan. That registration statement
will become effective immediately upon filing. Accordingly, shares covered by
that registration statement will become eligible for sale in the public markets,
subject to vesting restrictions, Rule 144 volume limitations applicable to our
affiliates or the lock-up agreements with Salomon Smith Barney. Holders of
options to purchase shares of common stock have entered into lock-up
agreements.
We have agreed not to issue, sell or otherwise dispose of any shares of
common stock during the 180-day period following the date of the prospectus,
except we may issue and grant options to purchase shares of common stock under
the 1995 Stock Plan. In addition, we may issue shares of common stock in
connection with an acquisition of or a strategic alliance with another company
if the terms of the issuance provide that the common stock so issued may not be
resold prior to the expiration of the 180-day lock-up period.
REGISTRATION RIGHTS
Upon completion of this offering, under specified circumstances and subject
to customary conditions, the holders of an aggregate of 30,652,908 shares of our
common stock, will be entitled to rights with respect to the registration under
the Securities Act of some or all of their shares, subject to the 180-day
lock-up period described above. These holders of registration rights are subject
to lock-up periods of not more than 180 days following the date of this
prospectus or any subsequent prospectus. Please refer to the information in this
prospectus under the heading "Description of Capital Stock--Registration Rights"
for a more detailed discussion of these registration rights.
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UNDERWRITING
Subject to the terms and conditions of an underwriting agreement, each
underwriter named below has severally agreed to purchase, and we have agreed to
sell to each underwriter, the number of shares set forth opposite the name of
that underwriter.
<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
- ------------------------------------------------------------ ---------
<S> <C>
Salomon Smith Barney Inc....................................
CIBC World Markets Corp.....................................
Credit Suisse First Boston Corporation......................
-------
Total.....................................................
=======
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase the shares included in this offering are subject to
approval of legal matters by their counsel and to other conditions. The
underwriters must purchase all the shares, other than those covered by the
over-allotment option described below, if they purchase any of the shares.
The underwriters, for whom Salomon Smith Barney Inc., CIBC World Markets
Corp. and Credit Suisse First Boston Corporation are acting as representatives,
propose to offer some of the shares directly to the public at the public
offering price set forth on the cover page of this prospectus and some of the
shares to dealers at the public offering price less a concession not in excess
of $ per share. The underwriters may allow, and the dealers may reallow, a
concession not in excess of $ per share on sales to other dealers. If all of
the shares are not sold at the initial offering price, the representatives may
change the public offering price and the other selling terms. The
representatives have advised us that the underwriters do not intend to confirm
any sales to any accounts over which they exercise discretionary authority.
We have granted to the underwriters an option, exercisable for 30 days from
the date of this prospectus, to purchase up to 1,200,000 additional shares of
common stock at the public offering price less the underwriting discount. The
underwriters may exercise that option solely to cover over-allotments, if any,
in connection with this offering. To the extent the option is exercised, each
underwriter must, subject to specified conditions, purchase a number of
additional shares approximately proportionate to that underwriter's initial
purchase commitment.
At our request, the underwriters have reserved for sale at the initial
public offering price up to 400,000 of the shares, or 5%, of our common stock to
be sold in this offering for sale to our directors, officers and employees and
friends and family of our directors, officers and employees. The underwriters
will reduce the number of shares available for sale to the general public to the
extent that any reserved shares are purchased. Any reserved shares not purchased
will be offered by the underwriters on the same basis as the other shares
offered.
We, our officers and directors, warrant holders and substantially all of our
stockholders have agreed that, with limited exceptions, for a period of
180 days from the date of this prospectus, we or they will not, without the
prior written consent of Salomon Smith Barney Inc., dispose of or hedge any
shares of our common stock or any securities convertible into or exchangeable
for common stock. Salomon Smith Barney Inc. in its sole discretion may release
any of the securities subject to these lock-up agreements at any time without
notice.
Prior to this offering, there has been no public market for the common
stock. Consequently, we and the representatives determined the initial public
offering price for the shares through negotiations. Among the factors considered
in determining the initial public offering price were our record of operations,
our current financial condition, our future prospects, our markets, the economic
conditions in and future prospects for the biotechnology and pharmaceutical
industries, our management and
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currently prevailing general conditions in the equity securities markets,
including current market valuations of publicly traded companies considered
comparable to us. However, the prices at which the shares will sell in the
public market after this offering may be lower than the price at which they are
sold by the underwriters and an active trading market in the common stock may
not develop or continue after this offering.
We have applied to have the common stock included for quotation on the
Nasdaq National Market under the symbol "PRCS."
The following table shows the underwriting discounts and commissions we will
pay to the underwriters in connection with this offering. These amounts are
shown assuming both no exercise and full exercise of the underwriters' option to
purchase additional shares of common stock.
<TABLE>
<CAPTION>
PAID BY PRAECIS
---------------------------
NO EXERCISE FULL EXERCISE
----------- -------------
<S> <C> <C>
Per share............................................ $ $
Total................................................ $ $
</TABLE>
In connection with the offering, Salomon Smith Barney Inc., on behalf of the
underwriters, may purchase and sell shares of common stock in the open market.
These transactions may include over-allotment, syndicate covering transactions
and stabilizing transactions. Over-allotment involves syndicate sales of common
stock in excess of the number of shares to be purchased by the underwriters in
the offering, which creates a syndicate short position. Syndicate covering
transactions involve purchases of the common stock in the open market after the
distribution has been completed in order to cover syndicate short positions.
Stabilizing transactions consist of bids or purchases of common stock made to
prevent or retard a decline in the market price of the common stock while the
offering is in progress.
The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to other underwriters a portion of the
underwriting discount received by it because the other underwriters have
repurchased shares sold by or for the account of the underwriter in stabilizing
or short covering transactions.
Any of these activities may cause the price of the common stock to be higher
than the price that otherwise would exist in the open market in the absence of
these transactions. The underwriters may effect these activities on the Nasdaq
National Market or in the over-the-counter market, or otherwise and, if
commenced, the underwriters may discontinue these activities at any time.
In addition, in connection with this offering, some of the underwriters may
engage in passive market making transactions in the common stock on the Nasdaq
National Market, prior to the pricing and completion of the offering. Passive
market making consists of displaying bids on the Nasdaq National Market no
higher than the bid prices of independent market makers and making purchases at
prices no higher than those independent bids and effected in response to order
flow. Net purchases by a passive market maker on each day are limited to a
specified percentage of the passive market maker's average daily trading volume
in the common stock during a specified period and must be discontinued when that
limit is reached. Passive market making may cause the price of the common stock
to be higher than the price that otherwise would exist in the open market in the
absence of these transactions. If the underwriters commence passive market
making, they may discontinue it at any time.
A prospectus in electronic format will be made available on the Web sites
maintained by one or more of the underwriters. The representatives may agree to
allocate a number of shares to underwriters for sale to their on line brokerage
account holders. The representatives will allocate shares to the underwriters
that make Internet distributions on the same basis as other allocations.
E*OFFERING
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Corp. will be participating in the offering as a member of the selling group and
plans to use the Internet as one of several means of retail distribution.
We estimate that the total expenses of this offering will be approximately
$1,000,000.00.
We have agreed to indemnify the underwriters against some liabilities,
including liabilities under the Securities Act of 1933, or to contribute to
payments the underwriters may be required to make in respect of any of those
liabilities.
LEGAL MATTERS
Various legal matters with respect to the validity of the common stock
offered by this prospectus will be passed upon for us by Skadden, Arps, Slate,
Meagher & Flom LLP, Boston, Massachusetts. Various legal matters in connection
with this offering will be passed upon for the underwriters by Goodwin,
Procter & Hoar LLP, Boston, Massachusetts.
EXPERTS
Our financial statements at December 31, 1998 and 1999 and for each of the
three years in the period ended December 31, 1999, appearing in this prospectus
and elsewhere in the registration statement have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon appearing
elsewhere herein and are included in reliance upon this report given upon the
authority of such firm as experts in accounting and auditing.
The statements in this prospectus relating to patents appearing in the
section entitled "Risk Factors" under the captions "If we are unable to obtain
and enforce valid patents, we could lose our competitive advantage" and "If our
potential products conflict with the patents of competitors, universities or
others, we could be subject to costly litigation and be able to commercialize
those products," and in the section entitled "Business" under the sub-heading
"Patents and Proprietary Rights" and other references in this prospectus to
patents have been examined by and passed upon for us by Lahive & Cockfield, LLP,
and are included in reliance upon such examination and upon the authority of
such counsel as experts on patents.
70
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-1 with the Securities and
Exchange Commission under the Securities Act with respect to the shares of
common stock offered in this offering. This prospectus, which is a part of the
registration statement, does not contain all of the information set forth in the
registration statement, or the exhibits which are part of the registration
statement, parts of which are omitted as permitted by the rules and regulations
of the Securities and Exchange Commission. For further information about us and
the shares of our common stock to be sold in this offering, please refer to the
registration statement and the exhibits which are part of the registration
statement. Statements contained in this prospectus as to the contents of any
contract or any other document are not necessarily complete. Each statement in
this prospectus regarding the contents of the referenced contract or other
document is qualified in all respects by our reference to the copy filed with
the registration statement.
For further information about us and our common stock, we refer you to our
registration statement and its attached exhibits, copies of which may be
inspected without charge at the Securities and Exchange Commission's public
reference room at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
regional offices of the Commission located at Seven World Trade Center, Suite
1300, New York, New York 10048 and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. You can request copies of these documents
by writing to the Securities and Exchange Commission and paying a duplicating
fee. Please call the Securities and Exchange Commission at 1-800-SEC-0330 for
further information about the public reference rooms. The Commission maintains a
World Wide Web site on the Internet at HTTP://WWW.SEC.GOV that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission.
Upon completion of this offering, we will become subject to the information
and periodic reporting requirements of the Exchange Act and, in accordance
therewith, will file periodic reports, proxy and information statements and
other information with the Commission. Our periodic reports, proxy and
information statements and other information will be available for inspection
and copying at the regional offices, public references facilities and Web site
of the Commission referred to above.
We intend to furnish our stockholders with annual reports containing audited
financial statements and an opinion thereon expressed by independent certified
public accountants. We also intend to furnish other reports as we may determine
or as required by law.
71
<PAGE>
PRAECIS PHARMACEUTICALS INCORPORATED
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Report of Independent Auditors.............................. F-2
Balance Sheets at December 31, 1998 and 1999................ F-3
Statements of Operations for the years ended December 31,
1997, 1998 and 1999....................................... F-4
Statements of Stockholders' Equity for the years ended
December 31, 1997, 1998 and 1999.......................... F-5
Statements of Cash Flows for the years ended December 31,
1997, 1998 and 1999....................................... F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
PRAECIS PHARMACEUTICALS INCORPORATED
We have audited the accompanying balance sheets of PRAECIS PHARMACEUTICALS
INCORPORATED as of December 31, 1998 and 1999, and the related statements of
operations, stockholders' equity, and cash flows for each of the three years in
the period ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards 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. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of PRAECIS PHARMACEUTICALS
INCORPORATED at December 31, 1998 and 1999, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1999, in conformity with accounting principles generally accepted in the United
States.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
February 2, 2000
F-2
<PAGE>
PRAECIS PHARMACEUTICALS INCORPORATED
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31, STOCKHOLDERS' EQUITY
------------------- DECEMBER 31,
1998 1999 1999
-------- -------- --------------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 85,298 $ 94,525
Accounts receivable....................................... 680 8,121
Unbilled revenue.......................................... -- 4,259
Materials inventory....................................... -- 21,100
Prepaid expenses and other assets......................... 526 708
Deferred income taxes..................................... 280 5,575
-------- --------
Total current assets.................................... 86,784 134,288
Property and equipment, net................................. 3,841 6,043
-------- --------
Total assets............................................ $ 90,625 $140,331
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 1,206 $ 9,878
Accrued expenses.......................................... 7,231 6,859
Deferred revenue.......................................... 1,302 5,501
Advance payments.......................................... -- 21,100
Income taxes payable...................................... 230 4,672
Current portion of capital lease obligations.............. 189 58
-------- --------
Total current liabilities............................... 10,158 48,068
Deferred revenue............................................ 2,035 4,547
Capital lease obligations, net of current portion........... 59 --
Commitments and contingencies
Stockholders' equity:
Preferred Stock--Unallocated, $0.01 par value, 312,700
shares authorized; no shares issued or outstanding...... $ -- $ -- $ --
Series A Convertible Preferred Stock, $0.01 par value;
1,061,166 shares authorized; 1,041,166 shares issued and
outstanding in 1998 and 1999 ($10,500 aggregate
liquidation preference); no shares issued and
outstanding pro forma................................... 10 10 --
Series B Convertible Preferred Stock, $0.01 par value;
63,700 shares authorized, issued and outstanding in 1998
and 1999 ($642 aggregate liquidation preference); no
shares issued and outstanding pro forma................. 1 1 --
Series C Convertible Preferred Stock, $0.01 par value;
1,052,632 shares authorized, issued and outstanding in
1998 and 1999 ($20,000 aggregate liquidation
preference); no shares issued and outstanding pro
forma................................................... 11 11 --
Series D Convertible Preferred Stock, $0.01 par value;
359,324 shares authorized, issued and outstanding in
1998 and 1999 ($10,000 aggregate liquidation
preference); no shares issued and outstanding pro
forma................................................... 4 4 --
Series E Convertible Preferred Stock, $0.01 par value;
900,478 shares authorized, issued and outstanding in
1998 and 1999 ($37,820 aggregate liquidation
preference); no shares issued and outstanding pro
forma................................................... 9 9 --
Common Stock, $0.01 par value; 60,000,000 shares
authorized; 5,920,174 shares in 1998; 6,358,684 shares
in 1999 issued and outstanding; and 31,966,545 shares
issued and outstanding pro forma........................ 59 64 320
Additional paid-in capital................................ 88,622 88,710 88,489
Accumulated deficit....................................... (10,343) (1,093) (1,093)
-------- -------- --------
Total stockholders' equity.............................. 78,373 87,716 $ 87,716
-------- -------- ========
Total liabilities and stockholders' equity.............. $ 90,625 $140,331
======== ========
</TABLE>
SEE ACCOMPANYING NOTES.
F-3
<PAGE>
PRAECIS PHARMACEUTICALS INCORPORATED
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Corporate collaborations.................................. $15,118 $37,624 $61,514
Contract services......................................... 2,615 1,943 --
------- ------- -------
Total revenues.......................................... 17,733 39,567 61,514
Costs and expenses:
Research and development.................................. 15,013 33,704 48,764
General and administrative................................ 3,780 3,605 6,173
------- ------- -------
Total costs and expenses................................ 18,793 37,309 54,937
------- ------- -------
Operating income (loss)..................................... (1,060) 2,258 6,577
Interest income............................................. 1,466 3,562 4,484
Interest expense............................................ (102) (46) (11)
------- ------- -------
Income before income taxes.................................. 304 5,774 11,050
Provision for income taxes.................................. 100 100 1,800
------- ------- -------
Net income.................................................. $ 204 $ 5,674 $ 9,250
======= ======= =======
Net income per share:
Basic..................................................... $ 0.05 $ 0.99 $ 1.51
======= ======= =======
Diluted................................................... $ 0.01 $ 0.16 $ 0.24
======= ======= =======
Weighted average number of common shares:
Basic..................................................... 4,446 5,738 6,106
Diluted................................................... 28,270 35,139 37,849
Unaudited pro forma net income per share:
Basic.......................................................................... $ 0.29
=======
Diluted........................................................................ $ 0.24
=======
Unaudited pro forma weighted average number of common
shares:
Basic.......................................................................... 31,714
Diluted........................................................................ 37,849
</TABLE>
SEE ACCOMPANYING NOTES.
F-4
<PAGE>
PRAECIS PHARMACEUTICALS INCORPORATED
STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
PREFERRED STOCK
---------------------------------------------------------------------------------------
SERIES A SERIES B SERIES C SERIES D
-------------------- ------------------- -------------------- -------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- -------- -------- -------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996.... 1,041,166 $10 63,700 $1 1,052,632 $11
Issuance of Common Stock........
Issuance of warrants to purchase
Common Stock..................
Common Stock issued upon
exercise of stock options.....
Repurchase of Treasury Stock....
Retirement of Treasury Stock....
Issuance of Series D Convertible
Preferred Stock............... 359,324 $4
Net income......................
--------- --- ------ -- --------- --- ------- --
Balance at December 31, 1997.... 1,041,166 10 63,700 1 1,052,632 11 359,324 4
Issuance of Series E Convertible
Preferred Stock...............
Common Stock issued upon
exercise of stock options.....
Net income......................
--------- --- ------ -- --------- --- ------- --
Balance at December 31, 1998.... 1,041,166 10 63,700 1 1,052,632 11 359,324 4
Common Stock issued upon
exercise of stock options.....
Net income......................
--------- --- ------ -- --------- --- ------- --
Balance at December 31, 1999.... 1,041,166 $10 63,700 $1 1,052,632 $11 359,324 $4
========= === ====== == ========= === ======= ==
<CAPTION>
PREFERRED STOCK
-------------------
SERIES E COMMON STOCK TREASURY STOCK ADDITIONAL
------------------- -------------------- ------------------- PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT
-------- -------- --------- -------- -------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996.... 3,341,402 $34 $30,926 $(16,221)
Issuance of Common Stock........ 1,617,772 16 9,448
Issuance of warrants to purchase
Common Stock.................. 500
Common Stock issued upon
exercise of stock options..... 123,082 1 18
Repurchase of Treasury Stock.... 17,498 $(2)
Retirement of Treasury Stock.... (17,498) (17,498) 2 (2)
Issuance of Series D Convertible
Preferred Stock............... 9,957
Net income...................... 204
------- -- --------- --- ------- --- ------- --------
Balance at December 31, 1997.... 5,064,758 51 50,847 (16,017)
Issuance of Series E Convertible
Preferred Stock............... 900,478 $9 37,622
Common Stock issued upon
exercise of stock options..... 855,416 8 153
Net income...................... 5,674
------- -- --------- --- ------- --- ------- --------
Balance at December 31, 1998.... 900,478 9 5,920,174 59 88,622 (10,343)
Common Stock issued upon
exercise of stock options..... 438,510 5 88
Net income...................... 9,250
------- -- --------- --- ------- --- ------- --------
Balance at December 31, 1999.... 900,478 $9 6,358,684 $64 $88,710 $ (1,093)
======= == ========= === ======= === ======= ========
<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY
-------------
<S> <C>
Balance at December 31, 1996.... $14,761
Issuance of Common Stock........ 9,464
Issuance of warrants to purchase
Common Stock.................. 500
Common Stock issued upon
exercise of stock options..... 19
Repurchase of Treasury Stock.... (2)
Retirement of Treasury Stock....
Issuance of Series D Convertible
Preferred Stock............... 9,961
Net income...................... 204
-------
Balance at December 31, 1997.... 34,907
Issuance of Series E Convertible
Preferred Stock............... 37,631
Common Stock issued upon
exercise of stock options..... 161
Net income...................... 5,674
-------
Balance at December 31, 1998.... 78,373
Common Stock issued upon
exercise of stock options..... 93
Net income...................... 9,250
-------
Balance at December 31, 1999.... $87,716
=======
</TABLE>
SEE ACCOMPANYING NOTES.
F-5
<PAGE>
PRAECIS PHARMACEUTICALS INCORPORATED
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income.................................................. $ 204 $ 5,674 $ 9,250
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation and amortization............................. 754 1,005 1,354
Deferred income taxes..................................... -- (280) (5,295)
Changes in operating assets and liabilities:
Accounts receivable..................................... (2,213) 1,867 (7,441)
Unbilled revenues....................................... (1,071) 1,071 (4,259)
Materials inventory..................................... -- -- (21,100)
Prepaid expenses and other assets....................... 115 (328) (182)
Accounts payable........................................ 1,252 (213) 8,672
Accrued expenses........................................ 3,280 2,468 (372)
Deferred revenue........................................ 4,931 (2,265) 6,711
Advance payments........................................ -- -- 21,100
Income taxes payable.................................... -- 230 4,442
-------- -------- --------
Net cash provided by operating activities................... 7,252 9,229 12,880
INVESTING ACTIVITIES:
Purchase of property and equipment.......................... (1,819) (1,492) (3,556)
Sale of short-term investments.............................. 4,960 -- --
-------- -------- --------
Net cash provided by (used in) investing activities......... 3,141 (1,492) (3,556)
FINANCING ACTIVITIES:
Proceeds from sale of Convertible Preferred Stock........... 9,961 37,631 --
Principal repayments of capital lease obligations........... (405) (421) (190)
Proceeds from the issuance of Common Stock, options and
warrants.................................................. 9,983 161 93
Repurchase of treasury stock................................ (2) -- --
-------- -------- --------
Net cash provided by (used in) financing activities......... 19,537 37,371 (97)
-------- -------- --------
Increase in cash and cash equivalents....................... 29,930 45,108 9,227
Cash and cash equivalents at beginning of year.............. 10,260 40,190 85,298
-------- -------- --------
Cash and cash equivalents at end of year.................... $ 40,190 $ 85,298 $ 94,525
======== ======== ========
</TABLE>
SEE ACCOMPANYING NOTES.
F-6
<PAGE>
PRAECIS PHARMACEUTICALS INCORPORATED
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
THE COMPANY
PRAECIS PHARMACEUTICALS INCORPORATED (the "Company") was incorporated under
the name Pharmaceutical Peptides, Inc. in July 1993 under the laws of the State
of Delaware. The Company is a drug discovery and development company engaged in
the development of drugs for the treatment of human diseases.
USE OF ESTIMATES
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make 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 income and expenses during the reporting
period. Actual results could differ from those estimates.
2. SIGNIFICANT ACCOUNTING POLICIES
CASH EQUIVALENTS
Cash equivalents consist principally of money market funds with original
maturities of three months or less at the date of purchase.
CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company to concentration
of credit risk consist principally of cash equivalents and accounts receivable.
The Company places its cash equivalents with high credit quality financial
institutions and, by policy, limits the credit exposure to any one financial
instrument; accounts receivable are limited to amounts due from collaborators.
UNBILLED REVENUE
Unbilled revenue represents reimbursable costs incurred by the Company but
not yet billed under corporate collaboration agreements. Billings are prepared
monthly upon receipt of all reimburseable cost documentation.
INVENTORY
Materials inventory is carried at the lower of actual cost or market (net
realizable value).
PROPERTY AND EQUIPMENT
Equipment is recorded at cost, and includes capitalized leases which are
stated at the present value of future minimum lease obligations at the date of
inception of the lease. Depreciation is recorded over the shorter of the
estimated useful life of the asset or the term of the lease (four years) using
the straight-line method. Leasehold improvements are stated at cost and are
amortized over the remaining life of the building lease.
REVENUE RECOGNITION
Revenue is deemed earned when all of the following have occurred: all
obligations of the Company relating to the revenue have been met and the earning
process is complete; the monies
F-7
<PAGE>
PRAECIS PHARMACEUTICALS INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
received or receivable are not refundable irrespective of research results; and
there are neither future obligations nor future milestones to be met by the
Company with respect such revenue.
CORPORATE COLLABORATIONS. Revenues are earned based upon research expenses
incurred and milestones achieved. Non-refundable payments upon initiation of
contracts are deferred and amortized over the period which the Company is
obligated to participate on a continuing and substantial basis in the research
and development activities outlined in each contract. Amounts received in
advance of reimbursable expenses are recorded as deferred revenue until the
related expenses are incurred. Milestone payments are recognized as revenue in
the period in which the parties agree that the milestone has been achieved.
CONTRACT SERVICES. Revenues are earned as services are performed or the
related expenses are incurred. Amounts received in advance of reimbursable
services to be performed are recorded as deferred revenue until the related
services are performed.
INCOME TAXES
The Company provides for income taxes under Statement of Financial
Accounting Standards (SFAS) No. 109, ACCOUNTING FOR INCOME TAXES. Under this
method, deferred taxes are recognized using the liability method, whereby tax
rates are applied to cumulative temporary differences between carrying amounts
of assets and liabilities for financial reporting purposes and the amounts used
for income tax purposes based on when and how they are expected to affect the
tax return.
TECHNOLOGY, LICENSES AND PATENTS
Costs associated with acquired technology, licenses and patents are expensed
as incurred.
STOCK-BASED COMPENSATION
The Company has elected to follow Accounting Principles Board Opinion
No. 25., ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES (APB 25), in accounting for
its stock-based employee compensation plans, rather than the alternative fair
value accounting method provided for under SFAS No. 123, ACCOUNTING FOR
STOCK-BASED COMPENSATION (SFAS No. 123), as SFAS No. 123 requires the use of
option valuation models that were not developed for use in valuing employee
stock options. Under APB 25, when the exercise price of options granted under
these plans equals the market price of the underlying stock on the date of
grant, no compensation expense is required.
ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS
No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, which is
effective for fiscal year 2001. This Statement requires all derivatives to be
carried on the balance sheet as assets or liabilities at fair value. The
accounting for changes in fair value would depend on the hedging relationship
and would be reported in the income statement or as a component of comprehensive
income. The Company believes that the adoption of this new accounting standard
will not have a material impact on the Company's financial statements.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin 101, which clarified the Staff's views concerning revenue
recognition policies and is effective no later than
F-8
<PAGE>
PRAECIS PHARMACEUTICALS INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
the quarter ended March 31, 2000. The Company believes its revenue recognition
policies are in compliance with the Staff Accounting Bulletin.
NET INCOME PER SHARE
Basic net income per share represents net income divided by the weighted
average shares of common stock outstanding during the period. Diluted net income
per share includes the effect of all dilutive, potentially issuable common
shares using the treasury stock method. The difference between basic and diluted
shares used in the computation of net income per share is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Weighted average number of common shares outstanding
used in basic net income per share................ 4,446 5,738 6,106
Effect of dilutive securities:
Convertible Preferred Stock....................... 17,680 23,387 25,608
Stock options..................................... 6,007 5,868 5,989
Warrants.......................................... 137 146 146
------ ------ ------
Weighted average number of common shares used in
diluted net income per share...................... 28,270 35,139 37,849
====== ====== ======
</TABLE>
PRO FORMA STOCKHOLDERS' EQUITY (UNAUDITED)
Upon the closing of the Company's initial public offering, all of the
outstanding shares of Series A, B, C, D and E convertible preferred stock will
convert into 25,607,861 shares of common stock. The pro forma presentation of
stockholders' equity has been prepared assuming the conversion of all of the
outstanding shares of preferred stock into shares of common stock on
December 31, 1999.
PRO FORMA NET INCOME PER SHARE (UNAUDITED)
Pro forma net income per share is computed using the historical basic and
diluted weighted average number of outstanding shares of common stock assuming
conversion of the outstanding shares of Series A, B, C, D and E convertible
preferred stock into a total of 25,607,861 shares of common stock (as of their
original dates of issuance), which will occur upon the closing of the initial
public offering as contemplated herein (See note 6).
F-9
<PAGE>
PRAECIS PHARMACEUTICALS INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1999
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Laboratory and office equipment........................... $ 4,127 $ 6,271
Leasehold improvements.................................... 2,113 3,711
Construction in progress.................................. 460 274
------- -------
6,700 10,256
Less accumulated depreciation and amortization............ 2,859 4,213
------- -------
$ 3,841 $ 6,043
======= =======
</TABLE>
4. LEASES
The Company has capitalized leased equipment totaling approximately
$1.6 million at December 31, 1998 and $0.3 million at December 31, 1999, and
related accumulated amortization of approximately $1.4 million and $0.3 million
at December 31, 1998 and 1999, respectively.
The Company leases its laboratory and office space under operating lease
agreements with fixed terms of ten years plus renewal options. In addition to
the minimum lease commitments, the leases require payment of the Company's pro
rata share of property taxes and building operating expenses. The leases also
contain certain rent inducements, which are being amortized over the term of the
agreements using the straight-line method.
At December 31, 1999, future minimum commitments under leases with
noncancelable terms of more than one year are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
YEARS ENDED DECEMBER 31, LEASES LEASES
- ------------------------ -------- ---------
(IN THOUSANDS)
<S> <C> <C>
2000....................................................... $59 $ 590
2001....................................................... -- 590
2002....................................................... -- 590
2003....................................................... -- 590
2004....................................................... -- 626
Thereafter................................................. -- 1,117
--- ------
Total...................................................... 59 $4,103
======
Less amount representing interest.......................... (1)
---
Present value of current minimum lease payments............ $58
===
</TABLE>
F-10
<PAGE>
PRAECIS PHARMACEUTICALS INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. LEASES (CONTINUED)
Total rent expense amounted to approximately $0.3 million in 1997,
$0.5 million in 1998 and $0.6 million in 1999. Interest paid under all financing
and leasing arrangements during each of the years presented approximated
interest expense.
5. ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1999
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Clinical trial costs........................................ $5,072 $4,116
Professional fees........................................... 645 533
Other....................................................... 1,514 2,210
------ ------
$7,231 $6,859
====== ======
</TABLE>
6. STOCKHOLDERS' EQUITY
STOCK SPLIT
On February 2, 2000, the Company's Board of Directors approved a two-for-one
stock split of the common stock, effected in the form of a 100% stock dividend.
All common share and per share data in the accompanying financial statements
have been retroactively adjusted to reflect the stock split.
CONVERTIBLE PREFERRED STOCK
The issuance date, purchase price per share, number of shares issued and
conversion terms of the Company's Series A, B, C, D and E convertible preferred
stock are summarized in the table below:
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK
DATE OF PER SHARE NUMBER OF SHARES ISSUABLE UPON CONVERSION
ISSUANCE PURCHASE PRICE ORIGINALLY ISSUED CONVERSION RATIO
--------------- -------------- ----------------- ----------------- -------------------------
<S> <C> <C> <C> <C> <C>
Series A................... December 1993/ $10.085 1,041,166 7,777,887 7.47-to-1
March 1994
Series B................... December 1993 $10.085 63,700 475,860 7.47-to-1
Series C................... April 1996 $ 19.00 1,052,632 7,905,118 7.51-to-1
Series D................... June 1997 $ 27.83 359,324 2,695,414 7.50-to-1
Series E................... April 1998 $ 42.00 900,478 6,753,582 7.50-to-1
</TABLE>
Each share of Series A, C, D and E Convertible Preferred Stock is
convertible into common stock at the option of the stockholder. The shares of
Series A, B, C, D and E Convertible Preferred Stock shall, by action of the
Board of Directors, be automatically converted into a total of 25,607,861 shares
of common stock upon the closing of an initial public offering with an initial
public offering price per share of common stock being at least $7.56.
Each holder of Series A, C, D and E Convertible Preferred Stock is entitled
to vote on all matters and is entitled to that number of votes equal to the
number of shares of common stock into which such preferred stock can be
converted. Holders of Series B Convertible Preferred Stock have no voting
rights, except as otherwise provided by law. In the event of a liquidation, the
holders of the Series A,
F-11
<PAGE>
PRAECIS PHARMACEUTICALS INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. STOCKHOLDERS' EQUITY (CONTINUED)
B, C, D and E convertible preferred stock would be entitled to receive an amount
equal to the price per share originally paid to the Company for those shares,
plus all declared, but unpaid, dividends, if any. After payments of such
liquidation amounts to the holders of the Series A, B, C, D and E convertible
preferred stock, the holders of common stock are entitled to receive a certain
amount, after which the holders of the Series A, B, C, D and E convertible
preferred stock and the holders of common stock are entitled to share in any
remaining assets available for distribution, with the holders of the Series A,
B, C, D and E convertible preferred stock participating based on the number of
shares of common stock into which such convertible preferred stock is then
convertible.
WARRANTS
In connection with its lease financing arrangement entered into March 29,
1995, the Company agreed to issue warrants to purchase 14,925 shares of
Series A Convertible Preferred Stock at $10.085 per share, which, pursuant to
the terms thereof will convert into warrants to purchase 111,495 shares of
common stock at $1.35 per share upon the completion of the initial public
offering contemplated herein. The fair value of the warrants, when issued
periodically over the two year period from March 1995 through March 1997, was
not material. These warrants expire on March 29, 2005 or two years from the date
of an initial public offering, whichever is later.
In May 1997, Sanofi-Synthelabo Inc. (a wholly owned subsidiary of
Sanofi-Synthelabo S.A.) formerly Sylamerica, Inc. (a wholly owned subsidiary of
Synthelabo S.A.) purchased 1,617,772 shares of common stock and a warrant to
purchase 404,445 shares of common stock, for an aggregate purchase price of
$10.0 million. The warrant has a five-year term and is exercisable at a price of
$12.88 per share. The Company allocated $0.5 million to the value of the
warrant. This value was estimated using the Black-Scholes valuation model using
assumptions that are substantially consistent with those used in valuing the
Company's common stock options under SFAS No. 123 (See "Stock Option Plan"
below).
STOCK OPTION PLAN
The Amended and Restated 1995 Stock Plan (the "Plan") allows for the
granting of incentive and nonqualified options and awards to purchase shares of
common stock. At December 31, 1999, the Plan provided for the issuance of up to
11,375,000 shares of common stock. Incentive options granted to employees
generally vest at 20% on the first anniversary of the date of grant, with the
remaining shares vesting equally over four years following such anniversary
date. However, options to purchase 600,002 shares of common stock for $3.71 per
share vest ratably over ten years or immediately upon the attainment of a
targeted price per share of common stock of $41.24 per share, whichever occurs
first. Nonqualified options generally vest over the period of service with the
Company.
F-12
<PAGE>
PRAECIS PHARMACEUTICALS INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. STOCKHOLDERS' EQUITY (CONTINUED)
Information regarding options under the Plan is summarized below:
<TABLE>
<CAPTION>
WEIGHTED-
NUMBER AVERAGE
OF EXERCISE
SHARES PRICE
-------- -------------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
Outstanding at December 31, 1996................... 5,170 $0.25
Granted............................................ 1,762 2.77
Canceled........................................... (170) 0.49
Exercised.......................................... (124) 0.15
----- -----
Outstanding at December 31, 1997................... 6,638 0.92
Granted............................................ 1,814 4.68
Canceled........................................... (858) 0.83
Exercised.......................................... (856) 0.19
----- -----
Outstanding at December 31, 1998................... 6,738 2.03
Granted............................................ 2,230 6.47
Canceled........................................... (318) 1.50
Exercised.......................................... (438) 0.21
----- -----
Outstanding at December 31, 1999................... 8,212 $3.35
===== =====
Options exercisable at December 31:
1997........................................... 2,038 $0.24
===== =====
1998........................................... 1,998 $0.66
===== =====
1999........................................... 2,777 $1.61
===== =====
</TABLE>
F-13
<PAGE>
PRAECIS PHARMACEUTICALS INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. STOCKHOLDERS' EQUITY (CONTINUED)
The weighted average per share fair value of options granted was $1.73 in
1997, $2.90 in 1998 and $4.07 in 1999. At December 31, 1999, there were
1,558,816 options available for grant and 35,894,790 shares of common stock
reserved for the exercise of stock options and warrants and the conversion of
preferred shares.
The following table presents weighted average price and life information
about significant option groups outstanding at December 31, 1999 (option amounts
in thousands):
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE WEIGHTED- WEIGHTED-
REMAINING AVERAGE AVERAGE
OPTIONS CONTRACTUAL EXERCISE OPTIONS EXERCISE
EXERCISE PRICE OUTSTANDING LIFE (YEARS) PRICE EXERCISABLE PRICE
- -------------- ----------- ------------ --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$0.14-$1.60.............................. 3,316 5.88 $0.45 1,967 $0.40
$3.71-$7.00.............................. 4,896 8.60 $5.33 810 $4.53
</TABLE>
Pursuant to the requirements of SFAS No. 123, the following are the pro
forma net income (loss) for each year as if the compensation cost for the stock
option plan had been determined based on the fair value at the grant date for
grants for each year:
<TABLE>
<CAPTION>
1997 1998 1999
------------------- ------------------- -------------------
AS PRO AS PRO AS PRO
REPORTED FORMA REPORTED FORMA REPORTED FORMA
-------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Net income (loss)....................... $ 204 $ (797) $5,674 $2,914 $9,250 $ 5,405
====== ======= ====== ====== ====== =======
Diluted net income (loss) per common
share................................. $ 0.01 $ (0.18) $ 0.16 $ 0.08 $ 0.24 $ 0.14
====== ======= ====== ====== ====== =======
</TABLE>
The fair value of the stock options at the date of grant was estimated using
the Black-Scholes option pricing model with the following weighted average
assumptions: risk-free interest rate of 6%; the volatility factor of the
expected market price of the common stock of 70%; and a weighted-average
expected life of the options of five years. The Company has never declared or
paid any cash dividends on any of its capital stock and does not expect to do so
in the foreseeable future.
The effects on pro forma net income of expensing the fair value of stock
options are not necessarily representative of the effects on reported results of
operations for future years as the periods presented include only two, three,
and four years, respectively, of option grants under the Company's plan.
F-14
<PAGE>
PRAECIS PHARMACEUTICALS INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. INCOME TAXES
The Company's provision for income taxes is as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Current:
Federal......................................... $ 85 $ 280 $ 5,295
State........................................... 15 100 1,800
------- ------- -------
100 380 7,095
Deferred:
Federal......................................... -- (280) (5,295)
State........................................... -- -- --
------- ------- -------
(280) (5,295)
------- ------- -------
$ 100 $ 100 $ 1,800
======= ======= =======
</TABLE>
A reconciliation of the Company's income tax provision to the statutory
federal provision is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Statutory federal income tax provision.......... $ 261 $ 2,327 $ 3,868
State income taxes.............................. 19 362 620
Decrease in valuation allowance................. -- -- (2,688)
Utilization of net operating losses............. (180) (2,589) --
------- ------- -------
Income tax provision............................ $ 100 $ 100 $ 1,800
======= ======= =======
</TABLE>
In 1997 and 1998, respectively, the Company utilized approximately
$4.6 million and $10.3 million of net operating loss carryforwards to offset
taxable income.
Significant components of the Company's deferred tax assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1999
-------- --------
<S> <C> <C>
Deferred tax assets:
Deferred revenue........................................ $ 1,221 $ 3,743
Property and equipment.................................. 2,395 4,104
Accrued expenses........................................ 438 1,169
Research and development tax credit carryforwards....... 2,238 --
Other................................................... 286 169
------- -------
Total deferred tax assets................................. 6,578 9,185
Valuation allowance....................................... (6,298) (3,610)
------- -------
$ 280 $ 5,575
======= =======
</TABLE>
F-15
<PAGE>
PRAECIS PHARMACEUTICALS INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. INCOME TAXES (CONTINUED)
At December 31, 1998 and 1999, the Company has provided a valuation
allowance for the excess of the deferred tax asset over the benefit from future
losses that could be carried back if, and when, they occur. The valuation
allowance decreased by $2.7 million in 1999 due primarily to utilization of
previously unbenefitted tax credit carryforwards. Due to anticipated operating
losses in the future, the Company believes that it is more likely than not that
it will not realize a portion of the net deferred tax assets in the future and
has provided an appropriate valuation allowance.
Income tax payments amounted to approximately $0.2 million in 1998 and
$2.6 million in 1999.
8. CORPORATE COLLABORATIONS
SANOFI-SYNTHELABO AGREEMENT
In May 1997, the Company entered into a license agreement with Synthelabo
S.A., who subsequently merged with Sanofi S.A. forming Sanofi-Synthelabo S.A.
(Sanofi-Synthelabo), for the development and commercialization of the Company's
abarelix products. Sanofi-Synthelabo received marketing rights in Europe, Latin
America, the Middle East and various countries in Africa in exchange for: (a) a
one-time, nonrefundable $4.7 million payment to the Company upon initiation;
(b) 30 million French Francs (approximately US $5 million) funding over three
years to be applied toward future research and development costs; (c) funding of
certain additional research and development expenses; (d) payments of up to
$59.9 million upon achievement of specific milestones; and (e) specified
percentages of product sales, if any. The Company retained worldwide
manufacturing rights. The Company recognized revenues of $10.7 million in 1997,
$13.8 million in 1998 and $4.7 million in 1999 under the Sanofi-Synthelabo
agreement.
ROCHE AGREEMENT
In August 1997, the Company entered into an agreement with Roche
Products Inc. (Roche) in return for a nonrefundable $2.0 million option fee and
reimbursement of certain development costs. The agreement provided Roche with
the option to enter into a definitive collaboration agreement with the Company.
In 1997, the Company recognized $4.4 million in revenues under the agreement.
