<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 7, 1997
REGISTRATION NO. 333-
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
GENE LOGIC INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 8731 06-1411336
(State or jurisdiction of (Primary Standard Industrial I.R.S. Employer
incorporation or organization) Classification Code Number) Identification
Number
</TABLE>
10150 OLD COLUMBIA ROAD
COLUMBIA, MARYLAND 21046
(410) 309-3100
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
------------------------
MICHAEL J. BRENNAN, M.D., PH.D.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
GENE LOGIC INC.
10150 OLD COLUMBIA ROAD
COLUMBIA, MARYLAND 21046
(410) 309-3100
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
COPIES TO:
FREDERICK T. MUTO, ESQ. LESLIE E. DAVIS, ESQ.
L. KAY CHANDLER, ESQ. LAWRENCE A. GOLD, ESQ.
NANCY E. DENYES, ESQ. TESTA, HURWITZ & THIBEAULT, LLP
COOLEY GODWARD LLP HIGH STREET TOWER
4365 EXECUTIVE DRIVE, SUITE 1100 125 HIGH STREET
SAN DIEGO, CA 92121 BOSTON, MA 02110
(619) 550-6000 (617) 248-7000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same
offering. / /________________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /________________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH CLASS AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
OF SECURITIES TO BE TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
REGISTERED REGISTERED (1) PER SHARE PRICE (2) FEE
<S> <C> <C> <C> <C>
Common Stock, $.01 par value..................... 3,450,000 $12.00 $41,400,000 $12,546
</TABLE>
(1) Includes 450,000 shares that the Underwriters have the option to purchase
solely to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee in accordance with Rule 457(a) under the Securities Act of
1933.
------------------------
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 THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED OCTOBER 7, 1997
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
[LOGO]
3,000,000 SHARES
COMMON STOCK
All of the 3,000,000 shares of Common Stock offered hereby are being sold by
GENE LOGIC INC. ("Gene Logic" or the "Company"). Prior to this offering, there
has been no public market for the Common Stock of the Company. It is currently
estimated that the initial public offering price of the Common Stock will be
between $10.00 and $12.00 per share. See "Underwriting" for information relating
to the method of determining the initial public offering price. Application has
been made to have the Company's Common Stock quoted on the Nasdaq National
Market under the symbol "GLGC."
Japan Tobacco Inc. ("Japan Tobacco") is a party to a strategic alliance with
the Company. As part of the strategic alliance, Japan Tobacco has agreed to
purchase $3,000,000 of the Company's Common Stock in a private transaction
concurrent with this offering at a price per share equal to the price per share
at which Common Stock is sold in this offering. See "Business--Strategic
Alliances--Japan Tobacco Inc."
----------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 7.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS COMPANY (1)
<S> <C> <C> <C>
Per Share.................................. $ $ $
Total (2).................................. $ $ $
</TABLE>
(1) Before deducting expenses payable by the Company estimated at $600,000.
(2) The Company has granted the Underwriters a 30-day option to purchase up to
an additional 450,000 shares of Common Stock solely to cover
over-allotments, if any. See "Underwriting." If such option is exercised in
full, the total Price to Public, Underwriting Discounts and Commissions and
Proceeds to Company will be $ , $ and $ , respectively.
----------------
The Common Stock is offered by the Underwriters as stated herein, subject to
receipt and acceptance by them and subject to their right to reject any order in
whole or in part. It is expected that delivery of such shares will be made
through the offices of BancAmerica Robertson Stephens, San Francisco,
California, on or about , 1997.
BANCAMERICA ROBERTSON STEPHENS
HAMBRECHT & QUIST
UBS SECURITIES
The date of this Prospectus is , 1997
<PAGE>
GENE LOGIC INC.
MOLECULAR TOPOGRAPHY-TM- OF GENE EXPRESSION
[GRAPHICAL DEPICTION OF MOLECULAR TOPOGRAPHY]
Above is a Molecular Topographic representing a quantitative snapshot of the
expression of essentially all of the genes in a human cell sample. The data were
generated using, Gene Logic's proprietary READS technology and are represented
using Gene Logic's Molecular Topography software tool. Gene Logic intends to use
these technologies to discover drug targets and drug leads and to develop
database products.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. FOR
A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
<PAGE>
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES OR AN OFFER
TO, OR A SOLICITATION OF, ANY PERSON IN ANY JURISDICTION IN WHICH SUCH AN OFFER
OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Summary........................................................................................ 4
Risk Factors................................................................................... 7
Use of Proceeds................................................................................ 20
Dividend Policy................................................................................ 20
Capitalization................................................................................. 21
Dilution....................................................................................... 22
Selected Financial Data........................................................................ 23
Management's Discussion and Analysis of Financial Condition and Results of Operations.......... 24
Business....................................................................................... 28
Management..................................................................................... 48
Certain Transactions........................................................................... 56
Principal Stockholders......................................................................... 57
Description of Capital Stock................................................................... 59
Shares Eligible For Future Sale................................................................ 61
Underwriting................................................................................... 63
Legal Matters.................................................................................. 64
Experts........................................................................................ 64
Additional Information......................................................................... 65
Index to Financial Statements.................................................................. F-1
</TABLE>
------------------------
READS-TM-, MuST-TM-, Flow-thru Chip-TM-, Molecular Topography-TM-, GENE
EXPRESS-TM-, ACCELERATED DRUG DISCOVERY-TM-, Pharmacology EXPRESS-TM-,
Toxicology EXPRESS-TM-, rEST-TM-, TAG-TM- and quEST-TM- are trademarks of the
Company. Tradenames and trademarks of other companies appearing in this
Prospectus are the property of their respective holders.
The Company was incorporated in Delaware in 1994. The Company's executive
offices are located at 10150 Old Columbia Road, Columbia, Maryland 21046, and
its telephone number is (410) 309-3100.
3
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN
THIS PROSPECTUS. THIS PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS
WHICH INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A
RESULT OF CERTAIN FACTORS, INCLUDING THOSE SET FORTH UNDER "RISK FACTORS" AND
ELSEWHERE IN THIS PROSPECTUS.
THE COMPANY
GENE LOGIC INC. ("Gene Logic" or the "Company") uses a proprietary system,
based on analysis of gene expression and gene regulation, designed to accelerate
the discovery of drug targets and drug leads. The Company's objective is to
provide its pharmaceutical company partners with novel drug targets, drug leads
and a suite of genomic database products to reduce the time, cost and risk
associated with drug discovery. The Company believes that by building its
portfolio of partnerships it will generate current revenues and establish a
long-term economic interest in the product pipelines of multiple partners
through milestone and royalty payments. Gene Logic has established major
strategic alliances with Procter & Gamble Pharmaceuticals, Inc. ("Procter &
Gamble") and Japan Tobacco Inc. ("Japan Tobacco").
The core of Gene Logic's ACCELERATED DRUG DISCOVERY system is its
proprietary READS (Restriction Enzyme Analysis of Differentially-expressed
Sequences) technology for analyzing patterns of gene expression. Gene Logic uses
READS in its drug target and drug lead discovery programs and to generate
genomic data for its database products.
DRUG TARGET DISCOVERY. Gene Logic identifies and analyzes
disease-associated genes and their functional pathways to determine which
genes might encode useful drug targets and prioritizes targets for drug
screening. Using READS, Gene Logic generates a gene expression profile, or
Molecular Topography, representing a quantitative snapshot of the levels of
expression of essentially all the genes expressed in a tissue sample. The
Company compares normal and diseased tissues through a series of Molecular
Topography snapshots, a "molecular movie," to identify the changes in gene
expression that occur as the disease develops and progresses and to
determine which genes are associated with the disease. In addition, using
its MuST (Multiplex Selection of Transcription Factors) technology, Gene
Logic characterizes the regions of the genes that regulate their expression.
This allows the Company to identify genes which share common regulatory
mechanisms with disease-associated genes and are therefore in the same
functional pathways. Gene Logic has received notices of allowance for patent
applications covering the key aspects of the READS and MuST technologies
from the United States Patent and Trademark Office.
DRUG LEAD DISCOVERY. Gene Logic is developing a proprietary, reusable
Flow-thru Chip for high-throughput analysis of changes in the expression of
known genes. The Company believes the Flow-thru Chip will enable the
development of high-throughput screening assays to evaluate the effects of
compounds on the expression of disease-associated genes identified by READS.
For a given disease, the Company will design a customized Flow-thru Chip
incorporating probes specific for these genes and use the chip to test the
effects of compounds on cells. Compounds that have the desired effect on
expression of the relevant genes may be evaluated as drug leads. Gene Logic
believes this technology represents a new approach to drug discovery and has
the potential to accelerate substantially the identification of drug leads.
GENOMIC DATABASES. Gene Logic is developing a suite of genomic database
products to accelerate the process of target identification and
prioritization, the discovery of lead compounds and the preclinical and
clinical development of drugs. The Company plans to market its genomic
database products, either in a single package or as separate modules, to
multiple pharmaceutical company customers. The Company's database products
are: (i) the GENE EXPRESS NORMAL database, a reference set of gene
expression profiles in a wide variety of normal tissues; (ii) the rare EST
(rEST) database containing sequences for rarely-expressed genes that are not
available through public sources; (iii) The Annotated Genome (TAG) database
which assigns human genes to functional pathways based on their patterns of
expression and regulation; (iv) the Pharmacology EXPRESS database to predict
efficacy of lead compounds at the preclinical drug development stage; and
(v) the Toxicology EXPRESS database for screening of lead compounds for
common classes of toxicological effects.
4
<PAGE>
The Company has designed and is continuing to develop a bioinformatics
system to manage and analyze the information it generates. The system integrates
Gene Logic's genomic data content with other proprietary or public genomic
databases, protein databases and the chemical, screening and assay databases
used by the Company's strategic partners.
Gene Logic's business strategy is to (i) establish strategic alliances with
pharmaceutical companies for drug target and drug lead discovery programs in
specific disease areas, (ii) establish independent discovery programs and
license resulting drug targets and drug leads to pharmaceutical companies for
further development and commercialization, (iii) market its suite of genomic
database products under non-exclusive license to multiple pharmaceutical company
customers, and (iv) retain significant rights to new product opportunities,
including diagnostic products, therapeutic proteins, gene therapy products and
products in the fields of differential diagnosis, molecular staging of disease
and pharmacogenomic profiling. The Company expects to receive a diversified
stream of technology license fees, research funding, milestone payments and
royalty or profit-sharing income from its strategic alliance partners and
licensees.
Gene Logic has established discovery programs in the fields of heart
failure, renal disease, certain diseases of the central nervous system,
osteoporosis and prostate cancer. The Company has collaborations with academic
institutions and commercial organizations for access to relevant normal and
diseased human tissues and cell types and animal disease models in these areas.