In June 1998, Roche exercised their option and entered into a definitive
agreement with the Company for the development and commercialization of the
Company's abarelix products. Roche received marketing rights in the United
States, Canada and the Pacific Rim in exchange for: (a) a one-time,
nonrefundable payment to the Company upon initiation; (b) funding of a portion
of additional research and development expenses; (c) payments upon achievement
of specific milestones; and (d) specified percentages of product sales, if any,
representing product cost payment. The Company retained worldwide manufacturing
rights. In November 1998, Roche and the Company entered into a termination
agreement as allowed for under the definitive agreement. Pursuant to the
termination agreement, Roche surrendered any rights with respect to the
Company's abarelix products, and neither party has any further obligations to
the other on account of, or arising from, the Roche definitive agreement. In
1998, the Company recognized $23.8 million of revenues under the definitive
agreement and termination agreements with Roche.
F-16
<PAGE>
PRAECIS PHARMACEUTICALS INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. CORPORATE COLLABORATIONS (CONTINUED)
AMGEN AGREEMENT
Effective March 1999, the Company entered into a binding agreement in
principle with Amgen Inc. (Amgen) for the development and commercialization of
the Company's abarelix products. Under terms of the agreement, Amgen has agreed
to assist in the development of abarelix for all indications and has received
the right to commercialize abarelix in the United States, Canada, Japan and all
other countries not covered by the Sanofi-Synthelabo Agreement.
Under terms of the agreement, Amgen will pay the Company up to $25 million
in signing and milestone payments. In addition, Amgen will pay all costs
associated with the development and commercialization of abarelix products,
including the cost of materials, in the United States incurred by Amgen and the
Company in 1999 and a substantial portion of such costs incurred in 2000. The
materials are consigned to Amgen until such time as they are used in the
manufacture of the final product and/or title passes to Amgen. At that time,
advance payments previously received are recognized as revenue.
Following these expenditures in 1999 and a portion of 2000, in general the
Company will share with Amgen all subsequent United States research and
development costs for abarelix products through the launch period and the
Company will reimburse Amgen for a share of costs associated with establishing a
sales and marketing infrastructure in the United States. In general, the Company
will receive a transfer price and royalty based on a sharing of the resulting
profits on sales of abarelix products in the United States. All program expenses
in Amgen's licensed territory outside the United States will be borne by Amgen,
and the Company will receive a royalty on net sales of abarelix products in
those territories.
Subject to various limitations and conditions, Amgen will also provide the
Company with a substantial line of credit through 2002. Borrowings under the
line will bear interest at market rates, will be secured by Company receivables
relating to abarelix products and must be repaid by 2008.
The agreement can be terminated by either party for material breach, or by
Amgen by giving 90-days notice.
In 1999, the Company recognized $56.8 million of revenues under the Amgen
agreement, which includes $53.8 million of reimbursed costs and that portion of
the signing payment recognized in 1999.
9. CONTRACT SERVICES
In August 1996, the Company entered into a service agreement with Boehringer
Ingelheim International GmbH (Boehringer) for the screening of certain
Boehringer compounds for $3.0 million of fees as well as reimbursement of
certain research personnel, equipment and materials expenses in connection with
the screening of those compounds. In August 1998, the Company completed its
responsibility for screening Boehringer compounds. Boehringer would be
responsible for all development, marketing and other costs with respect to any
Boehringer compound screened by the Company and developed and commercialized by
Boehringer or its licensee. The Company would be entitled to receive royalties
on net sales of any product containing a Boehringer compound which the Company
screened, if Boehringer or its licensee develops and commercializes the product.
F-17
<PAGE>
PRAECIS PHARMACEUTICALS INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
10. COMMITMENTS
INDIANA UNIVERSITY FOUNDATION (IUF) LICENSE AGREEMENT
The Company has a license agreement with IUF with respect to rights to
abarelix and certain related technology. In exchange for the license, the
Company agreed to pay (a) fees of $0.3 million, (b) up to an additional
$4.3 million upon achievement of specific milestones and (c) a royalty
percentage of net sales of licensed products, if any. The Company made fee
payments of $50,000 in 1997 and $495,000 in 1998 under the IUF agreement; no
such payments were made in 1999.
UCB SUPPLY AGREEMENT
In March 1998, the Company entered into an agreement with UCB-Bioproducts
S.A. (the UCB Agreement) for the development and supply of clinical and
commercial volumes of pharmaceutical-grade peptide. As of December 31, 1999, the
Company has purchased approximately $25.5 million of pharmaceutical-grade
peptide related to its commitment to UCB. In 1998, the Company did not purchase
any pharmaceutical-grade peptide under the UCB Agreement. As of December 31,
1999, the Company is committed to purchase an additional $30.5 million of
pharmaceutical-grade peptide through January 2001.
SALSBURY SUPPLY AGREEMENT
In July 1998, the Company entered into a seven-year agreement with Salsbury
Chemicals, Inc. (Salsbury) for the development and supply of clinical and
commercial depot formulation. Under the agreement, in 1998 and 1999, the Company
contributed $1.7 million and $4.3 million, respectively, towards construction of
the manufacturing facility which it has expensed as manufacturing start up
costs. As of December 31, 1999, the Company is committed to purchase $1.4
million of clinical depot formulation through December 2000. The Company has no
obligations beyond this initial commitment, but anticipates making additional
purchases in the future.
PHARMACEUTICAL APPLICATIONS ASSOCIATES AGREEMENT
In April 1999, the Company entered into a license agreement with
Pharmaceutical Applications Associates (PAA) for the worldwide rights to develop
and commercialize Latranal. The Company must pay PAA a royalty on the net sales,
if any, of Latranal products. The agreement, which may be terminated by the
Company at any time, expires in April 2009 or upon expiration of the last
licensed patent, whichever occurs later.
BUILDING
On January 14, 2000, the Company signed a purchase and sale agreement to
purchase, for $41.5 million, land and a building to be used as its principal
headquarters and research facility. In connection with the agreement, the
Company has made deposits of $1.2 million and expects the transaction to close
in the second quarter of 2000.
11. SUBSEQUENT EVENTS
On February 2, 2000, the Board of Directors approved an Amended and Restated
Certificate of Incorporation, which will become effective upon consummation of
the initial public offering, and increased the Company's shares of common stock
by 140,000,000 shares (for a total of 200,000,000
F-18
<PAGE>
PRAECIS PHARMACEUTICALS INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
11. SUBSEQUENT EVENTS (CONTINUED)
authorized shares of common stock) and provides for a total of 10,000,000
authorized shares of preferred stock, par value $0.01 per share. The preferred
stock will be issuable in one or more classes or series, each of such classes or
series to have such rights and preferences, including voting rights, dividend
rights, conversion rights, redemption privileges and liquidation preferences, as
may be determined by the Board of Directors.
On February 2, 2000, the Board of Directors adopted, subject to consummation
of the initial public offering, an Employee Stock Purchase Plan and authorized
the reservation of 160,000 shares of common stock for issuance thereunder. Under
the Employee Stock Purchase Plan, commencing July 3, 2000, eligible employees
may purchase shares of common stock at a price per share equal to 85% of the
lower of the fair market value per share of the common stock at the beginning or
the end of each six month period during the two-year term of the Employee Stock
Purchase Plan. Participation is limited to the lesser of 10% of the employee's
compensation or $25,000 in any calendar year.
In February 2000, the Company entered into an agreement with Human Genome
Sciences Inc. (HGS) for the discovery, development and commercialization of
compounds targeted to two proprietary molecules identified by HGS. Under the
terms of the agreement, the Company will apply its technology to these molecules
and any clinical drug candidates will be jointly developed by the parties on an
equal cost and profit sharing basis.
F-19
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
8,000,000 SHARES
PRAECIS PHARMACEUTICALS INCORPORATED
COMMON STOCK
[LOGO]
------
PROSPECTUS
, 2000
---------
SALOMON SMITH BARNEY
CIBC WORLD MARKETS
CREDIT SUISSE FIRST BOSTON
- --------------------------------------------------
- --------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
We estimate that the expenses, other than underwriting discounts and
commissions, that we expect to incur in connection with the issuance and
distribution of the securities we are registering under this registration
statement will be as follows:
<TABLE>
<S> <C>
SEC registration fee........................................ $ 41,290
NASD filing fees............................................ 16,140
The Nasdaq National Market listing fee...................... 95,000
Printing and engraving expenses............................. 150,000
Legal fees and expenses..................................... 425,000
Accounting fees and expenses................................ 200,000
Blue Sky fees and expenses (including legal fees)........... 10,000
Transfer agent fees......................................... 25,000
Miscellaneous............................................... 37,570
----------
Total................................................. $1,000,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporate Law permits indemnification of
officers, directors and other corporate agents under certain circumstances and
subject to certain limitations. Our amended and restated certificate of
incorporation and our amended and restated by-laws, effective upon the closing
of this offering, provide that we will indemnify our directors and officers to
the fullest extent authorized or permitted by law.
Our amended and restated certificate of incorporation further provides that
our directors will not be personally liable to us or any stockholder for
monetary damages for breach of fiduciary duty, except to the extent such
exemption is not permitted by law. Section 102 of the Delaware General Corporate
Law provides that officers and directors will not be personally liable for
monetary damages for breach of their fiduciary duties as directors, except
liability for:
- any breach of their duty of loyalty to the corporation or its
stockholders;
- acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- unlawful payments of dividends or unlawful stock repurchases or
redemptions; or
- any transaction from which the director derived an improper personal
benefit.
This provision has no effect on any non-monetary remedies that may be
available to us or our stockholders, nor does it relieve us or our officers or
directors from compliance with federal or state securities laws.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling us pursuant to
the foregoing provisions or otherwise, we have been informed 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.
Our by-laws also permit us to purchase and maintain insurance on behalf of
any officer or director for any liability arising out of his or her actions in
such capacity, regardless of whether our by-laws
II-1
<PAGE>
would otherwise permit indemnification for that liability. We are in the process
of obtaining directors' and officers' liability insurance which would indemnify
our directors and officers against damages arising out of claims which might be
made against them based on their negligent acts or omissions while acting in
their capacity as officers and directors.
The underwriting agreement provides that the underwriters must, under
various circumstances, indemnify our directors, officers and controlling persons
against some liabilities, including liabilities under the Securities Act.
Reference is made to the form of underwriting agreement filed as Exhibit 1.1 to
this registration statement.
Under agreements with J.H. Whitney & Co. and affiliated entities, William
Laverack, Jr., a director, is indemnified for certain liabilities which he may
incur in his capacity as a director.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
In the three years preceding the filing of this registration statement, we
have issued the securities set forth below that we did not register under the
Securities Act. We adjusted the share amounts and option and warrant exercise
prices set forth below to give effect to the 2-for-1 stock split of the common
stock effected March 8, 2000, and the corresponding adjustments to the
conversion price of the preferred stock.
(a) ISSUANCE OF CAPITAL STOCK.
In May 1997, we issued to one accredited investor 1,617,772 shares of common
stock and a warrant to purchase 404,445 shares of common stock, at an exercise
price of $12.88 per share, for an aggregate purchase price of $10,000,000.
In June 1997, we issued to one accredited investor 359,324 shares of our
Series D convertible preferred stock, par value $.01 per share, for an aggregate
purchase price of $10,000,000. Upon the closing of this offering, the shares of
Series D convertible preferred stock will automatically convert into
2,695,414 shares of common stock.
In April 1998, we issued to 23 accredited investors 900,478 shares of our
Series E convertible preferred stock, par value $.01 per share, for an aggregate
purchase price of $37,820,076. Upon the closing at this offering, the shares of
Series E convertible preferred stock will automatically convert into
6,753,582 shares of common stock.
No underwriters were involved in the foregoing sales of securities. We made
the sales of capital stock in reliance upon an exemption from registration under
the Securities Act provided by Section 4(2) of the Securities Act, and its
related rules and regulations, regarding sales by an issuer not involving a
public offering. All of the foregoing securities are deemed restricted
securities for purposes of the Securities Act.
(b) GRANTS AND EXERCISES OF STOCK OPTIONS AND STOCK AWARDS.
As of December 31, 1999, we had granted options to employees, directors and
consultants under our Amended and Restated 1995 Stock Plan, as amended, to
purchase a total of 12,273,780 shares of common stock at a weighted average
exercise price of $3.35 per share. Of these options, options to purchase
1,604,540 shares of common stock have been exercised for an aggregate
consideration of $297,016 as of December 31, 1999. Subsequent to December 31,
1999 through March 2, 2000, we granted options to purchase an additional
550,430 shares of common stock at an exercise price of $14.50 per share. Options
to purchase an additional 531,874 shares of common stock have been purchased for
an aggregate consideration of $388,194.
II-2
<PAGE>
In March 2000, we issued a stock award for 1,500 shares, with an estimated
fair market value of $21,000.00, to one of our consultants for services
rendered.
The issuance of options and common stock awards, and the issuance of common
stock upon the exercise of options, were exempt from registration under the
Securities Act either pursuant to Rule 701 under the Securities Act, as a
transaction pursuant to a compensatory benefit plan, or pursuant to Section 4(2)
of the Securities Act, as a transaction by an issuer not involving a public
offering. All of the foregoing securities are deemed restricted securities for
purposes of the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- -------
<S> <C>
*1.1 Form of Underwriting Agreement
**3.1 Amended and Restated Certificate of Incorporation, as
amended
3.2 Amendment to Amended and Restated Certificate of
Incorporation, as amended
**3.3 Form of Amended and Restated Certificate of Incorporation
(to be filed upon the closing of this offering)
**3.4 Amended and Restated By-Laws
**3.5 Form of Amended and Restated By-Laws (to become effective
upon the closing of this offering)
**4.1 Specimen certificate representing shares of common stock
**4.2 Warrant to purchase Series A Convertible Preferred Stock
dated as of August 12, 1998 held by Comdisco, Inc.
**4.3 Warrant to purchase Series A Convertible Preferred Stock
dated as of August 12, 1998 held by Gregory Stento
**4.4 Warrant to purchase Common Stock dated May 13, 1997
*5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
**10.1 Form of Second Amended and Restated 1995 Stock Plan
**10.2 Executive Management Bonus Plan
**10.3 Form of Employee Stock Purchase Plan
10.4 Amended and Restated Stockholders Agreement dated as of
April 30, 1998 by and among PRAECIS and certain stockholders
referred to therein, as amended by Amendment No. 1 dated as
of May 14, 1998, Amendment No. 2 dated as of July 21, 1998
and Amendment No. 3 dated January 31, 2000
**10.5 Stock and Warrant Purchase Agreement dated as of May 13,
1997 by and between Sylamerica, Inc. and PRAECIS
**+10.6 License Agreement dated as of May 13, 1997 by and between
PRAECIS and Synthelabo, as amended by a letter dated July
31, 1997
**+10.7 Amended and Restated Binding Agreement in Principle
effective as of March 8, 1999 by and between PRAECIS and
Amgen Inc.
**+10.8 Collaboration Agreement dated as of January 31, 2000 by and
between Human Genome Sciences, Inc. and PRAECIS
**+10.9 Collaboration and License Agreement dated as of August 1,
1996 by and between PRAECIS and Boehringer Ingelheim
International GmbH
**+10.10 License Agreement effective as of October 17, 1996 by and
between PRAECIS and Indiana University Foundation, as
amended as of June 3, 1998
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- -------
<S> <C>
**+10.11 License Agreement dated as of April 15, 1999 between
Pharmaceutical Applications Associates LLC, C. Donald
Williams, M.D.C.G.P., Robert Murdock, R.Ph. and PRAECIS
**+10.12 Development and Supply Agreement effective as of March 12,
1998 between UCB-Bioproducts S.A. and PRAECIS
**+10.13 Supply Agreement dated as of July 23, 1998 by and between
PRAECIS and Salsbury Chemicals, Inc.
**+10.14 Supply Agreement dated as of February 2, 2000 between Oread
Pharmaceutical Manufacturing Inc. and PRAECIS
**10.15 License Agreement dated December 23, 1993 between
Massachusetts Institute of Technology and PRAECIS
**10.16 Lease dated as of April 28, 1994 by and between PRAECIS and
The Charles Stark Draper Laboratory, Inc.
**10.17 Lease dated as of August 19, 1998 by and between PRAECIS and
BDG Piscataway, LLC
10.18 Contract of Sale dated as of January 14, 2000 by and between
Best Property Fund, L.P. and PRAECIS, as amended as of
February 7, 2000
*23.1 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 5.1)
23.2 Consent of Ernst & Young LLP
23.3 Consent of Lahive & Cockfield, LLP
**24.1 Power of Attorney (included on the signature page of this
registration statement)
**27 Financial Data Schedule
</TABLE>
- ------------------------
* To be filed by Amendment
** Previously filed
+ Confidential treatment requested as to certain portions of this exhibit.
Omitted portions have been filed separately with the Securities and Exchange
Commission.
(b) FINANCIAL STATEMENT SCHEDULES:
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement, certificates in the
denominations and registered in the names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has 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 the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
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, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to
II-4
<PAGE>
a court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
The registrant hereby undertakes:
(1) That for purposes of determining any liability under the Securities
Act of 1933, 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 the registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act is deemed to be part of this
registration statement as of the time it was declared effective.
(2) That for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus is 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-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-1 and has duly caused this Amendment
No. 1 to the registration statement to be signed on its behalf by the
undersigned, there unto duly authorized, in Cambridge, Massachusetts on
March 10, 2000.
<TABLE>
<S> <C> <C>
PRAECIS PHARMACEUTICALS INCORPORATED
By /s/ KEVIN F. MCLAUGHLIN
-----------------------------------------
Kevin F. McLaughlin
CHIEF FINANCIAL OFFICER, SENIOR VICE
PRESIDENT, SECRETARY AND TREASURER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the registration statement has been signed by the following persons in
the capacities indicated on March 10, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
*
------------------------------------------- Chairman of the Board, Chief Executive Officer
Malcolm L. Gefter, Ph.D. and President (PRINCIPAL EXECUTIVE OFFICER)
/s/ KEVIN F. MCLAUGHLIN Chief Financial Officer, Senior Vice
------------------------------------------- President, Secretary and Treasurer
Kevin F. McLaughlin (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)
*
------------------------------------------- Director
G. Leonard Baker, Jr.
*
------------------------------------------- Director
William Laverack, Jr.
*
------------------------------------------- Director
Henry F. McCance
*
------------------------------------------- Director
David B. Sharrock
*
------------------------------------------- Director
Damion E. Wicker, M.D.
*
------------------------------------------- Director
Albert L. Zesiger
</TABLE>
<TABLE>
<S> <C> <C> <C>
*By: /s/ KEVIN F. MCLAUGHLIN
--------------------------------------
Kevin F. McLaughlin
Attorney-in-Fact
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- -------
<C> <S>
*1.1 Form of Underwriting Agreement
**3.1 Amended and Restated Certificate of Incorporation, as
amended
3.2 Amendment to Amended and Restated Certificate of
Incorporation, as amended
**3.3 Form of Amended and Restated Certificate of Incorporation
(to be filed upon the closing of this offering)
**3.4 Amended and Restated By-Laws
**3.5 Form of Amended and Restated By-Laws (to become effective
upon the closing of this offering)
**4.1 Specimen certificate representing shares of common stock
**4.2 Warrant to purchase Series A Convertible Preferred Stock
dated as of August 12, 1998 held by Comdisco, Inc.
**4.3 Warrant to purchase Series A Convertible Preferred Stock
dated as of August 12, 1998 held by Gregory Stento
**4.4 Warrant to purchase Common Stock dated May 13, 1997
*5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
**10.1 Form of Second Amended and Restated 1995 Stock Plan
**10.2 Executive Management Bonus Plan
**10.3 Form of Employee Stock Purchase Plan
10.4 Amended and Restated Stockholders Agreement dated as of
April 30, 1998 by and among PRAECIS and certain stockholders
referred to therein, as amended by Amendment No. 1 dated as
of May 14, 1998, Amendment No. 2 dated as of July 21, 1998
and Amendment No. 3 dated January 31, 2000
**10.5 Stock and Warrant Purchase Agreement dated as of May 13,
1997 by and between Sylamerica, Inc. and PRAECIS
**+10.6 License Agreement dated as of May 13, 1997 by and between
PRAECIS and Synthelabo, as amended by a letter dated July
31, 1997
**+10.7 Amended and Restated Binding Agreement in Principle
effective as of March 8, 1999 by and between PRAECIS and
Amgen Inc.
**+10.8 Collaboration Agreement dated as of January 31, 2000 by and
between Human Genome Sciences, Inc. and PRAECIS
**+10.9 Collaboration and License Agreement dated as of August 1,
1996 by and between PRAECIS and Boehringer Ingelheim
International GmbH
**+10.10 License Agreement effective as of October 17, 1996 by and
between PRAECIS and Indiana University Foundation, as
amended as of June 3, 1998
**+10.11 License Agreement dated as of April 15, 1999 between
Pharmaceutical Applications Associates LLC, C. Donald
Williams, M.D.C.G.P., Robert Murdock, R.Ph. and PRAECIS
**+10.12 Development and Supply Agreement effective as of March 12,
1998 between UCB-Bioproducts S.A. and PRAECIS
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- -------
<C> <S>
**+10.13 Supply Agreement dated as of July 23, 1998 by and between
PRAECIS and Salsbury Chemicals, Inc.
**+10.14 Supply Agreement dated as of February 2, 2000 between Oread
Pharmaceutical Manufacturing Inc. and PRAECIS
**10.15 License Agreement dated December 23, 1993 between
Massachusetts Institute of Technology and PRAECIS
**10.16 Lease dated as of April 28, 1994 by and between PRAECIS and
The Charles Stark Draper Laboratory, Inc.
**10.17 Lease dated as of August 19, 1998 by and between PRAECIS and
BDG Piscataway, LLC
10.18 Contract of Sale dated as of January 14, 2000 by and between
Best Property Fund, L.P. and PRAECIS, as amended as of
February 7, 2000
*23.1 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 5.1)
23.2 Consent of Ernst & Young LLP
23.3 Consent of Lahive & Cockfield, LLP
**24.1 Power of Attorney (included on the signature page of this
registration statement)
**27 Financial Data Schedule
</TABLE>
- ------------------------
* To be filed by Amendment
** Previously filed
+ Confidential treatment requested as to certain portions of this exhibit.
Omitted portions have been filed separately with the Securities and Exchange
Commission.
<PAGE>
EXHIBIT 3.2
CERTIFICATE OF AMENDMENT
OF
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
PRAECIS PHARMACEUTICALS INCORPORATED
- --------------------------------------------------------------------------------
Pursuant to Sections 228 and 242 of
the General Corporation Law of the
State of Delaware
- --------------------------------------------------------------------------------
PRAECIS PHARMACEUTICALS INCORPORATED, a corporation organized and
existing under and by virtue of the provisions of the General Corporation Law of
the State of Delaware (the "Corporation"), does hereby certify as follows:
FIRST: That the following is hereby added immediately after the last
sentence of the second paragraph of Article FOURTH of the Corporation's Amended
and Restated Certificate of Incorporation, as amended:
"Upon the filing of this Amendment to the Certificate of
Incorporation, each outstanding share of Common Stock shall be further split
2-for-1, and without further action on the part of the Corporation or any
stockholder, shall become and be deemed to represent 2 shares of Common Stock.
Each certificate representing outstanding shares of Common Stock shall hereafter
be deemed to represent the number of shares of Common Stock adjusted to reflect
the 2-for-1 stock split, except that no such certificate shall represent
fractional shares. With respect to any fraction of a share that would have been
represented by such certificate, the Corporation shall pay to the holder an
amount in cash equal to such fraction multiplied by the current market value of
a share, determined in good faith by the Board of Directors. Subject to the
foregoing, upon any surrender for transfer or exchange of any certificate or
certificates representing shares of outstanding Common Stock, the Corporation
will issue and deliver a certificate or certificates for a number of shares of
Common Stock which gives effect to the 2-for-1 stock split."
<PAGE>
SECOND: That the foregoing amendment was duly adopted in accordance
with the provisions of Sections 228 and 242 of the General Corporation Law of
the State of Delaware.
2
<PAGE>
IN WITNESS WHEREOF, PRAECIS PHARMACEUTICALS INCORPORATED has
caused this Certificate to be executed in its corporate name this 8th day of
March, 2000.
PRAECIS PHARMACEUTICALS
INCORPORATED
By /s/ Malcolm L. Gefter
---------------------------------------
Malcolm L. Gefter
Chairman of the Board, Chief Executive
Officer and President
3
<PAGE>
Exhibit 10.4
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT dated as of
April 30, 1998 (the "Agreement") by and among PRAECIS PHARMACEUTICALS
INCORPORATED, a Delaware corporation (the "Company"), Malcolm L. Gefter ("Dr.
Gefter"), Ethan R. Signer ("Dr. Signer"), A. Donny Strosberg ("Dr.
Strosberg"), the other current Stockholders (as defined herein) as set forth
on Schedule 1 attached hereto (the "Existing Investors"), the additional
parties as set forth on Schedule 2 attached hereto (the "New Investors"), and
any additional Persons (as defined herein) who shall become parties to this
Agreement as Stockholders in accordance with the terms hereof.
WHEREAS, the Company, Dr. Gefter, Dr. Signer, Dr. Strosberg
and certain of the Existing Investors were parties to a Stockholders
Agreement dated as of December 23, 1993, as supplemented as of March 3, 1994
and amended as of December 2, 1994 (the "Original Stockholders Agreement");
and
WHEREAS, pursuant to Section 9.2 of the Original
Stockholders Agreement, the Original Stockholders Agreement was amended by
the Amended Stockholders Agreement, dated as of April 4, 1996, as amended by
Amendment No. 1 thereto dated as of February 13, 1997 and Amendment No. 2
thereto dated as of June 9, 1997 (such agreement as so amended, the "Amended
Stockholders Agreement"); and
WHEREAS, pursuant to Section 9.2 of the Amended
Stockholders Agreement, the Amended Stockholders Agreement may be amended by
a written instrument duly executed by the Company and the holders of a
majority of the then outstanding shares of the Company's common stock, par
value $.01 per share (the "Common Stock"), and 66 2/3% of the shares of
Common Stock issued or issuable upon conversion of the Company's Series A
Convertible Preferred Stock, par value $.01 per share (the "Series A
Preferred Stock"), Series C Convertible Preferred Stock, par value $.01 per
share (the "Series C Preferred Stock"), and Series D Convertible Preferred
Stock, par value $.01 per share (the "Series D Preferred Stock"); and
WHEREAS, the Company and certain Investors (as defined
herein) have entered into a Series E Preferred Stock Purchase Agreement dated
March 27, 1998 whereby, upon the terms and subject to the conditions set
forth therein, such
<PAGE>
Investors have agreed to purchase an aggregate of 900,478 shares (the
"Preferred Shares") of the Company's Series E Convertible Preferred Stock,
par value $.01 per share (the "Series E Preferred Stock"); and
WHEREAS, the parties hereto, representing a majority of the
out standing shares of Common Stock and 66 2/3% of the outstanding shares of
Common Stock issued or issuable upon conversion of the Series A Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock, desire to amend
and restate, as of the date hereof, the Amended Stockholders Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the par ties hereto, intending to be legally bound, hereby
agree to amend and restate the Amended Stockholders Agreement to read in its
entirety as set forth herein:
ARTICLE 1
DEFINITIONS
As used in this Agreement, the following terms shall have
the following respective meanings:
Affiliate shall mean, with respect to any person, any other
person controlling, controlled by or under common control with such person.
Board shall mean the Board of Directors of the Company.
Canaan shall mean Canaan Ventures II Offshore C.V., a
Netherland Antilles limited partnership and Canaan Ventures II Limited
Partnership, a Delaware limited partnership.
Certificate of Incorporation shall mean the Amended and
Restated Certificate of Incorporation of the Company, as filed with the
Secretary of State of the State of Delaware.
2
<PAGE>
Chase shall mean Chase Venture Capital Associates, L.P., a
California limited partnership, or one or more other funds affiliated with
Chase Capital Partners, a New York general partnership.
Commission shall mean the United States Securities and
Exchange Commission and any successor federal commission or agency having
similar powers.
Company Stock shall mean the Common Stock, the Preferred
Stock and any other common or preferred stock of the Company.
Effective Date shall mean the date of filing of the
Certificate of Incorporation with the Secretary of State of the State of
Delaware.
Equity Fund shall mean Whitney 1990 Equity Fund, L.P., a
Delaware limited partnership.
Exchange Act shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations thereunder.
Founders shall mean Dr. Gefter, Dr. Signer and Dr.
Strosberg.
Greylock shall mean Greylock Limited Partnership, a
Delaware limited partnership.
Highland shall mean Highland Capital Partners II Limited
Partner ship, a Delaware limited partnership.
Independent Director shall mean a director of the Company
who is not (apart from such directorship) an officer, Affiliate, employee,
principal stockholder, consultant or partner of the Company, of any Affiliate
of the Company, of any Stockholder or of any entity that was dependent upon
the Company or any Stock holder for more than 5% of its revenues or earnings
in its most recent fiscal year.
Initial Public Offering shall mean when the Company shall
consummate a public offering of shares of Common Stock registered under the
Securities Act which yields aggregate gross proceeds to the Company of not
less than $20,000,000 and which is at a price per share of Common Stock equal
to or greater than the minimum price per share (in each case, the "Minimum
Per Share Offering Price") for each applicable time period set forth below.
The Minimum Per Share
3
<PAGE>
Offering Price (which shall be subject to appropriate adjustment as set forth
in Section 4(f) of ARTICLE FIFTH of the Certificate of Incorporation) (i) for
the period commencing upon the Effective Date and ending at the close of
business on the first anniversary of the Effective Date shall be $16.80 per
share of Common Stock; (ii) for the period commencing on the day after the
first anniversary of the Effective Date and ending at the close of business
on the second anniversary of the Effective Date shall be $18.90 per share of
Common Stock; and (iii) at any time after the close of business on the second
anniversary of the Effective Date shall be $21.00 per share of Common Stock.
Notwithstanding the foregoing, in the event that the Company shall file with
the Securities and Exchange Commission a registration statement with respect
to a public offering of Common Stock on or before the close of business on
the second anniversary of the Effective Date, the Minimum Per Share Offering
Price applicable at the time of such filing of such registration statement
(the "Initial Filing Date") shall be the Minimum Per Share Offering Price for
the purposes of this definition of Initial Public Offering unless such public
offering is not consummated within 150 calendar days after the Initial
Filing Date.
Investors shall mean the Existing Investors, the New Investors
and their respective permitted transferees or assignees hereunder.
MIT shall mean Massachusetts Institute of Technology.
Person shall mean a corporation, association, partnership,
joint venture, organization, business, individual, trust or any other entity
or organization, including a government or any subdivision or agency thereof.
Preferred Stock shall mean the Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock
and Series E Preferred Stock.
Registrable Securities shall mean (i) shares of Common
Stock issued or issuable, upon conversion of any Preferred Stock, (ii) the
shares of Common Stock owned by MIT and the Founders and (iii) any equity
securities issued in exchange or substitution for, or in payment of dividends
on, any such shares referred to in clauses (i) and (ii) of this definition.
Any particular Registrable Securities shall cease to be Registrable
Securities when either (i) a registration statement with respect to the sale
of such securities shall have become effective under the Securities Act and
such securities shall have been disposed of under such registration
statement, (ii) they shall have been transferred pursuant to Rule 144, (iii)
they shall have been otherwise
4
<PAGE>
transferred or disposed of, and new certificates therefor not bearing a
legend restricting further transfer thereof under the Securities Act shall
have been delivered by the Company and subsequent transfer or disposition
thereof shall not require their registration or qualification under the
Securities Act or any similar state law then in force, or (iv) they shall
have ceased to be outstanding.
Registration Expenses shall mean any and all out-of-pocket
expenses incident to the Company's performance of or compliance with Article
6 hereof, including, without limitation, all Commission, stock exchange or
National Association of Securities Dealers, Inc. ("NASD") registration and
filing fees, all fees and expenses of complying with securities and blue sky
laws (including the reasonable fees and disbursements of underwriters'
counsel in connection with blue sky qualification and NASD filings), all fees
and expenses of the transfer agent and registrar for Company Stock, all
printing expenses, the fees and disbursements of counsel for the Company and
of its independent public accountants, including the expenses of any special
audits and/or "cold comfort" letters required by or incident to such
performance and compliance, and the reasonable fees and disbursements of one
counsel (other than house counsel) retained by the holders of Registrable
Securities being registered to represent such group of holders (which counsel
shall be satisfactory to the holders of a majority of the shares of
Registrable Securities being registered), but excluding (a) any allocation of
the personnel or other general overhead expenses of the Company or other
expenses for the preparation of financial statements or other data normally
prepared by the Company in the ordinary course of its business, which shall
be borne by the Company in all cases, and (b) underwriting discounts and
commissions and applicable transfer and documentary stamp taxes, if any,
which shall be borne by the seller of the Registrable Securities in all cases.
Related Party shall mean:
(i) In the case of an individual, (A) such person,
(B) such person's spouse, (C) the family members (i.e., spouse,
parents, parents-in-law, issue, nephews, nieces, brothers,
brothers-in-law, sisters, sisters-in-law, children-in-law and
grandchildren-in-law) of such person and such person's spouse, (D) a
trust for the benefit of any of the foregoing, (E) the estate or legal
representatives of such person and (F) any corporation or partnership
con trolled by such person;
5
<PAGE>
(ii) In the case of a partnership, (A) such
partnership and any of its partners (limited or general), (B) any
retired partners of such partnership, (C) the estates or legal
representatives of any such limited or general partners or retired
partners, (D) any corporation or other business organization to which
such partnership shall sell all or substantially all of its assets or
with which it shall be merged and (E) any Affiliate of such
partnership;
(iii) In the case of a corporation, (A) any such
corporation and any of its subsidiaries, (B) any stockholder of such
corporation, (C) any corporation or other business organization to
which such corporation shall sell all or substantially all of its
assets or with which it shall be merged and (D) any Affiliate of such
corporation; and
(iv) In the case of the Series D Purchaser (as
defined herein), in addition to the above, one or more of George Soros
or Soros Fund Management LLC or affiliates thereof, and any person or
entity for which any of George Soros, Soros Fund Management LLC or
affiliates thereof act as investment advisor or investment manager.
Securities Act shall mean the Securities Act of 1933, as
amended, and the rules and regulations thereunder.
Series A Preferred Stock shall have the meaning specified
in the third preamble paragraph hereof.
Series B Preferred Stock shall mean the Company's Series B
Convertible Preferred Stock, par value $.01 per share.
Series C Preferred Stock shall have the meaning specified
in the third preamble paragraph hereof.
Series D Preferred Stock shall have the meaning specified
in the third preamble paragraph hereof.
Series D Purchaser shall have the meaning specified in
Section 5.3 hereof.
6
<PAGE>
Series E Preferred Stock shall have the meaning specified
in the fourth preamble paragraph hereof.
Stockholder shall mean any of the Investors and the
Founders, as long as they hold any Common Stock, Preferred Stock or other
authorized and validly issued shares of any series of the Company's common or
preferred stock (including any permitted transferees or assignees hereunder
of any such holder).
Sutter Hill shall mean Sutter Hill Ventures, a California
limited partnership.
Underwritten Offering shall have the meaning specified in
Section 6.1.
ARTICLE 2
TRANSFERS
Section 2.1 Transfers. No Stockholder shall, directly or
indirectly, sell, assign, transfer, hypothecate, pledge, mortgage, encumber
or dispose of (each, a "Transfer") any shares of Company Stock except as
permitted by Section 2.2 hereof or Article 3 hereof.
Section 2.2 Permitted Transfers. (a) Any Stockholder may
Transfer any shares of Company Stock owned by such Stockholder to any of such
Stock holder's Related Parties.
(b) No Transfers of Company Stock shall be made
pursuant to the foregoing Section 2.2(a) unless, prior to the consummation of
any such Transfer, each such transferring Stockholder shall have caused the
transferee to execute and deliver to the Company a Stock Transfer Agreement
in the form attached hereto as Exhibit A.
7
<PAGE>
ARTICLE 3
COMPANY AND STOCKHOLDER RIGHT OF FIRST REFUSAL
Section 3.1 Right of First Refusal. If at any time any
Stockholder de sires to Transfer any shares of Company Stock to any Person
other than as permitted by Section 2.2 hereof and other than in connection
with a Sale of the Corporation (as defined in the Certificate of
Incorporation), such Stockholder (the "Offering Stockholder") will notify the
Company in writing (the "Notification") of such Stockholder's intention to do
so, specifying the number of shares of Company Stock proposed to be
transferred (the "Offered Shares"), the name of the Person or Persons to whom
such Stockholder proposes to Transfer the Offered Shares (or if no particular
purchaser is identified, then the general class of persons to whom such Stock
holder proposes to Transfer the Offered Shares), and a price per share which
shall be the minimum price at which such Stockholder proposes to effect the
Transfer (the "Minimum Price"). The Company shall promptly forward a copy of
the Notification to all other Stockholders. The Notification shall contain an
affirmation by the Offering Stockholder that such Stockholder has a
reasonable expectation of being able to effect the proposed Transfer to such
Person or Persons (or class of Persons) at the Minimum Price, and shall
recite the basis for such expectation. The Notification shall offer to sell
to the Company and, to the extent provided in this Article 3, the other
Stockholders, all of the Offered Shares, free and clear of any liens or
encumbrances in favor of third Persons, at the Minimum Price and on such
other terms and conditions, if any, not less favorable to the Company and the
other Stockholders than those proposed to be offered to such other Person or
Persons (or class of Persons). In the event all or any part of the
consideration for the proposed Transfer shall consist of other than cash, the
Minimum Price shall mean the fair value of such consideration, including the
fair value of any promissory notes of the prospective purchaser (taking into
account, among other matters, the terms of the notes and the credit
worthiness of the prospective purchaser).
Section 3.2 Notification by Company and Stockholders. The
Company and each Stockholder (other than the Offering Stockholder) shall have
the right and option (subject to the provisions of Section 3.3 hereof), for a
period of 30 days after delivery of the Notification, (i) in the case of the
Company, to elect to purchase all or any part of the Offered Shares at the
Minimum Price and on the terms and conditions stated therein and (ii) in the
case of each such Stockholder, to elect to purchase at the Minimum Price and
on the terms and conditions stated therein (A) up to its Proportionate
Percentage (as defined below) of any Offered Shares which the
8
<PAGE>
Company does not elect to purchase ("Remaining Shares") and (B) if such Stock
holder elects to purchase its full Proportionate Percentage, all or any part
of any other Stockholders' Proportionate Percentages of any Remaining Shares
to the extent that such other Stockholders do not elect to purchase their
full Proportionate Percentages of the Remaining Shares. "Proportionate
Percentage" shall mean as to each Stock holder, the percentage figure which
expresses the ratio between the number of shares of outstanding Company Stock
(on an as-converted basis) owned by such Stock holder and the aggregate
number of such shares of Company Stock (on an as-converted basis) owned by
all Stockholders with respect to which the calculation is being made. For
purposes of computing a Stockholder's Proportionate Percentage, each
Stockholder which is a partnership shall be deemed to be the owner of all
shares of Company Stock which have been transferred to and are held by such
Stockholder's Related Parties and the Related Parties of such Related
Parties. Such elections by the Company and such other Stockholders shall be
made by delivering a written notice to the Offering Stockholder within the
aforesaid 30-day period. The Company shall be entitled to purchase all
Offered Shares which it elects to purchase. Each such Stockholder shall be
entitled to purchase up to (i) its Proportionate Percentage of any Remaining
Shares and (ii) the Remaining Shares which such Stockholder elects to
purchase pursuant to clause (ii)(B) of the first sentence of this Section
3.2. If the Stockholders who elect to purchase their full Proportionate
Percentages of any Remaining Shares also elect to purchase in the aggregate
more than 100% of any Remaining Shares referred to in clause (ii)(B) of the
first sentence of this Section 3.2, such Remaining Shares will be sold to
such Stockholders in accordance with their respective Proportionate
Percentages; provided, however, that no such Stockholder may purchase a
greater number of such Remaining Shares than the amount which such
Stockholder elects to purchase pursuant to clause (ii)(B) of the first
sentence of this Section 3.2. Sales of Offered Shares under the terms of this
Section 3.2 hereof shall be made at the offices of the Company on a mutually
satisfactory business day within 30 days after the earlier of (i) the
expiration of the 30-day period referred to in Section 3.2 hereof, or (ii)
the receipt of written notices from the Company and all other Stockholders
responding to the Notification. Delivery of certificates or other instruments
evidencing such Offered Shares duly endorsed for transfer to the Company or
the other Stockholders shall be made on such date against payment of the
purchase price therefor.
Section 3.3 Third Party Sales. If effective acceptance
shall not be received pursuant to Section 3.2 hereof with respect to all
Offered Shares pursuant to any Notification, then the Offering Stockholder
may sell all or any part of such Offered Shares as to which such an effective
acceptance has not been so received
9
<PAGE>
(the "Saleable Offered Shares") at a price not less than the Minimum Price,
and on other terms not materially more favorable to the purchaser thereof
than the terms stated in such Notification, at any time within 90 days after
the expiration of the offer pursuant to the Notification. In the event such
Saleable Offered Shares are not sold by the Offering Stockholder during such
90-day period, the right of the Offering Stockholder to sell such Saleable
Offered Shares shall expire and the obligations of this Article 3 shall be
reinstated; provided, however, that in the event the Offering Stockholder
determines, at any time during such 90-day period, that the sale of all or
any part of the Saleable Offered Shares on the terms set forth in the
preceding sentence is impractical, the Offering Stockholder can terminate the
offer and reinstate the procedure provided in this Article 3, without waiting
for the expiration of such 90-day period. The Offering Stockholder may
specify in the Notification that all Offered Shares must be sold, in which
case acceptances received pursuant to Section 3.2 hereof shall be deemed
conditioned upon (i) receipt of written notices of acceptance with respect
to all Offered Shares mentioned in such Notification and/or (ii) the sale of
all or the remaining Offered Shares pursuant to this Section 3.3.
Section 3.4 Stock Transfer Agreement. It shall be a
condition of any Transfer of Offered Shares to a third Person or Persons that
the Offering Stockholder shall cause such Person or Persons to execute and
deliver to the Company a Stock Transfer Agreement in the form attached hereto
as Exhibit A.
Section 3.5 Legend. Each certificate representing shares of
Company Stock shall be stamped or otherwise imprinted with a legend
substantially in the following form:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and may not be
transferred or otherwise disposed of unless they have been registered
under said Act or an exemption from registration is available. The
securities represented by this certificate are subject to and shall be
transferable only upon the terms and conditions of an Amended and
Restated Stockholders Agreement by and among the issuer and certain
stock holders of the issuer, dated as of April 30, 1998, a copy of
which is on file with the Secretary of the issuer."
Section 3.6 Restrictions on Transferability.
Notwithstanding any other provision of this Agreement, Company Stock shall
not be Transferred, and the Company shall not be required to register any
Transfer of Company Stock on the
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books of the Company, unless the Company shall have been provided with an
opinion of counsel reasonably satisfactory to it prior to such Transfer that
registration under the Securities Act is not required in connection with the
transaction resulting in such Transfer; provided, however, that no such
opinion of counsel shall be required for a Transfer by an Investor which is a
partnership to a partner of such Purchaser or a retired partner of such
Purchaser who retires after the date hereof, or to the estate of any such
partner or retired partner, or a Transfer by gift, will or intestate
succession from any such partner to his spouse or members of his or his
spouse's family, if the transferee executes and delivers to the Company a
Stock Transfer Agreement in the form attached hereto as Exhibit A except if
the Company reasonably determines that it is not free from doubt as to
whether an exemption from registration under the Securities Act is available
for any such proposed Transfer.
Section 3.7 No Recognition of Transfer. The Company agrees
that it will not at any time permit any Transfer to be made on its books or
records of the certificates representing shares of Company Stock subject to
this Agreement, and that it will refuse to recognize any claims of ownership
of any purported direct or indirect transferee of such Company Stock, unless
such Transfer is made pursuant to and in accordance with the terms and
conditions of this Agreement.
ARTICLE 4
BOARD OF DIRECTORS
Section 4.1 Size of Board; Composition; Observer Rights.
The current members of the Board are: Dr. Gefter, Henry F. McCance, William
Laverack, Jr., David Sharrock, Albert L. Zesiger, G. Leonard Baker and Damion
E. Wicker. Each of Highland and Canaan (i) shall be entitled to have a
representative attend all meetings of the Board, and (ii) will be sent copies
of all notices of Board meetings and actions.
Section 4.2 Voting Agreement. (a) At every annual or
special meeting called (or written consent solicited) for the purpose of
electing directors of the Company, the Company shall use its best efforts to
cause to be nominated for election and elected as a director of the Company,
and thereafter to continue in office, (i) Dr. Gefter (so long as he is an
employee of or consultant to the Company), (ii) one person designated by
Equity Fund (the "Whitney Designee"), (iii) one person designated by
Greylock (the "Greylock Designee"), (iv) one person designated by Sutter
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Hill (the "Sutter Hill Designee") and (v) one person designated by Chase (the
"Chase Designee"). The current Whitney Designee is William Laverack, Jr., the
current Greylock Designee is Henry F. McCance, the current Sutter Hill
Designee is G. Leonard Baker, Jr. and the current Chase designee is Damion E.
Wicker. The Whitney Designee, the Greylock Designee, the Sutter Hill
Designee and the Chase Designee together are referred to collectively herein
as the "Designees" and individually as a "Designee". The current Independent
Director is David Sharrock.
(b) Each Stockholder entitled to vote agrees to
vote (or cause to be voted) all shares of Company Stock then owned by such
Stockholder so as to continue in office Dr. Gefter (so long as he is an
employee of, or consultant to, the Company) and the Designees.
(c) Each of Greylock, Equity Fund, Sutter Hill and
Chase may at any time by written notice to the Company designate their
respective Designees for removal as a member of the Board with or without
cause and, upon such designation, (i) each Stockholder entitled to vote
agrees to vote all shares of Company Stock then owned by such Stockholder to
effect such removal and (ii) the Stock holders and the Company shall use
their respective best efforts to effect, or cause the stockholders of the
Company to effect, such removal.
(d) If there is a vacancy in the Board caused by
the death, resignation or removal of a Designee, (i) each Stockholder
entitled to vote agrees to vote all shares of Company Stock then owned by
such Stockholder to elect to the Board, and thereafter to vote all such
shares to continue in office, such substitute director as the Person or
entity entitled to designate such Designee may designate and (ii) the Company
shall use its best efforts to elect or nominate for election by stockholders,
and thereafter to continue in office, such substitute director as the Person
or entity entitled to designate such Designee may so designate.
ARTICLE 5
RIGHT OF FIRST OFFER
Section 5.1 Right of First Offer. The Company grants to
each of the Stockholders the right of first offer to purchase (a) up to such
Stockholder's pro-rata share, as defined below, of any equity securities of
the Company, including shares of Common Stock or securities of any type
convertible into, or entitling the holder
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thereof to purchase shares of, Common Stock, proposed to be issued by the
Company subsequent to the date hereof (such securities being sometimes
hereinafter referred to as the "Equity Securities"), and (b) to the extent
specified in Section 5.2 hereof, all or any part of any other Stockholders'
respective pro-rata shares of such Equity Securities to the extent that such
other Stockholders do not elect to purchase their full pro-rata shares. A
Stockholder's "pro-rata share" shall be that portion of the Equity Securities
proposed to be issued which bears the same relation to all of the Equity
Securities proposed to be issued as the number of shares of Common Stock held
by such Stockholder bears to the outstanding shares of Common Stock held by
all Stockholders (assuming in each case the conversion of all outstanding
securities which are convertible into Common Stock, all determined
immediately prior to the offering of the Equity Securities). For purposes of
computing an Investor's pro-rata share, each Investor which is a partnership
shall be deemed to be the owner of all shares of Company Stock which have
been transferred to and are held by such Investor's Related Parties and the
Related Parties of such Related Parties in accordance with Section 2.2.
Section 5.2 Notice. In the event that the Company proposes
to undertake an issue of Equity Securities, it shall deliver to each
Stockholder written notice of its intention, describing such Equity
Securities, specifying such Stock holder's pro-rata share and stating the
purchase price and other material terms upon which it proposes to issue the
same (the "First Offer Notice"). For a period of 20 days from the date the
First Offer Notice is given, each Stockholder shall have the right to elect,
by written notice to the Company, to purchase (a) all or any portion of its
pro-rata share of the Equity Securities described in the First Offer Notice
and (b) if such Stockholder elects to purchase its full pro-rata share, all
or any part of the pro-rata share of any other Stockholder to the extent that
such other Stockholder does not elect to purchase its full pro-rata share,
upon the terms and condition specified in the First Offer Notice. If the
Stockholders who elect to purchase their full pro-rata shares also elect to
purchase in the aggregate more than 100% of the Equity Securities referred
to in clause (b) of the preceding sentence, the Equity Securities referred to
in clause (b) of the preceding sentence will be sold to such Stockholders in
accordance with their respective pro-rata shares; provided, however, that no
Stock holder may purchase a greater amount of such Equity Securities than the
amount which such Stockholder elects to purchase pursuant to clause (b) of
the preceding sentence. In the event the Stockholders fail to exercise their
right of first offer within the specified period, or the Stockholders elect
to acquire less than their aggregate pro-rata shares pursuant to the exercise
of such right, then, during the 90-day period following the expiration of
such 20-day period, the Company may sell, free of any
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right of first offer on the Stockholders' part, the portion of the
Stockholders' pro-rata shares not purchased pursuant to such right of first
offer (the "Third Party Shares"), at not less than the price, and on other
terms not more favorable to the purchasers in any material respect than the
other terms, stated in the First Offer Notice. The closing of sales of
Equity Securities to the Stockholders pursuant to this Article 5 shall take
place at the offices of the Company on a mutually satisfactory business day
within 15 days after the expiration of the aforesaid 20-day period, or, at
the Company's election, at the same time as the closing of the issuance and
sale of any Third Party Shares.
Section 5.3 Exceptions. The right of first offer granted
under this Article V shall not apply to (i) any shares of Common Stock issued
upon conversion of the Preferred Stock; (ii) the issuance of Equity
Securities to employees, consultants, directors or persons performing
similar functions, if such issuances are approved by the Board or such
issuances are pursuant to a plan or plans approved by the Board; (iii) the
issuance of Equity Securities upon a stock split, stock dividend or
combination with respect to the Common Stock; (iv) the issuance of any
Purchase Rights (as defined in the Certificate of Incorporation) pro-rata to
recordholders of Common Stock and Preferred Stock, or the issuance of Equity
Securities upon the conversion, exercise or exchange of any Purchase Rights;
(v) the issuance of Equity Securities upon the conversion, exercise or
exchange of any outstanding Equity Securities to which the right of first
offer set forth in this Article 5 applied at the time of issuance thereof;
(vi) the issuance of any Equity Securities in a public offering pursuant to a
registration statement under the Securities Act; (vii) the issuance of Equity
Securities pursuant to the acquisition by the Company of another corporation
by merger, acquisition of more than 51% of such corporation's outstanding
stock or purchase of all or substantially all of its assets; (viii) the
issuance of Equity Securities in connection with a strategic business
arrangement or lease arrangement in which the Person receiving such Equity
Securities or an Affiliate of such Person enters into a contractual
relationship with the Company relating to research and development,
manufacturing, marketing, licensing or leasing, which issuance and
transaction are approved in good faith by the Board; (ix) the issuance of
Series D Convertible Preferred Stock, par value $.01 per share, of the
Company pursuant to a Series D Preferred Stock Purchase Agreement dated June
9, 1997 by and between the Company and the purchaser listed on Schedule I
thereto (the "Series D Purchaser"); or (x) the issuance of Series E
Convertible Preferred Stock, par value $.01 per share, of the Company
pursuant to a Series E Preferred Stock Purchase Agreement dated March 27,
1998 by and among the Company and the purchasers listed on Schedules A and B
thereto.
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ARTICLE 6
REGISTRATION RIGHTS
Section 6.1 Demand Registration. (a) After the first to
occur of the consummation of the Initial Public Offering and December 23,
1996, upon the writ ten request of any holder or holders of at least 662/3%
of the outstanding Registrable Securities issued or issuable upon conversion
of the Series A Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock and Series E Preferred Stock requesting that the Company effect the
registration under the Securities Act of all or part of such holder's or
holders' Registrable Securities and specifying the number thereof to be
registered by each such holder and the intended method of disposition
thereof, the Company will, as expeditiously as possible, give written notice
of such request to all holders of Registrable Securities, and shall thereupon
use its reasonable best efforts to effect the registration under the
Securities Act, subject to Section 6.1(e), of:
(i) the Registrable Securities which the Com
pany has been so requested to register by such holder or holders; and
(ii) all other Registrable Securities which the
Company has been requested to register by any other holder thereof by
written request given to the Company within 30 calendar days after the
giving of such written notice by the Company (which request shall
specify the intended method of disposition of such Registrable
Securities),
all to the extent necessary to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities so to be
registered. Notwithstanding the foregoing provisions of subsection 6.1(a),
the Company shall not be obligated to file more than three registration
statements pursuant to this Section 6.1(a) and shall not be obligated to
file any registration statement pursuant to this Section 6.1(a) where the
proposed aggregate offering price of the securities to be sold thereunder is
less than $5 million.
(b) After the first anniversary of the Initial
Public Offering, upon the written request of any holder or holders of a
majority of the outstanding Registrable Securities issued or issuable upon
conversion of the Series E Preferred Stock (the "Requesting Series E
Holders") requesting that the Company effect the
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registration under the Securities Act of all or part of the Requesting Series
E Holders' Registrable Securities and specifying the number thereof to be
registered by each such holder and the intended method of disposition
thereof, the Company will, as expeditiously as possible, give written notice
of such request to all holders of Registrable Securities, and shall
thereupon use its reasonable best efforts to effect the registration under
the Securities Act, subject to Section 6.1(f), of:
(i) the Registrable Securities which the Com
pany has been so requested to register by the Requesting Series E
Holders; and
(ii) all other Registrable Securities which the
Company has been requested to register by any other holder thereof by
written request given to the Company within 30 calendar days after the
giving of such written notice by the Company (which request shall
specify the intended method of disposition of such Registrable
Securities),
all to the extent necessary to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities so to be
registered. Notwithstanding the foregoing provisions of subsection 6.1(b),
the Company shall not be obligated to file more than one registration
statement pursuant to this Section 6.1(b) and shall not be obligated to file
any registration statement pursuant to this Section 6.1(b) where the proposed
aggregate offering price of the securities to be sold thereunder is less than
$5 million.
(c) At such time as the Company shall have
qualified for the use of Form S-3 (or any similar form or forms promulgated
by the Commission), the holders of 10% of the then outstanding Registrable
Securities shall have the right to request the registration of Registrable
Securities on Form S-3. The Company shall give prompt written notice of each
such proposed registration to all other record holders of Registrable
Securities. Subject to Section 6.1(e) hereof, such other holders shall have
the right, by giving written notice to the Company within 30 days from
receipt of the Company's notice, to elect to have included in such
registration such of their Registrable Securities as such holders may request
in such notice of election. Thereupon, the Company shall, as expeditiously as
possible, use its reasonable best efforts to effect the registration on Form
S-3 of all Registrable Securities which the Company has been requested to
register; provided, however, that the Company shall not be obligated to file
and use its reasonable best efforts to
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cause to become effective (i) more than one registration on Form S-3 in any
one year period or (ii) any such registration statement where the proposed
aggregate offering price of the securities to be sold thereunder is less than
$2 million. In addition, the Company shall not be obligated to file and use
its reasonable best efforts to cause to become effective more than three
registration statements pursuant to which Registrable Securities are to be
sold pursuant to this Section 6.1(b). Three registrations effected on Form
S-3 pursuant to this Section 6.1(b) shall not be counted as demand
registrations pursuant to Section 6.1(a) hereof.
(d) At such time as the Company shall have
qualified for the use of Form S-3 (or any similar form or forms promulgated
by the Commission), the Requesting Series E Holders shall have the right to
request the registration of Registrable Securities on Form S-3. The Company
shall give prompt written notice of such proposed registration to all other
record holders of Registrable Securities. Subject to Section 6.1(f) hereof,
such other holders shall have the right, by giving written notice to the
Company within 30 days from receipt of the Company's notice, to elect to have
included in such registration such of their Registrable Securities as such
holders may request in such notice of election. Thereupon, the Company shall,
as expeditiously as possible, use its reasonable best efforts to effect the
registration on Form S-3 of all Registrable Securities which the Company has
been requested to register; provided, however, that the Company shall not be
obligated to file and use its reasonable best efforts to cause to become
effective (i) more than one registration on Form S-3 pursuant to this Section
6.1(d) or (ii) any such registration statement where the proposed aggregate
offering price of the securities to be sold thereunder is less than $2
million. A registration effected pursuant to this Section 6.1(d) shall not be
counted as a demand registration pursuant to Section 6.1(b) hereof.
(e) The Company may include in a registration
requested under Sections 6.1(a) or 6.1(c) any authorized but unissued shares
of Common Stock for sale by the Company; provided, however, that such shares
shall not be included to the extent that the holders of a majority of the
Registrable Securities included therein determine in good faith that the
inclusion of such shares will interfere with the successful marketing of the
Registrable Securities to be included therein. If the offering to which a
registration statement under either Section 6.1(a) or Section 6.1(c) relates
is an underwritten offering (an "Underwritten Offering"), and if, after all
shares of Common Stock proposed to be offered by the Company have been
excluded from such registration, a greater number of Registrable Securities
is offered for participation in such underwriting than in the opinion of the
investment banker or bankers that shall manage the offering (the "Managing
Underwriter") can be accom-
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modated without adversely affecting the underwriting, the amount of
Registrable Securities proposed to be offered in the underwriting shall be
reduced, pro-rata (based upon the amount of Registrable Securities owned)
among the holders requesting the inclusion of Registrable Securities in such
registration, to a number deemed satisfactory by the Managing Underwriter;
provided, however, that for purposes of making any such reduction, each
Investor which is a partnership, together with the affiliates, partners and
retired partners of such Investor, the estates and family members of any
such partners and retired partners and of their spouses, and any trusts for
the benefit of any of the foregoing Persons shall be deemed to be a single
"holder" of Registrable Securities and any pro-rata reduction with respect to
such "holder" shall be based upon the aggregate amount of Registrable
Securities owned by all entities and individuals included in such "holder",
as defined in this proviso (and the aggregate amount so allocated to such
"holder" shall be allocated among the entities and individuals included in
such "holder" in such manner as such Investor may reason ably determine); and
provided, further, that any such reduction may be greater than pro-rata with
respect to Registrable Securities held by officers, employees and consultants
of the Company if, in the reasonable opinion of the Managing Under writer,
without such greater reduction, the proposed offering could not proceed on
terms reasonably acceptable to the Managing Underwriter.
(f) The Company may include in a registration
requested under Sections 6.1(b) or 6.1(d) any authorized but unissued shares
of Common Stock for sale by the Company; provided, however, that such shares
shall not be included to the extent that the holders of a majority of the
Registrable Securities issued or issuable upon conversion of the Series E
Preferred Stock included therein determine in good faith that the inclusion
of such shares will interfere with the successful marketing of the
Registrable Securities to be included therein. If the offering to which a
registration statement under either Section 6.1(b) or Section 6.1(d) relates
is an Underwritten Offering, and if, after all shares of Common Stock
proposed to be offered by the Company have been excluded from such
registration, a greater number of Registrable Securities is offered for
participation in such underwriting than in the opinion of the Requesting
Series E Holders, based on advice of the Managing Underwriter, can be
accommodated without adversely affecting the underwriting, the amount of
Registrable Securities proposed to be offered in the underwriting shall be
reduced by excluding on a pro-rata basis (based upon the amount of
Registrable Securities owned, provided, however, that any such reduction may
be greater than pro-rata with respect to Registrable Securities held by
officers, employees and consultants of the Company if, in the reasonable
opinion of the Requesting Series E Holders, based on advice of the Managing
Underwriter, without such greater
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reduction, the proposed offering could not proceed on terms reasonably
acceptable to the Requesting Series E Holders) Registrable Securities offered
to be included in such registration which are held by persons (the
"Non-Series E Holders") other than the holders of Registrable Securities
issued or issuable upon conversion of the Series E Preferred Stock to a
number which is reasonably satisfactory to the Requesting Series E Holders,
based on advice of the Managing Underwriter. If after all Registrable
Securities held by Non-Series E Holders have been excluded from such
registration, a greater number of Registrable Securities is offered for
participation in such underwriting than in the opinion of the Managing
Underwriter can be accom modated without adversely affecting the
underwriting, the amount of Registrable Securities proposed to be offered in
the underwriting shall be reduced, pro-rata (based upon the amount of
Registrable Securities owned) among the holders of Registrable Securities
issued or issuable upon conversion of the Series E Preferred Stock requesting
the inclusion of Registrable Securities in such registration, to a number
deemed satisfactory by the Managing Underwriter; provided, however, that for
purposes of making any such reduction referred to in this Section 6.1(f),
each Investor which is a partnership, together with the affiliates, partners
and retired partners of such Investor, the estates and family members of any
such partners and retired partners and of their spouses, and any trusts for
the benefit of any of the foregoing Persons shall be deemed to be a single
"holder" of Registrable Securities and any pro-rata reduction with respect to
such "holder" shall be based upon the aggregate amount of Registrable
Securities owned by all entities and individuals included in such "holder",
as defined in this proviso (and the aggregate amount so allocated to such
"holder" shall be allocated among the entities and individuals included in
such "holder" in such manner as such Investor may reasonably deter mine).
(g) A registration requested pursuant to this
Section 6.1 will not be deemed to have been effected unless it has become
effective; provided that if, after it has become effective, the offering of
Registrable Securities pursuant to such registration is interfered with by
any stop order, injunction or other order or requirement of the Commission
or other governmental agency or court which prevents the successful
completion of such offering, such registration will be deemed not to have
been effected.
(h) The Company will pay all Registration Expenses
in connection with any registration of Registrable Securities effected by it
pursuant to this Section 6.1.
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(i) If a requested registration pursuant to this
Section 6.1 involves an Underwritten Offering, the Persons holding a majority
of the Registrable Securities to be included in such registration shall have
the right to select the Managing Underwriter, subject to the approval of the
Company which shall not be unreasonably withheld.
(j) If at the time a registration request pursuant
to this Section 6.1 is made or is pending, the Board determines that the
filing of a registration statement would require the disclosure of material
information regarding a possible financing, business combination or other
material transaction, which disclosure the Board determines in its good faith
judgment would be detrimental to the Company, the Company may delay a
registration pursuant to this Section 6.1 until the date upon which such
material information is disclosed to the public or ceases to be material.
(k) Notwithstanding the foregoing, in the event
that the Company intends to commence a public offering of securities to which
Section 6.2 hereof will apply, it shall so notify the holders of Registrable
Securities in writing and such holders shall be deemed to have waived their
rights to demand registration under this Section 6.1 for a period of 120 days
following such notice.
Section 6.2 Piggyback Registration. (a) If at any time the
Company proposes to register (other than a registration pursuant to Section
6.1 hereof) any of its Equity Securities under the Securities Act on Forms
S-1, S-2, S-3, SB-1, SB-2 or any other registration form at the time in
effect on which Registrable Securities could be registered for sale by the
holders thereof (other than a registration in connection with an acquisition
of or merger with another entity or the sale of shares to employees,
consultants or directors of the Company pursuant to employee stock option,
stock purchase or other employee benefit plans, provided that the only
securities covered by such registration are the securities to be issued as
part of such acquisition or merger or the securities to be sold to such
employees, consultants or directors), the Company shall on each such occasion
give written notice to all holders of Registrable Securities of its intention
so to do, describing such Equity Securities and specifying the form and
manner and the other relevant facts involved in such proposed registration
(including, without limitation, (x) whether or not such pro posed registered
offering will be an underwritten offering and, if so, the identity of the
Managing Underwriter and whether such offering will be pursuant to a "best
efforts" or "firm commitment" underwriting and (y) the price (net of any
underwriting commissions, discounts and the like) at which the Registrable
Securities, if any, are reasonably expected to be sold) if such disclosure is
acceptable to the Managing
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Underwriter. Upon the written request of any such holder delivered to the
Company within 30 calendar days after the receipt of any such notice (which
request shall specify the Registrable Securities intended to be disposed of by
such holder and the intended method of disposition thereof), the Company will
use its reasonable best efforts to effect the registration under the Securities
Act of all of the Registrable Securities that the Company has been so requested
to register; provided, however, that:
(i) If, at any time after giving such written
notice of its intention to register any securities and prior to the
effective date of the registration statement filed in connection with
such registration, the Company shall determine for any reason not to
register such securities, the Company may, at its election, give
written notice of such determination to each holder of Registrable
Securities who made a request as hereinabove provided and thereupon
shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from its
obligation to pay the Registration Expenses in connection therewith),
without prejudice, however, to the rights, if any, of any one or more
holders to request that such registration be effected as a registration
under Section 6.1; and
(ii) If such registration involves an Underwritten Offering,
all holders of Registrable Securities requesting to be included in the
Company's registration must sell their Registrable Securities to the
underwriters selected by the Company on the same terms and conditions
as apply to the Company.
No registration effected under this Section 6.2 shall relieve
the Company of its obligation to effect any registration upon request under
Section 6.1.
(b) The Registration Expenses incurred in connection
with each registration of Registrable Securities requested pursuant to this
Section 6.2 shall be paid by the Company.
(c) If a registration pursuant to this Section 6.2
involves an Underwritten Offering and the Managing Underwriter advises the
Company that, in its opinion, the number of shares proposed to be included in
such registration should be limited due to market conditions, then the Company
will include in such registration to the extent of the number which the Company
is so advised can be sold in such
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offering (i) first, the securities the Company proposes to sell and (ii) second,
the number of shares of Common Stock requested to be included in such
registration; provided, however, that if a greater number of Registrable
Securities and other shares proposed to be offered by other Stockholders is
offered for inclusion in the proposed underwriting than in the opinion of the
Managing Underwriter proposing to underwrite securities to be sold by the
Company can be accommodated without adversely affecting the proposed
underwriting, the Company may elect to reduce pro-rata (based upon the amount of
shares owned which carry registration rights) the amount of all securities
(including shares of Registrable Securities) proposed to be offered in the
underwriting for the accounts of all Persons other than the Company to a number
deemed satisfactory by the Managing Underwriter. With respect to the proviso of
the preceding sentence, if the Company elects to reduce pro-rata the amount of
securities proposed to be offered in the underwriting for the accounts of all
Persons other than the Company, for purposes of making any such reduction, (i)
each Investor which is a partnership, together with the Affiliates, partners and
retired partners of such Investor, the estates and family members of any such
partners and retired partners and of their spouses, and any trusts for the
benefit of any of the foregoing Persons shall be deemed to be a single "Person",
and any pro-rata reduction with respect to such "Person" shall be based upon
the aggregate amount of shares carrying registration rights owned by all
entities and individuals included as such "Person", as defined in this sentence
(and the aggregate amount so allocated to such "Person" shall be allocated among
the entities and individuals included in such "Person" in such manner as such
Investor may reasonably determine), and (ii) any such reduction may be greater
than pro-rata with respect to Registrable Securities held by officers, employees
and consultants of the Company if, in the reasonable opinion of the Managing
Underwriter without such greater reduction, the proposed offering could not
proceed on terms reasonable acceptable to the Managing Underwriter.
(d) In connection with any Underwritten Offering with
respect to which holders of Registrable Securities shall have requested
registration pursuant to subsection 6.2(a), the Company shall have the right to
select the Managing Underwriter with respect to the offering.
Section 6.3 Registration Procedures. (a) If and whenever the
Company is required to use its reasonable best efforts to effect or cause the
registration of any Registrable Securities under the Securities Act as provided
in Section 6.1 or 6.2, the Company will, as expeditiously as possible:
22
<PAGE>
(i) Prepare and, in any event within 60 calendar days after
the end of the period within which requests for registration may be
given to the Company, file with the Commission a registration
statement with respect to such Registrable Securities and use its
reasonable best efforts to cause such registration statement to become
and remain effective; provided, however, that the Company may
discontinue any registration of its securities that is being effected
pursuant to Section 6.2 at any time prior to the effective date of the
registration statement relating thereto.
(ii) Prepare and file with the Commission such amendments
(including post-effective amendments) and supplements to such
registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective for a
period not in excess of ninety days and to comply with the provisions
of the Securities Act with respect to the disposition of all securities
covered by such registration statement during such period in accordance
with the intended methods of disposition by the seller or sellers
thereof set forth in such registration statement.
(iii) Furnish to each holder of Registrable Securities covered
by the registration statement and to each underwriter, if any, of such
Registrable Securities, such number of copies of a prospectus and
preliminary prospectus for delivery in conformity with the requirements
of the Securities Act, and such other documents, as such Person may
reasonably request, in order to facilitate the public sale or other
disposition of the Registrable Securities.
(iv) Use its best efforts to cause such Registrable Securities
covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be
reasonably necessary to enable the seller or sellers thereof to
consummate the disposition of such Registrable Securities.
(v) Immediately notify each seller of Registrable Securities
covered by such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act
within the appropriate period mentioned in
23
<PAGE>
Section 6.3(a)(ii), if the Company becomes aware that the prospectus
included in such registration statement, as then in effect, includes an
untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and at the request of any such seller, deliver a reasonable
number of copies of an amended or supplemental prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(vi) Otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission and make generally
available to its security holders, in each case as soon as practicable,
but not later than 45 calendar days after the close of the period
covered thereby (90 calendar days in case the period covered
corresponds to a fiscal year of the Company), an earnings statement of
the Company which will satisfy the provisions of subsection 11(a) of
the Securities Act.
(vii) In the event the offering is an Underwritten Offering,
use its best efforts to obtain a "cold comfort" letter from the
independent public accountants for the Company in customary form and
covering such matters as are customarily covered by such letters.
(viii) Execute and deliver all instruments and documents
(including in an Underwritten Offering an underwriting agreement in
customary form) and take such other actions and obtain such
certificates and opinions as are customary in underwritten public
offerings.
(b) Each holder of Registrable Securities will, upon
receipt of any notice from the Company of the happening of any event of the kind
described in subsection 6.3(a)(v), forthwith discontinue disposition of the
Registrable Securities pursuant to the registration statement covering such
Registrable Securities until such
24
<PAGE>
holder's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 6.3(a)(v).
(c) If a registration pursuant to Section 6.1 or 6.2
involves an Underwritten Offering, each holder of Registrable Securities,
whether or not such holder's Registrable Securities are included in such
registration, will, if requested by the Managing Underwriter, enter into an
agreement not to effect any public sale or distribution, including any sale
pursuant to Rule 144 under the Securities Act, of any Registrable Securities, or
of any security convertible into or exchangeable or exercisable for any
Registrable Securities (other than as part of such Underwritten Offering),
without the consent of the Managing Underwriter, during a period commencing on
the effective date of such registration and ending a number of calendar days
thereafter not exceeding 180 as the Board and the Managing Underwriter shall
reasonably determine is required to effect a successful offering.
(d) If a registration pursuant to Section 6.1 or 6.2
involves an Underwritten Offering, the Company agrees, if so required by the
Managing Underwriter, not to effect any public sale or distribution of any of
its Equity Securities or securities convertible into or exchangeable or
exercisable for any of such Equity Securities during a period commencing on the
effective date of such registration and ending not more than 180 calendar days
thereafter, except for such Underwritten Offering or in connection with a stock
option plan, stock purchase plan, savings or similar plan, or an acquisition,
merger or exchange offer.
Section 6.4 Indemnification. (a) In the event of any
registration of any securities of the Company under the Securities Act, the
Company will, and hereby does, indemnify and hold harmless the holder of any
Registrable Securities covered by such registration statement, its directors and
officers, each other Person who participates as an underwriter in the offering
or sale of such securities and each other Person, if any, who controls such
holder or any such underwriter within the meaning of the Securities Act against
any losses, claims, damages or liabilities, joint or several, to which such
holder or any such director or officer or underwriter or controlling person may
become subject under the Securities Act, state securities or blue sky laws, or
otherwise, insofar as such losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
securities were registered under the Securities Act, any preliminary prospectus,
final prospectus or summary prospectus contained therein, any amendment or
supplement thereto, or
25
<PAGE>
any document filed in connection therewith or in connection with any
qualification pursuant to Section 6.3(a)(iv), or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein (in the case of a prospectus, in light
of the circumstances under which they were made) not misleading, and the Company
will reimburse such holder and each such director, officer, underwriter and
controlling person for any legal or any other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided that the Company shall not be liable
with respect to any holder of Registrable Securities in any such case to the
extent that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of or is based upon an untrue statement
or omission made in such registration statement, any such preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement, or
any document incident thereto or incident to registration or qualification of
any Registrable Securities pursuant to Section 6.3(a)(iv), in reliance upon and
in conformity with written information furnished to the Company by the holder
of Registrable Securities specifically for use in the preparation thereof; and
provided, further, that the Company shall not be liable to any Person who
participates as an underwriter, in the offering or sale of Registrable
Securities or to any other Person, if any, who controls such underwriter within
the meaning of the Securities Act, in any such case to the extent that any such
loss, claim, damage, liability (or action or proceeding in respect thereof) or
expense arises out of such Person's failure to send or give a copy of the final
prospectus, as the same may be then supplemented or amended, to the Person
asserting an untrue statement or alleged untrue statement or omission or alleged
omission at or prior to the written confirmation of the sale of Registrable
Securities to such Person if such statement or omission was corrected in such
final prospectus. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such holder of
Registrable Securities or any such director, officer, underwriter or controlling
person and shall survive the transfer of such securities by such holder.
(b)The Company may require, as a condition to
including any Registrable Securities in any registration statement filed
pursuant to Section 6.3, that the Company shall have received an undertaking
satisfactory to it from the prospective seller of such Registrable Securities,
to indemnify and hold harmless (in the same manner and to the same extent as set
forth in subdivision (a) of this Section 6.4) the Company, each director of the
Company, each officer of the Company and each other Person, if any, who controls
the Company within the meaning of the Securities Act, with respect to any
statement in or omission from such registration statement, any preliminary
prospectus, final prospectus or summary prospectus con-
26
<PAGE>
tained therein, or any amendment or supplement thereto, or any qualification
pursuant to Section 6.3(a)(iv), if such statement or omission was made in
reliance upon and in conformity with written information furnished to the
Company by the seller of such Registrable Securities specifically for use in the
preparation of such registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement. Such indemnity shall
remain in full force and effect, regardless of any investigation made by or on
behalf of the Company or any such director, officer or controlling person and
shall survive the Transfer of such securities by such seller. In no event shall
the liability of any such seller of Registrable Securities hereunder be greater
in amount than the dollar amount of the proceeds received by such seller upon
the sale of the Registrable Securities giving rise to such indemnification
obligation.
(c) Promptly after receipt by an indemnified party
of notice of the commencement of any action or proceeding involving a claim
referred to in the preceding subdivisions of this Section 6.4, such
indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the commencement
of such action, provided that the failure of any indemnified party to give
notice as provided herein shall not relieve the indemnifying party of its
obligations under the preceding subdivisions of this Section 6.4, except to
the extent that the indemnifying party is actually prejudiced by such failure
to give notice. In case any such action is brought against an indemnified
party, unless in such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying parties exists in respect
of such claim, the indemnifying party shall be entitled to participate in and
to assume the defense thereof, jointly with any other indemnifying party
similarly notified, to the extent that the indemnifying party may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently incurred
by the latter in connection with the defense thereof other than reasonable
costs of investigation. The indemnified party shall have the right to employ
its own counsel in any such action, but the fees and expenses of such counsel
shall be at the expense of such indemnified party, when and as incurred,
unless (i) the employment of counsel by such indemnified party has been
authorized by the indemnifying parties, (ii) the indemnified party shall have
reasonably concluded that there is a conflict of interest between the
indemnifying parties and the indemnified party in the conduct of the defense
of such action (in which case the indemnifying parties shall not have the
right to direct the defense of such action on behalf of the indemnified
party) or (iii)
27
<PAGE>
the indemnifying parties shall not in fact have employed counsel to assume the
defense of such action. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any settlement
of any such action 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. No indemnified party shall
consent to entry of any judgment or enter into any settlement of any such action
the defense of which has been assumed by an indemnifying party or for which an
indemnifying party may have liability hereunder without the consent of such
indemnifying party.
Section 6.5 Contribution. In order to provide for just and
equitable contribution in circumstances under which the indemnity contemplated
by Section 6.4 is for any reason not available, the parties entitled to
indemnification by the terms hereof shall contribute to the aggregate losses,
liabilities, claims, damages and expenses of the nature contemplated by such
indemnity incurred by the Company, any seller of Registrable Securities and one
or more of the underwriters, except to the extent that contribution is not
permitted under Section 11(f) of the Securities Act. In determining the amount
of contribution to which the respective parties shall be entitled, there shall
be considered the relative benefits received by each party from the offering of
the Registrable Securities (taking into account the portion of the proceeds of
the offering realized by each), the parties' relative knowledge and access to
information concerning the matter with respect to which the claim was asserted,
the opportunity to correct and prevent any statement or omission and any other
equitable considerations appropriate under the circumstances. The Company and
each seller of Registrable Securities agree with each other that no seller of
Registrable Securities shall be required to contribute any amount in excess of
the amount such seller would have been required to pay to an indemnified party
if the indemnity under subsection 6.4(b) was available. The Company and each
such seller agree with each other and the underwriters of the Registrable
Securities, if requested by such underwriters, that it would not be equitable if
the amount of such contribution were determined by pro-rata or per capita
allocation (even if the underwriters were treated as one entity for such
purpose) or for the underwriters' portion of such contribution to exceed the
percentage that the underwriting discount bears to the offering price of the
Registrable Securities. For purposes of this Section 6.5, each Person, if any,
who controls an underwriter within the meaning of Section 15 of the Securities
Act, shall have the same rights to contribution as such underwriter, and each
director and each officer of the Company who signed the registration statement,
and each Person, if any, who controls the Company or a seller of Registrable
Securities within the meaning of Section 15 of the Securities Act shall have
the same rights
28
<PAGE>
to contribution as the Company or such seller of Registrable Securities, as the
case may be.
Section 6.6 Rule 144. If the Company shall have filed a
registration statement pursuant to the requirements of Section 12 of the
Exchange Act or a registration statement pursuant to the requirements of the
Securities Act, the Company covenants that it will file the reports required to
be filed by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the Commission thereunder (or, if the Company is not
required to file such reports, it will, upon the request of any holder of
Registrable Securities, make publicly available other information), and it will
take such further action as any holder of Registrable Securities may reasonably
request, all to the extent required from time to time to enable such holder to
sell shares of Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by (i) Rule 144 under the
Securities Act, as such Rule may be amended from time to time, or (ii) any
similar rule or regulation hereafter adopted by the Commission. Upon the request
of any holder of Registrable Securities, the Company will deliver to such holder
a written statement as to whether it has complied with such requirements.
ARTICLE 7
FUTURE INVESTORS
If subsequent to the date hereof, the Company grants to
holders or prospective holders of its securities registration rights which are
more favorable than the terms or provisions of Article 6 of this Agreement are
to the Stockholders, such Article 6 shall be deemed to be automatically amended
(without the necessity of any action on the part of the Company or the
Stockholders) to grant to the Stockholders such more favorable registration
rights, in addition to those set forth herein. If subsequent to the date hereof,
the Company grants to holders or prospective holders of its securities
antidilution rights which are more favorable than the terms or provisions of the
Certificate of Incorporation are to the holders of Preferred Stock, this
Agreement shall be deemed to be automatically amended (without the necessity of
any action on the part of the Company or any holder of Preferred Stock) to grant
to the holders of Preferred Stock such more favorable antidilution rights, in
addition to those set forth in the Certificate of Incorporation, it being
understood and agreed that antidilution rights which provide that the conversion
price of a class or series of Equity Securities may not be adjusted such that it
is less than the applicable conversion price of another class or series of
Equity Securities shall not be deemed to be
29
<PAGE>
more favorable than the antidilution rights of such other class or series of
Equity Securities. In connection therewith, the Company shall take all action
available to it to cause the Certificate of Incorporation to be amended to
provide for such more favorable antidilution rights, and each Stockholder agrees
to vote (or cause to be voted) all shares of Company Stock then owned by such
Stockholder to approve such amendment. Such amended antidilution provisions
shall be applicable to any issuance or deemed issuance of Common Stock (to the
extent provided in such more favorable antidilution provisions) which is made
(i) after the issuance of securities in connection with which such more
favorable antidilution rights are granted to the holders of Preferred Stock
pursuant to this Article 7 and (ii) at a price below the Conversion Price in
effect under the Certificate of Incorporation (or such other applicable price
which, under the terms of such more favorable antidilution rights, gives rise to
an antidilution adjustment) at the time of such issuance or deemed issuance. The
provisions of this Article 7 may be waived in any specific instance by the vote
or written consent of Stockholders holding shares of Series A Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock
and/or Common Stock into which such shares of Preferred Stock have been
converted, representing at least 662/3% of the voting power of such shares of
Preferred Stock (for this purpose shares of Preferred Stock shall be deemed to
have a number of votes equal to the number of shares of Common Stock into which
such shares of Preferred Stock are then convertible) and Common Stock, voting or
acting by written consent as a single class, and each Stockholder owning any
such shares of Preferred Stock or such shares of Common Stock agrees that such
Stockholder will consider in good faith any such waiver requested by the Company
as being necessary or desirable to effect a financing on terms which are
otherwise favorable to the Company.