To date, Gene Logic has partnered two of its discovery programs with
pharmaceutical companies. In May 1997, the Company entered into a 4 1/2-year
strategic alliance with Procter & Gamble for drug target discovery in heart
failure. In September 1997, the Company and Japan Tobacco entered into a
five-year strategic alliance for drug target and drug lead discovery in renal
disease. Through both alliances, Gene Logic will receive committed technology
access fees and research funding. In each case, the Company's partner has the
right to expand the alliance to include discovery programs in two additional
disease indications upon terms, including committed payments, identical to those
covering the initial program. Gene Logic will also be entitled to receive
additional payments for the achievement of specified target discovery, product
development and associated regulatory milestones and royalties on worldwide net
sales of all products that may result from each alliance. As part of its
alliance, Japan Tobacco has agreed to purchase $3.0 million of Common Stock in
the Company in a private placement concurrent with this offering at a price per
share equal to the price per share at which Common Stock is sold in this
offering. The Company also granted Japan Tobacco a non-exclusive license to the
GENE EXPRESS NORMAL database, and Gene Logic intends to use its Flow-thru Chip
technology for drug screening. Japan Tobacco is obligated to pay Gene Logic chip
design fees and screening fees for use of the Flow-thru Chip and an accelerated
schedule of milestone and royalty payments on any resulting products. The
Company has retained certain rights to diagnostic products and certain classes
of therapeutics under these alliances.
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered by the Company............ 3,000,000 shares
Common Stock Outstanding after the Offering.... 13,382,377 shares (1)
Use of Proceeds................................ For research and development, capital
expenditures, working capital and general
corporate purposes, including possible
acquisitions of complementary
technologies, products or businesses. See
"Use of Proceeds."
Proposed Nasdaq National Market Symbol......... GLGC
</TABLE>
5
<PAGE>
SUMMARY FINANCIAL DATA
(in thousands, except per share data)
<TABLE>
<CAPTION>
PERIOD FROM SIX MONTHS ENDED
SEPTEMBER 22, 1994 YEAR ENDED
(INCEPTION) DECEMBER 31, JUNE 30,
THROUGH -------------------- --------------------
DECEMBER 31, 1994 1995 1996 1996 1997
------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
STATEMENT OF OPERATIONS DATA:
Revenues........................................... $ -- $ -- $ -- $ -- $ 167
Operating expenses:
Research and development........................ 44 486 1,747 491 1,837
General and administrative...................... 46 258 1,349 386 1,236
------ --------- --------- --------- ---------
Total operating expenses.......................... 90 744 3,096 877 3,073
Interest income, net.............................. -- -- 221 18 91
------ --------- --------- --------- ---------
Net loss.......................................... $ (90) $ (744) $ (2,875) $ (859) $ (2,815)
------ --------- --------- --------- ---------
------ --------- --------- --------- ---------
Pro forma net loss per share (2).................. $ (0.60) $ (0.48)
--------- ---------
--------- ---------
Shares used in computing pro forma
net loss per share (2).......................... 4,753 5,807
</TABLE>
- - - ------------------------
(1) Based on shares outstanding as of September 30, 1997. Includes (i) the sale
of 272,727 shares of Common Stock to Japan Tobacco at a price equal to the
assumed initial public offering price of $11.00 per share and (ii) 9,281,185
shares of Preferred Stock which will convert to Common Stock concurrent with
the initial public offering. Excludes (i) 2,424,381 shares of Common Stock
issuable upon exercise of outstanding stock options as of September 30, 1997
at a weighted average exercise price of $1.05 per share, and (ii) 162,576
shares of Common Stock issuable upon exercise of outstanding warrants at a
weighted average exercise price of $3.10 per share. Also excludes 61,000
shares of Common Stock issuable upon exercise of stock options granted after
September 30, 1997 with an exercise price of $3.50 per share. See
"Business--Strategic Alliances," "Management--Equity Incentive Plans" and
"Description of Capital Stock--Warrants."
(2) See Note 1 of Notes to Financial Statements for a description of the
computation of pro forma net loss per share.
<TABLE>
<CAPTION>
JUNE 30, 1997
-----------------------------------------
PRO FORMA
ACTUAL PRO FORMA (1) AS ADJUSTED (2)
--------- ------------- ---------------
<S> <C> <C> <C>
(UNAUDITED)
BALANCE SHEET DATA:
Cash and marketable securities.............................. $ 5,099 $ 24,234 $ 57,324
Working capital............................................ 2,668 21,803 54,893
Total assets............................................... 8,210 27,345 60,435
Total mandatorily redeemable convertible preferred stock... 10,849 -- --
Total stockholders' equity................................. (7,374) 22,610 55,700
</TABLE>
- - - ----------------
(1) Pro forma to give effect to the private placement of 4,444,443 shares of
Series C Preferred Stock in July 1997, at a price of $4.50 per share, net of
stock issue costs.
(2) As adjusted to give effect to the sale by the Company of 3,000,000 shares of
Common Stock offered hereby at an assumed initial public offering of $11.00
per share and 272,727 shares of Common Stock to Japan Tobacco at a price
equal to the assumed initial public offering price per share and the
application of the estimated net proceeds therefrom. See "Use of Proceeds"
and "Business--Strategic Alliances."
----------------
EXCEPT AS OTHERWISE INDICATED, ALL INFORMATION IN THIS PROSPECTUS (I) HAS BEEN
ADJUSTED TO GIVE EFFECT TO THE CONVERSION OF ALL OUTSTANDING SHARES OF PREFERRED
STOCK INTO COMMON STOCK UPON THE COMPLETION OF THIS OFFERING AND (II) ASSUMES NO
EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION. SEE "CAPITALIZATION" AND
"UNDERWRITING."
6
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, the following risk
factors should be considered carefully in evaluating the Company and its
business before purchasing shares of Common Stock offered hereby. This
Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including the matters set forth in the following risk factors and elsewhere in
this Prospectus.
TECHNOLOGICAL UNCERTAINTY AND PRODUCT DEVELOPMENT RISK
The Company has developed and intends to continue to develop its ACCELERATED
DRUG DISCOVERY system, including its proprietary READS and MuST technologies,
bioinformatics system and Flow-thru Chip, for the identification of genes, drug
targets and drug leads useful for the discovery and development of therapeutic
and diagnostic products. These technologies are new and unproven approaches and
are based on the assumption that information about gene expression and gene
sequences may enable scientists better to understand complex disease processes.
Generally, there is limited understanding of the roles of genes in these
diseases, and relatively few therapeutic products based on gene discoveries have
been developed and commercialized. There can be no assurance that the Company's
technologies will enable it or its strategic partners to identify genes, drug
targets and drug leads useful for the discovery and development of therapeutic
and diagnostic products. Even if the Company is successful in identifying genes
and drug targets associated with specific diseases, there can be no assurance
that the Company or its strategic partners will be able to discover drug leads
or develop products based on such discoveries. To date, no drug targets or drug
leads have been identified based on the Company's technologies, and the Company
has not commercialized any therapeutic or diagnostic products either alone or in
conjunction with its strategic partners. Failure to identify genes, drug targets
and drug leads useful for the discovery and development of therapeutic and
diagnostic products will have a material adverse effect on the Company's
business, financial condition and results of operations.
The development of therapeutic and diagnostic products based on the
Company's discoveries will also be subject to other risks of failure inherent in
pharmaceutical development. These risks include, among others, the possibilities
that any such products will be found to be ineffective or toxic, or otherwise
fail to receive necessary regulatory approvals; that any of the products, if
safe and effective, will prove difficult or impossible to manufacture on a large
scale or will be uneconomical to market; that the proprietary rights of third
parties will preclude the Company or its strategic partners from marketing any
products developed; and that third parties will market equivalent or superior
products. As a result, there can be no assurance that the activities of the
Company or its strategic partners will result in any commercially viable
products.
The Company has created a prototype of the Flow-thru Chip and plans to
commence in-house testing during 1998 but has not yet produced the Flow-thru
Chip on a commercial scale. The Company is in the process of developing its
suite of genomic database products, but, to date, only the GENE EXPRESS NORMAL
database is commercially available. Other than the option to require the Company
to develop Flow-thru Chip assays and the non-exclusive license to the GENE
EXPRESS NORMAL database granted to Japan Tobacco, the Company has not sold or
licensed rights to its Flow-thru Chip or any of its genomic database products.
There can be no assurance that the development or commercial scale-up of the
Flow-thru Chip or the genomic database products will be successful or that the
Company will be successful in marketing such products.
The success of the Company's genomic database products will depend on the
Company's ability to generate genomic data content and analyze such data using
software tools. Gene Logic's database products are complex and sophisticated and
could contain design defects or software errors that could be difficult to
detect and correct. There can be no assurance that, despite testing by the
Company and its strategic partners and customers, errors, bugs and viruses will
not be found in current and future products, if any.
7
<PAGE>
Failure to maintain and further develop the necessary bioinformatics platform to
support the drug discovery efforts of the Company and its partners could result
in the loss of or delay in revenues and market acceptance, which could have a
material adverse effect on the Company's business, financial condition and
results of operations. Because the Company's genomic database products contain
genomic information generated by the Company's technologies, the development and
commercialization of the Company's genomic database products will be materially
adversely affected in the event that its technologies fail to generate such
information. See "Business--Gene Logic's ACCELERATED DRUG DISCOVERY System" and
"--Gene Logic Programs and Products."
RELIANCE ON STRATEGIC PARTNERS
The Company's strategy for development and commercialization of therapeutic
and diagnostic products based on its discoveries depends, in large part, upon
the formation of multiple strategic alliances and licensing arrangements to
pursue drug targets and drug leads in different disease areas. The Company has
established strategic alliances with Procter & Gamble and Japan Tobacco in
certain disease fields. These strategic alliances have only been formed in
recent months. No drug targets have been identified pursuant to such alliances,
and there can be no assurance that the alliances will be successful. There can
also be no assurance that the Company will establish additional strategic
alliances or licensing arrangements that it deems necessary to develop and
commercialize products based upon its discovery programs, that any such
agreements will be made under terms acceptable to the Company or that any future
strategic alliances or licensing arrangements will ultimately be successful. The
Company has received a substantial portion of its revenues since inception from
alliances with its strategic partners and expects to continue to do so in the
near term. Failure of the Company to enter into additional strategic alliances
could have a material adverse effect on the Company's business, financial
condition and results of operations.
The Company's strategy includes entering into multiple, concurrent strategic
alliances. There can be no assurance that the Company will successfully manage
simultaneous collaborative programs. Failure by the Company to manage existing
and future strategic alliances, maintain confidentiality among strategic
partners or prevent the occurrence of conflicts among strategic partners could
lead to disputes that result in, among other things, a significant strain on
management resources, legal claims involving significant time, expense and loss
of reputation, loss of capital or a loss of revenues, any of which could have a
material adverse effect on the Company's business, financial condition and
results of operations.
The Company intends to rely on strategic partners for preclinical studies,
clinical development, regulatory approval, manufacturing and marketing of
therapeutic and diagnostic products, if any, resulting from its discovery
programs. Agreements with strategic partners typically will allow such partners
significant discretion in electing whether to pursue any of these activities.