ARTICLE 8
TERMINATION
Section 8.1 (a) Subject to subsection 8.1(c) hereof, this
Agreement shall terminate on the earlier of: (i) the date of an Initial Public
Offering or (ii) December 23, 2003.
(b) Notwithstanding the foregoing, this Agreement
shall in any event terminate with respect to any Stockholder when such
Stockholder no longer owns any shares of Common Stock, Preferred Stock, or other
common or preferred stock of the Company.
(c) The provisions set forth in Article VI, this
Section 8.1(c) and Article 9 hereof shall survive the termination of this
Agreement.
30
<PAGE>
ARTICLE 9
MISCELLANEOUS
Section 9.1 Successors and Assigns. Except as otherwise
provided herein, all of the terms and provisions of this Agreement shall be
binding upon the respective successors and assigns of the parties hereto
(including any nominee of a Stockholder which holds Company Stock in its name
which is beneficially owned by such Stockholder), and shall inure to the benefit
of and shall be enforceable by the respective successors and assigns of the
parties hereto. Any breach of any of the terms or provisions of this Agreement
by a nominee of any Stockholder shall be deemed a breach of this Agreement by
such Stockholder. No Stockholder may assign any of its rights hereunder to any
Person other than a transferee of Company Stock that has complied in all
respects with the requirements of Articles 2 and 3 hereof; provided, however,
that the rights provided for in Article 4 hereof to designate a Designee shall
not be assignable. If any transferee of any Stockholder shall acquire any
securities of the Company, in any manner, whether by operation of law or
otherwise, such securities shall be held subject to all of the terms of this
Agreement, and by taking and holding such securities such Person shall be
entitled to receive the benefits of and be conclusively deemed to have agreed to
be bound by and to comply with all of the terms and provisions of this Agreement
to the extent applicable to such Person's transferor; provided, however, that
the rights provided for in Article 4 hereof to designate a Designee shall not
inure to the benefit of or apply to any such transferee. Notwithstanding the
foregoing, each transferee of any securities of the Company shall execute and
deliver to the Company a Stock Transfer Agreement in the form attached hereto
as Exhibit A.
Section 9.2 Amendment and Modification; Waiver of Compliance.
This Agreement may be amended only by a written instrument duly executed by the
Company and Stockholders who own a majority of the then outstanding shares of
Common Stock, and shares of Series A Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock and Series E Preferred Stock and/or Common Stock into
which such shares of Preferred Stock have been converted, representing at least
66 2/3% of the voting power of such shares of Preferred Stock (for this purpose
shares of Preferred Stock shall be deemed to have a number of votes equal to the
number of shares of Common Stock into which such shares of Preferred Stock are
then convertible) and Common Stock, provided that, notwithstanding the
foregoing, without the prior consent or approval of the holders of a majority of
the Series E Preferred Stock, this Agreement may not be amended if such proposed
amendment affects the Series E Preferred Stock but does not so affect the Series
C Preferred Stock and the Series D Preferred Stock.
31
<PAGE>
(b) Except as otherwise provided in this Agreement,
any failure of any of the parties to comply with any obligation, agreement or
condition herein may be waived by the party entitled to the benefits thereof
only by a written instrument signed by the party granting such waiver, but such
waiver or failure to insist upon strict compliance with such obligation,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
Section 9.3 Notices. Any notice, request, claim, demand,
document and other communication hereunder to any party shall be effective upon
receipt (or refusal of receipt) and shall be in writing and delivered personally
or sent by telex, telecopy, or certified or registered mail, postage prepaid, or
other similar means of communication, as follows:
If to the Company or any Founder:
PRAECIS PHARMACEUTICALS INCORPORATED
One Hampshire Street
Cambridge, MA 02142
Attention: Malcolm L. Gefter, Ph.D.
Telecopy: (617) 494-8414
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
One Beacon Street, 31st Floor
Boston, MA 02108
Attention: Kent A. Coit, Esq.
Telecopy: (617) 573-4822
If to any of the Investors: at the addresses specified in
Schedules 1 or 2 attached hereto or a Stock Transfer
Agreement.
Section 9.4 Additional Parties. Any Person who acquires any
Company Stock from the Company after the date hereof may become a party to this
Agreement if agreed to by the Board and if such person shall agree in writing,
in form and substance reasonably acceptable to the Company, to be bound by and
to comply with all of the provisions of this Agreement.
Section 9.5 Entire Agreement; Governing Law. This Agreement
and the other writings referred to herein or delivered pursuant hereto, and
with respect to the Founders, the respective Stock Subscription and
Restriction Agreements dated July 27, 1993, as amended, between each of the
Founders and the Company, contain
32
<PAGE>
the entire agreement among the parties hereto with respect to the subject
transactions contemplated hereby and supersede all prior oral and written
agreements and memoranda and undertakings among the parties hereto with regard
to its subject matter; provided, however, that any representations set forth in
Section 3.6 of the Original Stockholders Agreement shall survive. This Agreement
shall be governed by and construed in accordance with the laws of the State of
Delaware without regard to the conflicts of laws provisions thereof.
Section 9.6 Injunctive Relief. The parties hereto
acknowledge and agree that a violation of any of the terms of this Agreement
will cause the parties irreparable injury for which adequate remedy at law is
not available. Therefore, the parties agree that each party shall be entitled to
an injunction, restraining order or other equitable relief from any court of
competent jurisdiction, restraining any party from committing any violations of
the provisions of this Agreement. Without limiting the generality of the
foregoing, the Company shall have the right to any such equitable relief to
prevent any unauthorized transfers of securities of the Company hereunder.
Section 9.7 Expenses. Except as expressly provided herein,
each party shall pay its own expenses incident to the performance or enforcement
of this Agreement, including all fees and expenses of its counsel for activities
of such counsel undertaken pursuant to this Agreement.
Section 9.8 Inspection. For so long as this Agreement shall
be in effect, this Agreement shall be made available for inspection by any
Stockholder at the principal executive office of the Company.
Section 9.9 Headings. The section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
Section 9.10 Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
33
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by
the requisite parties on the date first above written.
PRAECIS PHARMACEUTICALS
INCORPORATED
By:/s/ Kevin F. McLaughlin
------------------------------------
Name:
Title: V.P. and CFO
/s/ Malcolm L. Gefter
------------------------------------
Malcolm L. Gefter
/s/ Ethan R. Signer
------------------------------------
Ethan R. Signer
/s/ A. Donny Strosberg
------------------------------------
A. Donny Strosberg
MASSACHUSETTS INSTITUTE OF
TECHNOLOGY
By /s/ Allan S. Bufferd
------------------------------------
Name: Allan S. Bufferd
Title: Deputy Treasurer
/s/ David L. Anderson
------------------------------------
David L. Anderson
/s/ G. Leonard Baker, Jr.
------------------------------------
G. Leonard Baker, Jr.
CANAAN VENTURES II LIMITED
PARTNERSHIP
By: Canaan Venture Partners II L.P.
By /s/ Harry T. Rein
------------------------------------
Name: Harry T. Rein
Title: Managing General Partner
34
<PAGE>
CANAAN VENTURES II OFFSHORE
C.V.
By: Canaan Venture Partners II L.P.
By /s/ Harry T. Rein
------------------------------------
Name: Harry T. Rein
Title: Managing General Partner
CHASE VENTURE CAPITAL
ASSOCIATES, L.P.
By: CHASE CAPITAL PARTNERS
Its General Partner
By /s/ Damion Wicker
------------------------------------
Name: Damion Wicker
Title: General Partner
/s/ Tench Coxe
------------------------------------
Tench Coxe
/s/ Sherryl W. Hossack
------------------------------------
James C. Gaither
By: Sherryl W. Hossack
Under Power of Attorney
GENSTAR INVESTMENT LLC
By /s/ Richard D. Paterson
------------------------------------
Name: Richard D. Paterson
Title: Member
GREYLOCK LIMITED PARTNERSHIP
By /s/ Henry F. McCance
------------------------------------
Name: Henry F. McCance
Title: General Partner
35
<PAGE>
HIGHLAND CAPITAL PARTNERS II
LIMITED PARTNERSHIP
By: Highland Management Partners II
Limited Partnership
Its General Partner
By /s/ Wycliffe K. Grousbeck
------------------------------------
General Partner
J.H. WHITNEY & CO.
By /s/ William Laverack, Jr.
------------------------------------
Name: William Laverack, Jr.
Title: General Partner
ROBERT W. AND LAURIE KITTS
By /s/ Robert W. Kitts
------------------------------------
Robert W. Kitts
By /s/ Laurie Kitts
------------------------------------
Laurie Kitts
/s/ Sherryl W. Hossack
------------------------------------
Ronald L. Perkins
By: Sherryl W. Hossack
Under Power of Attorney
SAUNDERS HOLDINGS, L.P.
By /s/ G. Leonard Baker, Jr.
------------------------------------
Name: G. Leonard Baker, Jr.
Title: Managing Director of the General
Partner
36
<PAGE>
SUTTER HILL VENTURES, A CALIFORNIA LIMITED
PARTNERSHIP
By /s/ G. Leonard Baker, Jr.
------------------------------------
Name: G. Leonard Baker, Jr.
Title: Managing Director of the General
Partner
TOW PARTNERS, A CALIFORNIA LIMITED PARTNERSHIP
By /s/ Paul M. Wythes
------------------------------------
Name: Paul M. Wythes
Title: General Partner
WELLS FARGO BANK, TRUSTEE
SHV M/P/T FBO
David Anderson
By /s/ Annik Prasad
------------------------------------
Name: Annik Prasad
Title: Trust Officer
WELLS FARGO BANK, TRUSTEE
SHV M/P/T FBO
G. Leonard Baker, Jr.
By /s/ Annik Prasad
------------------------------------
Name: Annik Prasad
Title: Trust Officer
WHITNEY 1990 EQUITY FUND, L.P.
By /s/ William Laverack, Jr.
------------------------------------
Name: William Laverack, Jr.
Title: General Partner
37
<PAGE>
PAUL M. WYTHES AND MARSHA R.
WYTHES, TRUSTEES OF THE WYTHES
LIVING TRUST 7-21-87
By /s/ Paul M. Wythes
------------------------------------
Name: Paul M. Wythes
Title: Trustee
/s/ William H. Younger, Jr.
------------------------------------
William H. Younger, Jr.
WILLIAM H. YOUNGER, JR.,
TRUSTEE OF THE YOUNGER LIVING
TRUST 1-20-95
By /s/ William H. Younger, Jr.
------------------------------------
Name: William H. Younger, Jr.
Title: Trustee
/s/ Steven P. Bird
------------------------------------
Steven P. Bird
COMDISCO, INC.
By
------------------------------------
Name:
Title:
/s/ Kevin J. McQuillan
------------------------------------
Kevin J. McQuillan
HLM PARTNERS V, L.P.
By /s/ A. R. Haberkorn III
------------------------------------
Name: A. R. Haberkorn III
Title: General Partner HLM Associates V,
L.P. the General Partner of HLM
Partners V, L.P.
38
<PAGE>
PHARMA/wHEALTH FUND
By /s/ Samuel D. Isaly
------------------------------------
Name: Samuel D. Isaly
Title: Portfolio Manager
VULCAN VENTURES, INC.
By /s/ William D. Savoy
------------------------------------
Name: William D. Savoy
Title: Vice President
/s/ Albert L. Zesiger
------------------------------------
Albert L. Zesiger
ARTHUR D. LITTLE EMPLOYEE
PENSION PLAN
By /s/ Albert L. Zesiger
------------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
CITY OF STAMFORD FIREMEN'S
PENSION FUND
By /s/ Albert L. Zesiger
------------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
DEAN WITTER FOUNDATION
By /s/ Albert L. Zesiger
------------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
DEMVEST EQUITIES, L.P.
By /s/ Albert L. Zesiger
------------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
39
<PAGE>
FERRIS F. HAMILTON FAMILY TRUST
By /s/ Albert L. Zesiger
------------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
HBL CHARITABLE UNITRUST
By /s/ Albert L. Zesiger
------------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
/s/ Albert L. Zesiger
------------------------------------
William B. Lazar
By: Albert L. Zesiger
Agent & Attorney-in-fact
/s/ Albert L. Zesiger
------------------------------------
Jeanne Morency
By: Albert L. Zesiger
Agent & Attorney-in-fact
WOLFSON INVESTMENT PARTNERS LP
By /s/ Albert L. Zesiger
------------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
/s/ Albert L. Zesiger
------------------------------------
Leonard Kingsley
By: Albert L. Zesiger
Agent & Attorney-in-fact
/s/ Albert L. Zesiger
------------------------------------
Helen Hunt
By: Albert L. Zesiger
Agent & Attorney-in-fact
40
<PAGE>
MARY ANN HAMILTON TRUST
By /s/ Albert L. Zesiger
------------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
MORGAN TRUST CO. OF THE
BAHAMAS LTD.
By /s/ Albert L. Zesiger
------------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
NORWALK EMPLOYEE PENSION FUND
By /s/ Albert L. Zesiger
------------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
ROANOKE COLLEGE
By /s/ Albert L. Zesiger
------------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
STATE OF OREGON PERS/ZCG
By /s/ Albert L. Zesiger
------------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
TAB PRODUCTS COMPANY
PENSION PLAN
By /s/ Albert L. Zesiger
------------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
THE BREARLEY SCHOOL
ENDOWMENT FUND
By /s/ Albert L. Zesiger
------------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
41
<PAGE>
THE CHAPIN SCHOOL LTD.
ENDOWMENT FUND
By /s/ Albert L. Zesiger
------------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
THE JENIFER ALTMAN FOUNDATION
By /s/ Albert L. Zesiger
------------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
THE RAISER MARITAL TRUST
By /s/ Mark Collins, Jr.
------------------------------------
Name: Mark Collins, Jr.
Title: Principal, Alex Brown Capital
VAN LOBEN SELS FOUNDATION
By /s/ Albert L. Zesiger
------------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
WARREN INVESTMENT GROUP LTD.
LLC
By /s/ Albert L. Zesiger
------------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
WARREN OTOLOGIC PROFIT
SHARING TRUST
By /s/ Albert L. Zesiger
------------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
42
<PAGE>
WELLS FAMILY LLC
By /s/ Albert L. Zesiger
------------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
/s/ James Finnerty
------------------------------------
James Finnerty
QUANTUM INDUSTRIAL PARTNERS
LDC
By /s/ Michael C. Neus
------------------------------------
Name: Michael C. Neus
Title: Attorney-In-Fact
TRUSTEES OF AMHERST COLLEGE
By /s/ Albert L. Zesiger
------------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
CITY OF MILFORD PENSION &
RETIREMENT FUND
By /s/ Albert L. Zesiger
------------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
PUBLIC EMPLOYEE RETIREMENT
SYSTEM OF IDAHO
By /s/ Albert L. Zesiger
------------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
43
<PAGE>
SCHEDULE 1
NAMES AND ADDRESSES OF EXISTING INVESTORS
J.H. Whitney & Co.
177 Broad Street
Stamford, CT 06901
Attn: William Laverack
Whitney 1990 Equity Fund, L.P.
177 Broad Street
Stamford, CT 06901
Attn: William Laverack
Greylock Limited Partnership
One Federal Street, 26th Floor
Boston, MA 02110
Attn: Henry F. McCance
Chase Venture Capital Associates, L.P.
c/o Chase Capital Partners
380 Madison Avenue, 12th Floor
New York, NY 10017
Attn: Damion E. Wicker
Highland Capital Partners II Limited Partnership
Two International Place, 22nd Floor
Boston, MA 02110
Attn: Wycliffe Grousbeck
Canaan Ventures II Offshore C.V.
105 Rowayton Avenue
Rowayton, CT 06853
Attn: Harry T. Rein
<PAGE>
Canaan Ventures II Limited Partnership
105 Rowayton Avenue
Rowayton, CT 06853
Attn: Harry T. Rein
Sutter Hill Ventures
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
Attn: G. Leonard Baker
TOW Partners
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
Saunders Holdings, L.P.
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
William H. Younger, Jr.
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
Tench Coxe
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
Ronald L. Perkins
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
S1-2
<PAGE>
Wells Fargo Bank, Trustee SHV M/P/T FBO
G. Leonard Baker, Jr.
Attn: Annik Prasad
420 Montgomery Street
San Francisco, CA 94104
Wells Fargo Bank, Trustee SHV M/P/T FBO
David L. Anderson
Attn: Annik Prasad
420 Montgomery Street
San Francisco, CA 94104
James C. Gaither
755 Page Mill Road, Suite A-200
Palo Alto, CA 94304
William H. Younger, Jr., Trustee of
The Younger Living Trust 1-20-95
755 Page Mill Road, Suite A-200
Palo Alto, CA 94304
G. Leonard Baker, Jr.
755 Page Mill Road, Suite A-200
Palo Alto, CA 94304
David L. Anderson
755 Page Mill Road, Suite A-200
Palo Alto, CA 94304
Paul M. Wythes and Marsha R. Wythes,
Trustees of The Wythes Living
Trust 7-21-87
755 Page Mill Road, Suite A-200
Palo Alto, CA 94304
Genstar Investment LLC
Metro Tower, Suite 1170
950 Tower Lane
Foster City, CA 94404-2121
Attn: R.D. Paterson
S1-3
<PAGE>
Eric Gleacher
c/o Gleacher NatWest, Inc.
660 Madison Avenue
New York, NY 10021
Charles G. Phillips
c/o Gleacher NatWest, Inc.
660 Madison Avenue
New York, NY 10021
James Goodwin
c/o Gleacher NatWest, Inc.
660 Madison Avenue
New York, NY 10021
H. Conrad Meyer
c/o Gleacher NatWest, Inc.
660 Madison Avenue
New York, NY 10021
Emil W. Henry
c/o Gleacher NatWest, Inc.
660 Madison Avenue
New York, NY 10021
Richard A. Derbes
c/o Morgan Stanley & Co.
1585 Broadway
New York, NY 10036-8293
Robert W. Kitts
c/o Morgan Stanley & Co.
1585 Broadway
New York, NY 10036-8293
Comdisco, Inc.
6111 North River Road
Rosemont, IL 60018
Attn: Jill C. Hanses
S1-4
<PAGE>
Massachusetts Institute of Technology
Office of the Treasurer
238 Main Street
Suite 200
Cambridge, MA 02142
Attn: Philip Rotner
Venture Capital Officer
PHARMA/wHEALTH Fund
c/o G/A Capital Management
41 Madison Avenue
New York, NY 10010-2202
Attn: Samuel D. Isaly
Vulcan Ventures, Inc.
110-110th Avenue Northeast
Suite 550
Bellevue, WA 98004
Attn: William D. Savoy
Kevin J. McQuillan
345 Cervantes Road
Portola Valley, CA 94028
Steven P. Bird
8 Faxon Road
Atherton, CA 94027
HLM Partners V, L.P.
222 Berkeley Street
Boston, MA 02116
Attn: Buck Haberkorn
Robert W. and Laurie Kitts
c/o Morgan Stanley & Co.
1585 Broadway
New York, NY 10036-8293
Albert L. Zesiger
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
S1-5
<PAGE>
Arthur D. Little Employee Pension Fund
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Attn: Albert L. Zesiger
City of Stamford Firemen's Pension Fund
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Attn: Albert L. Zesiger
Dean Witter Foundation
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Attn: Albert L. Zesiger
Demvest Equities, L.P.
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Attn: Albert L. Zesiger
Ferris F. Hamilton Family Trust
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Attn: Albert L. Zesiger
HBL Charitable Unitrust
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Attn: Albert L. Zesiger
Helen Hunt
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Attn: Albert L. Zesiger
S1-6
<PAGE>
Leonard Kingsley
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Attn: Albert L. Zesiger
Mary Ann Hamilton Trust
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Attn: Albert L. Zesiger
Morgan Trust Co. of The Bahamas Ltd.
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Attn: Albert L. Zesiger
Norwalk Employee Pension Fund
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Attn: Albert L. Zesiger
Roanoke College
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Attn: Albert L. Zesiger
State of Oregon PERS/ZCG
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Attn: Albert L. Zesiger
Tab Products Company Pension Plan
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Attn: Albert L. Zesiger
S1-7
<PAGE>
The Brearley School Endowment Fund
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Attn: Albert L. Zesiger
The Chapin School Ltd. Endowment Fund
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Attn: Albert L. Zesiger
The Jennifer Altman Foundation
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Attn: Albert L. Zesiger
The Raiser Marital Trust
Alex Brown Capital Advisory & Trust Co.
19 South Street
Baltimore, MD 21202
Attn: Venedia Andrews
Van Loben Sels Foundation
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Attn: Albert L. Zesiger
Warren Investment Group Ltd. LLC
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Attn: Albert L. Zesiger
Warren Otologic Profit Sharing Trust
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Attn: Albert L. Zesiger
S1-8
<PAGE>
Wells Family LLC
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Attn: Albert L. Zesiger
James Finnerty
128 Cliff Road
Wellesley, MA 02181
Wolfson Investment Partners LP
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
William B. Lazar
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Jeanne Morency
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Quantum Industrial Partners LDC
c/o Michael C. Neus
Attorney-in-fact
888 Seventh Avenue
New York, NY 10106
S1-9
<PAGE>
SCHEDULE 2
NAMES AND ADDRESSES OF NEW INVESTORS
J.H. Whitney & Co.
177 Broad Street
Stamford, CT 06901
Attn: William Laverack
Whitney 1990 Equity Fund, L.P.
177 Broad Street
Stamford, CT 06901
Attn: William Laverack
Greylock Limited Partnership
One Federal Street, 26th Floor
Boston, MA 02110
Attn: Henry F. McCance
Chase Venture Capital Associates, L.P.
c/o Chase Capital Partners
380 Madison Avenue, 12th Floor
New York, NY 10017
Attn: Damion E. Wicker
Highland Capital Partners II Limited Partnership
Two International Place, 22nd Floor
Boston, MA 02110
Attn: Wycliffe Grousbeck
Canaan Ventures II Offshore C.V.
105 Rowayton Avenue
Rowayton, CT 06853
Attn: Harry T. Rein
Canaan Ventures II Limited Partnership
105 Rowayton Avenue
Rowayton, CT 06853
Attn: Harry T. Rein
S1-1
<PAGE>
Sutter Hill Ventures, A California Limited Partnership
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
Attn: G. Leonard Baker
Paul M. Wythes and Marsha R. Wythes,
Trustees of The Wythes Living Trust 7-21-87
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
TOW Partners, A California Limited Partnership
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
William H. Younger, Jr.,
Trustee of the Younger Living Trust 1-20-95
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
Tench Coxe
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
James C. Gaither
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
Ronald L. Perkins
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
Wells Fargo Bank, Trustee
SHV M/P/T FBO David L. Anderson
420 Montogmery Street, 2nd Floor
San Francisco, CA 94104
Attn: Annik Prasad
S1-2
<PAGE>
Wells Fargo Bank, Trustee
SHV M/P/T FBO G. Leonard Baker, Jr.
420 Montgomery Street, 2nd Floor
San Francisco, CA 94104
Attn: Annik Prasad
Genstar Investment LLC
Metro Tower, Suite 1170
950 Tower Lane
Foster City, CA 94404-2121
Attn: R.D. Paterson
Vulcan Ventures, Inc.
110-110th Avenue Northeast
Suite 550
Bellevue, WA 98004
Attn: William D. Savoy
HLM Partners V, L.P.
222 Berkeley Street
Boston, MA 02116
Attn: Buck Haberkorn
Trustees of Amherst College
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Attn: Albert L. Zesiger
City of Milford Pension & Retirement Fund
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Attn: Albert L. Zesiger
Public Employee Retirement System of Idaho
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Attn: Albert L. Zesiger
S1-3
<PAGE>
State of Oregon PERS/ZCG
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Attn: Albert L. Zesiger
S1-4
<PAGE>
EXHIBIT A
STOCK TRANSFER AGREEMENT
The undersigned, being the transferee of _____ shares of __________
stock1 of PRAECIS PHARMACEUTICALS INCORPORATED, a Delaware corporation (the
"Company"), as a condition to the receipt of such shares, acknowledges that
the voting and transfer of such shares are restricted by an Amended and
Restated Stockholders Agreement dated as of April 30, 1998 (the
"Stockholders Agreement") among the Company and certain of it stockholders,
and the undersigned agrees to be bound by the terms of (and shall be a party
to) the Stockholders Agreement, as such agreement has been or may be amended,
and to be a "Stockholder" for purposes of the Stockholders Agreement.
Agreed to this _____ day of __________, ____.
-----------------------------------
Name:
2
-------------------------------------------
Confirmed on behalf of the parties to the Stockholders Agreement as of the date
hereof.
PRAECIS PHARMACEUTICALS INCORPORATED
By ---------------------------------
Name:
Title:
- --------
1 Specify title of equity securities.
2 Include address for notices.
<PAGE>
AMENDMENT NO. 1 TO AMENDED AND RESTATED
STOCKHOLDERS AGREEMENT
AMENDMENT NO. 1 dated as of May 14, 1998 to Amended and
Restated Stockholders Agreement dated as of April 30, 1998 by and among PRAECIS
PHARMACEUTICALS INCORPORATED, a Delaware corporation (the "Company"), and the
stockholders of the Company referred to therein (the "Stockholders Agreement").
Capitalized terms used herein and not otherwise defined shall have the meanings
ascribed to such terms in the Stockholders Agreement.
The Company and the Stockholders of the Company who are
signatories hereto desire to amend the Stockholders Agreement as set forth
herein.
Pursuant to Section 9.2 of the Stockholders Agreement, the
Stockholders Agreement may be amended only by a written instrument duly
executed by the Company and Stockholders who own a majority of the then
outstanding shares of Common Stock, and shares of Series A Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock
and/or Common Stock into which such shares of Preferred Stock have been
converted, representing at least 66 2/3% of the voting power of such shares of
Preferred Stock (for this purpose shares of Preferred Stock shall be deemed to
have a number of votes equal to the number of shares of Common Stock into which
such shares of Preferred Stock are then convertible) and Common Stock.
The signatories hereto represent holders of greater than a
majority of the outstanding shares of Common Stock held by Stockholders and
greater than 66 2/3% of the shares of Common Stock issued or issuable upon
conversion of the Series A Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock.
In consideration of the foregoing, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. The definition of "Related Party" set forth in Article 1 of
the Stockholders Agreement is hereby amended by (x) deleting the word
"affiliates" as it appears in the third and fifth lines of clause (iv) of such
definition and replacing it with the word "Affiliates" and (y) deleting the
period at the end of clause (iv), adding ";" to the end of such clause and
adding the following as the final clauses of such definition:
"(v) In the case of a limited liability company, (A) such limited
liability company and any of its members, (B) any former
members of such
<PAGE>
limited liability company, (C) the estates or other legal
representatives of any such members or former members, (D) any
corporation, partnership, limited liability company or other
business organization to which such limited liability company
shall sell all or substantially all of its assets or with
which it shall be merged and (E) any Affiliate of such limited
liability company;
(vi) In the case of a Stockholder which is, or an Affiliate of
which is, engaged in the investment advisory or investment
management business as of the date hereof (a
"Manager-Stockholder"), in addition to the above, any Person
or entity for which such Manager-Stock holder or any such
Affiliate acts as investment advisor or investment manager;
and
(vii) In the case of a Stockholder for which a Manager-Stockholder
or any Affiliate thereof acts as investment advisor or
investment manager, in addition to the above, any other Person
or entity for which such Manager-Stockholder or any such
Affiliate acts as investment advisor or investment manager."
2. Section 3.6 of the Stockholders Agreement is hereby amended
by (x) inserting "(i)" immediately before the word "unless" in the fourth line
of such section; (y) replacing the word "Purchaser" as it appears in two places
in the ninth line of such section with the word "Investor"; and (z) deleting the
period at the end of such section and adding the following as the final clause
of Section 3.6:
"or (ii) the Company determines that such Transfer would
result in the Company being required to register any of its
securities under the Exchange Act."
3. Counterparts. This Amendment No. 1 may be signed in one or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
2
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment
No. 1 to the Stockholders Agreement as of the date first written above.
PRAECIS PHARMACEUTICALS
INCORPORATED
By:/s/ Malcolm L. Gefter
--------------------------
Name:
Title:
/s/ Malcolm L. Gefter
--------------------------
Malcolm L. Gefter
/s/ Ethan R. Signer
--------------------------
Ethan R. Signer
/s/ A. Donna Strosberg
--------------------------
A. Donny Strosberg
MASSACHUSETTS INSTITUTE OF
TECHNOLOGY
By /s/ Allan S. Bufferd
--------------------------
Name: Allan S. Bufferd
Title: Deputy Treasurer
/s/ David L. Anderson
--------------------------
David L. Anderson
/s/ G. Leonard Baker, Jr.
--------------------------
G. Leonard Baker, Jr.
3
<PAGE>
CANAAN VENTURES II LIMITED
PARTNERSHIP
By: Canaan Venture Partners II L.P.
By /s/ Harry T. Rein
--------------------------
Name: Harry T. Rein
Title: Managing General Partner
CANAAN VENTURES II OFFSHORE
C.V.
By: Canaan Venture Partners II L.P.
By /s/ Harry T. Rein
--------------------------
Name: Harry T. Rein
Title: Managing General Partner
CHASE VENTURE CAPITAL
ASSOCIATES, L.P.
By: CHASE CAPITAL PARTNERS
Its General Partner
By /s/ Damion E. Wicker
--------------------------
Name:
Title:
/s/ Tench Coxe
--------------------------
Tench Coxe
/s/ Sherryl W. Hossack
--------------------------
James C. Gaither
By: Sherryl W. Hossack
Under Power of Atty
GENSTAR INVESTMENT LLC
By /s/ Richard D. Paterson
--------------------------
Name: Richard D. Paterson
Title: Member
4
<PAGE>
GREYLOCK LIMITED PARTNERSHIP
By /s/ Henry F. McCance
--------------------------
Name: Henry F. McCance
Title: General Partner
HIGHLAND CAPITAL PARTNERS II
LIMITED PARTNERSHIP
By: Highland Management Partners II
Limited Partnership
Its General Partner
By /s/ Wycliffe K. Grousbeck
--------------------------
General Partner
J.H. WHITNEY & CO.
By /s/ William Laverack, Jr.
--------------------------
Name:
Title:
ROBERT W. AND LAURIE KITTS
By /s/ Robert W. Kitts
--------------------------
Robert W. Kitts
By /s/ Laurie Kitts
--------------------------
Laurie Kitts
/s/ Sherryl W. Hossack
--------------------------
Ronald L. Perkins
By: Sherryl W. Hossack
Under Power of Atty
SAUNDERS HOLDINGS, L.P.
By /s/ G. Leonard Baker, Jr.
--------------------------
Name: G. Leonard Baker, Jr.
Title: General Partner
5
<PAGE>
SUTTER HILL VENTURES, A CALIFORNIA
LIMITED PARTNERSHIP
By /s/ G. Leonard Baker, Jr.
--------------------------
Name: G. Leonard Baker, Jr.
Title: Managing Director of the
General Partner
TOW PARTNERS, A CALIFORNIA LIMITED
PARTNERSHIP
By /s/ Paul M. Wythes
--------------------------
Name: Paul M. Wythes
Title: General Partner
WELLS FARGO BANK, TRUSTEE
SHV M/P/T FBO David Anderson
By /s/ Annik Prasad
--------------------------
Name: Annik Prasad
Title: Trust Officer
WELLS FARGO BANK, TRUSTEE
SHV M/P/T FBO G. Leonard Baker, Jr.
By /s/ Annik Prasad
--------------------------
Name: Annik Prasad
Title: Trust Officer
WHITNEY 1990 EQUITY FUND, L.P.
By /s/ William Laverack, Jr.
--------------------------
Name:
Title:
PAUL M. WYTHES AND MARSHA R.
WYTHES, TRUSTEES OF THE WYTHES
LIVING TRUST 7-21-87
By /s/ Paul M. Wythes
--------------------------
Name: Paul M. Wythes
Title: Trustee
6
<PAGE>
/s/ William H. Younger, Jr.
--------------------------
William H. Younger, Jr.
WILLIAM H. YOUNGER, JR.,
TRUSTEE OF THE YOUNGER LIVING
TRUST 1-20-95
By /s/ William H. Younger, Jr.
--------------------------
Name: William H. Younger, Jr.
Title: Trustee
/s/ Steven P. Bird
--------------------------
Steven P. Bird
COMDISCO, INC.
By
--------------------------
Name:
Title:
/s/ Kevin J. McQuillan
--------------------------
Kevin J. McQuillan
HLM PARTNERS V, L.P.
By /s/ A.R. Haberkorn, III
--------------------------
Name: A.R. Haberkorn, III
Title: General Partner, HLM
Associates V, L.P., the
General Partner of HLM
Partners V, L.P.
PHARMA/wHEALTH FUND
By /s/ Samuel D. Isaly
--------------------------
Name: Samuel D. Isaly
Title: Manager of Fund
7
<PAGE>
VULCAN VENTURES, INC.
By /s/ William D. Savoy
-----------------------
Name: William D. Savoy
Title: Vice President
/s/ Albert L. Zesiger
--------------------------
Albert L. Zesiger
ARTHUR D. LITTLE EMPLOYEE
PENSION PLAN
By /s/ Albert L. Zesiger
-----------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
CITY OF STAMFORD FIREMEN'S
PENSION FUND
By /s/ Albert L. Zesiger
-----------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
DEAN WITTER FOUNDATION
By /s/ Albert L. Zesiger
-----------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
DEMVEST EQUITIES, L.P.
By /s/ Albert L. Zesiger
-----------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
FERRIS F. HAMILTON FAMILY TRUST
By /s/ Albert L. Zesiger
-----------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
8
<PAGE>
HBL CHARITABLE UNITRUST
By /s/ Albert L. Zesiger
-----------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
/s/ Albert L. Zesiger
--------------------------
William B. Lazar
By: Albert L. Zesiger
Agent & Attorney-in-fact
/s/ Albert L. Zesiger
--------------------------
Jeanne Morency
By: Albert L. Zesiger
Agent & Attorney-in-fact
WOLFSON INVESTMENT PARTNERS LP
By /s/ Albert L. Zesiger
-----------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
/s/ Albert L. Zesiger
--------------------------
Leonard Kingsley
By: Albert L. Zesiger
Agent & Attorney-in-fact
/s/ Albert L. Zesiger
--------------------------
Helen Hunt
By: Albert L. Zesiger
Agent & Attorney-in-fact
MARY ANN HAMILTON TRUST
By /s/ Albert L. Zesiger
-----------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
9
<PAGE>
MORGAN TRUST CO. OF THE
BAHAMAS LTD.
By /s/ Albert L. Zesiger
-----------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
NORWALK EMPLOYEE PENSION FUND
By /s/ Albert L. Zesiger
-----------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
ROANOKE COLLEGE
By /s/ Albert L. Zesiger
-----------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
STATE OF OREGON PERS/ZCG
By /s/ Albert L. Zesiger
-----------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
TAB PRODUCTS COMPANY
PENSION PLAN
By /s/ Albert L. Zesiger
-----------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
THE BREARLEY SCHOOL
ENDOWMENT FUND
By /s/ Albert L. Zesiger
-----------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
10
<PAGE>
THE CHAPIN SCHOOL LTD.
ENDOWMENT FUND
By /s/ Albert L. Zesiger
-----------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
THE JENIFER ALTMAN FOUNDATION
By /s/ Albert L. Zesiger
-----------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
THE RAISER MARITAL TRUST
By /s/ Mark Collins, Jr.
-----------------------
Name: Mark Collins, Jr.
Title: Principal, Alex Brown Capital
VAN LOBEN SELS FOUNDATION
By /s/ Albert L. Zesiger
-----------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
WARREN INVESTMENT GROUP LTD.
LLC
By /s/ Albert L. Zesiger
-----------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
WARREN OTOLOGIC PROFIT
SHARING TRUST
By /s/ Albert L. Zesiger
-----------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
11
<PAGE>
WELLS FAMILY LLC
By /s/ Albert L. Zesiger
-----------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
/s/ James Finnerty
--------------------------
James Finnerty
QUANTUM INDUSTRIAL PARTNERS
LDC
By /s/ Michael C. Neus
-----------------------
Name: Michael C. Neus
Title: Attorney-In-Fact
TRUSTEES OF AMHERST COLLEGE
By /s/ Albert L. Zesiger
-----------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
CITY OF MILFORD PENSION &
RETIREMENT FUND
By /s/ Albert L. Zesiger
-----------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
PUBLIC EMPLOYEE RETIREMENT
SYSTEM OF IDAHO
By /s/ Albert L. Zesiger
-----------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
12
<PAGE>
AMENDMENT NO. 2 TO AMENDED AND
RESTATED STOCKHOLDERS AGREEMENT
AMENDMENT NO. 2 dated as of July 21, 1998 to Amended and
Restated Stockholders Agreement dated as of April 30, 1998 by and among
PRAECIS PHARMACEUTICALS INCORPORATED, a Delaware corporation (the "Company"),
and the stockholders of the Company referred to therein, as amended by
Amendment No. 1 dated as of May 14, 1998 (the "Stockholders Agreement").
Capitalized terms used herein and not otherwise defined shall have the
meanings ascribed to such terms in the Stockholders Agreement.
The Company and the Stockholders of the Company who are
signatories hereto desire to amend the Stockholders Agreement as set forth
herein.
Pursuant to Article 6 of the Stockholders Agreement,
certain Stockholders have demand registration rights and all Stockholders
have piggyback registration rights.
The Company desires to effect an Initial Public Offering,
and, in order to facilitate such Initial Public Offering, the Company desires
that the piggyback registration rights of the Stockholders pursuant to
Section 6.2 of the Stockholders Agreement not apply to the Initial Public
Offering and the demand registration rights of the Stockholders pursuant to
Section 6.1 of the Stock holders Agreement be deferred until 180 days after
con summation of the Initial Public Offering.
Pursuant to Section 9.2 of the Stockholders Agreement, the
Stockholders Agreement may be amended by a written instrument duly executed
by (i) the Company; (ii) the Stockholders who own a majority of the then
outstanding shares of Common Stock, and shares of Series A Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock and Series E Preferred
Stock and/or Common Stock into which such shares of Preferred Stock have been
converted, representing at least 66 2/3% of the voting power of such shares
of Preferred Stock (for this purpose shares of Preferred Stock shall be
deemed to have a number of votes equal to the number of shares of Common
Stock into which such shares of Preferred Stock are then convertible) and
Common Stock; and (iii) since such proposed amendment in part affects the
Series E Preferred Stock (and not the Series C Preferred Stock and Series D
Preferred Stock), the holders of a majority of the Series E Preferred Stock.
<PAGE>
In consideration of the foregoing, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. Deferral of Registration Rights. The following is
hereby added as the final Section of Article 6 of the Stockholder Agreement:
"Section 6.7 Deferral of Registration Rights. The holders of
Registrable Securities shall have no right (i) pursuant to Section 6.2,
to have their Registrable Securities in cluded as part of an Initial
Public Offering and (ii) pursuant to Section 6.1, to request that the
Company effect a registration under the Securities Act of all or part
of such holder's Registrable Securities until 180 days after the
effectiveness of the registration statement for the Initial Public
Offering; provided, however, that if the Initial Public Offering is
not consummated on or prior to December 31, 1998, this Section 6.7
shall be void and of no further force or effect."
2. Counterparts. This Amendment No. 2 may be signed
in one or more counterparts, each of which shall be deemed an original but
all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this
Amendment No. 2 to the Amended and Restated Stockholders Agreement as of the
date first written above.
PRAECIS PHARMACEUTICALS
INCORPORATED
By: /s/ Malcolm L. Gefter
-------------------------------
Name: Malcolm L. Gefter
Title: Chairman of the Board, CEO and President
/s/ Malcolm L. Gefter
--------------------------------
Malcolm L. Gefter
2
<PAGE>
/s/ Ethan R. Signer
------------------------------
Ethan R. Signer
/s/ A. Donny Strosberg
------------------------------
A. Donny Strosberg
MASSACHUSETTS INSTITUTE OF
TECHNOLOGY
By:/s/ Allan S. Bufferd
------------------------------
Name: Allan S. Bufferd
Title: Director of Investments
/s/ David Anderson
------------------------------
David L. Anderson
/s/ G. Leonard Baker
------------------------------
G. Leonard Baker
CANAAN VENTURES II LIMITED
PARTNERSHIP
By: Canaan Venture Partners II
L.P.
By:/s/ Harry T. Rein
------------------------------
Name: Harry T. Rein
Title: General Partner
CANAAN VENTURES II OFFSHORE
C.V.
By: Canaan Venture Partners II
L.P.
By:/s/ Harry T. Rein
------------------------------
Name: Harry T. Rein
Title: General Partner
3
<PAGE>
CHASE VENTURE CAPITAL
ASSOCIATES, L.P.
By: CHASE CAPITAL PARTNERS
Its General Partner
By:/s/ Damion E. Wicker, M.D.
------------------------------
Name: Damion E. Wicker, M.D.
Title: General Partner
/s/ Tench Coxe
--------------------------------
Tench Coxe
/s/ Sherryl W Hossack
--------------------------------
James C. Gaither
By: Sherryl W. Hossack
Under Power of Attorney
GENSTAR INVESTMENT LLC
By:/s/ Angus A. MacNaughton
------------------------------
Name: Angus A. MacNaughton
Title: Member
GREYLOCK LIMITED PARTNERSHIP
By:/s/ Henry McCance
------------------------------
Name: Henry McCance
Title: General Partner
HIGHLAND CAPITAL PARTNERS II
LIMITED PARTNERSHIP
By: Highland Management Partners II
Limited Partnership
Its General Partner
By/s/ Wycliffe K. Grousbeck
------------------------------
General Partner
4
<PAGE>
J.H. WHITNEY & CO.
By:/s/ Daniel J. O'Brien
------------------------------
Name: Daniel J. O'Brien
Title: General Partner
ROBERT W. AND LAURIE KITTS
By/s/ Robert W. Kitts
------------------------------
Robert W. Kitts
By/s/ Laurie Kitts
------------------------------
Laurie Kitts
/s/ Sherryl W. Hossack
--------------------------------
Ronald L. Perkins
By: Sherryl W. Hossack
Under Power of Atty
SAUNDERS HOLDINGS, L.P.
By:/s/ G. Leonard Baker, Jr.
------------------------------
Name: G. Leonard Baker, Jr.
Title: General Partner
SUTTER HILL VENTURES
By /s/ G. Leonard Baker, Jr.
------------------------------
Name: G. Leonard Baker, Jr.
Title: Managing Director of
the General Partner
TOW PARTNERS
By /s/ Paul M. Wythes
------------------------------
Name: Paul M. Wythes
Title: General Partner
5
<PAGE>
WELLS FARGO BANK, TRUSTEE
SHV M/P/T FBO
David Anderson
By/s/ Vicki M. Bandel
------------------------------
Name: Vicki M. Bandel
Title: A.V.P. & T.O.
By/s/ S. Matson
------------------------------
Name: S. Matson
Title: A.V.P. & T.O.
WELLS FARGO BANK, TRUSTEE
SHV M/P/T FBO
G. Leonard Baker, Jr.
By/s/ Vicki M. Bandel
------------------------------
Name: Vicki M. Bandel
Title: A.V.P. & T.O.
By/s/ S. Matson
------------------------------
Name: S. Matson
Title: A.V.P. & T.O.
WHITNEY 1990 EQUITY FUND, L.P.
By:/s/ Daniel J. O'Brien
------------------------------
Name: Daniel J. O'Brien
Title: General Partner
PAUL M. WYTHES AND MARSHA R.
WYTHES, TRUSTEES OF THE WYTHES
LIVING TRUST 7-21-87
By/s/ Paul M. Wythes
------------------------------
Name: Paul M. Wythes
Title: Trustee
/s/ William H. Younger
--------------------------------
William H. Younger, Jr.
6
<PAGE>
WILLIAM H. YOUNGER, JR.,
TRUSTEE OF THE YOUNGER LIVING
TRUST 1-20-95
By/s/ William H. Younger
------------------------------
Name: William H. Younger, Jr.
Title: Trustee
/s/ Steven Bird
--------------------------------
Steven P. Bird
COMDISCO, INC.
By:
------------------------------
Name:
Title:
/s/ Kevin J. McQuillan
--------------------------------
Kevin J. McQuillan
HLM PARTNERS V, L.P.
By:/s/ A.R. Haberkorn III
------------------------------
Name: A.R. Haberkorn III
Title: General Partner
PHARMA/wHEALTH FUND
By:/s/ Samuel D. Isaly
------------------------------
Name: Samuel D. Isaly
Title: Portfolio Manager
VULCAN VENTURES, INC.
By:/s/ William D. Savoy
------------------------------
Name: William D. Savoy
Title: Vice President
7
<PAGE>
/s/ Albert L. Zesiger
--------------------------------
Albert L. Zesiger
By: Albert L. Zesiger
Agent & Attorney-in-fact
ARTHUR D. LITTLE EMPLOYEE
PENSION PLAN
By:/s/ Albert L. Zesiger
------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
CITY OF STAMFORD FIREMEN'S
PENSION FUND
By:/s/ Albert L. Zesiger
------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
DEAN WITTER FOUNDATION
By:/s/ Albert L. Zesiger
------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
/s/ Albert L. Zesiger
------------------------------
Susan U. Halpern
By: Albert L. Zesiger
Agent & Attorney-in-fact
FERRIS F. HAMILTON FAMILY TRUST
By:/s/ Albert L. Zesiger
------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
8
<PAGE>
HBL CHARITABLE UNITRUST
By:/s/ Albert L. Zesiger
------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
/s/ Albert L. Zesiger
--------------------------------
William B. Lazar
By: Albert L. Zesiger
Agent & Attorney-in-fact
/s/ Albert L. Zesiger
------------------------------
Jeanne Morency
By: Albert L. Zesiger
Agent & Attorney-in-fact
/s/ Albert L. Zesiger
------------------------------
Helen Hunt
By: Albert L. Zesiger
Agent & Attorney-in-fact
/s/ Albert L. Zesiger
------------------------------
Leonard Kingsley
By: Albert L. Zesiger
Agent & Attorney-in-fact
WOLFSON INVESTMENT PARTNERS LP
By:/s/ Albert L. Zesiger
------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
MARY ANN HAMILTON TRUST
By:/s/ Albert L. Zesiger
------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
9
<PAGE>
MORGAN TRUST CO. OF THE
BAHAMAS LTD.
By:/s/ Albert L. Zesiger
------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
NORWALK EMPLOYEE PENSION FUND
By:/s/ Albert L. Zesiger
------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
ROANOKE COLLEGE
By:/s/ Albert L. Zesiger
------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
STATE OF OREGON PERS/ZCG
By:/s/ Albert L. Zesiger
------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
TAB PRODUCTS COMPANY
PENSION PLAN
By:/s/ Albert L. Zesiger
------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
10
<PAGE>
THE BREARLEY SCHOOL
ENDOWMENT FUND
By:/s/ Albert L. Zesiger
------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
THE JENNIFER ALTMAN FOUNDATION
By:/s/ Albert L. Zesiger
------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
THE RAISER MARITAL TRUST
By:/s/ Mark Collins, Jr.
------------------------------
Name: Mark Collins, Jr.
Title: Principal, Alex Brown Capital
VAN LOBEN SELS FOUNDATION
By:/s/ Albert L. Zesiger
------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
WARREN INVESTMENT GROUP LTD. LLC
By:/s/ Albert L. Zesiger
------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
11
<PAGE>
WARREN OTOLOGIC PROFIT
SHARING TRUST
By:/s/ Albert L. Zesiger
------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
WELLS FAMILY LLC
By:/s/ Albert L. Zesiger
------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
TRUSTEES OF AMHERST COLLEGE
By:/s/ Albert L. Zesiger
------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
CITY OF MILFORD PENSION &
RETIREMENT FUND
By:/s/ Albert L. Zesiger
------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
PUBLIC EMPLOYEE RETIREMENT
SYSTEM OF IDAHO
By:/s/ Albert L. Zesiger
------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
/s/ James Finnerty
------------------------------
James Finnerty
12
<PAGE>
QUANTUM INDUSTRIAL PARTNERS LDC
By:/s/ Michael C. Neus
------------------------------
Name: Michael C. Neus
Title: Attorney-in-fact
13
<PAGE>
AMENDMENT NO. 3 TO AMENDED AND
RESTATED STOCKHOLDERS AGREEMENT
AMENDMENT NO. 3 dated as of January 31, 2000 to Amended and Restated
Stockholders Agreement dated as of April 30, 1998 by and among PRAECIS
PHARMACEUTICALS INCORPORATED, a Delaware corporation (the "Company"), and the
stockholders of the Company referred to therein, as amended by Amendment No. 1
dated as of May 14, 1998 and Amendment No. 2 dated as of July 21, 1998 (the
"Stockholders Agreement"). Capitalized terms used herein and not otherwise
defined shall have the meanings ascribed to such terms in the Stockholders
Agreement.
The Company and the Stockholders of the Company who are signatories
hereto desire to amend the Stockholders Agreement as set forth herein.
Pursuant to Article 6 of the Stockholders Agreement, certain
Stockholders have demand registration rights and all Stockholders have piggyback
registration rights.
The Company desires to effect an Initial Public Offering, and, in
order to facilitate such Initial Public Offering, the Company desires that the
piggyback registration rights of the Stockholders pursuant to Section 6.2 of the
Stockholders Agreement not apply to the Initial Public Offering and the demand
registration rights of the Stockholders pursuant to Section 6.1 of the
Stockholders Agreement be deferred until 180 days after consummation of the
Initial Public Offering.
Pursuant to Section 9.2 of the Stockholders Agreement, the
Stockholders Agreement may be amended by a written instrument duly executed by
(i) the Company; (ii) the Stockholders who own a majority of the then
outstanding shares of Common Stock, and shares of Series A Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock
and/or Common Stock into which such shares of Preferred Stock have been
converted, representing at least 66 2/3% of the voting power of such shares of
Preferred Stock (for this purpose shares of Preferred Stock shall be deemed to
have a number of votes equal to the number of shares of Common Stock into which
such shares of Preferred Stock are then convertible) and Common Stock; and (iii)
in the case of certain amendments, the holders of a majority of the Series E
Preferred Stock.
14
<PAGE>
In consideration of the foregoing, the parties hereto, intending to be
legally bound, hereby agree as follows:
1. DEFERRAL OF REGISTRATION RIGHTS. The following is hereby added as
the final Section of Article 6 of the Stockholder Agreement:
"Section 6.8 DEFERRAL OF REGISTRATION RIGHTS. The holders of
Registrable Securities shall have no right (i) pursuant to
Section 6.2, to have their Registrable Securities included as
part of an Initial Public Offering and (ii) pursuant to Section
6.1, to request that the Company effect a registration under the
Securities Act of all or part of such holder's Registrable
Securities until 180 days after the effectiveness of the
registration statement for the Initial Public Offer ing;
provided, however, that if the Initial Public Offering is not con
summated on or prior to September 30, 2000, this Section 6.8
shall be void and of no further force or effect."
2. COUNTERPARTS. This Amendment No. 3 may be signed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
15
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment No. 3 to
the Amended and Restated Stockholders Agreement as of the date first written
above.
PRAECIS PHARMACEUTICALS
INCORPORATED
By /s/ Malcolm L. Gefter
------------------------------------
Name:
Title:
/s/ Malcolm L. Gefter
----------------------------------------
Malcolm L. Gefter
/s/ Ethan R. Signer
----------------------------------------
Ethan R. Signer
/s/ A. Donny Strosberg
----------------------------------------
A. Donny Strosberg
MASSACHUSETTS INSTITUTE OF
TECHNOLOGY
By /s/ Allan S. Bufferd
-------------------------------------
Name: Allan S. Bufferd
Title: Treasurer
/s/ David L. Anderson
----------------------------------------
David L. Anderson
/s/ G. Leonard Baker
----------------------------------------
G. Leonard Baker
16
<PAGE>
CANAAN VENTURES II LIMITED
PARTNERSHIP
By: Canaan Venture Partners II L.P.
By /s/ Harry T. Rein
-------------------------------------
Name: Harry T. Rein
Title: Managing General Partner
CANAAN VENTURES II OFFSHORE
C.V.
By: Canaan Venture Partners II L.P.
By /s/ Harry T. Rein
-------------------------------------
Name: Harry T. Rein
Title: Managing General Partner
CHASE VENTURE CAPITAL
ASSOCIATES, L.P.
By: CHASE CAPITAL PARTNERS
Its General Partner
By /s/ Damion E. Wicker, M.D.
-------------------------------------
Name: Damion E. Wicker, M.D.
Title: General Partner
/s/ Tench Coxe
----------------------------------------
Tench Coxe
17
<PAGE>
/s/ Sherryl W. Hossack
----------------------------------------
James C. Gaither
By Sherryl W. Hossack
Under Power of Attorney
GENSTAR INVESTMENT LLC
By /s/ Richard D. Paterson
-------------------------------------
Name: Richard D. Paterson
Title: Member
GREYLOCK LIMITED PARTNERSHIP
By /S/ HENRY F. McCANCE
-------------------------------------
Name:
Title:
HIGHLAND CAPITAL PARTNERS II
LIMITED PARTNERSHIP
By: Highland Management Partners II
Limited Partnership
Its General Partner
By /s/ Wycliffe Grousbeck
-------------------------------------
General Partner
J.H. WHITNEY & CO.
By /s/ Daniel J. O'Brien
-------------------------------------
Name: Daniel J. O'Brien
Title: General Partner
18
<PAGE>
ROBERT W. AND LAURIE KITTS
By /s/ Robert W. Kitts
-------------------------------------
Robert W. Kitts
By /s/ Laurie Kitts
-------------------------------------
Laurie Kitts
By /s/ Sherryl W. Hossack
-------------------------------------
Ronald L. Perkins
By Sherryl W. Hossack
Under Power of Attorney
SAUNDERS HOLDINGS, L.P.
By /s/ G. Leonard Baker, Jr.
-------------------------------------
Name: G. Leonard Baker, Jr.
Title: General Partner
SUTTER HILL VENTURES
By /s/ G. Leonard Baker, Jr.
-------------------------------------
Name: G. Leonard Baker, Jr.
Title: Managing Director of the
General Partner
TOW PARTNERS
By /s/ Paul M. Wythes
-------------------------------------
Name: Paul M. Wythes
Title: General Partner
19
<PAGE>
WELLS FARGO BANK, TRUSTEE
SHV M/P/T FBO
David Anderson
By /s/ Vicki M. Bandel /s/ S. Matson
-------------------------------------
Name: Vicki M. Bandel S. Matson
Title: AVP & TO AVP & TO
WELLS FARGO BANK, TRUSTEE
SHV M/P/T FBO
G. Leonard Baker, Jr.
By /s/ Vicki M. Bandel /s/ S. Matson
-------------------------------------
Name: Vicki M. Bandel S. Matson
Title: AVP & TO AVP & TO
WHITNEY 1990 EQUITY FUND, L.P.
By /s/ Daniel J. O'Brien
-------------------------------------
Name: Daniel J. O'Brien
Title: General Partner
PAUL M. WYTHES AND MARSHA R.
WYTHES, TRUSTEES OF THE
WYTHES LIVING TRUST 7-21-87
By /s/ Paul M. Wythes
-------------------------------------
Name: Paul M. Wythes
Title: Trustee
/s/ Sherryl W. Hossack
----------------------------------------
William H. Younger, Jr.
By Sherryl W. Hossack
Under Power of Attorney
20
<PAGE>
WILLIAM H. YOUNGER, JR.,
TRUSTEE OF THE YOUNGER LIVING
TRUST 1-20-95
By /s/ Sherryl W. Hossack
-------------------------------------
Name:
Title:
By Sherryl W. Hossack
Under Power of Attorney
/s/ Steven P. Bird
----------------------------------------
Steven P. Bird
COMDISCO, INC.
By /s/ Jill C. Hanses
-------------------------------------
Name: Jill C. Hanses
Title: Senior Vice President
/s/ Kevin J. McQuillan
----------------------------------------
Kevin J. McQuillan
HLM PARTNERS V, L.P.
By: HLM Associates V, L.P.
its General Manager
By: HLM Management Co., Inc.
Managing General Partner
By /s/ A.R. Haberkorn III
-------------------------------------
Name: A.R. Haberkorn III
Title: Clerk
21
<PAGE>
PHARMA/wHEALTH FUND
By /s/ Samuel D. Isaly
-------------------------------------
Name: Samuel D. Isaly
Title: Portfolio Manager
VULCAN VENTURES, INC.
By /s/ William D. Savoy
-------------------------------------
Name: William D. Savoy
Title: Vice President
*
----------------------------------------
Albert L. Zesiger
LANDMARK SECONDARY PARTNERS, L.P.
LANDMARK SECONDARY PARTNERS, L.P.
By: Landmark Partners Viii, LLC
its General Partner
By: Landmark Equity Advisors, LLC
its Managing Member
By: /s/ [SIGNATURE ILLEGIBLE]
-------------------------------------
Member
CITY OF STAMFORD FIREMEN'S
PENSION FUND
By *
----------------------------------------
Name:
Title:
22
<PAGE>
DEAN WITTER FOUNDATION
By *
-------------------------------------
Name:
Title:
*
----------------------------------------
Susan U. Halpern
FERRIS F. HAMILTON FAMILY TRUST
By *
-------------------------------------
Name:
Title:
HBL CHARITABLE UNITRUST
By *
-------------------------------------
Name:
Title:
*
----------------------------------------
William B. Lazar
*
----------------------------------------
Jeanne Morency
*
----------------------------------------
Helen Hunt
*
----------------------------------------
Leonard Kingsley
23
<PAGE>
WOLFSON INVESTMENT PARTNERS LP
By *
-------------------------------------
Name:
Title:
MARY ANN HAMILTON TRUST
By *
-------------------------------------
Name:
Title:
MORGAN TRUST CO. OF THE
BAHAMAS LTD.
By *
-------------------------------------
Name:
Title:
NORWALK EMPLOYEE PENSION FUND
By *
-------------------------------------
Name:
Title:
ROANOKE COLLEGE
By *
-------------------------------------
Name:
Title:
STATE OF OREGON PERS/ZCG
By *
-------------------------------------
Name:
Title:
24
<PAGE>
TAB PRODUCTS COMPANY
PENSION PLAN
By *
-------------------------------------
Name:
Title:
THE BREARLEY SCHOOL
ENDOWMENT FUND
By *
-------------------------------------
Name:
Title:
THE JENIFER ALTMAN FOUNDATION
By *
-------------------------------------
Name:
Title:
THE RAISER MARITAL TRUST
By /s/ Mark Collins Jr.
----------------------------------------
Name: Mark Collins for
Title: Partner, Brown 1A
VAN LOBEN SELS FOUNDATION
By /s/ Toni Rembe
-------------------------------------
Name:
Title: President
WARREN INVESTMENT GROUP LTD. LLC
By /s/ Stephen R. Lippy
-------------------------------------
Name: Stephen R. Lippy
Title: Member
25
<PAGE>
WARREN OTOLOGIC PROFIT
SHARING TRUST
By /s/ Stephen R. Lippy
-------------------------------------
Name: Stephen R. Lippy
Title: Member
WELLS FAMILY LLC
By *
-------------------------------------
Name:
Title:
* -- ZESIGER CAPITAL GROUP LLC TRUSTEES OF AMHERST COLLEGE
AGENT & ATTORNEY-IN FACT
By /s/ Albert L. Zesiger By *
------------------------------- -------------------------------------
Name: Albert L. Zesiger Name:
Title:
CITY OF MILFORD PENSION &
RETIREMENT FUND
By *
-------------------------------------
Name:
Title:
PUBLIC EMPLOYEE RETIREMENT
SYSTEM OF IDAHO
By *
-------------------------------------
Name:
Title:
/s/ James Finnerty
----------------------------------------
James Finnerty
26
<PAGE>
QUANTUM INDUSTRIAL PARTNERS LDC
By /s/ Michael C. Neus
-------------------------------------
Name: Michael C. Neus
Title: Attorney-in-Fact
27
<PAGE>
Exhibit 10.18
CONTRACT OF SALE
by and between
BEST PROPERTY FUND, L.P.,
as Seller
and
PRAECIS PHARMACEUTICALS INCORPORATED,
as Purchaser
-----------------------------------------------
Property:
830 Winter Street
Waltham, Massachusetts
<PAGE>
TABLE OF CONTENTS
PAGE
Property..................................................................1
Purchase Price............................................................1
Condition of Property; Title..............................................3
Time and Place of Closing.................................................4
Conditions to Closing.....................................................4
Seller's Representations and Agreements..................................12
Purchaser's Representation and Agreements................................20
Apportionments...........................................................22
Closing Matters..........................................................24
Title Examination........................................................24
Risk of Loss.............................................................26
Brokerage................................................................28
Remedies.................................................................28
Notices .................................................................29
Foreign Investment In Real Property Tax Act..............................31
Choice of Law............................................................31
Exhibit A - LEGAL DESCRIPTION OF LAND....................................39
Exhibit B - SELLER'S WORK................................................40
EXHIBIT B - PUNCH LIST ITEMS.............................................47
Exhibit C - PERMITTED TITLE EXCEPTIONS...................................48
i
<PAGE>
Exhibit D - CONTRACTS AND AGREEMENTS.....................................49
Exhibit E - LIST OF PERMITS..............................................50
ii
<PAGE>
CONTRACT OF SALE
AGREEMENT, made on this 14th day of January, 2000, by and between BEST
PROPERTY FUND, L.P., a Delaware limited partnership, ("SELLER") and PRAECIS
PHARMACEUTICALS INCORPORATED, a Delaware corporation, ("PURCHASER").
W I T N E S S E T H:
In consideration of the mutual covenants and provisions herein
contained, including without limitation Purchaser's payment to Seller of TWO
HUNDRED FIFTY THOUSAND AND 00/100 DOLLARS ($250,000.00) in the event Purchaser
terminates this Agreement pursuant to SECTION 5(c), and other good and valuable
consideration, the receipt and sufficiency of which hereby are acknowledged, the
parties hereby covenant and agree as follows:
1. PROPERTY. Seller hereby agrees to sell and Purchaser agrees to
purchase, upon the terms and conditions set forth in this Agreement, the
property ("PROPERTY") consisting of (a) those certain plots, pieces or parcels
of land located in Waltham, Massachusetts, having a street address at 830 Winter
Street, and all more particularly described in EXHIBIT A hereto ("LAND"), (b)
all buildings and all other structures, facilities or improvements presently
located or hereafter located in or on the Land ("IMPROVEMENTS"), (c) all
fixtures, machinery, systems, equipment, warranties, guaranties, indemnities,
claims against third parties relating to the Land or Improvements, licenses,
permits, approvals, documents, plans, specifications, drawings, items of
personal property owned by Seller attached or appurtenant to, located on and
used in connection with the ownership, use, operation or maintenance of the Land
or the Improvements (collectively, the "PERSONAL PROPERTY"), and (d) all strips,
gores, easements, privileges, licenses, rights and appurtenances relating to any
of the foregoing.
2. PURCHASE PRICE. (a) The purchase price for the Property is FORTY-ONE
MILLION FIVE HUNDRED THOUSAND 00/100 DOLLARS ($41,500,000.00) ("PURCHASE
PRICE").
(b) The Purchase Price shall be payable as follows:
(i) Upon the execution of this Agreement, ONE MILLION TWO
HUNDRED FIFTY THOUSAND AND 00/100 DOLLARS ($1,250,000.00)
1
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("INITIAL DOWNPAYMENT"), by Purchaser's check, evidencing good funds,
subject to collection, payable to the order of "Brown, Rudnick, Freed &
Gesmer, P.C., as escrow agent" ("ESCROW AGENT") or by wire transfer of
immediately available federal funds to an account or accounts to be
designated in writing by Escrow Agent.
(ii) Unless on or before April 6, 2000, Purchaser has
delivered to Seller a copy of a Financing Commitment (hereinafter
defined), then on April 7, 2000, Purchaser shall deliver to Escrow
Agent SEVEN HUNDRED FIFTY THOUSAND AND 00/100 DOLLARS ($750,000.00)
("ADDITIONAL DOWNPAYMENT") by Purchaser's check, evidencing good funds,
subject to collection, payable to the order of Escrow Agent, or by wire
transfer of immediately available federal funds to an account or
accounts to be designated in writing by Escrow Agent following the
written request of Purchaser. Notwithstanding the foregoing, Seller and
Purchaser agree and acknowledge that Purchaser's purchase of the
Property is not subject to, or conditioned upon, Purchaser obtaining
financing for such purchase, including, without limitation, Purchaser
obtaining a Financing Commitment or the ultimate funding of a Financing
Commitment. Seller and Purchaser further agree and acknowledge that the
provisions of this Agreement related to the Financing Commitment are
made a part of this Agreement so as to enable Seller to evaluate
Purchaser's ability to consummate the purchase of the Property.
For purposes of this Agreement, the term "FINANCING
COMMITMENT" shall mean a bona fide commitment from an institutional
third party lender, which is unaffiliated with Purchaser, to finance
not less than seventy percent (70.0%) of the Purchase Price, on
prevailing commercial terms, which, together with replacements or
extensions thereof, shall remain in effect until the Closing
(hereinafter defined).
(iii) If Purchaser terminates this Agreement pursuant to
SECTION 5(c), then $250,000.00 of the Initial Downpayment shall be paid
to Seller and the remainder of the Initial Downpayment, together with
all accrued interest thereon, shall be paid to Purchaser. If Purchaser
does not terminate this Agreement pursuant to SECTION 5(c) and the
Closing (hereinafter defined) occurs, then the Initial Downpayment,
together with the Additional Downpayment, if applicable, and all
accrued interest thereon (the "INTEREST"), shall be paid by Escrow
Agent to Seller. The Initial Downpayment, the Additional Downpayment,
if applicable, and the Interest shall be credited against the Purchase
Price. If Purchaser does not terminate this Agreement pursuant to
SECTION 5(c) but the Closing does not occur, then the Initial
2
<PAGE>
Downpayment, together with the Additional Downpayment, if applicable,
and the Interest shall be paid by Escrow Agent in accordance with the
terms of SECTION 13 of this Agreement. Escrow Agent shall have no
liability in connection with the Initial Downpayment, the Additional
Downpayment or the Interest, except for its own gross negligence or
willful misconduct. The Initial Downpayment and the Additional
Downpayment, if applicable, are referred to herein collectively as the
"DOWNPAYMENT." The Downpayment shall be invested by Escrow Agent in a
money market fund.
(iv) At the Closing, an amount, subject to adjustment pursuant
to the terms of this Agreement, equal to the difference between the
Purchase Price and the total of the amount of the Downpayment received
by Escrow Agent plus the Interest shall be paid by good, unendorsed
cashier's or official bank check payable to the order of Seller (or
Seller's designee or designees) or by wire transfer of immediately
available federal funds to an account or accounts to be designated in
writing by Seller at or prior to the Closing.
(c) Escrow and title insurance costs, fees and expenses shall be paid
in accordance with SECTION 9 (a) hereof.
3. CONDITION OF PROPERTY; TITLE. (a) Subject to the terms of this
Agreement, Purchaser agrees to purchase the Property on the Closing Date (as
hereinafter defined) in its then "AS IS" condition; Seller acknowledging that
Seller is required to achieve Final Completion (as defined in EXHIBIT B) of the
Seller's Work (hereinafter defined) in accordance with the terms of EXHIBIT B.
Purchaser further agrees that from and after the Closing Seller shall not be
liable for any latent or patent defects in the Property. Except as set forth in
this Agreement, Seller has not made any repre sentations as to the physical
condition or any other matter or thing affecting or related to the Property,
and, except as set forth in EXHIBIT B hereto, Seller shall have no obligation to
improve the Property.
(b) Purchaser shall accept title to the Property subject to the matters
set forth on EXHIBIT C hereto and any matter arising out of any action taken by
Purchaser or its agents (collectively, the "PERMITTED TITLE EXCEPTIONS"). If
Seller shall so request, Purchaser will allow Seller to pay from the balance of
the Purchase Price as much thereof as may be necessary to satisfy any lien(s) or
encumbrance(s) which Seller is obligated or elects to cure hereunder and will
provide Seller at the Closing with separate certified and/or official bank
checks or effect such additional wire transfers, payable as directed in writing
by Seller, for such purposes.
3
<PAGE>
(c) The parties acknowledge that Seller will be constructing certain
improvements ("SELLER'S WORK") at the Property in accordance with EXHIBIT B.
Seller shall use commercially diligent efforts to complete the construction of
the Seller's Work and deliver the Property on or before September 1, 2000
("TARGET COMPLETION DATE"). If, despite such commercially diligent efforts,
Seller has been unable to complete such Seller's Work and deliver the Property
on or before the Target Completion Date, Purchaser's remedies for such failure
shall be as set forth in EXHIBIT B.
(d) If prior to the Closing, Purchaser delivers to Seller an
environmental report from a Licensed Site Professional concluding that there is
a reasonable likelihood that the environmental condition of the Property is
adversely different than it was on the date of this Agreement, then Seller
either shall remediate such condition, and deliver reasonable evidence thereof
to Purchaser, or deliver to Purchaser reasonably acceptable evidence that the
environmental condition of Property is not adversely different than it was on
the date of this Agreement.
4. TIME AND PLACE OF CLOSING. (a) The closing of the transactions
contemplated hereby ("CLOSING") shall take place at 10:00 a.m. on the fifteenth
(15th) Business Day (hereinafter defined) after Seller notifies Purchaser
("CLOSING NOTICE") of the Final Completion of Seller's Work or on such other
date as may be permitted by the terms of this Agreement ("CLOSING DATE"). If the
Final Completion of the Seller's Work does not occur by December 31, 2000 (as
such date shall be extended by the number of days that Final Completion of the
Seller's Work was delayed because of Purchaser Initiated Change Orders), then
Purchaser may terminate this Agreement by written notice to Seller, given no
later than five (5) Business Days after such date, whereupon the Downpayment,
plus the Interest, shall be paid to Purchaser. As used herein, the term
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or national
holiday. The Closing shall take place at the offices of Brown, Rudnick, Freed &
Gesmer, One Financial Center, 18th Floor, Boston, Massachusetts 02111, or at
such time and place to which Seller and Purchaser may mutually agree.
5. CONDITIONS TO CLOSING. (a) PURCHASER'S CONDITIONS. Purchaser's
obligation to pay the Purchase Price, to accept title to the Property and
otherwise to consummate the transactions contemplated hereby shall be subject
to the satisfaction of the following conditions precedent on and as of the
Closing Date:
(i) Seller shall deliver to Purchaser on or before the Closing
Date the following documents ("SELLER'S CLOSING DOCUMENTS"):
4
<PAGE>
(1) a quitclaim deed ("DEED") conveying Seller's
fee simple interest in the Land and the
Improvements to Purchaser (which fee simple
interest shall be the same fee simple
interest Seller had in the Land and the
Improvements on January 3, 2000, subject to
the Permitted Title Exceptions) in proper
statutory form for recording, duly executed
and acknowledged by Seller;
(2) a bill of sale, conveying Seller's right,
title and interest in the Personal Property
to Purchaser, free of any liens and
encumbrances, in form and substance
reasonably acceptable to Seller and
Purchaser ("BILL OF SALE"), duly executed
and acknowledged by Seller;
(3) an assignment by Seller and assumption by
Purchaser, in form and substance reasonably
acceptable to Seller and Purchaser ("GENERAL
ASSIGNMENT"), duly executed and acknowledged
by Seller and by Purchaser, of all of
Seller's (or Bren Schreiber Properties,
Inc.'s or Seller's agent's) obligations,
right, title and interest in, to and under:
(A) the contracts and agreements and
the amendments, modifications and
supplements thereto set forth on
EXHIBIT D attached hereto
(collectively, "CONTRACTS");
(B) the Permits (as defined in SECTION
5(a)(i)(5) hereof);
(C) (x) all guaranties and warranties
arising under the Construction
Contract (as defined in EXHIBIT B)
as it exists on the date hereof;
(y) all guaranties and warranties
arising under the Design Contract
(as defined in EXHIBIT B) as it
exists on the date hereof and (z)
all other guaranties and
warranties then in effect with
respect to the Improvements and the
Personal Property (collectively,
the "GUARANTIES"); and
5
<PAGE>
(D) All existing claims and recourse of
any nature whatsoever benefiting
Seller and arising under the
Contracts and/or the Guaranties.
Notwithstanding the foregoing, with respect
to that certain Mutual Covenants agreement
dated March 25, 1999 between Seller and
Polaroid Corporation, filed with the South
Registry District of Middlesex County as
Document No. 1101667 ("MUTUAL COVENANTS"),
which is one of the Contracts, the General
Assignment shall provide: (v) that at the
Closing, Purchaser shall deliver to Polaroid
bonds with respect to the water pipeline and
traffic signalization matters described in
the Mutual Covenants (which bonds shall be
in the amount equal to the remaining
obligations of Seller with respect to such
matters, which shall not exceed $150,000 as
to each such matter) in replacement of the
bonds which were delivered under the Mutual
Covenants by Seller (or otherwise make
arrangements, reasonably acceptable to
Seller, for the release of such bonds), (w)
that Seller and Purchaser shall cooperate to
obtain the release by Polaroid Corporation
of the bonds which were so delivered by
Seller, (x) that Purchaser shall assume all
obligations of Seller set forth in the
Mutual Covenants with respect to traffic
signalization under the Mutual Covenants,
(y) that if Seller has expended any funds
which were credited or are creditable
against Seller's obligations with respect to
traffic signalization under the Mutual
Covenants, then at the Closing, Purchaser
shall reimburse Seller for the amounts so
expended by Seller, and (z) that if as of
the Closing, Seller has not satisfied its
obligations under the Mutual Covenants with
respect to the water pipeline, as evidenced
by an acknowledgement of satisfaction
executed by Polaroid Corporation, or its
successors), Purchaser will assume such
obligations but Seller will pay to
Purchaser, at the Closing, an amount equal
to the difference between $150,000.00 and
the amount of any funds expended by Seller
which were credited or are creditable
against Seller's obligations with respect to
said water pipeline;
6
<PAGE>
(4) to the extent the same are in Seller's
possession, original, fully executed copies
of the Contracts, and originals, certified
by Seller, as correct and complete, of the
Construction Contract and the Design
Contract;
(5) Original mechanical, electrical and plumbing
plans and specifications (together with
as-built plans therefor prepared by the
subcontractors performing such work),
surveys, fire underwriter certificates for
the Property, and other certificates,
licenses and permits for the Property
(including all amendments, modifications,
supplements and extensions thereof)
("PERMITS"), except to the extent the same
are required to be, and are, affixed at the
Property;
(6) Originals of all Guaranties (other than
those guaranties and warranties set forth in
the Construction Contract or the Design
Contract which are otherwise assigned to
Purchaser) and a full copy of the Record
Drawings (as defined in EXHIBIT B) certified
by Architect (as defined in EXHIBIT B) to be
correct and complete;
(7) a certificate of Seller dated as of the
Closing Date, to the effect that (A) this
Agreement and Seller's Closing Documents
executed by Seller have been duly
authorized, executed and delivered by Seller
pursuant to all necessary resolutions or
consents of the general partner of Seller
and that said resolutions or consents remain
in full force and effect, (B) appearing on
said certificate is the signature of persons
authorized to act on behalf of Seller's
general partner who have executed this
Agreement and who will execute all
agreements to be delivered by Seller
hereunder; (C) the executing persons acting
on behalf of Seller's general partner are
fully authorized to act on behalf of
Seller's general partner and that such
general partner is fully authorized to act
on behalf of Seller and (D) Seller's
representations set forth in this Agreement
remain true as of the Closing, or if not
true, the specific manner in which they are
not true;
7
<PAGE>
(8) a letter by Seller to the other parties to
the Contracts, the Construction Contract and
the Design Contract informing them of the
change in ownership of the Property;
(9) an affidavit, duly executed and acknowledged
by Seller, in the standard form required by
the Title Company (as hereinafter defined),
relative to mechanics liens and parties in
possession;
(10) Certificates for the benefit of Seller and
Purchaser from the Architect and the
contractor under the Construction Contract
stating that all sums due under said
agreements have been paid in full by Seller
and that Seller has completely performed its
obligations thereunder; and
(11) Such certificates of legal existence and
corporate good standing and affidavits of
Seller, Seller's general partner and
Schreiber Developments, LLC as the Title
Company reasonably may request; provided
that such certificates do not materially
increase Seller's liability under this
Agreement.
(ii) Subject to SECTION 6(e) hereof, the representations and
warranties of Seller contained in this Agreement shall be true and
complete in all material respects at and as of the Closing Date as if
such representations and warranties were made at and as of the Closing
Date and Seller shall have performed and complied with, in all material
respects, all covenants, agreements, conditions, terms and provisions
of this Agreement required to be performed or complied with by Seller
prior to or at the Closing, in each case subject only to exceptions
permitted by this Agreement.
(iii) Seller shall have Finally Completed Seller's Work.
(iv) The environmental condition of the Property shall not be
adversely different than it is in on the date of this Agreement,
subject to Seller's right to remediate pursuant to SECTION 3(d).
8
<PAGE>
(b) SELLER'S CONDITIONS. Seller's obligation to deliver title to the
Property and otherwise to consummate the transactions contemplated hereby shall
be subject to compliance by Purchaser with the following conditions precedent on
and as of the Closing Date:
(i) Purchaser shall deliver to Seller on the Closing Date the
balance of the Purchase Price due pursuant to SECTION 2(b) hereof and
such other amounts as are due Seller hereunder, subject to adjustment
of such amount pursuant to SECTION 8 hereof;
(ii) Purchaser shall deliver to Seller on the Closing Date the
following, each of which shall be in form and substance reasonably
satisfactory to Seller ("PURCHASER'S CLOSING DOCUMENTS"):
(1) a certificate of Purchaser, dated the
Closing Date, to the effect that (A) this
Agreement and Purchaser's Closing Documents
executed by Purchaser have been duly
authorized, executed and delivered by
Purchaser pursuant to all necessary
resolutions or consents of the Board of
Directors of Purchaser, and that said
resolutions and consents remain in full
force and effect, (B) appearing on said
certificate is the true signature of the
officer or officers of Purchaser who have
executed this Agreement and who will execute
all agreements and instruments to be
delivered by Purchaser hereunder, (C) the
executing officer or officers of Purchaser
are fully authorized to act on behalf of
Purchaser and (D) Purchaser's
representations set forth in this Agreement
remain true as of the Closing, or if not
true, the specific manner in which they are
not true;
(2) duly executed and acknowledged counterparts
of the General Assignment described in
SECTION 5(a)(i)(3) hereof; and
(3) sufficient funds to the Title Company to
satisfy all amounts payable by Purchaser
under SECTION 9(a)(i) hereof;
9
<PAGE>
(iii) Purchaser shall, at the reasonable request of Seller,
from time to time after April 7, 2000, furnish to Seller updated
financial information regarding Purchaser.
(iv) The representations and warranties of Purchaser contained
in this Agreement shall be true and complete in all material respects
at and as of the Closing Date as if such representations and warranties
were made at and as of the Closing Date and Purchaser shall have
performed and complied with, in all material respects, all covenants,
agreements, conditions, terms and provisions of this Agreement required
to be performed or complied with by Purchaser prior to or at the
Closing, in each case subject only to exceptions permitted by this
Agreement.
(c) DUE DILIGENCE PERIOD. (i) Purchaser has commenced its due diligence
review ("DUE DILIGENCE REVIEW"), which shall include, without limitation, the
matters listed in (1), (2) and (3) of this SECTION 5(c)(i), on the date of this
Agreement. Purchaser shall complete the Due Diligence Review no later than
February 7, 2000 (the "DUE DILIGENCE PERIOD"). During the Due Diligence Period,
Seller shall:
(1) cooperate in providing Purchaser and its
representatives, agents and designees with access to
the Property at reasonable times, upon reasonable
prior notice and, to conduct, at Purchaser's sole
cost and expense, such physical, economic,
environmental, pest control and other investigations
and such other tests and studies as Purchaser may
elect to perform with respect to the Property;
provided, however, that Purchaser shall not conduct
any so-called "Phase II" environmental investigation
at the Property without the prior written consent of
Seller, which consent may be granted, withheld or
conditionally granted, in Seller's sole discretion;
(2) deliver to Purchaser correct and complete copies of
all contracts affecting the Property in Seller's
possession or control; and
(3) deliver to Purchaser correct and complete copies of
the following written materials pertaining to the
Property, to the extent the same are in Seller's
possession or control and to the extent Seller has
not provided such materials to Purchaser prior to the
date of this Agreement:
10
<PAGE>
(A) a survey and existing title report with
respect to the Property;
(B) copies of the tax bills for the Property;
(C) all existing drawings, plans and
specifications and contracts relating to
Seller's Work;
(D) all existing building permits relating to
the Property; and
(E) any other existing written contracts that
would be binding on Purchaser following the
Closing.