The Company cannot control the amount and timing of resources its strategic
partners may devote to the Company's programs or potential products, and there
can be no assurance that such partners will perform their obligations as
expected. A strategic partner's performance under its alliance agreement with
the Company could be materially adversely affected if such partner were involved
in certain third party transactions such as a business combination or in the
event that the partner had a significant strategic shift in its business focus.
If any strategic partner were to breach its agreement with the Company, or
otherwise fail to conduct its collaborative activities in a timely manner, such
conduct could have a material adverse effect on the Company's business,
financial condition and results of operations. Each of the Company's current
strategic alliances provides the strategic partner with certain rights to
terminate the alliance agreement without cause by giving Gene Logic six months
notice at any time after 12 months from the date of commencement of the research
program under such agreement. The early termination of any strategic alliance
could have a material adverse effect on the Company's business, financial
condition and results of operations. The Company intends to continue to rely on
its strategic partners for significant funding in support of its research
operations. The Company would be required to devote additional internal
resources to such
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programs, or to scale back or terminate certain programs, if such funding were
not available or were reduced in amount.
Under its current strategic alliances, the Company has agreed not to conduct
certain research, independently or with other commercial third parties, that is
in the same field as the research conducted under the alliance agreement.
Consequently, such arrangements could have the effect of limiting the areas of
research the Company may pursue, either alone or with others. Should a strategic
partner fail to develop or commercialize a product to which it has rights, the
Company's business may be materially adversely affected. There can be no
assurance that a strategic partner will not develop, either alone or with
others, alternative technologies or products which are competitive with any that
might result from the Company's research program with the strategic partner.
Possible disagreements between the Company and its partners could lead to delays
in collaborative research, development or commercialization of certain products
or could require or result in litigation or arbitration, which would be time
consuming and expensive, and could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business--Gene Logic's Strategy" and "--Strategic Alliances."
EARLY STAGE OF DEVELOPMENT; LIMITED OPERATING HISTORY; PROFITABILITY UNCERTAIN
The Company is at an early stage of development. There is limited historical
information available upon which an investor can base an evaluation of an
investment in the Company. The Company was founded in September 1994, but did
not scale up operations until May 1996 following its first major financing.
Substantially all of the Company's resources have been, and for the foreseeable
future will continue to be, dedicated to the development of the Company's
ACCELERATED DRUG DISCOVERY system and its application to the identification of
genes, drug targets and drug leads with therapeutic and diagnostic potential.
All of the Company's programs and strategic alliances are at an early stage. The
development of the Company's technologies and their application to the discovery
of genes, drug targets and drug leads will require significant additional
research and development and investment, including testing to further validate
performance and demonstrate cost effectiveness. There can be no assurance that
the Company's technologies will continue to be successfully developed, or that
any therapeutic or diagnostic products discovered or developed through their
utilization will prove to be commercially useful, meet applicable regulatory
standards in a timely manner or at all, compete with other technologies and
products, avoid infringing the proprietary rights of others, be manufactured in
sufficient quantities or at reasonable costs or be marketed successfully. The
Company expects that it will be a number of years, if ever, before the Company
will recognize revenue from therapeutic or diagnostic product sales or
royalties.
The Company has incurred operating losses in each year since its inception,
including net losses of approximately $2.9 million and $2.8 million during the
year ended December 31, 1996 and the six months ended June 30, 1997,
respectively, and as of June 30, 1997, had an accumulated deficit of $7.4
million. The Company expects to incur additional losses for at least the next
several years and that such losses will increase as the Company expands its
research and development activities. The Company's losses to date have resulted
principally from costs incurred in research and development and from general and
administrative costs associated with the Company's operations. To date,
substantially all of the Company's revenues have been derived from payments from
strategic alliances and licensing arrangements, and the Company expects that
substantially all of its revenues for the foreseeable future will result from
payments from strategic alliances and licensing arrangements and interest
income. There can be no assurance that the Company will receive additional
revenues under existing strategic alliances or that the Company will be
successful in entering into any new strategic alliance that results in revenues.
The Company's ability to generate revenues and achieve profitability is
dependent in large part on the Company's ability to enter into additional
strategic alliances, and on the ability of the Company and its strategic
partners to discover genes and drug targets associated with particular diseases
and, thereafter, utilize such discoveries to identify drug leads, develop
therapeutic and diagnostic products, conduct preclinical studies and clinical
trials, obtain required regulatory approvals and successfully manufacture,
introduce and market such
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products. In addition, to the extent that the Company relies upon others for
these research, development and commercialization activities, the Company's
ability to achieve profitability will be dependent in part upon the success of
such outside parties. The time required to reach profitability is highly
uncertain and there can be no assurance that the Company will be able to achieve
profitability on a sustained basis, if at all. Failure to achieve significant
revenues or profitability would have a material adverse effect on the Company's
business, financial condition and results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
DEPENDENCE UPON ACCESS TO CERTAIN MATERIALS AND INFORMATION AND LICENSED
TECHNOLOGIES
The Company obtains relevant normal and diseased human tissue samples,
related clinical and other biological information and animal disease models
through collaborations with academic institutions and commercial organizations.
Use of the Company's technologies to discover disease-related genes and drug
targets requires access to such materials and information and there is
substantial competition for such materials and information. There can be no
assurance that the Company will continue to be able to obtain access to such
materials and information upon terms acceptable to the Company, if at all, and
any material lack of availability of such materials and information would have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business--Gene Logic Programs and Products."
Certain of the components of the ACCELERATED DRUG DISCOVERY system, such as
the technologies underlying READS, MuST and the Flow-thru Chip, have been
acquired or licensed from third parties. Changes in certain third party license
agreements and relationships, or termination thereof, could materially adversely
affect the Company's research and development activities. There can be no
assurance that the Company will be able to acquire from third parties or develop
new technologies, alone or with others. Failure to license necessary
technologies would have a material adverse effect on the Company's business,
financial condition and results of operations. There also can be no assurance
that there will not be disruptions in the Company's relationships with third
parties from whom the Company derives technology, or that any disruptions that
do arise will be resolved in a timely and cost-effective manner, if at all. Any
such disruptions could have a material adverse effect on the Company's business,
financial condition and results of operations.
FLUCTUATIONS IN OPERATING RESULTS
The Company's operating results may fluctuate significantly from quarter to
quarter as a result of a variety of factors, including changes in the demand for
the Company's technologies and products, variations in payments under strategic
alliances, including milestone payments, royalties, license fees and other
contract revenues, the timing of new product introductions, if any, by the
Company, changes in the research and development budgets of the Company's
strategic partners and any potential partners, the introduction of new products
by the Company's competitors and other competitive factors, regulatory actions,
adoption of new technologies, manufacturing results, and the cost, quality and
availability of cell and tissue samples, reagents and related components. If
revenue in a particular period does not meet expectations, the Company may not
be able to adjust significantly its level of expenditures in such period, which
would have an adverse effect on the Company's operating results. The Company
believes that quarterly comparisons of its financial results will not
necessarily be a meaningful indication of future performance. Due to the
foregoing and other unforeseen factors, in some future quarter or quarters the
Company's operating results may be below the expectations of public market
analysts and investors. In such event, the price of the Company's Common Stock
could be materially and adversely affected. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
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PATENTS AND PROPRIETARY RIGHTS; THIRD PARTY RIGHTS
Gene Logic seeks United States and international patent protection for major
components of its technology platform, including elements of its READS, MuST,
Flow-thru Chip and bioinformatics technologies; it relies upon trade secret
protection for certain of its confidential and proprietary information; and it
uses license agreements both to access external technologies and assets and to
transfer certain intellectual property rights to others. The Company's
commercial success will be dependent in part upon its ability to obtain
commercially valuable patent claims and to protect its intellectual property
portfolio.
As of September 30, 1997, the Company had exclusive rights to eight United
States patent applications, as well as corresponding international and foreign
patent applications, relating to its technologies. Although the Company has
received notices of allowance for two United States patent applications covering
the key aspects of the READS and MuST technologies, no patents have issued to
date.
The patent positions of pharmaceutical, biopharmaceutical and biotechnology
companies, including Gene Logic, are generally uncertain and involve complex
legal and factual questions. There can be no assurance that any of the pending
patent applications to which the Company has exclusive rights will result in
issued patents, that the claims of any patents which do issue will provide
meaningful protection, that the Company will develop additional proprietary
technologies that are patentable, that any patents licensed or issued to the
Company or its strategic partners will provide a basis for commercially viable
products or will provide the Company with any competitive advantages or will not
be challenged by third parties, or that the patents of others will not have an
adverse effect on the ability of the Company to do business. In addition, patent
law relating to the scope of claims in the technology field in which the Company
operates is still evolving. The degree of future protection for the Company's
proprietary rights, therefore, is uncertain. Furthermore, there can be no
assurance that others will not independently develop similar or alternative
technologies, duplicate any of the Company's technologies, or, if patents are
licensed or issued to the Company, design around the patented technologies
licensed to or developed by the Company. In addition, the Company could incur
substantial costs in litigation if it is required to defend itself in patent
suits brought by third parties or if it initiates such suits.
The Company is aware of a number of United States patents and patent
applications and corresponding foreign patents and patent applications owned by
third parties relating to the analysis of gene expression or the manufacture and
use of DNA chips. There can be no assurance that these or other technologies
will not provide third parties with competitive advantages over the Company and
will not have a material adverse effect on the Company's business, financial
condition and results of operations. In addition, certain third party patent
applications contain broad claims, and it is not possible to determine whether
or not such claims will be narrowed during prosecution and/or will be allowed
and issued as patents, even if such claims appear to cover the prior art or have
other defects. There can be no assurance that an owner or licensee of a patent
in the field will not threaten or file an infringement action or that the
Company would prevail in any such action. There can be no assurance that the
cost of defending an infringement action would not be substantial and would not
have a material adverse effect on the Company's business, financial condition
and results of operations. Furthermore, there can be no assurance that any
required licenses would be made available on commercially viable terms, if at
all. Failure to obtain any required license could prevent the Company from
utilizing or commercializing one or more of its technologies and could have a
material adverse effect on the Company's business, financial condition and
results of operations.
In general, the Company intends to continue to apply for patent protection
for methods relating to gene expression and to apply for patent protection for
the individual disease genes and drug targets it discovers. Such patents may
include claims relating to novel genes and gene fragments and to novel uses for
known genes or gene fragments identified through its discovery programs. There
can be no assurance that the Company will be able to obtain meaningful patent
protection for its discoveries; even if patents are issued, the scope of the
coverage or protection afforded thereby is uncertain. Failure to secure such
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meaningful patent protection could have a material adverse effect on the
Company's business, financial condition and results of operations.