(ii) If Purchaser is unsatisfied, in Purchaser's sole and
absolute discretion, with the results of the Due Diligence Review or
any other matter regarding the Property, Purchaser may terminate this
Agreement by so notifying Seller on or before the last day of the Due
Diligence Period. If Purchaser so notifies Seller, this Agreement shall
terminate and $1,000,000.00 of the Downpayment, plus the Interest,
shall be returned to Purchaser, and the remainder of the Downpayment,
$250,000.00, shall be released to Seller in consideration for Seller
entering into this Agreement. In the event that Purchaser does not so
notify Seller, this Agreement shall continue in full force and effect.
(iii) Intentionally omitted.
(iv) Purchaser shall repair and/or replace any property
damaged at the Property to the same condition and quality as existed
prior to such damage if such damage is caused by or arises out of or in
connection with the Due Diligence Review. Purchaser shall indemnify
Seller against any liability and damages, including, without
limitation, any damage, death or injury to any person or property which
occurs as a result of the negligence or misconduct of Purchaser or its
agents in connection with the Due Diligence Review; provided, however,
that Purchaser shall have no liability resulting from the mere
discovery of existing conditions at or affecting the Property.
(v) Purchaser acknowledges and agrees that if as a result of
the Due Diligence Review, Purchaser or its agents have actual knowledge
of any matter or state of facts inconsistent with the Information
(hereinafter defined) or the representations and warranties of Seller
set forth in this Agreement
11
<PAGE>
then the Information and the representations and warranties of Seller
set forth in this Agreement shall be deemed modified to conform to the
matters and state of facts actually known by Purchaser or its agents as
a result of the Due Diligence Review.
(vi) The information and data (collectively, "INFORMATION")
which has been or will be made available to Purchaser with respect to
the Property in connection with the Due Diligence Review is
confidential and shall be governed by the terms of that certain
Confidentiality Agreement dated as of December 23, 1999 between Seller
and Purchaser ("CONFIDENTIALITY AGREEMENT"). In the event that this
Agreement is terminated pursuant to the provisions of this SECTION
5(c), all written Information shall be returned promptly to Seller.
(vii) The provisions of SECTIONS 5(c)(iv) AND 5(c)(vi) shall
survive the Closing or earlier termination of this Agreement, as the
case may be.
(d) CONDITIONS GENERALLY. The foregoing conditions are for the benefit
only of the party for whom they are specified to be conditions precedent and
such party may, in its sole discretion, waive any or all of such conditions and
close title under this Agreement without any increase in, abatement of or credit
against the Purchase Price.
6. SELLER'S REPRESENTATIONS AND AGREEMENTS
(a) REPRESENTATIONS. Seller represents and warrants to Purchaser as
follows (for purposes of this SECTION 6(a), Seller's knowledge shall be deemed
to be the actual knowledge of David S. Hall, without any independent
investigation):
(i) AS TO SELLER'S ORGANIZATION, POWER AND AUTHORITY.
(1) Seller is a limited partnership that has
been duly organized and is validly existing
under the laws of the State of Delaware and
as of the Closing shall be duly qualified
to do business in the Commonwealth of
Massachusetts;
(2) Seller has full power and right to enter
into and perform its obligations under this
Agreement and the other agreements
contemplated herein to be executed and
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<PAGE>
performed by it, including, without being
limited to, conveying the Property as herein
provided;
(3) Neither Seller nor any general partner in
Seller is in the hands of a receiver, nor is
an application for a receiver pending, nor
has Seller or any general partner in Seller
made an assignment for the benefit of
creditors, nor has Seller or any general
partner in Seller filed, or had filed
against it, any petition in bankruptcy;
(4) The execution and delivery of this Agreement
and the consummation of the transactions
contemplated hereby on the part of Seller
(A) have been duly authorized by all
necessary partnership acts on the part of
Seller and any general partner in Seller,
and (B) do not and will not (v) require any
governmental or other consent, (w) violate
or conflict with any judgment, decree or
order of any court applicable to or
affecting Seller or any general partner in
Seller, (x) violate or conflict with any law
or governmental regulation applicable to
Seller or any general partner in Seller, (y)
violate or conflict with the organizational
documents of Seller or any general partner
in Seller and (z) do not and will not result
in the breach of, or constitute a default
under, any agreement, contract, indenture or
other instrument or other obligation to
which Seller is a party or is otherwise
bound. Upon the assumption that this
Agreement constitutes the legal, valid and
binding obligation of Purchaser, this
Agreement constitutes the legal, valid and
binding obligation of Seller;
(5) Seller is not a "foreign person", as defined
in Section 1445 of the United States
Internal Revenue Code of 1986, as amended,
and the regulations issued thereunder
("CODE"); and
(6) There are no actions, suits or proceedings
(including, but not limited to bankruptcy)
pending or, to the knowledge of Seller,
threatened, against Seller or, to Seller's
knowledge, affecting Seller which if
determined adversely to Seller, would
adversely affect the
13
<PAGE>
Property or Seller's ability to perform its
obligations hereunder.
(ii) AS TO THE PROPERTY.
(1) Prior to the date of this Agreement, Seller
has not received written notice of any
pending or threatened condemnation of all or
any part of the Property;
(2) Except as set forth in the Permitted Title
Exceptions, there are no occupancy rights,
leases or tenancies presently affecting the
Property;
(3) (A) The Contracts are all of the material
service, maintenance, supply and management
contracts and agreements presently
affecting the Property to which Seller is a
party and which will be binding on Purchaser
or the Property following the Closing and
there are no other contracts which will be
binding on Purchaser or the Property
following the Closing; (B) Seller has
heretofore delivered to Purchaser true and
complete copies of each of the Contracts;
and (C) the Contracts have not been modified
or amended, except as indicated on EXHIBIT
D hereto;
(4) Seller's obligation to Polaroid Corporation
and any other parties under the Mutual
Covenants with respect to the water pipeline
described therein shall not exceed
$150,000.00 in the aggregate and with
respect to traffic signalization described
therein shall not exceed $150,000 in the
aggregate;
(5) Seller has no knowledge of any legal action
commenced or threatened against Seller or
Seller's interest in the Property which
could materially and adversely affect the
Property;
(6) Seller has not received any written notice
of any violation of any zoning, building,
subdivision, land sales, securities, land
use, ecology or environmental protection
laws, ordinances, rules and regulations of
govern-
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ment authorities including those of any and
all regulatory agencies and administrative
officials having or asserting jurisdiction
over the Property or any portion of the
Property, pertaining to the Property or any
portion of the Property which has not been
complied with, nor does Seller have any
knowledge of any violation thereof. Seller
has received no written notice prior to the
date of this Agreement from any governmental
authority of, nor has any knowledge of, any
proposed or pending proceeding to change or
redefine the zoning classification of all or
any portion of the Property;
(7) Seller has not received any written notice
from any insurance company insuring the
Property of any defects or inadequacies in
the Property or any part thereof which would
materially adversely affect the insurability
of the Property or the premiums for the
insurance thereof;
(8) Seller has not received any written notice
prior to the date of this Agreement from any
governmental agency or official to the
effect that any condemnation proceeding is
contemplated in connection with the
Property;
(9) Intentionally omitted;
(10) Except as set forth in the Permitted Title
Exceptions, Seller has not granted, nor does
Seller have knowledge of, any option
agreements or rights of first refusal with
respect to the purchase, lease or occupancy
of the Property or any rights in favor of
third persons to purchase or otherwise
acquire the Property or any interest in the
Property;
(11) Seller has delivered to Purchaser true and
complete copies of all Contracts (including
all amendments or supplements thereto) and,
to the best of Seller's knowledge, all
other contracts and agreements which affect
the use or operation of the Property. Seller
has not received any written notice of any
default under any Contract that has not been
cured or waived;
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(12) There are no employment contracts entered
into by Seller which will be binding after
Closing on Purchaser as owner of the
Property. Seller has no employees with
respect to whom Purchaser shall bear any
responsibility or continued employment
after Closing or for payment of wages,
benefits or the like which accrue prior to
Closing;
(13) As of the Closing, all contractors,
subcontractors, suppliers, architects,
engineers and others who have performed
services, labor or supplied material during
the period of Seller's ownership of the
Property shall have been paid in full, and
all liens arising therefrom (or claims which
with the passage of time or notice or both,
could mature into liens) shall have been
bonded over or satisfied and released;
(14) Except for the Permits, Seller has not
entered into any unrecorded commitments or
agreements with any governmental agencies
or authorities affecting the Property;
(15) To Seller's knowledge, as of the date of
this Agreement, no abatement proceedings are
pending with reference to any real estate
taxes assessed against the Property and
Seller shall not institute any such
proceeding without Purchaser's prior written
consent. As of the date of this Agreement,
there are no betterment assessments or other
special assessments presently pending or, to
Seller's knowledge, proposed by any
governmental authority with respect to any
portion of the Property; and
(16) EXHIBIT E lists all licenses, permits,
authorizations, consents and approvals from
any governmental authorities received by
Seller in connection with the Property as of
the date of this Agreement, which EXHIBIT E
shall be updated at the Closing.
(b) MISCELLANEOUS AGREEMENTS. Seller, during the term of this
Agreement, (i) will not, without Purchaser's consent, which consent Purchaser
agrees not to
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unreasonably withhold or delay unless the same shall materially affect
Purchaser's rights or interests, extend or otherwise modify any Contract, (ii)
will not lease or sublease any of the Property, and (iii) will not commit to,
enter into or make any brokerage agreement related to the Property without
Purchaser's consent.
(c) ACCESS. Purchaser or Purchaser's representative may attend all job
meetings for Seller's Work. Purchaser may, upon reasonable notice, inspect all
of Seller's records regarding Seller's Work. Seller shall, during normal
business hours upon reasonable prior notice, allow Purchaser or its
representatives access to the Property, so long as Purchaser and Purchaser's
representatives do not unreasonably interfere with the operation of the Property
or the construction activities being performed at the Property; PROVIDED,
HOWEVER, that Purchaser will indemnify Seller against any liability or damages
in connection with or arising out of any negligent or improper act of Purchaser
or its representatives as a result of their access or inspection of the
Property. Said indemnification provisions shall survive the Closing or earlier
termination of this Agreement, as the case may be.
(d) SURVIVAL. The only representations, warranties and agreements of
Seller hereunder that shall survive the Closing are those specifically stated
herein to survive. The representations and warranties of Seller contained in
SECTION 6(A) shall survive the Closing for a period of one (1) year.
(e) CERTAIN LIMITATIONS ON SELLER'S REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Seller set forth in SECTION 6(a) are subject
to the following express limitations:
(i) Seller does not represent or warrant that the parties,
other than Seller, to the Contracts, will not be in default under their
respective Contracts.
(f) NO OTHER REPRESENTATIONS OR WARRANTIES. Purchaser represents,
warrants and agrees that (i) as of the expiration of the Due Diligence Period
Purchaser shall have examined the Property and be familiar with the physical
condition thereof and shall have conducted such investigation of the affairs of
the Property as Purchaser has considered appropriate, (ii) neither Seller nor
any of the employees, agents or attorneys of Seller have made any verbal or
written representations, warranties, promises or guaranties whatsoever to
Purchaser, whether express or implied, and, in particular, that no such
representations, warranties, promises or guaranties have been made with respect
to the physical condition or operation of the Property, the actual or projected
revenue and expenses of the Property, the zoning and other laws, regulations and
rules applicable to the Property or the compliance of
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the Property therewith, the quantity, quality or condition of the articles of
personal property and fixtures included in the transactions contemplated hereby,
the use or occupancy of the Property or any part thereof or any other matter or
thing affecting or related to the Property or the transactions contemplated
hereby, except as, and solely to the extent, herein specifically set forth, and
(iii) Purchaser has not relied upon any such representations, warranties,
promises or guaranties (other than those expressly set forth in this Agreement)
or upon any statements made in any informational brochure with respect to the
Property and has entered into this Agreement knowing that it must rely solely on
its own independent investigation, inspection, analysis, appraisal, examination
and evaluation of the facts and circumstances. `
TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, AND EXCEPT FOR SELLER'S
REPRESENTATIONS AND WARRANTIES IN SECTION 6(a), OR CONTAINED IN ANY OF TITLE
CLOSING DOCUMENTS REQUIRED TO BE DELIVERED BY SELLER AT THE CLOSING PURSUANT TO
THIS AGREEMENT (COLLECTIVELY, "SELLER'S WARRANTIES"), THIS SALE IS MADE AND WILL
BE MADE WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND (WHETHER EXPRESS,
IMPLIED, OR, TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, STATUTORY) BY
SELLER. AS A MATERIAL PART OF THE CONSIDERATION OF THIS AGREEMENT, BUT WITHOUT
LIMITING SELLER'S OBLIGATION TO ACHIEVE FINAL COMPLETION OF THE SELLER'S WORK IN
ACCORDANCE WITH EXHIBIT B OR THE SATISFACTION OF THE PURCHASER'S CONDITIONS SET
FORTH IN SECTION 5(a) OR SELLER'S OBLIGATIONS UNDER SECTION 10, PURCHASER AGREES
TO ACCEPT THE PROPERTY ON AN "AS IS" AND "WHERE IS" BASIS, WITH ALL FAULTS, AND
WITHOUT ANY REPRESENTATION OR WARRANTY BY SELLER OR ANYONE ACTING OR CLAIMING
TO ACT BY, THROUGH OR UNDER OR ON SELLER'S BEHALF, ALL OF WHICH SELLER HEREBY
DISCLAIMS, EXCEPT FOR SELLER'S WARRANTIES. EXCEPT FOR SELLER'S WARRANTIES, NO
WARRANTY OR REPRESENTATION IS MADE BY SELLER AS TO FITNESS FOR ANY PARTICULAR
PURPOSE, MERCHANTABILITY, DESIGN, QUALITY, CONDITION, OPERATION OR INCOME,
COMPLIANCE WITH DRAWINGS OR SPECIFICATIONS, ABSENCE OF DEFECTS, ABSENCE OF
HAZARDOUS OR TOXIC SUBSTANCES, ABSENCE OF FAULTS, FLOODING OR COMPLIANCE WITH
LAWS AND REGULATIONS INCLUDING, WITHOUT LIMITATION, THOSE RELATING TO HEALTH,
SAFETY AND THE ENVIRONMENT (INCLUDING, WITHOUT LIMITATION, THE AMERICANS WITH
DISABILITY ACT AND COMPARABLE STATE LAWS). PURCHASER ACKNOWLEDGES THAT PURCHASER
HAS ENTERED INTO THIS AGREEMENT WITH THE INTENTION OF MAKING AND RELYING
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<PAGE>
UPON ITS OWN INVESTIGATION OF THE PHYSICAL, ENVIRONMENTAL, ECONOMIC USE,
COMPLIANCE AND LEGAL CONDITION OF THE PROPERTY, SELLER'S WARRANTIES AND THE
COVENANTS TO BE PERFORMED BY SELLER PRIOR TO THE CLOSING AS EXPRESSLY SET FORTH
IN THIS AGREEMENT, AND THAT PURCHASER IS NOT NOW RELYING, AND WILL NOT LATER
RELY, UPON ANY REPRESENTATIONS AND WARRANTIES MADE BY SELLER OR ANYONE ACTING OR
CLAIMING TO ACT, BY, THROUGH OR UNDER OR ON SELLER'S BEHALF CONCERNING THE
PROPERTY, EXCEPT FOR SELLER'S WARRANTIES AND THE CLOSING DOCUMENTS REQUIRED TO
BE DELIVERED BY SELLER AT THE CLOSING PURSUANT TO THIS AGREEMENT. ADDITIONALLY,
PURCHASER AND SELLER HEREBY AGREE THAT EXCEPT FOR SELLER'S WARRANTIES, THE
COVENANTS TO BE PERFORMED BY SELLER PRIOR TO THE CLOSING AS EXPRESSLY SET FORTH
IN THIS AGREEMENT, THE SATISFACTION OF THE PURCHASER'S CONDITIONS TO THE CLOSING
SET FORTH IN SECTION 5(a), (1) PURCHASER IS TAKING THE PROPERTY "AS IS" WITH ALL
LATENT AND PATENT DEFECTS AND THERE IS NO WARRANTY BY SELLER THAT THE PROPERTY
IS FIT FOR A PARTICULAR PURPOSE, (2) PURCHASER IS SOLELY RELYING UPON ITS
EXAMINATION OF THE PROPERTY, AND (3) PURCHASER TAKES THE PROPERTY UNDER THIS
AGREEMENT UNDER THE EXPRESS UNDERSTANDING THAT THERE ARE NO EXPRESS OR IMPLIED
WARRANTIES BY SELLER OR ANYONE ACTING OR CLAIMING TO ACT BY, THROUGH OR UNDER OR
ON SELLER'S BEHALF. FOR PURPOSES OF THIS PARAGRAPH, THE CONSTRUCTION, DESIGN AND
ENGINEERING PROFESSIONALS PERFORMING THE SELLER'S WORK SHALL NOT BE DEEMED TO BE
ACTING OR CLAIMING TO ACT BY, THROUGH OR UNDER OR ON SELLER'S BEHALF
WITH RESPECT TO THE FOLLOWING, PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT,
EXCEPT AS SET FORTH IN THE SELLER WARRANTIES, SELLER SHALL NOT HAVE ANY
LIABILITY, OBLIGATION OR RESPONSIBILITY OF ANY KIND AND THAT SELLER HAS MADE NO
REPRESENTATIONS OR WARRANTIES OF ANY KIND.
A. THE CONTENT OR ACCURACY OF ANY REPORT, STUDY, OPINION OR CONCLUSION OF
ANY SOILS, TOXIC, ENVIRONMENTAL OR OTHER ENGINEER OR OTHER PERSON OR
ENTITY WHO HAS EXAMINED THE PROPERTY OR ANY ASPECT THEREOF;
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<PAGE>
B. THE CONTENT OR ACCURACY OF ANY OF THE ITEMS (INCLUDING, WITHOUT
LIMITATION, THE PROPERTY INFORMATION) DELIVERED TO PURCHASER PURSUANT
TO PURCHASER'S REVIEW OF THE CONDITION OF THE PROPERTY; OR
C. THE CONTENT OR ACCURACY OF ANY PROJECTION, FINANCIAL OR MARKETING
ANALYSIS OR OTHER INFORMATION GIVEN TO PURCHASER BY SELLER OR REVIEWED
BY PURCHASER WITH RESPECT TO THE PROPERTY.
D. PURCHASER HAS RECEIVED THE ADVICE OF SOPHISTICATED REAL ESTATE
PROFESSIONALS IN CONNECTION WITH THE TRANSACTION CONTEMPLATED BY THIS
AGREEMENT AND IS, OR AS OF THE CLOSING, WILL BE, FAMILIAR WITH THE
PROPERTY AND ITS SUITABILITY FOR PURCHASER'S INTENDED USE. THE
PROVISIONS OF THIS SECTION 6(f) SHALL SURVIVE INDEFINITELY ANY CLOSING
OR TERMINATION OF THIS AGREEMENT AND SHALL NOT BE MERGED INTO THE
DOCUMENTS EXECUTED AT THE CLOSING.
7. PURCHASER'S REPRESENTATION AND AGREEMENTS.
(a) REPRESENTATIONS. Purchaser represents, warrants and covenants with
Seller as follows:
(i) Purchaser is a corporation that has been duly organized
and is validly existing under the laws of Delaware and is duly
qualified to do business in the Commonwealth of Massachusetts;
(ii) Purchaser has full power and right to enter into and
perform its obligations under this Agreement and the other agreements
contemplated herein to be executed and performed by it;
(iii) Purchaser is not in the hands of a receiver, nor is
application for a receiver pending, nor has Purchaser made an
assignment for the benefit of creditors, nor has Purchaser filed, or
had filed against it, any petition in bankruptcy; and
(iv) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby on the part of
Purchaser (1) have been duly authorized by all necessary corporate acts
on the part of
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Purchaser, and (2) do not and will not (A) require any governmental or
other consent, (B) violate or conflict with any judgment, decree or
order of any court applicable to or affecting Purchaser, (C) violate or
conflict with any law or governmental regulation applicable to
Purchaser, (D) violate or conflict with the organization documents of
Purchaser and (E) do not and will not result in the breach of, or
constitute a default under, any agreement, contract, indenture or other
instrument or other obligation to which Purchaser is a party or is
otherwise bound. Upon the assumption that this Agreement constitutes
the legal, valid and binding obligation of Seller, this Agreement
constitutes the legal, valid and binding obligation of Purchaser.
(b) MISCELLANEOUS AGREEMENTS. In the event the Closing does not occur
and this Agreement is terminated, Purchaser shall promptly return to Seller all
copies of Information without retaining any copy thereof or extract therefrom.
(c) ERISA. Purchaser is not purchasing any of the Property with "plan
assets" of an Employee Benefit Plan subject to Title 1 of the Employee
Retirement Income Security Act of 1974 (as amended from time to time, the "ACT,"
and together with any regulation, rule or judicial or administrative case, order
or pronouncement arising under or connected with the Act, "ERISA") or of a plan
subject to Section 4975 of the Code. Purchaser shall take all actions reasonably
requested by Seller for the purpose of ensuring, to Seller's satisfaction, that
the transactions contemplated herein will comply with ERISA and not result in an
imposition of an excise tax under Section 4975 of the Code; such actions shall
include, without limitation, the making of such further representations and
warranties as Seller's counsel reasonably deems necessary to ensure that neither
this Agreement not any of the transactions contemplated herein will violate
ERISA or result in the imposition of an excise tax under Section 4975 of the
Code.
(d) SURVIVAL. The representations, warranties and covenants set forth
in SECTION 7, as applicable at the Closing Date, shall survive the Closing for a
period of one (1) year.
8. APPORTIONMENTS. (a) The following items shall be apportioned at the
Closing as of the midnight on the day immediately preceding the Closing Date:
(i) Real estate taxes, assessments, other than special
assessments made against the Property, based on the rates and assessed
valuation applicable in the fiscal year for which assessed;
(ii) Water rates and charges;
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(iii) Sewer and vault taxes and rents;
(iv) Annual license, permit and inspection fees except for
those relating to construction of the Improvements, which shall be
Seller's obligation in their entirety;
(v) Intentionally omitted;
(vi) All charges and payments for water and sewer services
supplied to the Property, provided, however, that if there is not meter
or if the current bill for any of such utilities has not been issued
prior to the Closing Date, the charges therefor shall be adjusted at
the Closing on the basis of the charges for the prior period for which
bills were issued and shall be further adjusted when the bills for the
current period are issued; and
(vii) Amounts paid or outstanding for the water pipeline and
traffic signalization under the Mutual Covenants in accordance with
SECTION 5(a)(i)(3).
If any of the foregoing cannot be apportioned at the Closing because of the
unavailability of the amounts which are to be apportioned, such items shall be
apportioned as soon as practicable after the Closing Date.
(b) The amount of any unpaid real property taxes and assessments, water
rates and charges and sewer taxes and rents which Seller is obligated to pay and
discharge may, at the option of Seller, be credited to Purchaser out of the cash
balance of the Purchase Price, provided that official bills therefor, indicating
the interest and penalties, if any, thereon, are furnished by Seller at the
Closing.
(c) If any refunds of real property taxes or assessments, water rates
and charges or sewer taxes and rents shall be made after the Closing, the same
shall be held in trust by Seller or Purchaser, as the case may be, and shall
first be applied to the unreimbursed costs incurred in obtaining the same, then
paid to any tenant at the Property who is entitled to the same and the balance,
if any, shall be paid to Seller (for the period prior to the Closing Date) and
to Purchaser (for the period commencing with the Closing Date).
(d) If at the Closing Date the Property or any part thereof shall be or
shall have been affected by any general assessment or assessments or real
property taxes which are or may become payable in installments of which any
installment is then a charge or lien and has become payable, Seller shall pay or
cause to be paid the
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unpaid installments of such assessments due prior to the Closing Date and
Purchaser shall pay or cause to be paid all installments which are due on or
after the Closing Date. The current installments shall be apportioned at the
Closing. Any special assessment made against the Property prior to the Closing
shall be paid by Seller prior to the Closing whether or not the payments
therefor are due and payable prior to the Closing.
(e) If, on the Closing Date, there are any Purchaser Initiated Change
Orders (as defined in EXHIBIT B) which have not been fully paid for by
Purchaser, then the additional costs due to such Purchaser Initiated Change
Orders shall be paid by Purchaser at the Closing.
(f) In the event the apportionments hereinabove provided which are to
be made at the Closing result in a credit balance (i) to Purchaser, such sum
shall be paid at the Closing, by giving Purchaser a credit against the balance
of the Purchase Price in the amount of such credit balance or (ii) to Seller,
Purchaser shall pay the amount thereof to Seller at the Closing by wire transfer
of immediately available funds to the account or accounts designated by Seller
in writing for the balance of the Purchase Price.
(g) Seller shall be responsible for the payment of amounts due pursuant
to clause (ii) of the last paragraph of Section 2.3 of the Reciprocal Easement
Agreement dated as of March 25, 1999 between Seller and Polaroid Corporation,
filed with the South Registry District of Middlesex County as Document No.
1101666, and all other amounts due under the Contracts prior to the Closing
Date. Purchaser shall be responsible for all other amounts which arise under the
Contracts which are not due until on or after the Closing Date.
(h) No insurance policies of Seller are to be transferred to Purchaser,
and no apportionment of the premiums therefor shall be made. Purchaser
acknowledges that it shall be responsible for securing its own insurance for the
Property as of the Closing Date.
(i) The obligations of the parties hereto under this SECTION 8 shall
survive the Closing.
9. CLOSING MATTERS The following items shall be provided for at the
Closing:
(a) PAYMENT OF RECORDING, TITLE AND OTHER FEES.
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(i) RECORDING FEES. Seller shall pay the fee for
documentary deed stamps due in connection with the
consummation of the transactions contemplated by this
Agreement. Purchaser shall pay at the Closing all state, city,
county, municipal and other governmental recording fees in
connection with the conveyance of the Property.
(ii) TITLE FEES. Purchaser shall pay all charges and
fees and premiums of the Title Company in connection with the
examination of title. Purchaser shall pay all premiums of the
Title Company in connection with the title insurance policy,
if any, to be obtained by Purchaser.
(iii) OTHER CHARGES. Other charges, if any, shall be
paid in the manner in which purchasers and sellers of real
property in Middlesex County, Massachusetts customarily divide
such charges.
(b) UTILITY DEPOSITS. Seller shall be entitled to any deposits made by
Seller with utility companies servicing the Property, and, if the same are not
refundable to Seller without replacement by Purchaser, Purchaser shall either:
(i) deliver the requisite replacement deposit to the utility company on or prior
to the Closing Date or (ii) pay to Seller at the Closing the amount of such
deposit, against reasonable evidence of such deposit and a good and sufficient
transfer by Seller to Purchaser of all interest of Seller in the deposit.
(c) SURVIVAL. The obligations of Seller and Purchaser under this
SECTION 9 shall survive the Closing.
10. TITLE EXAMINATION. (a) Purchaser shall obtain from a title company
licensed to do business in the Commonwealth of Massachusetts ("TITLE COMPANY") a
commitment for a title insurance policy and, in connection therewith, shall
cause title to the Property to be searched and examined by the Title Company,
and shall request that the Title Company deliver directly to Seller's counsel
copies of the Title Company's report, the tax and departmental searches and the
survey reading and any updates or continuations thereof and any supplements
thereto. No later than February 7, 2000, Purchaser shall deliver to Seller a
written statement setting forth any liens or encumbrances affecting, or other
defects in or objections to, title to the Property disclosed by such materials
other than Permitted Title Exceptions ("ADDITIONAL EXCEPTIONS"). The failure by
Purchaser to deliver any statement required by the immediately preceding
sentence within the time period specified therefor, or to include any matter in
any such statement which was delivered by Purchaser within the time period
specified therefor, shall constitute a waiver by Purchaser of any and
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all Additional Exceptions which may be, or should have been, disclosed by the
materials to be covered by such statement and such Additional Exceptions shall
be deemed Permitted Title Exceptions as if fully set forth in EXHIBIT C hereto.
Notwithstanding any of the foregoing to the contrary, (i) Seller shall be
required to discharge prior to the Closing (or deliver at the Closing
instruments sufficient, upon filing with the Land Court, to discharge such
matters from title to the Property)_ all title encumbrances evidencing monetary
indebtedness of Seller, including without limitation a mortgage, assignment of
leases and rents and uniform commercial code financing statements from Seller in
favor of Pacific Life Insurance Company ("FINANCIAL ENCUMBRANCES"), and (ii)
Seller shall exercise reasonable efforts to discharge prior to the Closing all
other title encumbrances which do not constitute Permitted Title Exceptions,
provided however that with respect to the discharge of matters referenced in
this clause (ii), Seller's "reasonable efforts" shall not be deemed to require
Seller to bring any legal action or proceeding or otherwise incur expenses in
excess of $250,000. All such matters described in clauses (i) and (ii) of the
preceding sentence which first became record title matters after January 2,
2000, also shall constitute "ADDITIONAL EXCEPTIONS."
(b) Seller shall be entitled to reasonable adjournments of the Closing
during which Seller shall attempt to remove Additional Exceptions in accordance
with SECTION 10(a). If for any reason, despite Seller's efforts consistent with
the preceding sentence, Seller is unable, despite the exercise of reasonable
efforts, to remove any Additional Exception (other than Financial Encumbrances
or Additional Exceptions voluntarily entered into by Seller in violation of this
Agreement, which Seller shall remove), as of the Closing Date, as such date may
be adjourned pursuant to this SECTION 10(b), Seller shall so notify Purchaser.
If such notice is given by Seller, Purchaser shall elect (i) to terminate this
Agreement by giving notice to Seller, in which event the provisions of SECTION
13(b) shall apply or (ii) to perform all of Purchaser's obligations hereunder
and accept title to the Property subject to such uncured Additional Exceptions
without any abatement of the Purchase Price or liability on the part of Seller.
Purchaser shall make its election between clauses (i) and (ii) of the
immediately preceding sentence by written notice to Seller given not later than
5:00 P.M. on the fifth Business Day after the giving of the notice by Seller of
its inability or unwillingness to remove such Additional Exceptions. If
Purchaser shall fail or refuse to give such written notice as aforesaid, it
shall be deemed to have elected clause (ii) above and the Closing shall take
place on the Closing Date.
(c) At Purchaser's reasonable request, Seller agrees to exercise
reasonable efforts (which shall not require the expenditure of any funds other
than minimal legal or consultants' fees) during the pendency of this Agreement
to obtain (i) from Polaroid Corporation and MMS Winter Street, L.L.C. an
acknowledgement or
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release to the effect that there are no ongoing obligations on the part of
Seller (or, following the Closing, Purchaser) with respect to the Polaroid
Utility Easement, Polaroid Driveway Easement and Common Drainage Easement
encumbering Lots 8 and 10 as shown on the "Survey of Lot 9 in Waltham,
Massachusetts" prepared by Martinage Engineering Associates, Inc. for Bren
Schreiber Properties, Inc. dated March 11, 1999 and (ii) certificates from the
other parties to the contracts regarding any outstanding obligation of Seller.
11. RISK OF LOSS. (a) If a part of the Property is destroyed or damaged
by fire or other casualty, Seller shall promptly notify Purchaser of such fact.
Seller shall have the right to terminate this Agreement by giving notice to
Purchaser not later than ten (10) days after the giving of Seller's notice if,
despite Seller's best efforts, Seller's existing mortgagee refuses to release
casualty proceeds in accordance with the terms of its mortgage encumbering the
Property and the part of the Property damaged or destroyed has a value, as
reasonably determined by Seller, in excess of One Million and 00/100 Dollars
($1,000,000.00). Seller also shall have the right to terminate this Agreement if
such casualty occurs after Seller delivers the Closing Notice but prior to the
Closing Date by giving notice to Purchaser not later than ten (10) days after
the giving of Seller's notice if the part of the Property damaged or destroyed
has a value, as reasonably determined by Seller, in excess of Seven Million Five
Hundred Thousand and 00/100 Dollars ($7,500,000.00). Purchaser shall have the
right to terminate this Agreement if such casualty occurs after Seller delivers
the Closing Notice but prior to the Closing Date by giving notice to Seller not
later than ten (10) days after the giving of Seller's notice if the part of the
Property damaged or destroyed has a value, as reasonably determined by Seller,
in excess of Five Hundred Thousand and 00/00 Dollars ($500,000.00). If either
party elects to terminate this Agreement as aforesaid, this Agreement shall
terminate and be of no further force and effect and neither party shall have any
liability to the other hereunder, except that Seller shall be obligated to
return to Purchaser the Downpayment. If neither Seller nor Purchaser elects to
terminate this Agreement as aforesaid, or if there is damage to or destruction
of an "immaterial part" (i.e., anything other than a material part) of the
Property by fire or other casualty, then the sale of the Property shall be
consummated as herein provided at the Purchase Price (without abatement) and
Seller shall assign to Purchaser (without recourse) at the Closing the rights of
Seller to the proceeds, if any, under Seller's insurance policies covering the
Property with respect to such damage or destruction, and Purchaser shall be
entitled to receive and keep any moneys received from such insurance policies.
Seller shall cause the Property to be insured until the Closing with insurance
at not less than the limits at which the Property currently is insured, as
evidenced by insurance certificates or binders previously delivered to
Purchaser.
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(b) If all or any significant portion of the Property is taken by
eminent domain (or is the subject of a pending taking which has not yet been
consummated), Seller shall notify Purchaser of such fact promptly after
obtaining knowledge thereof and either Purchaser or Seller shall have the right
to terminate this Agreement by giving notice to the other not later than ten
(10) days after the giving of Seller's notice. For the purposes hereof, a
"significant portion" of the Property shall mean such a portion of the Property
as shall negatively impact the value of the Property by an amount, as reasonably
determined by Seller, in excess of Five Hundred Thousand and 00/00 Dollars
($500,000.00), or otherwise negatively affects zoning, parking or access. If
either party elects to terminate this Agreement as aforesaid, this Agreement
shall terminate and be of no further force and effect and neither party shall
have any liability to the other hereunder, except that Seller shall be obligated
to return to Purchaser the Downpayment. If neither Seller nor Purchaser elects
to terminate this Agreement as aforesaid, or if an "insignificant portion"
(I.E., anything other than a significant portion) of the Property is taken by
eminent domain (or becomes the subject of a pending taking), then the sale of
the Property shall be consummated as herein provided at the Purchase Price
(without abatement) and Seller shall assign to Purchaser (without recourse) at
the Closing all of Seller's right, title and interest in and to all awards, if
any, for the taking, and Purchaser shall be entitled to receive and keep all
awards for the taking of the Property or such portions thereof.
(c) The parties' obligations, if any, under this SECTION 11 shall
survive the Closing.
12. BROKERAGE. Each of Purchaser and Seller represents and warrants to
the other that it has not hired, retained or dealt with any broker, consultant,
intermediary or finder in connection with the negotiation, execution or delivery
of this Agreement or the consummation of the transactions contemplated hereby to
whom a commission is or will be owed other than Grubb & Ellis and McCall & Almy,
Inc. Seller and Purchaser each covenant and agree to indemnify the other against
liability arising out of any breach or inaccuracy of the aforesaid
representation or warranty. Seller shall be solely responsible for the brokerage
commission due to Grubb & Ellis and for $800,000.00 of the brokerage commission
due to McCall & Almy, Inc. in connection with the transactions contemplated by
this Agreement, but only if, as and when the Deed is delivered to Purchaser and
recorded and the full Purchase Price is paid to Seller. Purchaser shall be
responsible for any other brokerage commission due to McCall & Almy, Inc. in
connection with the transactions contemplated by this Agreement. The provisions
of this SECTION 12 shall survive the Closing.
13. REMEDIES. (a) The parties hereto agree that in the event Purchaser
defaults in its obligation to deliver the Purchase Price at the Closing or
otherwise
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<PAGE>
perform its obligations at the Closing, Seller may terminate this Agreement by
written notice to Purchaser and receive Two Million and 00/100 Dollars
($2,000,000.00) (plus any Interest on the Downpayment) as liquidated damages,
and Purchaser thereafter shall not have any further liability or obligation to
Seller at law or in equity. The Downpayment (plus any Interest on the
Downpayment) shall be released to Seller to satisfy (if Purchaser delivered the
Additional Downpayment) or partially to satisfy (if Purchaser did not deliver
the Additional Downpayment) the liquidated damages to be paid to Seller. If
Purchaser did not deliver the Additional Downpayment, then upon such termination
of this Agreement, Purchaser immediately shall deliver to Seller the amount of
Seven Hundred Fifty Thousand and 00/100 Dollars ($750,000.00), which, together
with the Initial Downpayment and any interest accrued on the Initial
Downpayment, shall be paid to Seller as liquidated damages. Purchaser's
obligation to deliver such liquidated damages to Seller, including without
limitation such $750,000.00, shall survive the termination of this Agreement.
Seller and Purchaser agree and acknowledge that Seller's actual damages in the
event of default by Purchaser would be extremely difficult or impossible to
ascertain and that the amount of liquidated damages provided herein is
reasonable in light of anticipated loss caused by such a default and the
difficulties of proof of loss.
(b) In the event that on the Closing Date, Seller shall be unable,
despite the exercise of commercially diligent efforts, to perform its
obligations or to satisfy any condition applicable to Seller hereunder in
accordance with the provisions of this Agreement or to cause the title to the
Property to comply with this Agreement and this Agreement shall be terminated in
accordance with its terms as a result thereof, the sole liability of Seller
shall be to return the Downpayment, together with the Interest, to Purchaser,
and upon such return, this Agreement shall be deemed terminated and Seller shall
not have any further liability or obligations to Purchaser hereunder nor shall
Purchaser have any further liability or obligation to Seller hereunder, except
for such liabilities or obligations as are specifically stated to survive the
termination of this Agreement.
(c) In the event that Seller willfully defaults in its obligation to
transfer the Property in accordance with this Agreement, Purchaser shall be
entitled to such remedies against Seller as are available at law or in equity,
including the rights to damages and specific performance of this Agreement.
14. NOTICES. All notices and other communications required or permitted
hereby shall be in writing and shall be deemed to have been duly and
sufficiently given if personally delivered with proof of delivery thereof (any
notice or communication so delivered being deemed to have been received at the
time so delivered), or
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sent by United States registered or certified mail, postage prepaid, at a post
office regularly maintained by the United States Postal Service (any notice or
communication so sent being deemed to have been received two (2) Business Days
after mailing in the United States), or by electronic facsimile transfer (any
notice or communication so sent being deemed to have been received at the time
indicated on the sender's receipt of transfer) addressed to the respective
parties as follows:
(a) if to Seller:
Best Property Fund, L.P.
c/o Bren Schreiber Properties, Inc.
125 Summer Street, Suite 1640
Boston, Massachusetts 02110
Attention: David S. Hall
Fax: (617) 345-9200
with a copy to:
Edward S. Hershfield, Esq.
Brown, Rudnick, Freed & Gesmer, P.C.
One Financial Center
Boston, Massachusetts 02111
Fax: (617) 856-8201
(b) if to Purchaser:
Praecis Pharmaceuticals Incorporated
One Hampshire Street
Cambridge, Massachusetts 02139
Attention: Kevin F. McLaughlin, Chief Financial Officer
Fax: (617) 494-8414
with a copy to:
Michael H. Glazer, Esquire
Goodwin, Proctor & Hoar LLP
Exchange Place
Boston, Massachusetts 02109-2881
Fax: (617) 227-8591
and with a copy to:
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<PAGE>
Mary L. Lentz
McCall & Almay, Inc.
One Post Office Square
Boston, Massachusetts 02109
Fax: (617) 542-4499
Either party may, by notice given as aforesaid, change the person or persons
and/or address or addresses, or designate an additional person or persons or an
additional address or addresses, for its notices, PROVIDED, HOWEVER, that notice
of change of address or addresses shall only be effective upon receipt. All
notices from Seller to Purchaser or from Purchaser to Seller pursuant to this
Agreement will be effective if executed by their respective attorneys (including
facsimile transfer).
15. FOREIGN INVESTMENT IN REAL PROPERTY TAX ACT. At the Closing, Seller
shall deliver to Purchaser an affidavit in the form required by Section 1445 at
the Code, to the effect that Seller is not a "foreign person" as defined in
Section 1445 of the Code.
16. CHOICE OF LAW. The interpretation, enforcement and performance of
this Agreement shall be governed by the laws of the Commonwealth of
Massachusetts applicable to agreements made and to be performed wholly within
such Commonwealth.