Several groups are attempting to identify and patent gene fragments and
full-length genes, the functions of which have not been characterized, as well
as fully characterized genes. There is substantial uncertainty regarding the
possible patent protection for gene fragments or genes without known function or
correlation with specific diseases. To the extent any patents issue to other
parties on such partial or full-length genes, the risk increases that the
potential products and processes of the Company or its strategic partners may
give rise to claims of patent infringement. The public availability of partial
or full sequence information or the existence of patent applications related
thereto, even if not accompanied by relevant function or disease association,
prior to the time the Company applies for patent protection on a corresponding
gene could adversely affect the Company's ability to obtain patent protection
with respect to such gene or related expression patterns. Furthermore, others
may have filed, and in the future are likely to file, patent applications
covering genes or gene products that are similar or identical to any for which
the Company may seek patent protection. No assurance can be given that any such
patent application will not have priority over patent applications filed by the
Company. Any legal action against the Company or its strategic partners claiming
damages and seeking to enjoin commercial activities relating to the affected
products and processes could, in addition to subjecting the Company to potential
liability for damages, require the Company or its strategic partners to obtain a
license in order to continue to manufacture or market the affected products and
processes. There can be no assurance that the Company or its strategic partners
would prevail in any such action or that any license required under any such
patent would be made available on commercially acceptable terms, if at all. The
Company believes that there is likely to be significant litigation in the
industry regarding patent and other intellectual property rights. If the Company
becomes involved in such litigation, it could consume a substantial portion of
the Company's managerial and financial resources and have a material adverse
effect on the Company's business, financial condition and results of operations.
Enactment of legislation implementing the General Agreement on Tariffs and
Trade has resulted in certain changes to United States patent laws that became
effective on June 8, 1995. Most notably, the term of patent protection for
patent applications filed on or after June 8, 1995 is no longer a period of 17
years from the date of grant. The new term of United States patents will
commence on the date of issuance and terminate 20 years from the earliest
effective filing date of the application. Because the time from filing to
issuance of biotechnology patent applications is often more than three years, a
20-year term from the effective date of filing may result in a substantially
shortened period of patent protection which may adversely affect the Company's
patent position. If this change results in a shorter period of patent coverage,
the Company's business could be adversely affected to the extent that the
duration and level of the royalties it is entitled to receive from its strategic
partners are based on the existence of a valid patent covering the product
subject to the royalty obligation.
With respect to proprietary know-how that is not patentable and for
processes for which patents are difficult to enforce, the Company has chosen to
rely on trade secret protection and confidentiality agreements to protect its
interests. The Company believes that several elements of its ACCELERATED DRUG
DISCOVERY system involve proprietary know-how, technology or data which are not
covered by patents or patent applications. In addition, the Company has
developed a proprietary index of gene and gene fragment sequences which it
updates on an ongoing basis. Some of these data will be the subject of patent
applications whereas other data will be maintained as proprietary trade secret
information. The Company has taken security measures to protect its proprietary
know-how and technologies and confidential data and continues to explore further
methods of protection. While Gene Logic requires all employees, consultants and
collaborators to enter into confidentiality agreements, there can be no
assurance that proprietary information will not be disclosed, that others will
not independently develop substantially equivalent proprietary information and
techniques or otherwise gain access to the Company's trade secrets, or that the
Company can meaningfully protect its trade secrets. In the case of a strategic
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partnership or other collaborative arrangement which requires the sharing of
data, the Company's policy is to make available to its partner only such data as
are relevant to the partnership or arrangement, under controlled circumstances,
and only during the contractual term of the strategic partnership or
collaborative arrangement, and subject to a duty of confidentiality on the part
of its partner or collaborator. There can be no assurance, however, that such
measures will adequately protect the Company's data. Any material leak of
confidential data into the public domain or to third parties may have a material
adverse effect on the Company's business, financial condition and results of
operations.
The Company is a party to various license agreements which give it rights to
use certain technologies and biological materials in its research and
development processes. There can be no assurance that the Company will be able
to maintain such rights on commercially reasonable terms, if at all. Failure by
the Company to maintain such rights could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business--Intellectual Property."
INTENSE COMPETITION; RAPID TECHNOLOGICAL CHANGE
Competition among entities attempting to identify genes associated with
specific diseases and to develop products based on such discoveries is intense.
Gene Logic faces, and will continue to face, competition from pharmaceutical,
biotechnology and diagnostic companies, academic and research institutions and
government agencies, both in the United States and abroad. Several entities are
attempting to identify and patent randomly sequenced genes and gene fragments,
while others are pursuing a gene identification, characterization and product
development strategy based on positional cloning. The Company is aware that
certain entities are utilizing a variety of different gene expression analysis
methodologies, including the use of chip-based systems, to attempt to identify
disease-related genes. In addition, numerous pharmaceutical companies are
developing genomic research programs, either alone or in partnership with the
Company's competitors. Competition among such entities is intense and is
expected to increase. In order to compete against existing and future
technologies, the Company will need to demonstrate to potential customers that
its technologies and capabilities are superior to competing technologies.
Many of the Company's competitors have substantially greater capital
resources, research and development staffs, facilities, manufacturing and
marketing experience, distribution channels and human resources than the
Company. These competitors may discover, characterize or develop important
genes, drug targets or drug leads, drug discovery technologies or drugs in
advance of Gene Logic or which are more effective than those developed by Gene
Logic or its strategic partners, or may obtain regulatory approvals of their
drugs more rapidly than the Company and its strategic partners, any of which
could have a material adverse effect on any similar Gene Logic program.
Moreover, there can be no assurance that the Company's competitors will not
obtain patent protection or other intellectual property rights that would limit
the Company's or its strategic partners' ability to use the Company's drug
discovery technologies or commercialize therapeutic or diagnostic products,
which could have a material adverse effect on the Company's business, financial
condition and results of operations. The Company also faces competition from
these and other entities in gaining access to relevant samples used in its
discovery programs.
The Company will rely on its strategic partners for support of certain of
its discovery programs and intends to rely on its strategic partners for
preclinical and clinical development of related potential products and the
manufacturing and marketing of such products. Each of the Company's strategic
partners is conducting multiple product development efforts within each area
which is the subject of its strategic alliance with Gene Logic. Generally, the
Company's strategic alliance agreements do not preclude the strategic partner
from pursuing development efforts utilizing approaches distinct from that which
is the subject of the alliance. Any product candidate of the Company, therefore,
may be subject to competition with a potential product under development by a
strategic partner. See "--Reliance on Strategic Partners."
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Future competition will come from existing competitors as well as other
companies seeking to develop new technologies for drug discovery based on gene
sequencing, gene expression analysis, bioinformatics and related technologies.
In addition, certain pharmaceutical and biotechnology companies have significant
needs for genomic information and may choose to develop or acquire competing
technologies to meet such needs. Genomic technologies have undergone and are
expected to continue to undergo rapid and significant change. The Company's
future success will depend in large part on its maintaining a competitive
position in the genomics field. Rapid technological development by the Company
or others may result in products or technologies becoming obsolete before the
Company recovers the expenses it incurs in connection with their development.
Products offered by the Company could be made obsolete by less expensive or more
effective drug target and drug lead technologies, including technologies which
may be unrelated to genomics. There can be no assurance that the Company will be
able to make the enhancements to its technology necessary to compete
successfully with newly emerging technologies. See "Business--Competition."
FUTURE CAPITAL REQUIREMENTS; UNCERTAINTY OF ACCESS TO ADDITIONAL FUNDING
The Company has invested significant capital in its infrastructure and in
its scientific and business development activities and expects capital and
operating expenditures to increase over the next several years as it expands its
operations. The Company believes that the net proceeds from this offering and
the sale of shares to Japan Tobacco, existing cash and marketable securities and
anticipated cash flow from strategic alliances will be sufficient to support the
Company's operations for at least the next 24 months. However, this expectation
is based on the Company's current operating plan, which could change as a result
of many factors, and the Company could require additional funding sooner than
expected. In addition, the Company may choose to raise additional capital due to
market conditions or strategic considerations even if it has sufficient funds
for its operating plan. The Company's actual future capital requirements and the
adequacy of its available funds will depend on many factors, including progress
of its discovery programs, the number and breadth of these programs, the ability
of the Company to establish and maintain strategic alliance and licensing
arrangements and the progress of the development and commercialization efforts
of the Company's strategic partners. These factors also include the level of the
Company's activities relating to its independent discovery programs and to the
development and commercialization rights it retains in its strategic alliance
arrangements, competing technological and market developments, the costs
associated with obtaining access to tissue samples and related information and
the costs involved in preparing, filing, prosecuting, maintaining and enforcing
patent claims and other intellectual property rights.
The Company expects that it will require significant additional funding in
the future, which it may seek through public or private equity offerings, debt
financings or additional strategic alliance and licensing arrangements. No
assurance can be given that additional financing or strategic alliance and
licensing arrangements will be available when needed, or that, if available,
such financing will be obtained on terms favorable to the Company or its
stockholders. To the extent the Company raises additional capital by issuing
equity or convertible debt securities, ownership dilution to stockholders will
result. If adequate funds are not available when needed, the Company may be
required to curtail operations significantly or to obtain funds by entering into
strategic alliances and licensing arrangements, in which case the Company may be
required to relinquish rights to certain of its technologies, discoveries or
potential products, or to grant licenses on terms that are not favorable to the
Company, any of which could have a material adverse effect on the Company's
business, financial condition and results of operations. In the event that
adequate funds are not available, the Company's business would be adversely
affected. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
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ATTRACTION AND RETENTION OF KEY EMPLOYEES
The Company is highly dependent on the principal members of its management
and scientific staff. The loss of the services of any of these persons could
significantly impede the accomplishment of the Company's scientific and business
objectives. The Company's success is also dependent upon its ability to attract
and retain additional qualified scientific, technical and managerial personnel.
There is substantial competition among biotechnology, pharmaceutical and health
care companies, universities, government entities and non-profit organizations
for such personnel, and there can be no assurance that the Company will retain
its key scientific, technical and managerial employees or that it will be able
to attract, assimilate and retain such other highly qualified scientific,
technical and managerial personnel as may be required in the future. The
inability of the Company to retain its current scientific, technical and
managerial personnel and to attract and retain additional key employees could
have a material adverse effect on the Company's business, financial condition
and results of operations. See "Business--Competition," "--Scientific Advisers"
and "--Employees."
GOVERNMENT REGULATION; NO ASSURANCE OF REGULATORY APPROVAL; HAZARDOUS MATERIALS
The Company does not plan to conduct clinical trials in humans or
commercialize therapeutic products discovered as a result of its genes, drug
target and drug lead discovery programs but intends to rely on its strategic
partners to conduct such activities. Prior to marketing, any new drug developed
by the Company's strategic partners must undergo an extensive regulatory
approval process in the United States and other countries. This regulatory
process, which includes preclinical studies and clinical trials, and may include
post-marketing surveillance of each compound to establish its safety and
efficacy, can take many years and require the expenditure of substantial
resources. Data obtained from preclinical studies and clinical trials are
subject to varying interpretations that could delay, limit or prevent regulatory
approval. Delays or rejections may also be encountered based upon changes in
United States Food and Drug Administration ("FDA") policies for drug approval
during the period of product development and FDA regulatory review of each
submitted new drug application ("NDA") in the case of new pharmaceutical agents,
or product license application ("PLA") or biologics license application ("BLA")
in the case of biological therapeutics. Similar delays may also be encountered
in the regulatory approval of any diagnostic product, where such approval is
required, and in obtaining regulatory approval in foreign countries. Delays in
obtaining regulatory approvals could adversely affect the marketing of any drugs
developed by the Company or its strategic partners, impose costly procedures
upon the Company's or its partners' activities, diminish any competitive
advantages that the Company or its partners may attain and adversely affect the
Company's receipt of royalties. There can be no assurance that regulatory
approval will be obtained for any drugs or diagnostic products developed by the
Company or its strategic partners. Furthermore, regulatory approval may entail
limitations on the indicated uses of a drug. Because certain of the products
likely to result from the Company's drug target and lead discovery programs
involve the application of new technologies and may be based upon a new
therapeutic approach, such products may be subject to substantial additional
review by various government regulatory authorities and, as a result, regulatory
approvals may be obtained more slowly than for products based upon more
conventional technologies.
Even if regulatory approval is obtained, a marketed product and its
manufacturer are subject to continuing review. Discovery of previously unknown
problems with a product may result in withdrawal of the product from the market,
and could have adverse effects on the Company's business, financial conditions
and results of operations. Violations of regulatory requirements at any stage
during the regulatory process, including preclinical studies and clinical
trials, the approval process, post-approval or in good manufacturing practices
manufacturing requirements, may result in various adverse consequences to the
Company, including the FDA's delay in approval or refusal to approve a product,
withdrawal of an approved product from the market or the imposition of criminal
penalties against the manufacturer and NDA, PLA or BLA holder. No
investigational new drug application ("IND") has been submitted for any
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product candidate resulting from the Company's discovery programs, and no
product candidate has been approved for commercialization in the United States
or elsewhere. The Company intends to rely on its strategic partners to file INDs
and generally direct the regulatory approval process. There can be no assurance
that the Company's strategic partners will be able to conduct clinical testing
or obtain necessary approvals from the FDA or other regulatory authorities for
any products. Failure to obtain required governmental approvals will delay or
preclude the Company's strategic partners from marketing drugs or diagnostic
products developed through the Company's research or limit the commercial use of
such products and could have a material adverse effect on the Company's
business, financial condition and results of operations.
The Company's research and development activities involve the controlled use
of certain biological and other hazardous materials, chemicals and various
radioactive materials. The Company is subject to federal, state and local laws
and regulations governing the use, storage, handling and disposal of such
materials and certain waste products. Although the Company believes that its
safety procedures for handling and disposing of such materials comply with the
standards prescribed by federal, state and local laws and regulations, the risk
of accidental contamination or injury from these materials cannot be completely
eliminated. In the event of such an accident, the Company could be held liable
for any damages that result, and any liability could exceed the resources of the
Company. Other than such laws and regulations governing the generation, use and
disposal of hazardous materials and wastes, and limiting workplace exposures to
such materials, the Company does not believe its current and proposed activities
are subject to any specific government regulation other than regulations
affecting the operations of companies generally. See "Business--Government
Regulation."
ETHICAL, LEGAL AND SOCIAL IMPLICATIONS OF GENE-BASED DIAGNOSTICS
The Company and its partners may seek to develop diagnostic products based
on genes it discovers. The prospect of broadly available gene-based diagnostic
tests raises issues regarding their appropriate utilization and the
confidentiality of the information provided by such testing. It is possible that
discrimination by third party payors, based on the results of such testing,
could lead to the increase of premiums by such payors to prohibitive levels,
outright cancellation of insurance or unwillingness to provide coverage to
individuals showing unfavorable gene expression profiles. Similarly, employers
could discriminate against employees with gene expression profiles indicative of
the potential for high disease-related costs and lost employment time. Finally,
government authorities could, for social or other purposes, limit or prohibit
the use of such tests under certain circumstances. There can be no assurance
that such ethical and social factors or concerns about genetic testing and
target identification will not have a material adverse effect on market
acceptance of the Company's technologies and products.
REIMBURSEMENT RISK
The levels of revenues and profitability of pharmaceutical companies may be
affected by the continuing efforts of governments and third party payors to
contain or reduce the costs of health care through various means including by
limiting prices paid for pharmaceuticals. In both the United States and
elsewhere, sale of prescription pharmaceuticals are dependent in part on the
availability of reimbursement to the consumer from third party payors, such as
government insurance programs (Medicare and Medicaid) and private and corporate
health insurance plans. Third party payors are increasingly challenging the
prices charged for pharmaceuticals and, in some cases, refusing payment for
off-label use and other uses of pharmaceuticals they deem inappropriate.
EXPANSION OF OPERATIONS; MANAGEMENT OF GROWTH
The Company has recently experienced, and expects to continue to experience,
significant growth in the number of its employees and the scope of its
operations. The Company has significantly increased the scale of its operations
and number of employees to support its partnered and independent discovery
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programs and to manage its strategic alliances. The number of employees of the
Company increased from three on January 1, 1996 to 57 on September 30, 1997.
This growth has placed, and may continue to place, a significant strain on the
Company's management, operations and systems. The Company's ability to manage
such growth effectively will depend upon its broadening its management team and
attracting, hiring and retaining skilled employees. In addition, in order to
increase capacity to remain competitive and satisfy the needs of current and
future strategic partners, the Company will be required to acquire additional
capital equipment and resources. There can be no assurance that the Company will
be able to manage its growth, and the Company's inability to manage growth
effectively could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business--Employees" and
"--Facilities."
LIMITED CLINICAL DEVELOPMENT, MANUFACTURING, MARKETING AND SALES EXPERIENCE
The Company has made no investment in therapeutic or diagnostic
manufacturing, marketing or product sales resources and does not generally
expect to engage directly in the manufacturing, marketing or sale of therapeutic
or diagnostic products. Instead, the Company currently intends to contract with
others to pursue the commercialization of therapeutic or diagnostic products
based upon or discovered using its technologies. There can be no assurance that
the Company will be able to enter into such arrangements on acceptable terms, if
at all. The Company will be dependent to a significant extent on partners,
licensees or other entities for development, manufacturing and commercialization
of such products. The Company's dependence upon third parties for the
manufacture, marketing and sales of therapeutic or diagnostic products may
materially adversely affect the Company's ability to develop and deliver such
products on a timely and competitive basis, if at all. To the extent the Company
directly engages in development, manufacturing and marketing of certain
therapeutic or diagnostic products, it will require substantial additional
funds, personnel and production facilities. See "--Reliance on Strategic
Partners."
PRODUCT LIABILITY EXPOSURE
Clinical trials, manufacturing, marketing and sale of any of the Company's
or its partners' potential therapeutic or diagnostic products may expose the
Company to liability claims from the use of such products. The Company currently
does not carry product liability insurance. There can be no assurance that the
Company or its partners will be able to obtain such insurance or, if obtained,
that sufficient coverage can be acquired at a reasonable cost. The inability to
obtain sufficient insurance coverage at an acceptable cost or to otherwise
protect against potential product liability claims could prevent or inhibit the
commercialization of pharmaceutical products developed by the Company or its
partners. A product liability claim or recall would have a material adverse
effect on the Company's business, financial condition and results of operations.
CONTROL BY MANAGEMENT AND EXISTING STOCKHOLDERS
Upon completion of this offering, the Company's executive officers,
directors and affiliated individuals and entities together will beneficially own
approximately 35.3% of the outstanding shares of Common Stock (34.2% if the
Underwriters' over-allotment option is exercised in full). As a result, these
stockholders, acting together, will be able to influence significantly and
possibly control most matters requiring approval by the stockholders of the
Company, including approvals of amendments to the Company's Certificate of
Incorporation, mergers, a sale of all or substantially all of the assets of the
Company, going private transactions and other fundamental transactions. In
addition, the Company's Certificate of Incorporation, as it is proposed to be
amended and restated concurrently with the closing of this offering (the
"Restated Certificate"), does not provide for cumulative voting with respect to
the election of directors. Consequently, the present executive officers,
directors and affiliated individuals and entities will be able to control the
election of the members of the Board of Directors of the Company. Such a
17
<PAGE>
concentration of ownership could affect the liquidity of the Company's Common
Stock and have an adverse effect on the price of the Common Stock, and may have
the effect of delaying or preventing a change in control of the Company,
including transactions in which stockholders might otherwise receive a premium
for their shares over then current market prices. See "Principal Stockholders"
and "Description of Capital Stock."
NO PRIOR PUBLIC MARKET FOR COMMON STOCK; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to this offering, there has been no public market for the Common
Stock, and there can be no assurance that an active public market for the Common
Stock will develop or be sustained after this offering or that the market price
of the Common Stock will not decline below the initial public offering price.
The initial public offering price will be determined by negotiations between the
Company and the Underwriters and is not necessarily indicative of the market
price at which the Common Stock of the Company will trade after this offering.
See "Underwriting" for a discussion of the factors considered in determining the
initial public offering price. The market prices for securities of biotechnology
and pharmaceutical companies have been highly volatile, and the market has
experienced significant price and volume fluctuations that are often unrelated
to the operating performance of particular companies. Announcements of
technological innovations or new commercial products by the Company or its
competitors, disputes or other developments concerning proprietary rights,
including patents and litigation matters, developments concerning strategic
alliance agreements, publicity regarding actual or potential results with
respect to products or technology under development by the Company, its
strategic partners or its competitors, regulatory developments in both the
United States and foreign countries, public concern as to the efficacy of new
technologies, quarterly fluctuations in the Company's operating results, future
sales of substantial amounts of Common Stock by existing stockholders and
comments by securities analysts, as well as general market conditions and other
factors, may have a significant impact on the market price of the Common Stock.
In particular, the realization of any of the risks described in these "Risk
Factors" could have a material adverse impact on such market price.