17. MISCELLANEOUS. (a) ENTIRE AGREEMENT; EXHIBITS. The Confidentiality
Agreement and this Agreement, together with the exhibits hereto, constitutes the
entire agreement of the parties hereto regarding the subject matter of this
Agreement and all other prior or contemporaneous agreements, understandings,
representations and statements, oral or written, hereby are merged herein. All
exhibits attached hereto are hereby incorporated herein and made a part hereof
by reference as fully as though set forth herein. Without limiting the
generality of the foregoing, that certain Letter of Intent dated December 23,
1999 between Seller and Purchaser is of no further force and effect, it having
been superceded by the terms of this Agreement.
(b) AMENDMENTS. This Agreement may not be modified, amended, altered,
supplemented or cancelled except pursuant to the terms hereof or an instrument
in writing signed by the parties hereto.
(c) ACCEPTANCE OF THE DEED. The acceptance of the Deed to the Property
by Purchaser shall be deemed an acknowledgment by Purchaser that Seller has
fully complied with all of its obligations hereunder and that Seller is
discharged therefrom and that Seller shall have no further obligation or
liability with respect to any of the
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<PAGE>
agreements made by Seller in this Agreement, except for those provisions of this
Agreement which expressly provide that any obligations of Seller shall survive
the Closing.
(d) INDEMNIFICATION GENERALLY. Wherever it is provided in this
Agreement or in any agreement or document delivered pursuant hereto that a party
shall indemnify another party hereunder against liability or damages, such
phrase and words of similar import shall mean that the indemnifying party hereby
agrees to and does indemnify, defend and hold harmless the indemnified party and
such party's direct and indirect shareholders, partners and/or members and their
respective past, present and future officers, directors, employees and agents
from and against any and all costs, claims, demands, suits, judgments,
interests, damages, losses, liabilities and expenses (including without
limitation reasonable attorneys' fees and disbursements) to which they or any of
them may become subject or which may be incurred by or asserted against any or
all of them attributable to, arising out of or in connection with the matters
provided for in such provision. The provisions of this SECTION 17(d) shall
survive the Closing or earlier termination of this Agreement.
(e) BINDING EFFECT. This Agreement does not constitute an offer to sell
or purchase and shall not bind Seller or Purchaser unless and until Seller and
Purchaser elect to be bound hereby by executing and delivering to one another an
executed original counterpart hereof and Seller receives the Initial Downpayment
in accordance with the terms of this Agreement and such funds have cleared.
(f) PARTIAL INVALIDITY. If any term or provision of this Agreement or
the application thereof to any persons or circumstances shall, to any extent, be
invalid or unenforceable, the remainder of this Agreement or the application of
such term or provision to persons or circumstances other than those as to which
it is held invalid or unenforceable shall not be affected thereby, and each term
and provision of this Agreement shall be valid and enforceable to the fullest
extent permitted by law.
(g) RECORDATION OF AGREEMENT. Neither Seller nor Purchaser may record
this Agreement or any notice of this Agreement. To the extent that any such
filing is made by Purchaser in violation of this Agreement, Purchaser shall
indemnify Seller against any damages incurred by Seller in connection therewith.
The provisions of this SECTION 17(g) shall survive the termination of this
Agreement.
(h) FURTHER ASSURANCES. The parties mutually agree to execute and
deliver to each other, at the Closing, such other and further documents as may
be reasonably required by counsel for the parties to carry into effect the
purposes and intents of this Agreement, provided such documents are customarily
delivered in real estate
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transactions in Massachusetts and do not impose any material obligations upon
any party hereunder which are inconsistent with the terms of this Agreement.
(i) NONIMPUTATION. Neither party to this Agreement nor any other
corporation or entity referred to herein shall have imputed to it the knowledge
of any agent, officer, servant or employee thereof unless and until such agent,
officer, servant or employee has actual knowledge of the relevant event, notice,
condition, occurrence, fact or situation or has reasonable cause to know, or
should reasonably be aware thereof and then only if such event, notice,
condition, occurrence, fact or situation is related to matters as to which such
agent, officer, servant or employee is entrusted and with which has authority to
deal.
(j) PREVAILING PARTY COSTS. In the event any dispute between the
parties hereto results in litigation, the prevailing party shall be reimbursed
and indemnified by the party not prevailing in such dispute for all costs and
expenses reasonably incurred by the prevailing party in enforcing or
establishing its rights hereunder, including without limitation court costs and
reasonable attorneys' fees and disbursements. The prevailing party shall be
determined by the court based upon an assessment of which party's major
arguments or positions taken in the proceedings could fairly be said to have
prevailed over the other party's major arguments or positions on major disputed
issues. The provisions of this SECTION 17(j) shall survive the Closing or
earlier termination of this Agreement.
(k) HEADINGS; SECTION AND EXHIBIT REFERENCES. The section headings used
herein are for reference purposes only and do not control or affect the meaning
or interpretation of any term or provision hereof and shall not be deemed in any
manner to modify, explain, qualify or restate any of the provisions of this
Agreement. All references in this Agreement to sections and exhibits are to the
sections hereof and the exhibits attached hereto, respectively.
(l) COUNTERPARTS. This Agreement may be executed in any number of
counterparts with the same effect as if all parties hereto had executed the same
document. All such counterparts shall be construed together and shall constitute
one instrument.
(m) ASSIGNMENT. Neither party hereto may assign its respective rights
and obligations hereunder, in whole or in part, without the prior written
consent of the other party hereto. Any assignment without such prior written
consent shall be deemed null and void. Subject to and without limiting the
preceding two sentences, this Agreement shall bind and inure to the benefit of
the respective heirs, executors, administrators, personal representatives,
successors and assigns of the parties hereto.
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<PAGE>
Notwithstanding the foregoing, immediately prior to the Closing, Purchaser may
assign its rights under this Agreement, following written notice to Seller, to
any affiliated entity or to an entity with which Purchaser shall perform a
sale/leaseback transaction, a synthetic lease transaction or another similar
transaction provided that any such assignment shall not result in a violation of
ERISA.
(n) NO WAIVER. The failure of any party hereto to enforce at any time
any of the provisions of this Agreement shall in no way be construed as a waiver
of any of such provisions, or the right of any party thereafter to enforce each
and every such provision. No waiver of any breach of this Agreement shall be
held to be a waiver of any other or subsequent breach.
(o) NO OTHER PARTIES. The representations, warranties and agreements of
the parties contained herein are intended solely for the benefit of the parties
to whom such representation, warranties or agreements are made, shall confer no
rights hereunder, whether legal or equitable, in any other party, and no other
party shall be entitled to rely thereon.
(p) CONSTRUCTION. This Agreement shall not be construed more strictly
against one party than against the other, merely by virtue of the fact that it
may have been drafted or prepared by counsel for one of the parties, it being
recognized that both Seller and Purchaser have contributed substantially and
materially to the preparation of this Agreement.
(q) DUE AUTHORIZATION. Each party represents and warrants that the
individual and/or entity executing this Agreement on behalf of such party has
the capacity set forth on the signature pages hereof with full power and
authority to bind the party on whose behalf such individual and/or entity is
executing this Agreement to the terms hereof.
(r) TIME OF THE ESSENCE. Time is of the essence in the performance of
and compliance with each of the provisions and conditions of this Agreement.
(s) NO PARTNERSHIP. Notwithstanding anything to the contrary contained
herein, this Agreement shall not be deemed or construed to make the parties
hereto partners or joint venturers, or to render either party liable for any
debts or obligations of the other, it being the intention of the parties merely
to create the relationship of seller and purchaser with respect to the Property
to be conveyed as contemplated hereby.
(t) CONFIDENTIALITY. Without limiting the provisions of the
Confidential-
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ity Agreement, each of Seller and Purchaser agrees that it shall keep the
contents of this Agreement and the transactions contemplated hereby confidential
until February 7, 2000. Notwithstanding the foregoing, Seller and Purchaser may
disclose the contents of this Agreement and the transactions contemplated hereby
to their respective agents, representatives, employees, consultants and legal
counsel, and Purchaser also may disclose the contents of this Agreement and the
transactions contemplated hereby to (i) potential lenders, (ii) potential
parties who may participate in the ownership of the Property with Purchaser,
and (iii) potential parties who may participate in a lease, sale/leaseback or
sublease transaction of the Property with Purchaser.
(u) RELEASE. By proceeding with this transaction following the
expiration of the Due Diligence Period and Closing the transaction, Purchaser
shall be deemed to have made its own independent investigation of the Property,
the Information and the presence of Hazardous Materials (hereinafter defined) on
the Property as Purchaser deems appropriate. Accordingly, subject to Seller's
Warranties, the covenants to be performed by Seller prior to the Closing as
expressly set forth in this Agreement and the satisfaction of Purchaser's
conditions to the Closing set forth in SECTION 5(a), Purchaser, on behalf of
itself and all of its officers, directors, shareholders, employees,
representatives and affiliated entities (collectively, the "RELEASORS") as of
the Closing, shall be deemed to, and shall have expressly waived and
relinquished any and all rights and remedies Releasors may now or hereafter have
against Seller, its successors and assigns, partners, shareholders, officer
and/or directors (the "SELLER PARTIES"), whether known or unknown, which may
arise from or be related to (i) the physical condition, quality, quantity and
state of repair of the Property and the prior management and operation of the
Property, (ii) the Information, (iii) the Property's compliance or lack of
compliance with any federal, state or local laws or regulations, and (iv) any
past, present or future presence or existence of Hazardous Materials on, under
or about the Property or with respect to any past, present or future violation
of any rules, regulations or laws, now or hereafter enacted, regulating or
governing the use, handling, storage or disposal of Hazardous Materials,
including, without limitation, (i) any and all rights and remedies Releasors may
now or hereafter have under the Comprehensive Environmental Response
Compensation and Liability Act of 1980 ("CERCLA"), the Superfund Amendments and
Reauthorization Act of 1986, the Resource Conservation and Recovery Act, the
Toxic Substance Control Act, Massachusetts General Laws, Chapter 21C and
Massachusetts General Laws, Chapter 21E, all as amended, and any similar state,
local or federal environmental law, rule or regulation, and (ii) any and all
claims, whether known or unknown, now or hereafter existing, with respect to the
Property under Section 107 of CERCLA (42 U.S.C.A. Section 9607). As used herein,
the teRM "HAZARDOUS MATERIAl(s)" includes, without limitation, any hazardous or
toxic materials substances or wastes, such as (1)
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any materials, substances or wastes which are toxic, ignitable, corrosive or
reactive and which are regulated by any state or local governmental authority,
or any agency of the United States government, (2) any other material,
substance, or waste which is defined or regulated as a hazardous material,
extremely hazardous material, hazardous waste or toxic substance pursuant to
any laws, rules, regulations or orders of the United States government, or any
state or local governmental body, (3) asbestos, (4) petroleum and petroleum
based products, (5) formaldehyde, (6) polychlorinated biphenyls (PCBs), and (7)
freon and other chlorofluorocarbons. The provisions of this SECTION 17(u) shall
survive the Closing.
(v) Section 1031 Exchange. Seller may consummate the sale of
the Property as part of a so-called like kind exchange (the "EXCHANGE") pursuant
to Section 1031 of the Code, provided that any such exchange transaction, and
the related documentation, shall: (i) be at the sole cost and expense of Seller,
(ii) not require Purchaser to execute any contract, make any commitment, or
incur any obligations, contingent or otherwise, to third parties, (iii) not
cause Purchaser to be liable or potentially liable for any environmental
conditions affecting property other than the Property, (iv) not delay the
closing of the transaction contemplated by this Agreement, (v) not include
Purchaser's acquiring title to any property other than the Property or otherwise
becoming involved in a transaction with third party, and (vi) not otherwise be
contrary to or inconsistent with the terms of this Agreement. Notwithstanding
anything to the contrary contained herein, Purchaser is not to incur any, and
Seller shall reimburse, indemnify and hold Purchaser harmless from, any and all
costs, expenses and liabilities incurred solely from Purchaser's accommodation
of such tax deferred exchange, including, without limitation, reasonable
attorneys' fees, and any title or escrow fees or expenses. The obligations of
Seller and Purchaser under this SECTION 17(v) shall survive the Closing and
shall not be merged therein.
(w) WAIVER OF JURY TRIAL. To the extent permitted by
applicable law, the parties hereby waive any right to trial by jury in any legal
proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby.
(x) NO PERSONAL LIABILITY. Notwithstanding anything stated to
the contrary herein, Seller's liability under this Agreement shall be limited to
Seller's interest in the Property and the proceeds therefrom and neither Seller,
Seller's asset manager, nor Seller's partners, nor any member, director,
employee, or agent of any of the foregoing shall have any personal liability
hereunder. The provisions of this SECTION 17(x) shall survive the Closing or
earlier termination of this Agreement.
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(y) REPORTING. Seller shall satisfy any reporting requirements
arising under Section 6405 of the Code. The provisions of this Section 17(y)
shall survive the Closing.
[SEE SIGNATURES ON NEXT PAGE]
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed under seal as of the day and year first above written.
SELLER:
BEST PROPERTY FUND, L.P., a Delaware
limited partnership
By: BBS INVESTORS II, a Delaware general
partnership, its general partner
By: SCHREIBER DEVELOPMENTS, LLC,
a California limited liability company, a
general partner
By: /s/ Charles J. Schreiber, Jr.
------------------------------
Charles J. Schreiber, Jr.,
Manager
PURCHASER:
PRAECIS PHARMACEUTICALS IN
CORPORATED
By: /s/ Malcolm L. Gefter
------------------------------
Name:
Title:
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<PAGE>
Escrow Agent hereby acknowledges receipt of the Initial Downpayment,
subject to collection, and agrees to serve as escrow agent in accordance with
the provisions of this Agreement.
OWN RUDNICK FREED & GESMER, P.C.
By: /s/ Edward S. Hershfield
----------------------------
Edward S. Hershfield, Member
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EXHIBIT A - LEGAL DESCRIPTION OF LAND
39
<PAGE>
EXHIBIT A
A certain parcel of land off Winter Street, in Waltham, Middlesex County,
Massachusetts, shown as Lot 9 on Land Court Plan No. 30618E, a copy of a portion
of which is filed with the Middlesex South Registry District of the Land Court
with Certificate of Title No. 214324 in Registration Book 1201, Page 174.
Together with the benefit of rights reserved in Easement dated July 14, 1997,
filed as Document No. 1036276, and recorded in Book 27478, Page 136; as affected
by Utility Easement from owners of Lots 2 and 3 on Land Court Plan #30618C and
Lots 2, 3, B and C on Plan #669 of 1997, to Boston Edison Company and New
England Telephone and Telegraph Company, d/b/a Bell Atlantic, dated August 27,
1998, filed as Document No. 1078157; as further affected by Reciprocal Access
and Utility Easement dated March 25, 1999, filed as Document No. 1101665 and
recorded March 26, 1999, as Instrument No. 503.
Together with the benefit of grant and reservation recited in Reciprocal Access
and Utility Easement with the owner of Lots 5 and 6 on Land Court Plan No.
30618D dated March 31, 1998, filed as Document No. 1061070, and recorded in Book
28405, Page 421, affecting areas shown as "Reserved Easement Area" on a plan
entitled "Easement Plan of Land in Waltham, Massachusetts," dated March 30,
1998, recorded therewith; as affected by First Amendment to Reciprocal Access
and Utility Easement and to Reciprocal Easement Agreement dated September 10,
1998, filed as Document No. 1079645, and recorded in Book 29108, Page 346; as
further affected by Reciprocal Access and Utility Easement dated March 25, 1999,
filed as Document No. 1101665 and recorded March 26, 1999, as Instrument No.
503, and by Reciprocal Easement Agreement dated March 25, 1999, filed as
Document No. 1101666.
Together with the benefit of Reciprocal Easement Agreement with the owner of
Lots 5 and 6 on Land Court Plan No. 30618D dated March 31, 1998, filed as
Document No. 1061071, and recorded in Book 28405, Page 443, affecting areas
shown on a plan entitled "Easement Plan of Land in Waltham, Massachusetts,"
dated March 30, 1998, recorded therewith; as affected by First Amendment to
Reciprocal Access and Utility Easement and to Reciprocal Easement Agreement
dated September 10, 1998, filed as Document No. 1079645, and recorded in Book
29108, Page 346; as further affected by Reciprocal Easement Agreement dated
March 25, 1999, filed as Document No. 1101666.
Together with the benefit of Reciprocal Easement Agreement with the owner of Lot
8 on Land Court Plan No. 30618E dated March 10, 1999, filed as Document
No. 1099963.
Together with the benefit of Reciprocal Access and Utility Easement Agreement
with the owner of Lot 8 on Land Court Plan No. 30618E dated March 10, 1999,
filed as Document No. 1099964, and recorded March 10, 1999, as Instrument No.
1121; as further affected by Reciprocal Access
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<PAGE>
EXHIBIT A (CONT.)
and Utility Easement dated March 25, 1999, filed as Document No. 1101665 and
recorded March 26, 1999, as Instrument No. 503.
Together with the benefit of Reciprocal Access and Utility Easement dated March
25, 1999, filed as Document No. 1101665 and recorded March 26, 1999, as
Instrument No. 503.
Together with the benefit of Reciprocal Easement Agreement dated March 25, 1999,
filed as Document No. 1101666.
Together with the benefit of Mutual Covenants agreement dated March 25, 1999,
filed as Document No. 1101667.
Together with the benefit of Landscape License Agreement dated March 25, 1999,
filed as Document No. 1101668.
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EXHIBIT B - SELLER'S WORK
I. DEFINITIONS
The following terms shall have the meanings specified in this Section
when used in this EXHIBIT B (the meanings specified are applicable to both the
singular and plural):
APPLICABLE LAWS" shall mean all applicable federal, state and local
laws, codes, ordinances, rules, regulations, standards or orders of any public
authority having jurisdiction over the Property, including building, health,
labor, safety, licensing, environmental or zoning laws, codes, ordinances,
rules, regulations, standards or orders of any such public authority.
ARCHITECT" shall mean Jung/Brannen Associates, Inc., who shall be
responsible for the design of the Seller's Work on behalf of Seller, pursuant
to the Design Contract (as hereinafter defined).
"CONSTRUCTION CONTRACT" shall mean the construction contract dated as
of April 13, 1999 by and between Seller or its affiliates or agents and the
Contractor for the construction of the Seller's Work, as such construction
contract may be amended from time to time; provided, however, that no such
amendment shall affect Contractor's warranties set forth therein.
"CONTRACTOR" shall mean John Moriarty & Associates, Inc., the general
contractor who will be responsible for constructing the Seller's Work on behalf
of Seller pursuant to the Construction Contract.
"DESIGN CONTRACT" shall mean the design contract entered into by and
between Seller or its affiliates or agents and the Architect for the design of
the Seller's Work, as such design contract may be amended; provided, however,
that no such amendment shall affect Architect's warranties set forth therein.
"EVENT OF FORCE MAJEURE" shall mean labor disputes, fire, unusual
delays in deliveries, unavoidable conditions or other causes beyond the
Contractor's control, or other causes which the Architect determines may justify
delay. "PLANS AND SPECIFICATIONS" shall mean the drawings, plans and written
requirements prepared by the Architect or engineers or other consultants which
describe improvements to be constructed at the Property and which have been
delivered to Purchaser prior to the date of this Agreement, and which are listed
on SCHEDULE 1 hereto.
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"RECORD DRAWINGS" shall mean, collectively, the Plans and
Specifications, together with all Addenda (hereinafter defined) approved by
Seller, all Seller Initiated Change Orders (hereinafter defined) approved by
Seller and all Purchaser Initiated Change Orders (hereinafter defined) approved
by Seller.
"SELLER'S WORK" shall mean all labor, materials, equipment and
services, or any portion thereof, that are indicated on or are reasonably
inferable from the Record Drawings, or that are required in accordance with any
Applicable Law now in effect including, but not limited to, all types and
quantities of components, items, systems, materials and methods of construction.
"SUBCONTRACTOR" shall mean any subcontractor or supplier in privity
with the Contractor at any tier.
II. SELLER'S DUTIES AND RESPONSIBILITIES
Seller shall be responsible for the following duties and
responsibilities:
1. Seller shall oversee the Contractor who shall cause the
Seller's Work to be constructed in accordance with the Record
Drawings.
2. Seller shall provide construction and design administration
services and coordinate all portions of the Seller's Work
(provided that Seller shall not have responsibility for or
have control over the construction means, methods, techniques,
sequences and procedures affecting the Seller's Work).
3. Seller shall take all other actions reasonably necessary to
perform its obligations as set forth in this EXHIBIT B.
4. Seller shall oversee the efforts of the Contractor who shall
establish and implement adequate procedures for processing and
approval of shop drawings, product data, samples and other
submittals.
5. Seller shall oversee the efforts of the Contractor who shall
maintain appropriate record copies of all subcontracts,
drawings, specifications, Addenda, Seller Initiated Change
Orders, Purchaser Initiated Change Orders and other
modifications in good order. Seller shall monitor the efforts
of the Contractor who shall mark-up the Plans and
Specifications to reflect changes as they occur which shall be
turned over to Seller upon completion of the Seller's Work.
43
<PAGE>
6. Seller shall monitor the Contractor's management of the
performance of Subcontractors.
7. Seller shall coordinate inspections by the Architect with the
Contractor.
8. Seller shall coordinate the efforts of Purchaser, the
Architect and the Contractor in Punch List compilation. Seller
shall monitor the efforts of the Contractor in the completion
of the Punch List items.
9. Seller shall secure from the Contractor all warranties and
guaranties for the benefit of Purchaser, manuals, Record
Drawings and keys upon final completion.
III. INSPECTION AND ENTRY
From and after the date of this Agreement, Purchaser and its agents
shall have the right to enter onto the Property from time to time
during construction to observe and inspect the Seller's Work; provided
such entry shall be at the sole risk of Purchaser and that Seller shall
not be liable in any way for any injury, loss or damage which may occur
to any of the installations made or to property placed therein or for
any delay in the delivery of the Property or the completion of the
Seller's Work caused by such entry and installations. Purchaser shall
cooperate with Seller in all respects and shall not interfere with
construction activities of the Contractor in connection with the
completion of the Seller's Work, and Purchaser shall immediately comply
with any directive of Seller with respect to activities at the
Property.
IV. CHANGES IN THE WORK
1. ADDENDA AND SELLER INITIATED CHANGE ORDERS
Seller may approve addenda and minor changes and substitutions, such as
field changes to the Plans and Specifications (collectively, "ADDENDA")
and may approve change orders to the Plans and Specifications proposed
by Seller, Architect and/or Contractor ("SELLER INITIATED CHANGE
ORDERS"); provided, however, that the same (A) do not modify the Plans
and Specifications in any material respect, unless Purchaser has
granted (or has been deemed to have granted) its prior written
approval, which may be granted or withheld in Purchaser's sole
discretion; (B) do not reduce the scope, quality, quantity, function or
intent of Seller's Work as specified in the Plans and
44
<PAGE>
Specifications, unless Purchaser has granted its prior written
approval, which may be granted or withheld in Purchaser's sole
discretion; and (C) do not otherwise change the quality of the Seller's
Work, unless Purchaser has granted (or has been deemed to have granted)
its prior written approval, which approval shall not be unreasonably
withheld or delayed. If Seller requests Purchaser's written approval
pursuant to this SECTION (IV)(1), Purchaser shall respond to any such
request within seven (7) days. If such response is a refusal to grant
approval, it shall contain Purchaser's reasons for refusing to grant
the requested approval. If Purchaser fails to respond to any such
request for written approval within such seven (7) days period, as a
result of such failure, Purchaser shall be deemed to have granted its
prior written approval as requested by Seller.
2. PURCHASER INITIATED CHANGE ORDERS
A. Purchaser acknowledges that the Plans and Specifications do
not include tenant improvements, amenity spaces, signs,
directories, decorations, fixtures or other upgrades. Except
as otherwise provided herein, no extra work (including,
without limitation, increases in the scope of the Seller's
Work) or changes in the Seller's Work requested by Purchaser (
"PURCHASER'S INITIATED CHANGE") shall be made except in
accordance with a duly issued written change order authorizing
such Purchaser Initiated Change ("PURCHASER INITIATED CHANGE
ORDER"), notwithstanding the course of dealing between, or the
course of performance of, the parties or industry standards.
No work under a Purchaser Initiated Change Order shall be
carried out unless Seller has received funds from Purchaser to
fund any such Purchaser Initiated Change Order. Any such funds
shall be conclusively deemed to be fully earned when the work
to be performed pursuant to such Purchaser Initiated Change
Order is completed, and shall not be subject to refund or
offset under any other circumstances, unless Seller defaults
in its obligations under this Agreement. All Purchaser
Initiated Change Orders shall be executed in writing by
Purchaser and Seller and Seller may elect to execute or not
execute any such Purchaser Initiated Change Order, in Seller's
sole discretion, except that Seller shall not unreasonably
refuse to execute any such Purchaser Initiated Change Order
which (i) improves the Improvements; (ii) does not delay the
performance of the Seller's Work or require new licenses,
permits or approvals or resubmission or modification of
existing licenses, permits or approvals; and (iii) does not
require the
45
<PAGE>
removal of any of the components of the Seller's Work in the
event the Improvements are used as an office building.
B. In connection with any Purchaser Initiated Change, Seller
shall submit, in writing, to Purchaser, a proposed Purchaser
Initiated Change Order for accomplishing such Purchaser
Initiated Change, which proposed Purchaser Initiated Change
Order shall reflect the change in the amount due to the
Contractor pursuant to the Construction Contract and in
addition shall indicate the additional construction time, if
any, due to such proposed Purchaser Initiated Change.
Purchaser shall respond to such proposed Purchaser Initiated
Change Order within five (5) days following receipt.
V. CHANGES IN SCHEDULE
1. SCHEDULE
Seller has provided Purchaser with a construction schedule,
prepared by the Contractor, detailing the scheduling and
timing of the Seller's Work, and indicating a Final Completion
date prior to September 1, 2000 ( "SCHEDULE"), it being
understood that the Schedule shall be updated by Seller from
time to time to reflect the actual progress of construction.
2. SUBSTANTIAL COMPLETION
Seller shall provide Purchaser not less than sixty (60) days
prior written notice of the anticipated date of Final
Completion (hereinafter defined). When Seller has achieved
Substantial Completion (as defined in the Construction
Contract) of the Seller's Work, Seller shall cause the
Architect to issue a certificate of Substantial Completion
with a copy to Purchaser. No later than two (2) Business Days
following Purchaser's receipt of such certificate of
Substantial Completion, Purchaser and Seller shall jointly
inspect the Seller's Work with the Architect. No later than
three (3) Business Days after such inspection, the Architect
shall prepare a list of all purported nondeminimus
discrepancies between the Record Drawings and the Seller's
Work as constructed ( "PUNCH LIST"), and shall deliver such
list to Seller and Purchaser. If Seller or Purchaser contest
the inclusion of any item in, or the omission of any item
from, the Punch List, then during the next four (4) Business
Day period, Seller, Purchaser
46
<PAGE>
and the Architect shall cooperate in good faith to finalize
the Punch List. In the event that despite such cooperation,
Seller, Purchaser and the Architect are unable to finalize the
Punch List, then any disputes regarding the inclusion of any
item in, or the omission of any item from, the Punch List
shall be determined as follows: (A) Disputes involving items
having a cumulative value, as estimated by the Architect, not
in excess of $25,000, shall be determined by the Architect
within five (5) Business Days following such four (4) Business
Day period. (B) Disputes involving items having a cumulative
value as estimated by the Architect, in excess of $25,000,
shall be determined within five (5) Business Days following
such four (4) Business Day period by Peter Barber, presently
of Northland Development Corporation ("INITIAL ARBITRATOR")
or Robert M. Keeley, presently of Diversified Project
Management ("SECONDARY ARBITRATOR"), if the Initial Arbitrator
is not available. The Architect shall submit matters to the
Initial Arbitrator or the Secondary Arbitrator. All decisions
of the Architect, Initial Arbitrator and Secondary Arbitrator
pursuant to this SECTION V(2) shall be binding and conclusive.
After the Punch List is finalized pursuant to this SECTION
V(2), Seller shall proceed to cause the Punch List to be
completed as soon as reasonably practicable after Substantial
Completion All costs and expenses incurred with respect to the
Initial Arbitrator or the Secondary Arbitrator shall be shared
equally between Seller and Buyer.
3. FINAL COMPLETION
Final completion of the Seller's Work shall mean the date on
which the last of the following shall have occurred:
(a) The completion of the Punch List, as certified by the
Architect.
(b) The submission to Purchaser by the Seller of the
Record Drawings for the Seller's Work, along with all
warranties and guaranties, manuals and keys.
(c) The submission to Purchaser by the Seller of final
lien releases and waivers from the Contractor and, if
available, all major Subcontractors, which releases
and waivers may be conditioned on receipt of amounts
due from Seller upon final completion of the
Seller's Work.
47
<PAGE>
(d) The removal from the Property by Seller of temporary
facilities, tools and similar items.
(e) The issuance by the City of Waltham of a core and
shell certificate of occupancy for the Seller's
Work.
Upon Final Completion, Seller shall notify Purchaser of the Closing
Date in accordance with Section 4 of the Agreement.
VI. FINAL COMPLETION DATE
A. The Seller agrees to use commercially diligent
efforts to cause Final Completion of the Seller's
Work to be achieved on or before September 1, 2000,
subject to Events of Force Majeure and Purchaser
Initiated Change Orders.
B. If Final Completion is not achieved on or before
September 1, 2000 (which date shall be extended for
up to sixty (60) days for each day that the
construction of the Seller's Work was delayed because
of an Event of Force Majeure which date also shall be
extended by one day for each day that the
construction of the Seller's Work was delayed due to
Purchaser Initiated Change Orders), then, as
Purchaser's sole remedy on account of such delay
(other than Purchaser's termination right set forth
in SECTION 4 of this Agreement) for each day
thereafter until Final Completion is achieved, the
Purchase Price shall be reduced by $5,000 per day,
provided, however, that if Purchaser shall elect not
to exercise its right to terminate this Agreement as
of December 31, 2000 (or such later date as Purchaser
shall have the right to terminate this Agreement on
account of Purchaser Initiated Change Orders), all as
described in Section 4 of this Agreement, then the
$5,000 per day reduction in the Purchase Price shall
be tolled for thirty (30) days following Purchaser's
election (or deemed election) not so to terminate
this Agreement. Purchaser shall not lose the benefit
of any Purchase Price reduction that already shall
have accrued, and the $5,000 per day reduction shall
recommence to accrue following such thirty (30) day
period if Seller shall not then have achieved Final
Completion of the Seller's Work.
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<PAGE>
SCHEDULE 1 -
PLANS AND SPECIFICATIONS
49
<PAGE>
PROJECT BULLETINS/CHANGES AND CLARIFICATIONS
TO PROJECT PLANS AND SPECIFICATIONS
<TABLE>
<CAPTION>
BULLETIN
NUMBER DATE TO FROM REFERENCES AND ATTACHMENTS
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SPECIFICATIONS
08/05/99 John G. Crowe Associates Specifications - Base Building - Shell
& Core Only Vol. 1
08/05/99 John G. Crowe Associates Specifications - Base Building - Shell
& Core Only Vol. 2
08/20/99 John G. Crowe Associates Site Preparation Binder
08/23/99 John G. Crowe Associates CD Set L1 - L10 (L6 revised 10/26/99)
ARCHITECTURAL
1 08/31/99 John Moriarty & Associates Jung Brannen Associates SKA - 2R (revised)
2 08/31/99 John Moriarty & Associates Jung Brannen Associates SKA - 3A, 3B, 3C, 3D
3 08/31/99 John Moriarty & Associates Jung Brannen Associates SKA - 4A, 4B, 4C
4 09/03/99 John Moriarty & Associates Jung Brannen Associates SKA - 5A, 5B, 5C
5 09/03/99 John Moriarty & Associates Jung Brannen Associates Faxed sketch from JMA
8 10/07/99 John Moriarty & Associates Jung Brannen Associates SKA - 8
9 10/22/99 John Moriarty & Associates Jung Brannen Associates None
10 10/25/99 John Moriarty & Associates Jung Brannen Associates SKS - 101499 - 1, 2, 3
11 10/27/99 John Moriarty & Associates Jung Brannen Associates SKA - 9; AHA Sketch dated 10/26/99
12 10/27/99 John Moriarty & Associates Jung Brannen Associates Superceded by bulletin #17
13 11/02/99 John Moriarty & Associates Jung Brannen Associates SKA - 11
14 11/22/99 John Moriarty & Associates Jung Brannen Associates None
15 12/01/99 John Moriarty & Associates Jung Brannen Associates P - 3 and P - 4 revision 2; 11/23/99
16 12/01/99 John Moriarty & Associates Jung Brannen Associates None
17 12/08/99 John Moriarty & Associates Jung Brannen Associates SKA - 10; SKE - 6 - 9 incl.;
SKH - 2 - 4 incl.; SKFP - 1 & 2
None 09/29/99 Jung Brannen Associates SKA - 7
ENGINEERS
10/18/99 Jung Brannen Associates McNamara/Salvia Sketches for canopy
11/05/99 Jung Brannen Associates/ McNamara/Salvia Marked up plan showing corrected
John Moriarty & Associates dimensions for the second floor
opening.
OTHER
A 09/09/99 John Moriarty & Associates John G. Crowe Associates SKL - 1 - 5
B 09/13/99 John Moriarty & Associates John G. Crowe Associates SKL - 6 - 9
C 09/13/99 John Moriarty & Associates John G. Crowe Associates SKL - 10 - 11
D 09/30/99 John Moriarty & Associates John G. Crowe Associates SKL - 12, 13
E 10/05/99 John Moriarty & Associates John G. Crowe Associates SKL - 14 - 19
F 10/05/99 John Moriarty & Associates John G. Crowe Associates SKL - 20 - 21
G 10/05/99 John Moriarty & Associates John G. Crowe Associates SKL - 22
H 11/10/99 John Moriarty & Associates John G. Crowe Associates SKL - 23 - 27
I 12/02/99 John Moriarty & Associates John G. Crowe Associates SKL - 28
J 01/05/00 John Moriarty & Associates John G. Crowe Associates SKL - 29 - 31
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
DWG TITLE DATED REC'D ISSUED BY COMMENTS
<S> <C> <C> <C> <C> <C>
CIVIL
C-1 Title Sheet 2-Apr-98 23-Aug-99 John G. Crowe
L-1 Existing Conditions Plan 2-Apr-98 23-Aug-99 John G. Crowe
L-2 Existing Conditions Plan 2-Apr-98 23-Aug-99 John G. Crowe
L-3 Proposed Grading & Material Plan 2-Apr-98 23-Aug-99 John G. Crowe
L-4 Proposed Drainage & Utility Plan 2-Apr-98 23-Aug-99 John G. Crowe
L-5 Proposed Layout Plan 2-Apr-98 23-Aug-99 John G. Crowe
L-6 Site Planting Plan 2-Apr-98 23-Aug-99 John G. Crowe
L-7 Site Details 2-Apr-98 23-Aug-99 John G. Crowe
L-8 Site Details 2-Apr-98 23-Aug-99 John G. Crowe
L-9 Site Details 2-Apr-98 23-Aug-99 John G. Crowe
L-10 Site Details 2-Apr-98 23-Aug-99 John G. Crowe
GENERAL NOTES:
First set
Second Set: 19-Jul-99
Third Set: 23-Aug-99
ARCHITECTURAL
A-001 Drawing list, Abbreviations, Desig's, 27-May-99 5-Aug-99 Jung/Brannen
Notes, Symbols & Code Sum
A-100 Basement Plan 27-May-99 5-Aug-99 Jung/Brannen
A-101 First Floor Plan 27-May-99 5-Aug-99 Jung/Brannen
A-102 Second Floor Plan 27-May-99 5-Aug-99 Jung/Brannen
A-103 Third Floor Key Plan 27-May-99 5-Aug-99 Jung/Brannen
A-104 Roof Plan 27-May-99 5-Aug-99 Jung/Brannen
A-201 Building Elevations 27-May-99 5-Aug-99 Jung/Brannen
A-202 Typ. Enlarged Building Elevation 27-May-99 5-Aug-99 Jung/Brannen
A-203 Enlarged Atypical building & Entrance 4-Jun-99 5-Aug-99 Jung/Brannen
Elevation
A-211 Building Sections 27-May-99 4-Aug-99 Jung/Brannen Not updated
A-301 Wall Sections 27-May-99 5-Aug-99 Jung/Brannen
A-302 Wall Sections 4-Jun-99 5-Aug-99 Jung/Brannen
A-401 Egress Stairs & Corridors: Plans & 4-Jun-99 5-Aug-99 Jung/Brannen
Sections
A-402 Egress Stair Plans: Sections & Details 4-Jun-99 5-Aug-99 Jung/Brannen
A-411 Elevator Core. Cabs & Machine Rm: 4-Jun-99 5-Aug-99 Jung/Brannen
Plans, Sections & Details
A-421 First Floor Bathrooms & Locker Rooms: 27-May-99 5-Aug-99 Jung/Brannen
Plans, RCP's & Elevations
A-422 Second & Third Floor Bathrooms: RCP's 4-Jun-99 5-Aug-99 Jung/Brannen
& Elevations
A-431 Atrium/Lobby: First Floor Plan 4-Jun-99 5-Aug-99 Jung/Brannen
A-432 Atrium/Lobby: Second & Third Floor Plan 4-Jun-99 5-Aug-99 Jung/Brannen
A-433 Atrium/Lobby: First Floor Reflected 4-Jun-99 5-Aug-99 Jung/Brannen
Ceiling Plan
A-434 Atrium/Lobby: Second & Third Floor RCP 4-Jun-99 5-Aug-99 Jung/Brannen
A-435 Atrium/Lobby: Skylight Plan & Section 4-Jun-99 5-Aug-99 Jung/Brannen
A-436 Atrium/Lobby: Section/Elevation 4-Jun-99 5-Aug-99 Jung/Brannen
A-437 Atrium/Lobby: Section/Elevation 16-Jul-99 5-Aug-99 Jung/Brannen
A-438 Atrium/Lobby: Elevations 16-Jul-99 5-Aug-99 Jung/Brannen
A-439 Atrium/Lobby: Elevations 16-Jul-99 16-Jul-99 Jung/Brannen Not updated
A-441 Rear Entrance & Corridor 4-Jun-99 5-Aug-99 Jung/Brannen
A-451 Building Conference & Cafe 16-Jul-99 5-Aug-99 Jung/Brannen
A-501 Exterior Details 27-May-99 5-Aug-99 Jung/Brannen
A-502 Exterior Details 4-Jun-99 5-Aug-99 Jung/Brannen
A-503 Exterior Details 5-Aug-99 5-Aug-99 Jung/Brannen
A-504 Exterior Details 5-Aug-99 5-Aug-99 Jung/Brannen
A-601 Door & Hardware Schedule: Door Frame 4-Jun-99 5-Aug-99 Jung/Brannen
types: Details
A-801 Finish Schedule 4-Jun-99 5-Aug-99 Jung/Brannen
A-901 Interior/Exterior - Details 4-Jun-99 5-Aug-99 Jung/Brannen
A-902 Atrium/Lobby - Details 16-Jul-99 5-Aug-99 Jung/Brannen
A-903 Interior/Exterior - Details 16-Jul-99 5-Aug-99 Jung/Brannen
A-904 Interior/Exterior - Details 16-Jul-99 5-Aug-99 Jung/Brannen
</TABLE>
51
<PAGE>
<TABLE>
<CAPTION>
DWG TITLE DATED REC'D ISSUED BY COMMENTS
<S> <C> <C> <C> <C> <C>
A-905 Atrium/Lobby - Details 5-Aug-99 5-Aug-99 Jung/Brannen
STRUCTURAL
S-100 General Notes I 27-May-99 5-Aug-99 Jung/Brannen/MC/Sal
S-101 General Notes II 27-May-99 5-Aug-99 Jung/Brannen/MC/Sal
S-200 Basement Foundation Plan 27-May-99 5-Aug-99 Jung/Brannen/MC/Sal
S-201 First Floor Plan 27-May-99 5-Aug-99 Jung/Brannen/MC/Sal
S-202 Second Floor Plan 27-May-99 5-Aug-99 Jung/Brannen/MC/Sal
S-203 Third Floor Plan 27-May-99 5-Aug-99 Jung/Brannen/MC/Sal
S-204 Roof Plan 27-May-99 5-Aug-99 Jung/Brannen/MC/Sal
S-300 Column Schedule 27-May-99 5-Aug-99 Jung/Brannen/MC/Sal
S-301 Brace Frame Elevations 27-May-99 5-Aug-99 Jung/Brannen/MC/Sal
S-400 Concrete Details I 27-May-99 5-Aug-99 Jung/Brannen/MC/Sal
S-401 Concrete Details II 27-May-99 5-Aug-99 Jung/Brannen/MC/Sal
S-402 Concrete Details III 27-May-99 5-Aug-99 Jung/Brannen/MC/Sal
S-403 Concrete Details IV 27-May-99 5-Aug-99 Jung/Brannen/MC/Sal
S-500 Steel Details I 27-May-99 5-Aug-99 Jung/Brannen/MC/Sal
S-501 Steel Details II 27-May-99 5-Aug-99 Jung/Brannen/MC/Sal
S-502 Steel Details III 27-May-99 5-Aug-99 Jung/Brannen/MC/Sal
S-503 Steel Details IV 27-May-99 5-Aug-99 Jung/Brannen/MC/Sal
S-504 Steel Details V 4-Jun-99 5-Aug-99 Jung/Brannen/MC/Sal
FIRE PROTECTION
FP-1 Fire Alarm System Legend Riser & Notes 4-Jun-99 5-Aug-99 AHA Consulting Eng.