ANTI-TAKEOVER PROVISIONS
The Restated Certificate provides for staggered terms for the members of the
Board of Directors. In addition, the Restated Certificate authorizes the Board
of Directors of the Company, without stockholder approval, to issue additional
shares of Common Stock and to fix the rights, preferences and privileges of and
issue additional shares of Preferred Stock with voting, conversion, dividend and
other rights and preferences that could adversely affect the voting power or
other rights of the holders of Common Stock. The issuance of Preferred Stock,
rights to purchase Preferred Stock or additional shares of Common Stock may have
the effect of delaying or preventing a change in control of the Company. In
addition, the possible issuance of Preferred Stock or additional shares of
Common Stock could discourage a proxy contest, make more difficult the
acquisition of a substantial block of the Company's Common Stock or limit the
price that investors might be willing to pay for shares of the Company's Common
Stock. Further, the Restated Certificate provides that any action required or
permitted to be taken by stockholders of the Company must be effected at a duly
called annual or special meeting of stockholders and may not be effected by
written consent. Special meetings of the stockholders of the Company may be
called only by the Chairman of the Board of Directors, the President of the
Company or by the Board of Directors pursuant to a resolution adopted by a
majority of the total number of authorized directors. These and other provisions
contained in the Restated Certificate and the Company's By-laws, as well as
certain provisions of Delaware law, could delay or make more difficult certain
types of transactions involving an actual or potential change in control of the
Company or its management (including transactions in which stockholders might
otherwise receive a premium for their shares over then current market prices)
and may limit the ability of stockholders to remove current management of the
Company or approve transactions that stockholders may deem to be in their best
interests and, therefore, could adversely affect the price of the Company's
Common Stock. See "Description of Capital Stock."
18
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE AND POTENTIAL ADVERSE EFFECT ON MARKET PRICE
Future sales of Common Stock in the public market following this offering
could adversely affect the market price of the Common Stock. Upon completion of
this offering, the Company will have 13,382,377 shares of Common Stock
outstanding, assuming no exercise of currently outstanding options or warrants.
Of these shares, the 3,000,000 shares sold in this offering (plus any additional
shares sold upon exercise of the Underwriters' over-allotment option) will be
freely transferable without restriction under the Securities Act of 1933, as
amended (the "Securities Act"), unless they are held by "affiliates" of the
Company as that term is used under the Securities Act and the regulations
promulgated thereunder. The remaining 10,382,377 shares of Common Stock held by
existing stockholders are "restricted securities" as that term is defined in
Rule 144 of the Securities Act (the "Restricted Shares"). Restricted Shares may
be sold in the public market only if registered or if they qualify for an
exemption from registration under Rule 144 or Rule 701 under the Securities Act.
As a result of contractual restrictions and the provisions of Rules 144 and 701,
additional shares will be available for sale in the public market as follows:
(i) no Restricted Shares will be eligible for immediate sale on the date of this
Prospectus; (ii) approximately 5,732 Restricted Shares will be eligible for sale
90 days after the date of this Prospectus; (iii) approximately 5,609,475
Restricted Shares will be eligible for sale 180 days after the effective date of
this offering upon expiration of lock-up agreements and upon expiration of their
respective holding periods under Rule 144; and (iv) the remainder of the
Restricted Shares will be eligible for sale from time to time thereafter upon
expiration of their respective holding periods under Rule 144. In addition,
1,200,752 shares issuable upon exercise of vested stock options will become
eligible for sale 180 days after the date of this Prospectus upon expiration of
lock-up agreements. The holders of 9,281,185 shares of Common Stock and the
holders of warrants to purchase 30,051 shares of Common Stock have the right in
certain circumstances to require the Company to register their shares under the
Securities Act for resale to the public beginning three months after the
effective date of this offering. If such holders, by exercising their demand
registration rights, cause a large number of shares to be registered and sold in
the public market, such sales could have an adverse effect on the market price
for the Company's Common Stock. If the Company were required to include in a
Company-initiated registration shares held by such holders pursuant to the
exercise of their piggyback registration rights, such sales may have an adverse
effect on the Company's ability to raise needed capital. In addition, the
Company expects to file a registration statement on Form S-8 registering a total
of approximately 6,134,268 shares of Common Stock subject to outstanding stock
options or reserved for issuance under the Company's equity incentive plans.
Such registration statement is expected to be filed and to become effective 180
days after the effective date of this offering. Shares registered under such
registration statement will, subject to Rule 144 volume limitations applicable
to affiliates, be available for sale in the open market, unless such shares are
subject to vesting restrictions with the Company or the lock-up agreements
described above. See "Management--Equity Incentive Plans," "Description of
Capital Stock--Registration Rights," "Shares Eligible for Future Sale" and
"Underwriting."
DILUTION; ABSENCE OF CASH DIVIDENDS
Purchasers of the shares of Common Stock offered hereby will experience
immediate and substantial dilution in the net tangible book value of their
investment from the initial public offering price. Additional dilution will
occur upon exercise of outstanding options and warrants. See "Dilution" and
"Shares Eligible for Future Sale." The Company has never paid any dividends and
does not anticipate paying dividends in the foreseeable future. See "Dividend
Policy."
19
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 3,000,000 shares of
Common Stock offered by the Company hereby and the sale of 272,727 shares of
Common Stock to Japan Tobacco are estimated to be approximately $33,090,000
($37,693,500 if the Underwriters' over-allotment option is exercised in full),
assuming an initial public offering price of $11.00 per share, after deducting
the underwriting discounts and commissions and estimated offering expenses
payable by the Company.
The Company intends to use the net proceeds from this offering and the sale
of shares to Japan Tobacco to fund its research and development activities and
capital expenditures, including scale-up of its laboratory, database and
business development operations and tenant improvements, and for working capital
and general corporate purposes. The amount and timing of these expenditures will
vary significantly depending on a number of factors, including the progress of
the Company's programs, future revenue growth, if any, and the amount of cash,
if any, generated by the Company's operations. The Company's management will
retain broad discretion in the allocation of such net proceeds. The Company may
also use a portion of the net proceeds to fund acquisitions of complementary
technologies, products or businesses, although the Company has no current
agreements or commitments for any such acquisitions. Pending such uses, the
Company intends to invest the net proceeds of this offering and the sale of
shares to Japan Tobacco in short-term, interest bearing, investment-grade
securities.
The Company believes that its existing capital resources, together with the
net proceeds from this offering and the sale of shares to Japan Tobacco,
interest income and future payments due under its existing strategic alliances,
will be sufficient to satisfy its current and projected funding requirements for
at least the next 24 months. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources."
DIVIDEND POLICY
The Company has never declared or paid dividends on its Common Stock and
does not anticipate paying any dividends on its Common Stock in the forseeable
future. The Company currently intends to retain any future earnings to fund the
development of its business.
20
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
30, 1997, and as adjusted to reflect the sale of 3,000,000 shares of Common
Stock offered hereby at an assumed initial public offering price of $11.00 per
share and the sale of 272,727 shares of Common Stock to Japan Tobacco at a price
equal to the assumed initial public offering price per share and the application
of the estimated net proceeds therefrom:
<TABLE>
<CAPTION>
JUNE 30, 1997
-----------------------------------------------
<S> <C> <C> <C>
PRO FORMA
ACTUAL (1) PRO FORMA (2) AS ADJUSTED (3)
----------- --------------- -----------------
<CAPTION>
(in thousands)
<S> <C> <C> <C>
Current portion of long-term debt and capital lease
obligations.......................................... $ 350 $ 350 $ 350
----------- ------- -------
----------- ------- -------
Noncurrent portion of long-term debt and capital lease
obligations.......................................... $ 1,091 $ 1,091 $ 1,091
Series A, A-1, B and C convertible preferred stock,
$0.01 par value; 9,550,000 shares authorized;
4,836,742 shares issued and outstanding, actual; no
shares issued and outstanding, pro forma and pro
forma as adjusted (3)................................ 10,849 -- --
Stockholders' equity:
Preferred Stock, $.01 par value; no shares
authorized, actual and pro forma; 10,000,000 shares
authorized, pro forma as adjusted; no shares issued
or outstanding, actual, pro forma and pro forma as
adjusted........................................... -- -- --
----------- ------- -------
Common Stock, $.01 par value; 6,000,000 shares
authorized, actual; 17,000,000 shares authorized,
pro forma; 60,000,000 shares authorized, pro forma
as adjusted; 637,733 shares issued and outstanding,
actual; 9,918,918 shares issued and outstanding,
pro forma; 13,191,645 shares issued and
outstanding, pro forma as adjusted................. 6 99 132
Additional paid-in capital........................... 63 29,954 63,011
Deferred compensation, net........................... (56) (56) (56)
Unrealized loss on marketable securities............. (1) (1) (1)
Accumulated deficit.................................. (7,386) (7,386) (7,386)
----------- ------- -------
Total stockholders' equity......................... (7,374) 22,610 55,700
----------- ------- -------
Total capitalization............................. $ 4,566 $ 23,701 $ 56,791
----------- ------- -------
----------- ------- -------
</TABLE>
- - - ------------------------
(1) Excludes: (i) 2,424,381 shares of Common Stock issuable upon exercise of
outstanding stock options as of September 30, 1997 at a weighted average
exercise price of $1.05 per share; and (ii) 162,576 shares of Common Stock
issuable upon exercise of outstanding warrants at a weighted average
exercise price of $3.10 per share. Also excludes 61,000 shares of Common
Stock issuable upon exercise of stock options granted after September 30,
1997 with an exercise price of $3.50 per share. See "Management--Equity
Incentive Plans," "Description of Capital Stock--Warrants" and Note 13 of
Notes to Financial Statements.
(2) Pro forma to give effect to the private placement of 4,444,443 shares of
Series C Preferred Stock in July 1997, at a price of $4.50 per share, net of
stock issue costs, and the conversion of all outstanding shares of Preferred
Stock into 9,281,185 shares of Common Stock upon the closing of this
offering.
(3) See the Financial Statements and Note 9 of Notes to the Financial Statements
for descriptions of the authorized, issued and outstanding shares,
liquidation preferences and conversion features of the individual Series of
Preferred Stock.
21
<PAGE>
DILUTION
The pro forma net tangible book value of the Company as of June 30, 1997 was
$22,290,322 or $2.25 per share of Common Stock. Pro forma net tangible book
value per share represents the amount of the Company's total tangible assets
less total liabilities, divided by the number of shares of Common Stock
outstanding after giving effect to the conversion of all outstanding shares of
Preferred Stock into Common Stock and the issuance of 4,444,443 shares of Series
C Convertible Preferred 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 net tangible book value per share of the Common
Stock immediately after completion of this offering. After giving effect to the
sale by the Company of 3,000,000 shares of Common Stock offered hereby at an
assumed initial public offering price of $11.00 per share and after deducting
the underwriting discounts and commissions and estimated offering expenses
payable by the Company, and the sale of 272,727 shares of Common Stock to Japan
Tobacco at a price equal to the assumed initial public offering price per share
and assuming no other changes in the net tangible book value after June 30,
1997, the Company's pro forma net tangible book value as of June 30, 1997 would
have been $55,380,322 or $4.20 per share. This represents an immediate increase
in pro forma net tangible book value of $1.95 per share to existing stockholders
and an immediate dilution in pro forma net tangible book value of $6.80 per
share to new purchasers of Common Stock in this offering and in the sale of
shares of Common Stock to Japan Tobacco, as illustrated by the following table:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............ $ 11.00
Pro forma net tangible book value per share as of June
30, 1997............................................... $ 2.25
Increase attributable to new investors................... 1.95
---------
Pro forma net tangible book value per share after the
offering................................................. 4.20
---------
Dilution to new investors.................................. $ 6.80
---------
---------
</TABLE>
The following table sets forth on a pro forma basis, as of June 30, 1997,
the difference between the number of shares of Common Stock purchased from the
Company, the total consideration paid and the average price per share paid by
the existing holders of Common Stock and by the new investors, before deducting
the underwriting discounts and commissions and estimated offering expenses
payable by the Company:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------------- -------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders (1).......................... 9,918,918 75.2% $ 30,176,700 45.6% $ 3.04
New investors...................................... 3,272,727 24.8 36,000,000 54.4 11.00
------------ ----- ------------- -----
Total............................................ 13,191,645 100.0% $ 66,176,700 100.0%
------------ ----- ------------- -----
------------ ----- ------------- -----
</TABLE>
- - - ------------------------
(1) Gives effect to the conversion of all outstanding shares of Preferred Stock
(including the Series C Preferred Stock issued subsequent to June 30, 1997)
into 9,281,185 shares of Common Stock upon the closing of this offering.
The calculation of net tangible book value and the other computations above
assume no exercise of outstanding options and warrants. As of June 30, 1997,
1,403,394 shares of Common Stock were subject to outstanding options and
warrants at a weighted average exercise price of $0.26 per share. To the extent
additional shares are purchased pursuant to the exercise of outstanding options
and warrants, there will be further dilution to new investors. See
"Management--Equity Incentive Plans," "Description of Capital Stock-- Warrants"
and Note 13 of Notes of Financial Statements.
22
<PAGE>
SELECTED FINANCIAL DATA
The selected financial data presented below for the period from September
22, 1994 (inception) through December 31, 1994, and the years ended December 31,
1995 and 1996 and at December 31, 1994, 1995 and 1996 are derived from the
Company's financial statements audited by Arthur Andersen LLP, independent
auditors, which are included elsewhere in this Prospectus. The statement of
operations data for the six months ended June 30, 1996 and 1997 and the balance
sheet data at June 30, 1996 and 1997 have been derived from unaudited financial
statements; however, management believes such financial statements include all
adjustments, consisting only of normal recurring adjustments, that the Company
considers necessary for a fair presentation of the financial position and
results of operations for these periods. Operating results for the six months
ended June 30, 1997 are not necessarily indicative of the results that may be
expected for the entire year ended December 31, 1997. The data set forth below
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the financial statements and
related notes thereto appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PERIOD FROM
SEPTEMBER 22, 1994 YEAR ENDED SIX MONTHS ENDED
(INCEPTION) DECEMBER 31, JUNE 30,
THROUGH -------------------- --------------------
DECEMBER 31, 1994 1995 1996 1996 1997
--------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.............................................. $ -- $ -- $ -- $ -- $ 167
Operating expenses:
Research and development.......................... 44 486 1,747 491 1,837
General and administrative........................ 46 258 1,349 386 1,236
--- --------- --------- --------- ---------
Total operating expenses.............................. 90 744 3,096 877 3,073
Interest income, net.................................. -- -- 221 18 91
--- --------- --------- --------- ---------
Net loss.............................................. $ (90) $ (744) $ (2,875) $ (859) $ (2,815)
--- --------- --------- --------- ---------
--- --------- --------- --------- ---------
Pro forma net loss per share (1)...................... $ (0.60) $ (0.48)
--------- ---------
--------- ---------
Shares used in computing pro forma net loss per share
(1)................................................. 4,753 5,807
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------------------- --------------------
<S> <C> <C> <C> <C> <C>
1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------
<CAPTION>
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and marketable securities................................ $ 298 $ 348 $ 5,671 $ 6,857 $ 5,099
Working capital............................................... 310 245 4,590 6,604 2,668
Total assets.................................................. 310 423 7,817 7,534 8,210
Total long-term debt and capital lease obligations............ -- -- 446 456 1,441
Total mandatorily redeemable convertible
preferred stock............................................. 400 1,153 10,481 8,772 10,849
Total stockholders' equity.................................... (90) (834) (4,199) (1,865) (7,374)
</TABLE>
- - - ------------------------
(1) See Note 1 of Notes to Financial Statements for a description of the
computation of the pro forma net loss per share.
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations contains certain forward-looking statements which
involve risk and uncertainties. Actual events and results may differ materially
from those anticipated in these forward-looking statements as a result of
various factors, including the matters set forth under the caption "Risk
Factors" and elsewhere in this Prospectus.
OVERVIEW
The Company was incorporated in September 1994, and has devoted
substantially all of its resources to the development of its genomics
technologies, bioinformatics systems and database products used to identify the
expression of genes, drug targets and drug leads. The Company has incurred
losses since inception and, as of June 30, 1997, had an accumulated deficit of
$7.4 million.
The Company entered into a strategic alliance with Procter & Gamble in the
field of heart failure in May 1997 and with Japan Tobacco in the field of renal
disease in September 1997. These agreements provide the Company with various
combinations of technology and database access fees and research funding and may
provide certain additional payments upon the attainment of research and
regulatory milestones and royalty payments based on sales of any products
resulting from the collaborations. Revenue recognized under the alliance with
Procter & Gamble through June 30, 1997 totalled approximately $167,000. Each
strategic partner has the option to expand the collaboration to cover two
additional disease indications. In addition, Japan Tobacco is also obligated to
purchase $3.0 million of the Company's Common Stock in a private placement to
close simultaneously with this offering.
The Company's future profitability will depend in part on the successful
development and marketing of the ACCELERATED DRUG DISCOVERY system, the genomic
database products and the Flow-thru Chip and the establishment of strategic
alliances. Payments from strategic alliance partners and interest income are
expected to be the only sources of revenue for the foreseeable future. These
payments will include committed technology access fees and milestone payments
for the discovery of drug targets and leads. Such revenue is dependent in large
part on the discovery of genes, drug targets and drug leads using the Company's
technologies. Royalties or other revenue from commercial sales of products
developed from any therapeutic or diagnostic product identified using the
Company's technologies are not expected for at least several years, if at all.
Payments under strategic alliances will be subject to significant fluctuation in
both timing and amount, and, therefore, the Company's results of operations for
any period may not be comparable to the results of operations for any other
period. Furthermore, the generation of significant revenues and profitability
will depend upon the Company entering into additional alliances. There can be no
assurance that the Company will enter into additional alliances on acceptable
terms, if at all, or that such current or future alliances will be successful.
The Company has incurred operating losses in each year since its inception,
including net losses of approximately $2.9 million and $2.8 million for the year
ended December 31, 1996 and the six months ended June 30, 1997, respectively,
and at June 30, 1997, the Company had an accumulated deficit of approximately
$7.4 million. The Company's losses have resulted principally from costs incurred
in research and development and from general and administrative costs associated
with the Company's operations. These costs have exceeded the Company's interest
income and revenues which to date have been generated principally from strategic
alliances. The Company expects to incur substantial additional operating losses
over the next few years as a result of increases in its expenses for research
and development capabilities.
The Company's quarterly operating results may fluctuate significantly as a
result of a variety of factors, including changes in the demand for the
Company's technologies and products, variations in payments under strategic
alliances, including milestone payments, royalties, license fees and other
contract
24
<PAGE>
revenues, and the timing of new product introductions, if any, by the Company.
The Company's quarterly operating results may also fluctuate significantly
depending on changes in the research and development budgets of the Company's
strategic partners and any potential partners, the introduction of new products
by the Company's competitors and other competitive factors, regulatory actions,
adoption of new technologies, manufacturing results, and the cost, quality and
availability of cell and tissue samples, reagents and related components.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997 AND JUNE 30, 1996
Revenue under strategic alliance agreements was $167,000 for the six months
ended June 30, 1997. There was no revenue for the six months ended June 30,
1996. The 1997 revenue resulted from the Company's strategic alliance agreement
with Procter & Gamble.
Research and development expenses increased to $1,837,000 for the six months
ended June 30, 1997 from $491,000 for the comparable period in 1996. This
increase was primarily attributable to increased payroll and personnel expenses
as the Company hired additional research and development personnel, increased
purchases of laboratory supplies and increased equipment depreciation as a
result of capital expenditures. The Company expects research and development
expenses to continue to increase as personnel and research and development
facilities are expanded to accommodate new and existing strategic alliances.
General and administrative expenses increased to $1,236,000 for the six
months ended June 30, 1997 from $386,000 for the comparable period in 1996. This
increase was primarily attributable to increased payroll and personnel expenses
as the Company hired additional management and administrative personnel and
professional fees in connection with the overall scale-up of the Company's
operations and business development efforts. The Company expects that general
and administrative expenses will continue to increase as the Company continues
to expand its operations.
Net interest income increased to $91,000 for the six months ended June 30,
1997 from $18,000 for the comparable period in 1996. This increase was primarily
due to larger cash and investment balances on hand during 1997 as a result of
private placements of equity securities.
As of June 30, 1997, the Company had accumulated losses of $7.4 million
since inception and, therefore, has not paid any federal income taxes.
Realization of deferred tax assets is dependent on future earnings, if any, the
timing and amount of which are uncertain. Accordingly, valuation allowances in
amounts equal to the deferred tax assets have been established to reflect these
uncertainties. See Note 7 of Notes to Financial Statements.
YEARS ENDED DECEMBER 31, 1996 AND DECEMBER 31, 1995
Research and development expenses increased to $1,747,000 in 1996 from
$486,000 in 1995. This increase was primarily attributable to increased payroll
and personnel expenses as the Company hired additional research and development
personnel, increased purchases of laboratory supplies and increased contracted
services.
General and administrative expenses increased to $1,349,000 in 1996 from
$258,000 in 1995. This increase was primarily attributable to increased payroll
and personnel expenses as the Company hired additional management and
administrative personnel and professional fees in connection with the expansion
of the Company's operations and business development efforts.
The Company had net interest income of $221,000 in 1996 resulting from
interest earned on cash and marketable securities derived from private
placements of equity securities. The Company did not earn interest income in
1995.
25
<PAGE>
YEAR ENDED DECEMBER 31, 1995 AND PERIOD FROM SEPTEMBER 22, 1994 (INCEPTION)
THROUGH
DECEMBER 31, 1994
Research and development expenses increased to $486,000 in 1995 from $44,000
in the 1994 period. This increase was primarily due to the inclusion of a full
year of operations in 1995 and to payroll and personnel expenses as the Company
scaled-up its research and development efforts.
General and administrative expenses increased to $258,000 in 1995 from
$46,000 in the 1994 period. This increase was primarily due to the inclusion of
a full year of operations in 1995 as well as increased payroll, personnel and
facility costs as the Company established operations.
LIQUIDITY AND CAPITAL RESOURCES
From inception through June 30, 1997, the Company financed its operations
through private placements of equity securities, payment from a strategic
alliance partner, a capital lease and an equipment loan. The private placement
of equity securities has provided the Company with aggregate gross proceeds of
approximately $10,160,000 as of June 30, 1997. The Company also has obtained
$3,000,000 under its strategic alliance with Procter & Gamble, as of June 30,
1997, comprised of an initial research and technology access payment of
$1,000,000 and a $2,000,000 note which will be forgiven over the initial 18
months of the agreement upon the Company's performance of research obligations.