FP-2 Fire Alarm Basement Plan 4-Jun-99 5-Aug-99 AHA Consulting Eng. 5-Aug-99
FP-3 Fire Alarm First Floor Plan 4-Jun-99 5-Aug-99 AHA Consulting Eng. 5-Aug-99
FP-4 Fire Alarm Second Floor Plan 4-Jun-99 5-Aug-99 AHA Consulting Eng.
FP-5 Fire Alarm Third Floor Plan 4-Jun-99 5-Aug-99 AHA Consulting Eng.
FP-6 Enlarged Reflected Ceiling Plan 16-Jul-99 5-Aug-99 AHA Consulting Eng.
PLUMBING
P-1 Legends, Schedules & Diagrams 4-Jun-99 2-Sep-99 AHA Consulting Eng. 5-Aug-99
P-2 Buried Piping Plan 4-Jun-99 2-Sep-99 AHA Consulting Eng. 5-Aug-99
P-3 Basement Plan 4-Jun-99 2-Sep-99 AHA Consulting Eng. 5-Aug-99
P-4 First Floor Plan 4-Jun-99 2-Sep-99 AHA Consulting Eng. 5-Aug-99
P-5 Second Floor Plan 4-Jun-99 2-Sep-99 AHA Consulting Eng. 5-Aug-99
P-6 Third Floor Plan 16-Jul-99 2-Sep-99 AHA Consulting Eng. 5-Aug-99
P-7 Roof Plan 16-Jul-99 2-Sep-99 AHA Consulting Eng. 5-Aug-99
P-8 Riser Diagram 16-Jul-99 2-Sep-99 AHA Consulting Eng. 5-Aug-99
GENERAL NOTES:
First set 4-Jun-99
Second Set 5-Aug-99
HVAC
H-1 HVAC Schedules, Notes and Legends 4-Jun-99 5-Aug-99 AHA Consulting Eng.
H-2 HVAC Details 4-Jun-99 5-Aug-99 AHA Consulting Eng.
H-3 HVAC Basement Plan 4-Jun-99 2-Sep-99 AHA Consulting Eng.
H-4 HVAC First Floor Plan 4-Jun-99 5-Aug-99 AHA Consulting Eng.
H-5 HVAC Second Floor Plan 4-Jun-99 5-Aug-99 AHA Consulting Eng.
H-6 HVAC Third Floor Plan 4-Jun-99 5-Aug-99 AHA Consulting Eng.
H-7 HVAC Roof Plan 4-Jun-99 5-Aug-99 AHA Consulting Eng.
ELECTRICAL
E-1 Notes and Legands 4-Jun-99 5-Aug-99 AHA Consulting Eng.
E-2 Lighting Fixture Schedule & Detail 4-Jun-99 5-Aug-99 AHA Consulting Eng.
E-3 Site Plan & Details 4-Jun-99 5-Aug-99 AHA Consulting Eng.
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
DWG TITLE DATED REC'D ISSUED BY COMMENTS
<S> <C> <C> <C> <C> <C>
E-4 Basement Lighting Plan 4-Jun-99 9-Sep-99 AHA Consulting Eng. 5-Aug-99
E-5 Basement Power Plan 4-Jun-99 2-Sep-99 AHA Consulting Eng. 5-Aug-99
E-6 First Floor Lighting Plan 4-Jun-99 5-Aug-99 AHA Consulting Eng.
E-7 First Floor Power Plan 4-Jun-99 5-Aug-99 AHA Consulting Eng.
E-8 Second Floor Lighting Plan 4-Jun-99 5-Aug-99 AHA Consulting Eng.
E-9 Second Floor Power Plan 4-Jun-99 4-Aug-99 AHA Consulting Eng.
E-10 Third Floor Lighting Plan 4-Jun-99 5-Aug-99 AHA Consulting Eng.
E-11 Third Floor Power Plan 4-Jun-99 5-Aug-99 AHA Consulting Eng.
E-12 Power Riser Diagram 4-Jun-99 2-Sep-99 AHA Consulting Eng. 4-Jun-99
E-13 Electrical Schedules 4-Jun-99 5-Aug-99 AHA Consulting Eng.
E-14 Electrical Schedules & Details 16-Jul-99 5-Aug-99 AHA Consulting Eng.
Specifications:
</TABLE>
53
<PAGE>
EXHIBIT C -PERMITTED TITLE EXCEPTIONS
(a) Any and all present and future laws, regulations,
restrictions, requirements, ordinances, resolutions and orders
(including, without being limited to, any of the foregoing relating to
zoning, building and environmental protection) as to the use,
occupancy, subdivision or improvement of the Property adopted or
imposed by any bureau, board, commission, legislature, department or
other governmental body.
(b) The Contracts.
(c) Any state of facts existing as of the date of this
Agreement which a personal inspection of the Property might disclose.
(d) Taxes, water charges, sewer rents and assessments, subject
to adjustment as provided in this Agreement.
(e) Any lien or encumbrance encumbering the Property as to
which Seller shall deliver to Purchaser, or Purchaser's title company,
if any, at or prior to the Closing (or after the Closing in accordance
with customary conveyancing practices), proper instruments, in
recordable form, canceling such lien or encumbrance, together with any
other instruments necessary thereto and the cost of recording and
canceling the same.
(f) Variations between the tax lot lines and the record lines.
(g) Any Additional Exceptions that, pursuant to the terms of
SECTION 10 of this Agreement, shall be or be deemed to be Permitted
Title Exceptions.
(h) All matters set forth in First American Title Insurance
Company Policy No. 20344472 other than those evidencing Financial
Encumbrances.
(i) Proposed Easement and Maintenance Agreement between Seller
and Massachusetts Wellness & Fitness, L.L.C.
54
<PAGE>
EXHIBIT D - CONTRACTS AND AGREEMENTS
1. Reciprocal Access and Utility Easement dated March 25, 1999 between
Seller and Polaroid Corporation, filed with the South Registry District
of Middlesex County as Document No. 1101665 and recorded with the
Middlesex South District Registry of Deeds on March 26, 1999 as
Instrument No. 503.
2. Reciprocal Easement Agreement dated March 25, 1999 between Seller and
Polaroid Corporation, filed with the South Registry District of
Middlesex County as Document No. 1101666.
3. Mutual Covenants agreement dated March 25, 1999 between Seller and
Polaroid Corporation, filed with the South Registry District of
Middlesex County as Document No. 1101667.
4. Landscape License Agreement dated March 25, 1999 between Seller and
Polaroid Corporation, filed with the South Registry District of
Middlesex County as Document No. 1101668.
5. Agreement regarding the apportionment of real estate taxes between
Polaroid Corporation and Seller, a copy of which has been delivered to
Purchaser.
55
<PAGE>
EXHIBIT E - LIST OF PERMITS
56
<PAGE>
/ / Form A Approval - plans approved by City of Waltham Board of Survey and
Planning 3/4/99
/ / MEPA confirmation that no review is required - see advisory opinion from
EOEA/MEPA office dated 3/5/99
/ / DEP Division of Watershed Management - Negative Determination relative to
the applicability of the NPDES program (i.e. proposed development does not
constitute a storm water discharge within the ORW) - see letter dated
7/2/99
/ / Waltham Conservation Commission (Ch. 131) Negative Determination of
Applicability - executed 7/6/99
/ / DEP - Notification Prior to Construction or Demolition (7/16/99)
/ / City of Waltham Permit to Build - Site Preparation (7/12/99)
/ / City of Waltham Sewer Connection Permit
/ / City of Waltham Permit to Build - Construction of Office Building (8/25/99)
57
<PAGE>
[Receipt of deposit of $1,000,000.00 into account of Brown, Rudnick, Freed &
Gesmer.
Photocopy of check in the amount of $1,000,000.00 from PRAECIS PHARMACEUTICALS
INCORPORATED to Brown, Rudnick, Freed & Gesmer signed by Malcolm L. Gefter and
Kevin F. McLaughlin.]
58
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BEST PROPERTY FUND, L.P.
Bren Schreiber Properties, Inc.
125 Summer Street, Suite 1640
Boston, MA 02110
January 14, 2000
PRAECIS PHARMACEUTICALS INCORPORATED
One Hampshire Street
Cambridge, MA 02139
Attention: Mr. Kevin F. McLaughlin, Chief Financial Officer
RE: LETTER AGREEMENT PURSUANT TO PROPERTY LOCATED AT 830 WINTER STREET,
WALTHAM MA (THE "PROPERTY")
Dear Mr. McLaughlin:
Praecis Pharmaceuticals Incorporated ("Praecis") and Best
Property Fund, L.P. ("Best") have executed that certain Contract of Sale dated
January 14, 2000 (the "Contract") regarding the Property. Praecis and Best
mutually acknowledge the desirability of entering into a supplemental agreement
with respect to construction change orders by Praecis pursuant to current
construction being undertaken by Best at the Property.
The letter ("Letter Agreement") shall constitute an agreement
between Praecis and Best to proceed with reasonable diligence and good faith to
negotiate and execute a binding agreement pursuant to change orders (the "Change
Order Agreement") by February 7, 2000 ("Target Date"). The Change Order
Agreement may be a separate agreement or an amendment to the Contract as
determined by the parties. In no event shall failure of the parties to agree on
or enter into the Change Order Agreement serve to nullify, change, modify or
otherwise affect in any way the agreement between the parties in the Contract.
BREN SCHREIBER PROPERTIES, INC., as agent
for BEST PROPERTY FUND, L.P.
By: /s/ D.S. Hall
-------------------------------------
Name: David S. Hall
Title: Development Manager
PRAECIS PHARMACEUTICALS, INCORPORATED
By: /s/ Kevin McLaughlin
-------------------------------------
Name: Kevin McLaughlin
Title: Senior Vice President &
Chief Financial Officer
CC:
E. Hershfield, Esq.
M. Glazer P.C.
L. Owens
M. Lentz
J. Kerrigan
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FIRST AMENDMENT TO CONTRACT OF SALE
This first amendment ("FIRST AMENDMENT") is made as of February 7,
2000, by and among Best Property Fund, L.P., a Delaware limited partnership
("SELLER"); and Praecis Pharmaceuticals Incorporated, a Delaware corporation
("BUYER").
W I T N E S S E T H
WHEREAS, Seller and Buyer have duly executed that certain Contract of
Sale dated as of January 14, 2000 in connection with certain property commonly
known as 830 Winter Street, Waltham, Massachusetts ("AGREEMENT"); and
WHEREAS, Seller and Buyer desire to amend and modify the Agreement in
the manner set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises, and other
good and valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, Seller and Buyer agree that the Agreement shall be and hereby is
amended as follows:
1. EXHIBIT B of the Agreement is hereby deleted in its entirety and the
"EXHIBIT B" attached hereto shall be substituted in its stead.
2. Except as herein amended, the Agreement and all covenants, agreements,
terms and conditions thereof shall remain and continue in full force
and effect and hereby are in all respects ratified and confirmed.
3. The covenants, agreements, terms and conditions of the First Amendment
shall bind and inure to the benefit of the parties hereto and their
respective successors and assigns.
4. This First Amendment shall not be changed orally, but only by writing
signed by the party against whom enforcement thereof is sought.
5. This First Amendment may be executed in one or more counterparts, which
collectively will constitute only one instrument.
[SEE SIGNATURES ON NEXT PAGE]
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IN WITNESS WHEREOF, the undersigned have executed this instrument under
seal as of the date first above written.
SELLER:
BEST PROPERTY FUND, L.P., a Delaware
limited partnership
By: BBS INVESTORS II, a Delaware general
partnership, its general partner
By: SCHREIBER
DEVELOPMENTS, LLC, a California
limited liability company, a
general partner
By: /s/ C.J. Schreiber
---------------------------------
Charles J. Schreiber, Jr.
Manager
PURCHASER:
PRAECIS PHARMACEUTICALS
INCORPORATED
By: /s/ Kevin F. Mclaughlin
-------------------------------------
Name: Kevin F. McLaughlin
Title: Sr. V.P. and C.F.O.
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EXHIBIT B
SELLER'S WORK
I. DEFINITIONS
The following terms shall have the meanings specified in this Section
when used in this EXHIBIT B (the meanings specified are applicable to both the
singular and plural):
"APPLICABLE LAWS" shall mean all applicable federal, state and local
laws, codes, ordinances, rules, regulations, standards or orders of any public
authority having jurisdiction over the Property, including building, health,
labor, safety, licensing, environmental or zoning laws, codes, ordinances,
rules, regulations, standards or orders of any such public authority.
"ARCHITECT" shall mean Jung/Brannen Associates, Inc., who shall be
responsible for the design of the Seller's Work on behalf of Seller, pursuant to
the Design Contract (as hereinafter defined).
"CONSTRUCTION CONTRACT" shall mean the construction contract dated as
of April 13, 1999 by and between Seller or its affiliates or agents and the
Contractor for the construction of the Seller's Work, as such construction
contract may be amended from time to time; provided, however, that no such
amendment shall affect Contractor's warranties set forth therein.
"CONTRACTOR" shall mean John Moriaty & Associates, Inc., the general
contractor who will be responsible for constructing the Seller"s Work on behalf
of Seller pursuant to the Construction Contract.
"CORRECTION COSTS" shall mean all costs and expenses, including without
limitation, all hard costs; construction management fees, remobilization fees
and other soft costs; and lost rent (calculated on an assumed rental of $400,000
per month) that Seller reasonably estimates would be incurred or suffered by
Seller if a Major Purchaser Initiated Change (hereinafter defined) is carried
out, Purchaser then does not purchase the Property and Seller then must
reconstitute the Improvements as an office building in accordance with the Plans
and Specifications. Such costs and expenses shall include, without limitation,
Seller's reasonable estimate of (i) all costs and expenses which would result
from the required removal of certain non-reusable components of the Improvements
which were added as a result of the Major Purchaser Initiated Change; (ii) all
costs and expenses which would result from the reincorporation into the
Improvements of certain components of the work set forth in the Plans and
Specifications which were deleted from the
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Seller's Work as a result of the Major Purchaser Initiated Change; and (iii) all
lost rent Seller would suffer, at an assumed rate of $400,000 per month from (x)
the date which is sixty (60) days after the date on which Seller reasonably
estimates the Seller's Work would have been Finally Completed (as hereinafter
defined) if no Purchaser Initiated Change Orders (hereinafter defined) had been
executed and (y) the date on which Seller reasonably estimates the
reconstitution of the Improvements as an office building in accordance with the
Plans and Specifications would be Finally Complete (assuming that such
reconstitution would not begin until the day after the date of the Closing set
forth in this Agreement). Notwithstanding the foregoing, the portion of any such
delay which also is the subject of a Letter of Credit shall not be included in
the calculation of Correction Costs.
"DESIGN CONTRACT" shall mean the design contract entered into by and
between Seller or its affiliates or agents and the Architect for the design of
the Seller's Work, as such design contract may be amended; provided, however,
that no such amendment shall affect Architect's warranties set forth therein.
"EVENT OF FORCE MAJEURE" shall mean labor disputes, fire, unusual
delays in deliveries, unavoidable conditions or other causes beyond the
Contractor's control which the Architect determines may justify delay.
"LETTER OF CREDIT" shall mean a letter of credit on terms and from an
issuing bank(s) acceptable to Seller and which otherwise satisfies the
requirements set forth herein.
If the Letter of Credit is being issued in connection with a Time
Extending Purchaser Initiated Change (hereinafter defined), and the Time
Extending Purchaser Initiated Change, together with any then executed Purchaser
Initiated Change Orders, would, in Seller's reasonable estimation, result in a
cumulative delay in the Final Completion of the Seller's Work of more than sixty
(60) days from the date on which Seller reasonably estimates the Seller's Work
would have been Finally Completed if no Purchaser Initiated Change Orders had
been executed, then the Letter of Credit shall be in an amount equal to the
product of $13,333.00 multiplied by the number of days that Seller reasonably
estimates the Final Completion of the Seller's Work would be so delayed beyond
such sixty (60) day period.
If the Letter of Credit is being issued in connection with a Major
Purchaser Initiated Change, then the Letter of Credit shall be in an amount
equal to the Correction Costs; plus, if the Major Purchaser Initiated Change,
together with any then executed Purchaser Initiated Change Orders, would, in
Seller's reasonable estimation, result in a cumulative delay in the Final
Completion of the Seller's Work of more than sixty (60) days from the date on
which Seller reasonably estimates the Seller's Work would have been Finally
Completed if no Purchaser
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Initiated Change Orders had been executed, then the amount of the Letter of
Credit shall be increased by an amount equal to the product of $13,333.00
multiplied by the number of days that Seller reasonably estimates that the Final
Completion of the Seller's Work would be so delayed beyond such sixty (60) day
period.
If the Closing occurs in accordance with the terms of this Agreement,
each such Letter of Credit shall be returned to Purchaser. If Purchaser defaults
in its obligations to purchase the Property under this Agreement, which default
would entitle Seller to retain the Deposit as liquidated damages, then Seller
may draw upon each Letter of Credit, and any funds drawn thereunder shall not be
part of the Deposit or applied against any liquidated damages to be paid to
Seller, shall be conclusively deemed to be fully earned by Seller and shall not
be subject to refund or offset under any circumstances. Seller may not draw upon
any Letter of Credit except as set forth in the preceding sentence.
"PLANS AND SPECIFICATIONS" shall mean the drawings, plans and written
requirements prepared by the Architect or engineers or other consultants which
describe improvements to be constructed at the Property and which have been
delivered to Purchaser prior to the date of this Agreement, and which are listed
on SCHEDULE 1 hereto.
"RECORD DRAWINGS" shall mean, collectively, the Plans and
Specifications, together with all Addenda (hereinafter defined) approved by
Seller, all Seller Initiated Change Orders (hereinafter defined) approved by
Seller and all Purchaser Initiated Change Orders (hereinafter defined) approved
by Seller.
"SELLER'S WORK" shall mean all labor, materials, equipment and
services, or any portion thereof, that are indicated on or are reasonably
inferable from the Record Drawings, or that are required in accordance with any
Applicable Law now in effect including, but not limited to, all types and
quantities of components, items, systems, materials and methods of construction.
"SUBCONTRACTOR" shall mean any subcontractor or supplier in privity
with the contractor at any tier.
II. SELLER'S DUTIES AND RESPONSIBILITIES
Seller shall be responsible for the following duties and
responsibilities:
1. Seller shall oversee the Contractor who shall cause the
Seller's Work to be constructed in accordance with the Record
Drawings.
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2. Seller shall provide construction and design administration
services and coordinate all portions of the Seller's Work
(provided that Seller shall not have responsibility for or
have control over the construction means, methods, techniques,
sequences and procedures affecting the Seller's Work).
3. Seller shall take all other actions reasonably necessary to
perform its obligations as set forth in this EXHIBIT B.
4. Seller shall oversee the efforts of the Contractor who shall
establish and implement adequate procedures for processing
and approval of shop drawings, product data, samples and other
submittals.
5. Seller shall oversee the efforts of the Contractor who shall
maintain appropriate record copies of all subcontracts,
drawings, specifications, Addenda, Seller Initiated Change
Orders, Purchaser Initiated Change Orders and other
modifications in good order. Seller shall monitor the efforts
of the Contractor who shall mark-up the Plans and
Specifications to reflect changes as they occur which shall be
turned over to Seller upon completion of the Seller's Work.
6. Seller shall monitor the Contractor's management of the
performance of Subcontractors.
7. Seller shall coordinate inspections by the Architect with the
Contractor.
8. Seller shall coordinate the efforts of Purchaser, the
Architect and the contractor in Punch List compilation. Seller
shall monitor the efforts of the Contractor in the completion
of the Punch List items.
9. Seller shall secure from the Contractor all warranties and
guaranties for the benefit of Purchaser, manuals, Record
Drawings and keys upon final completion.
III. INSPECTION AND ENTRY
From and after the date of this Agreement, Purchaser and its agents
shall have the right to enter onto the Property from time to time during
construction to observe and inspect the Seller's Work; provided such entry shall
be at the sole risk of Purchaser and that Seller shall not be liable in any way
for any injury, loss or damage which may occur to any of the installations made
or to property placed therein or for any delay in the delivery of the Property
or the completion of the Seller's Work caused by such entry and installations.
Purchaser shall cooperate with Seller in all
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respects and shall not interfere with construction activities of the Contractor
in connection with the completion of the Seller's Work, and Purchaser shall
immediately comply with any directive of Seller with respect to activities at
the Property.
IV. CHANGES IN THE WORK
1. ADDENDA AND SELLER INITIATED CHANGE ORDERS
Seller may approve addenda and minor changes and substitutions, such as
field changes to the Plans and Specifications proposed by Seller, Architect
and/or Contractor (collectively, "ADDENDA") and may approve change orders to the
Plans and Specifications proposed by Seller, Architect and/or Contractor
("SELLER INITIATED CHANGE ORDERS"); provided, however, that the same (A) do not
modify the Plans and Specifications in any material respect, unless Purchaser
has granted (or has been deemed to have granted) its prior written approval,
which may be granted or withheld in Purchaser's sole discretion; (B) do not
reduce the scope, quality, quantity, function or intent of Seller's Work as
specified in the Plans and Specifications, unless Purchaser has granted (or has
been deemed to have granted) its prior written approval, which may be granted or
withheld in Purchaser's sole discretion; and (C) do not otherwise change the
quality of the Seller's Work, unless Purchaser has granted (or has been deemed
to have granted) its prior written approval, which approval shall not be
unreasonably withheld or delayed. If Seller requests Purchaser's written
approval pursuant to this SECTION (IV)(1), Purchaser shall respond to any such
request within seven (7) days. If such response is a refusal to grant approval,
it shall contain Purchaser's reasons for refusing to grant the requested
approval. If Purchaser fails to respond to any such request for written approval
within seven (7) days period, as a result of such failure, Purchaser shall be
deemed to have granted its prior written approval as requested by Seller.
2. PURCHASER INITIATED CHANGE ORDERS
A. Purchaser acknowledges that the Plans and
Specifications do not include tenant improvements,
amenity spaces, signs, directories, decorations,
fixtures or other upgrades. Except as otherwise
provided herein, no extra work (including, without
limitation, increases in the scope of the Seller's
Work) or changes in the Seller's Work requested by
Purchaser ("PURCHASER INITIATED CHANGE") shall be
made except in accordance with a duly issued written
change order executed by Seller and Purchase
authorizing such Purchaser Initiated Change
("PURCHASER INITIATED CHANGE ORDER"), notwithstanding
the course of dealing between, or the course of
performance of, the parties or industry standards.
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B. If Purchaser, from time to time, requests a Purchaser
Initiated Change, Purchaser shall send Seller a
written notice, setting forth, in reasonable detail,
the changes in the Plans and Specifications, and the
changes in the scope of the Seller's Work, which
would be required by the Purchaser Initiated Change
(each, a "PURCHASER INITIATED CHANGE NOTICE").
C. Within ten (10) business days after Seller receives a
purchaser Initiated Change Notice, Seller shall send
Purchaser a written notice (each a "SELLER PIC
RESPONSE NOTICE") specifying whether, in Seller's
reasonable determination, the Purchaser Initiated
Change described in the Purchaser Initiated Change
Notice is a "MINOR PURCHASER INITIATED CHANGE"
(hereinafter defined), a "MAJOR PURCHASER INITIATED
CHANGE" or a "TIME EXTENDING PURCHASER INITIATED
CHANGE." Each Seller PIC Response Notice shall
specify the reasons for Seller's determination.
A "Minor Purchaser Initiated Change" shall mean a
Purchaser Initiated Change which Seller determines,
in its reasonable discretion, (i) will not involve
the incorporation into the Seller's Work of any
components which will have to be removed in the event
the Property is not purchased by Purchaser in order
to reconstitute the Improvements as an office
building in accordance with the Plans and
Specifications; (ii) will not delay the Final
Completion of the Seller's Work; (iii) will not
require new licenses, permits or approvals or the
resubmission or modification of existing licenses,
permits or approvals; and (iv) will not involve the
removal of any component of the work set forth in the
Plans and Specifications which will need to be
reincorporated into the Improvements in the event the
Property is not purchased by Purchaser.
A "Major Purchaser Initiated Change" shall mean a
Purchaser Initiated Change which Seller determines,
in its reasonable discretion, (i) will involve the
incorporation into the Seller's Work of any component
which will have to be removed in the event the
Property is not purchased by Purchaser in order to
reconstitute the Improvements as an office building
in accordance with the Plans and Specifications; or
(ii) will delay the Final Completion of the Seller's
Work; or (iii) will require new licenses, permits or
approvals or the resubmission or modification of
existing licenses, permits or approvals; or (iv) will
involve the removal of any component of the work set
forth in the Plans and Specifications which will need
to be
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reincorporated into the Improvements in the event the
Property is not purchased by Purchaser.
A "Time Extending Purchaser Initiated Change" shall
mean a Purchaser Initiated Change which Seller
determines, in its reasonable discretion, will delay
the Final Completion of the Seller's Work, but (i)
will not involve the incorporation into the Seller's
Work of any component which will have to be removed
in the event the Property is not purchased by
Purchaser in order to reconstitute the Improvements
as an office building in accordance with the Plans
and Specifications; (ii) will not require new
licenses, permits or approvals or the resubmission or
modification of existing licenses, permits or
approvals; and (iii) will not involve the removal of
any component of the work set forth in the Plans and
Specifications which will need to be reincorporated
into the Improvements in the event the Property is
not purchased by Purchaser.
D. If a Seller PIC Response Notice indicates that a
Purchaser Initiated Change is a Minor Purchaser
Initiated Change, then said Seller PIC Response
Notice shall be accompanied by a proposed Purchaser
Initiated Change Order, which shall reflect (i) any
change (positive or negative) in the amount due to
the Contractor pursuant to the Construction Contract
as a result of the Minor Purchaser Initiated Change;
and (ii) any additional funds to be paid by Purchaser
in connection with such Minor Purchaser Initiated
Change, including, without limitation, all increased
construction management fees and other soft costs to
be incurred by Seller in connection with such Minor
Purchaser Initiated Change.
If Purchaser receives such a proposed Purchaser
Initiated Change Order, then Purchaser may elect
either (i) to cause Seller to carry out the changes
in the Seller's Work authorized in such proposed
Purchaser Initiated Change Order by executing such
proposed Purchaser Initiated Change order and
returning it to Seller within five (5) business days
after receipt, together with good funds equal to the
total of any positive change in the amount due to the
Contractor on account of such Purchaser Initiated
Change Order and any additional funds to be paid to
Seller, or (ii) to withdraw the applicable Minor
Purchaser Initiated Change.
If Purchaser does not so execute and deliver the
Purchaser Initiated Change Order and said funds, then
Purchaser shall be deemed to have
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withdrawn the applicable Minor Purchaser Initiated
Change. If Purchaser does so execute and deliver the
Purchaser Initiated Change Order and said funds,
then, upon receipt (y) Seller shall execute the
Purchaser Initiated Change Order, whereupon it shall
become effective, and (z) any funds paid to Seller
shall not be part of the Deposit or applied against
any liquidated damages to be paid to Seller, shall be
conclusively deemed to be fully earned by Seller when
the work to be performed pursuant to such Purchaser
Initiated Change Order is completed, and shall not be
subject to refund or offset under any other
circumstances, unless Seller defaults in its
obligations under this Agreement. If such Purchaser
Initiated Change Order indicates any negative change
in the amount due to the Contractor, then, at the
Closing, Purchase shall receive a credit against the
Purchase Price equal to such amount.
E. If a Seller PIC Response Notice indicates that a
Purchaser Initiated Change is a Time Extending
Purchaser Initiated Change, then said Seller PIC
Response Notice either shall indicate that Seller has
elected, in its Sole discretion, not to carry out the
changes in the Seller's Work which would be required
by the Time Extending Purchaser Initiated Change or
shall be accompanied by a proposed Purchaser
Initiated Change Order. Any such proposed Purchaser
Initiated Change Order shall reflect (i) any change
(positive or negative) in the amount due to the
Contractor pursuant to the Construction Contract as a
result of the Time Extending Purchase Initiated
Change; (ii) any additional funds to be paid by
Purchaser in connection with such Time Extending
Purchaser Initiated Change, including, without
limitation, all increased construction management
fees and other soft costs to be incurred by Seller in
connection with such Time Extending Purchaser
Initiated Change; (iii) the delay in the Final
Completion of the Seller's Work which Seller
reasonably estimates will result from the Time
Extending Purchaser Initiated Change; and (iv)
whether a Letter of Credit must be provided in
connection with the Time Extending Purchaser
Initiated Change, and, if so, the amount of such
Letter of Credit. If Seller elects not to carry out
the Time Extending Purchaser Initiated Change, it
shall not be carried out.
If Purchaser receives such a proposed Purchaser
Initiated Change Order, then Purchaser may elect
either (i) to cause Seller to carry out the changes
in the Seller's work authorized in such proposed
Purchaser Initiated Change Order by executing such
proposed Purchaser Initiated Change
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Order and returning it to Seller within five (5)
business days after receipt, together with good funds
equal to the total of any positive change in the
amount due to the Contractor on account of such
Purchaser Initiated Change Order and any additional
funds to be paid to Seller, and together with any
Letter of Credit to be provided in connection with
the Purchaser Initiated Change Order, or (ii) to
withdraw the applicable Time Extending Purchaser
Initiated Change.
If Purchaser does not so execute and deliver the
Purchaser Initiated Change Order, said funds and any
applicable Letter of Credit, then Purchaser shall be
deemed to have withdrawn the applicable Time
Extending Purchaser Initiated Change. If Purchaser
does so execute and deliver the Purchaser Initiated
Change Order, said funds and any applicable Letter of
Credit, then, upon receipt (x) Seller shall execute
the Purchaser Initiated Change Order, whereupon it
shall become effective, (y) any funds paid to Seller
shall not be part of the Deposit or applied against
any liquidated damages to be paid to Seller, shall be
conclusively deemed to be fully earned by Seller when
the work to be performed pursuant to such Purchaser
Initiated Change Order is completed, and shall not be
subject to refund or offset under any other
circumstances, unless Seller default in its
obligations under this Agreement, and (z) any Letter
of Credit and any funds resulting therefrom shall be
retained by Seller in accordance with the provisions
set forth in the definition of "Letter of Credit" in
this EXHIBIT B. If such Purchaser Initiated Change
Order indicates any negative change in the amount
due to the Contractor, then, at the Closing,
Purchaser shall receive a credit against the Purchase
Price equal to such amount.
F. If a Seller PIC Response Notice indicates that a
Purchaser Initiated Change is a Major Purchaser
Initiated Change, then said Seller PIC Response
Notice either shall indicate that Seller has elected,
in its sole discretion, not to carry out the changes
in the Seller's Work which would be required by the
Major Purchaser Initiated Change (provided, however,
that this option to not carry out such changes only
shall be available to Seller if Seller determines, in
its reasonable discretion, that the Major Purchaser
Initiated Change will delay the Final Completion of
the Seller's Work or will require new licenses,
permits or approvals or the resubmission or
modification of existing licenses, permits or
approvals) or shall be accompanied by a proposed
Purchaser Initiated Change Order. If
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Seller elects not to carry out the Major Purchase
Initiated Change Order, it shall not be carried out.
Any such Proposed Purchaser Initiated Change Order
shall reflect (i) any change (positive or negative)
in the amount due to the Contractor pursuant to the
Construction Contract as a result of the Major
Purchaser Initiated Change; (ii) any additional funds
to be paid by Purchaser in connection with such Major
Purchaser Initiated Change, including, without
limitation, all increased construction management
fees and other soft costs incurred by Seller in
connection with such Major Purchaser Initiated
Change; (iii) the delay, if any, in the Final
Completion of the Seller's Work which Seller
reasonably estimates will result from the Major
Purchaser Initiated Change; and (v) the amount of the
Letter of Credit to be provided in connection with
the Major Purchaser Initiated Change.
If Purchaser receives such a proposed Purchaser
Initiated Change Order, then Purchaser may elect
either (i) to cause Seller to carry out the changes
in the Seller's Work authorized in such proposed
Purchaser Initiated Change Order and returning it to
Seller within five (5) business days after receipt,
together with good funds equal to the total of any
positive change in the amount due to the Contractor
on account of such Purchaser Initiated Change Order
and any additional funds to be paid to Seller, and
together with the Letter of Credit to be provided in
connection with the Purchaser Initiated Change Order
or (ii) to withdraw the applicable Major Purchaser
Initiated Change.
If Purchaser does not execute and deliver the
Purchaser Initiated Change Order, said funds and the
applicable Letter of Credit, then Purchaser shall be
deemed to have withdrawn the applicable Major
Purchaser Initiated Change. If Purchaser does so
execute and deliver the Purchaser Initiated Change
Order, said funds and the applicable Letter of
Credit, then, upon receipt, (x) Seller shall execute
the Purchaser Initiated Change Order, whereupon it
shall become effective, (y) any funds paid to Seller
shall not be part of the Deposit or applied against
any liquidated damages to be paid to Seller, shall be
conclusively deemed to be fully earned by Seller when
the work to be performed pursuant to such Purchaser
Initiated Change Order is completed, and shall not be
subject to refund or offset under any other
circumstances, unless Seller defaults in its
obligations under this Agreement, and (z) the Letter
of Credit and any funds resulting therefrom, shall be
retained by Seller in accordance with the provisions
set forth in
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the definition of "Letter of Credit" in this EXHIBIT
B. If such Purchaser Initiated Change Order indicates
any negative change in the amount due to the
Contractor, then, at the Closing, Purchaser shall
receive a credit against the Purchase Price equal to
such amount.
V. CHANGES IN SCHEDULE
1. SCHEDULE
Seller has provided Purchaser with a construction schedule, prepared by
the Contractor, detailing the scheduling and timing of the Seller's Work, and
indicting a Final Completion date prior to September 1, 2000 ("SCHEDULE"), it
being understood that the Schedule shall be updated by Seller from time to time
to reflect the actual progress of constructions.
2. SUBSTANTIAL COMPLETION
Seller shall provide Purchaser not less than sixty (60) days prior
written notice of the anticipated date of Final Completion (herein defined).
When Seller has achieved Substantial Completion (as defined in the Construction
Contract) of the Seller's Work, Seller shall cause the Architect to issue a
certificate of Substantial Completion with a copy to Purchaser. No later than
two (2) Business Days following Purchaser's receipt of such certificate of
Substantial Completion, Purchaser and Seller shall jointly inspect the Seller's
Work with the Architect. No later than three (3) Business Days after such
inspection, the Architect shall prepare a list of all purported non-deminimus
discrepancies between the Record Drawings and the Seller's Work as constructed
("PUNCH LIST"), and shall deliver such list to Seller and Purchaser. If Seller
or Purchaser contest the inclusion of any item in, or the omission of any item
from, the Punch list, then during the next four (4) Business Day period, Seller,
Purchaser and the Architect shall cooperate in good faith to finalize the Punch
list. In the event that despite such cooperation, Seller, Purchaser and the
Architect are unable to finalize the Punch List, then any disputes regarding the
inclusion of any item in, or the omission of any item from, the Punch List shall
be determined as follows: (A) disputes involving items having a cumulative
value, as estimated by the Architect, not in excess of $25,000, shall be
determined by architect within five (5) Business Days following such four (4)
Business Day period. (B) Disputes involving items having a cumulative value as
estimated by the Architect, in excess of $25,000, shall be determined within
five (5) Business Days following such four (4) Business Day period by Peter
Barber, presently of Northland Development Corporation ("INITIAL ARBITRATOR")
or Robert M. Keeley, presently of Diversified Project Management ("SECONDARY
ARBITRATOR"), if the Initial Arbitrator is not available. The architect shall
submit matters to the Initial Arbitrator and Secondary Arbitrator. All decisions
of the Architect, Initial Arbitrator and Secondary Arbitrator pursuant to this
SECTION V(2) shall be
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binding and conclusive. After the Punch List is finalized pursuant to this
SECTION V(2), Seller shall proceed to cause the Punch List to be completed as
soon as reasonably practicable after Substantial Completion. All costs and
expenses incurred with respect to the Initial Arbitrator or the Secondary
Arbitrator shall be shared equally between Seller and Buyer.
3. FINAL COMPLETION
"Final Completion" (and derivations thereof) of the Seller's Work shall
mean the date on which the last of the following shall have occurred:
(a) The completion of the Punch List, as certified by the
Architect.
(b) The submission to Purchaser by the Seller of the Record
Drawings for the Seller's Work, along with all warranties and
guaranties, manuals and keys.
(c) The submission to Purchaser by the Seller of final lien
releases and waivers from the Contractor and, if available,
all major Subcontractors, which releases and waivers may be
conditioned on receipt of amounts due from Seller upon final
completion of the Seller's Work.
(d) The removal from the Property by Seller of temporary
facilities, tools and similar items.
(e) The issuance by the City of Waltham of a core and shell
certificate of occupancy for the Seller's Work.
Upon Final Completion, Seller shall notify Purchaser of the Closing
Date in accordance with SECTION 4 of the Agreement.
VI. FINAL COMPLETION DATE
A. The Seller agrees to use commercially diligent
efforts to cause Final Completion of the Seller's
Work to be achieved on or before September 1, 2000,
subject to Events of Force Majeure and Purchaser
Initiated Change Orders.
B. If Final Completion is not achieved on or before
September 1, 2000 (which date shall be extended for
up to sixty (60) days for each day that the
construction of the Seller's Work was delayed because
of an Event of
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Force Majeure and which date also shall be extended
by one day for each day that the construction of the
Seller's Work was delayed due to Pur chaser Initiated
Orders), then, as Purchaser's sole remedy on account
of such delay (other than Purchaser's termination
right set forth in SECTION 4 of this Agreement) for
each day thereafter until Final Completion is
achieved, the Purchase Price shall be reduced by
$5,000 per day, provided, however, that if Purchaser
shall elect not to exercise its right to terminate
this Agreement as of December 31, 2000 (or such later
date as Purchaser shall have the right to terminate
this Agreement on account of Purchaser Initiated
Change Orders), all as described in SECTION 4 of this
Agreement, then the $5,000 per day reduction in the
Purchase Price shall be tolled for thirty (30) days
following Purchaser's election (or deemed election)
not so to terminate this Agreement. Purchaser shall
not lose the benefit of any Purchase Price reduction
that already shall have accrued, and the $5,000 per
day reduction shall recommence to accrue following
such thirty (30) day period if Seller shall not then
have achieved Final Completion of the Seller's Work.
<PAGE>
EXHIBIT 23.2
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Selected
Financial Data" and "Experts" and to the use of our report dated February 2,
2000 in the Registration Statement (Form S-1 No. 333-96351) and related
Prospectus of PRAECIS PHARMACEUTICALS INCORPORATED.
/s/ Ernst & Young LLP
Boston, Massachusetts
March 9, 2000
<PAGE>
EXHIBIT 23.3
[LETTERHEAD OF LAHIVE & COCKFIELD, LLP]
March 10, 2000
The Board of Directors
PRAECIS PHARMACEUTICALS INCORPORATED
One Hampshire Street
Cambridge, MA 02139-1532
Re: Registration Statement on Form S-1
Dear Sirs:
Further to our letter dated February 8, 2000 we hereby consent to
the reference to our firm under the caption "Experts" in the Prospectus which
is a part of PRAECIS PHARMACEUTICALS INCORPORATED's Registration Statement on
Form S-1 (File No. 333-96351) as filed with the Securities and Exchange
Commission, and amended as of March 10, 2000.
Very truly yours,
LAHIVE & COCKFIELD, LLP
/s/ Elizabeth A. Hanley
Elizabeth A. Hanley
for Giulio A. DeConti, Jr.