The Company has also obtained $471,000 of capital lease financing and $1,084,000
under an equipment loan. As of June 30, 1997, the Company had approximately
$5,099,000 in cash and marketable securities.
Amounts financed for equipment under a capital lease for the year ended
December 31, 1996 were approximately $471,000. The Company also had purchases of
equipment of approximately $12,000, $1,339,000 and $762,000 during the years
ended December 31, 1995 and 1996 and the six months ended June 30, 1997,
respectively. Although the Company had no material commitments for capital
expenditures as of June 30, 1997, the Company expects capital expenditures to
increase over the next several years as it expands its facilities and acquires
scientific and computer equipment to support the planned expansion of its
research and development efforts.
As of December 31, 1996, the Company had net operating loss carryforwards of
approximately $2,779,000 to offset federal and state income taxes. The Company's
research and development tax credit carryforwards were estimated to be
approximately $56,000 for federal income tax purposes. If not utilized, the
federal and state net operating loss carryforwards will expire through 2011. See
Note 7 to Notes to Financial Statements.
To date, all revenue received by the Company has been from its strategic
alliances. The Company expects that substantially all revenue for the
foreseeable future will come from strategic alliance partners and interest
income. Furthermore, the Company's ability to achieve profitability will be
dependent upon the ability of the Company to enter into additional strategic
alliances. There can be no assurance that the Company will be able to negotiate
additional strategic alliances in the future on acceptable terms, if at all, or
that current or future strategic alliances will be successful and provide the
Company with expected benefits.
The Company believes that the net proceeds from this offering and the sale
of shares to Japan Tobacco, existing cash and marketable securities and
anticipated cash flow from its current strategic alliances will be sufficient to
support the Company's operations for at least the next 24 months. The Company's
actual future capital requirements and the adequacy of its available funds,
however, will depend on many factors, including progress of its discovery
programs, the number and breadth of these programs, the ability of the Company
to establish and maintain additional strategic alliance and licensing
arrangements and the progress of the development and commercialization efforts
of the Company's strategic partners. These factors also include the level of the
Company's activities relating to its independent discovery programs and to the
development and commercialization rights it retains in its strategic
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alliance arrangements, competing technological and market developments, the
costs associated with obtaining access to tissue samples and related information
and the costs involved in preparing, filing, prosecuting, maintaining and
enforcing patent claims and other intellectual property rights. The Company
expects that it will require significant additional financings in the future,
which it may seek to raise through public or private equity offerings, debt
financing or additional strategic alliance and licensing arrangements. No
assurance can be given that additional financing or strategic alliance and
licensing arrangements will be available when needed, if at all, or that, if
available, such financing will be obtained on terms favorable to the Company or
its stockholders. To the extent the Company raises additional capital by issuing
equity or convertible debt securities, ownership dilution to stockholders will
result. If adequate financing is not available when needed, the Company may be
required to curtail significantly one or more of its research and development
programs or to obtain funds through arrangements with strategic partners or
others that may require the Company to relinquish rights to certain of its
technologies, discoveries or potential products, or to grant licenses on terms
that are not favorable to the Company, any of which could have a material
adverse effect on the Company's business, financial condition and results of
operations. In the event that adequate funds are not available, the Company's
business would be adversely affected.
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BUSINESS
The following Business section contains forward-looking statements which
involve risks and uncertainties. The Company's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including those set forth under "Risk Factors" and
elsewhere in this Prospectus.
OVERVIEW
GENE LOGIC INC. ("Gene Logic" or the "Company") uses a proprietary system,
based on analysis of gene expression and gene regulation, to discover drug
targets and drug leads. Gene Logic uses READS in its drug target and drug lead
discovery programs and to generate genomic data for its database products. The
Company's objective is to provide its pharmaceutical company partners with novel
drug targets, drug leads and a suite of genomic database products to reduce the
time, cost and risk associated with drug discovery. The Company believes that by
building its portfolio of partnerships it will generate current revenues and
establish a long-term economic interest in the product pipleines of multiple
partners through milestone and royalty payments. Gene Logic has established
major strategic alliances with Procter & Gamble and Japan Tobacco.
INDUSTRY BACKGROUND
DRUG DISCOVERY AND DEVELOPMENT
Diseases are the result of disturbances of, or abnormalities in, the
physiological pathways that regulate the functioning of cells in the human body.
The main components of these pathways are proteins, such as enzymes, receptors
or ion channels, encoded by genes expressed within the cells affected by the
disease. Drugs generally exert their therapeutic effects by interacting with
certain of these proteins, referred to as drug targets, in such a way as to
restore the normal functioning of the disease-affected pathways or otherwise to
compensate for the abnormalities. The process of drug discovery involves the
screening of collections of compounds against a drug target to identify those
compounds which interact with the target to produce the desired effect.
In response to increasing competitive pressures to discover and develop new
drugs in a more rapid and cost-effective manner, pharmaceutical and
biotechnology companies have recently made significant advances in combinatorial
chemistry and high-throughput screening technologies which enable the rapid
generation and screening of large and diverse compound libraries against many
potential targets. However, the current drug discovery process remains
time-consuming and costly, in part because of the difficulty and complexity of
identifying novel drug targets using traditional methodologies. In general,
pharmaceutical companies rely upon their own basic research and academic
discoveries to identify drug targets. The Company believes this approach
provides an insufficient number of targets to fill the industry's increasing
annual screening objectives. Recent developments in genomics have permitted the
partial sequencing of tens of thousands of new genes and the identification of
the classes of proteins they encode. These developments have not enabled the
rapid identification of drug targets, because the gene sequence data by itself
provides limited information, if any, about a gene's relationship to a specific
disease. There remains a significant need for a rapid and cost-effective method
to correlate genes with specific diseases to discover drug targets.
GENES, GENE EXPRESSION AND DISEASE
The genetic content of humans, the human genome, is maintained in
chromosomes, which contain deoxyribonucleic acid ("DNA"). DNA is composed of two
strands of four constituent molecules known as bases or nucleotides: adenine
(A), thymine (T), guanine (G) and cytosine (C). The specific order, or sequence,
of these bases encodes genetic information within units defined as genes, which
are the
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hereditary units that control the structure, health and function of all
organisms. The beginning sequence of any gene is called 5 prime (5') and its end
is called 3 prime (3'). The human genome is estimated to comprise approximately
three billion base pairs encoding 100,000 to 150,000 genes. While all of these
genes are present in every human cell, certain of these genes are switched "on"
only in specific tissues or only at certain developmental stages and are
otherwise inactive. On average, in any single cell type, 10,000 to 20,000
different genes are expressed out of the possible 100,000 to 150,000. The cell's
pattern of gene expression defines the function of that cell.
Genes consist of coding and non-coding regions which ultimately direct and
regulate the production of the various proteins that maintain normal cellular
function. The coding regions, which account for less than five percent of the
human genome, direct the production of proteins, and the order of the bases in
these regions determine the order of amino acids in a given protein. An enzyme
reads these genes and makes a strand of RNA (a molecule similar to DNA) that
consists of a string of bases complementary to that of the DNA of the gene. This
process is known as transcription and results in the production of messenger RNA
("mRNA"). Messenger RNA directs the assembly of amino acids in a sequence that
corresponds to the order of the bases of the mRNA defining the sequence of a
protein. The amount of mRNA in a cell provides a direct indication of the level
of activity of the corresponding gene.
Some of the non-coding DNA sequences, referred to as promoter regions,
regulate genes in the different tissues. A series of regulatory proteins, called
transcription factors, bind to specific promoter regions, either singularly or
in unique, multi-component complexes, and act as switches controlling the
activity of the genes. The synthesis of regulatory proteins is, in turn,
directed by genes coding for transcription factors and their accessory proteins.
Together these control elements regulate the pattern of gene expression in
specific cells.
When a mutation occurs in a gene, the resulting protein may be abnormal in
function, resulting in disease. A number of relatively rare diseases, such as
cystic fibrosis and sickle cell anemia, result from such single gene mutations,
and the genes responsible for many of these monogenic diseases have been
identified over the last decade. Detailed knowledge of gene sequences that
encode defective proteins may facilitate development of novel therapeutic
products and diagnostic tests for these conditions. However, almost all major
common diseases, including heart failure, renal disease, diseases of the central
nervous system, osteoporosis and cancer, are believed to involve multiple genes
and, often, complex interactions of genetic and environmental factors. These
conditions evolve over time as a result of successive changes in the patterns of
gene expression in the cells involved in the disease.
THE NEED FOR NOVEL DRUG TARGETS
A critical step for drug development is the identification of suitable drug
targets for screening. The major pharmaceutical companies are facing increasing
pressures to introduce new drugs more rapidly than in the past. Because most
drug candidates fail during the development process, these companies need to
identify a large number of potential drug candidates by screening compound
libraries against large numbers of targets to improve their chances of
identifying commercially viable drugs. Recent estimates suggest that major
pharmaceutical companies may have to screen hundreds of new targets each year in
order to meet their drug discovery objectives. This figure compares with a
published 1995 industry source estimate that approximately 300 targets in total
were then in active screening by the pharmaceutical industry.
The majority of drug targets are proteins that are encoded by genes
expressed within tissues affected by a disease. The importance of certain
protein classes, such as enzymes, receptors or ion channels, as targets is
illustrated by the world's top selling prescription drugs. Of the 100 most
prescribed drugs, approximately 80% interact with one of four classes of
proteins: 33 drugs inhibit 13 different enzymes; 22 bind to ten different
G-protein-coupled receptors; 13 interact with six different ion channels; and 15
bind to four different nuclear hormone receptors. It is estimated that there are
approximately 10,000 different
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enzymes, 1,000 different G-protein-coupled receptors, 200 different ion channels
and 100 different nuclear hormone receptors encoded in the human genome. These
proteins are key components of the pathways involved in disease and, therefore,
are likely to be a rich source of new drug targets.
Proven drug targets share certain other characteristics which can only be
identified by understanding their expression levels in cells and cannot be
determined by their gene sequence alone. Drug targets are (i) often expressed
primarily in specific tissues, allowing for selectivity of pharmacological
action and reducing the potential for adverse side effects and (ii) generally
expressed at low abundance in the cells of the relevant organ. An effective
target discovery system would therefore enable the detection of genes that
encode for proteins expressed in specific tissues at low abundance, thereby
permitting the rapid identification of proteins which are likely to be targets
for therapeutic and diagnostic development.
LIMITATIONS OF TRADITIONAL GENOMICS TECHNOLOGIES
Although traditional genomics technologies have yielded sequence information
for many genes and have succeeded in identifying genes that predispose
individuals to certain diseases, the rate at which novel drug targets can be
identified from this information is limited. Traditional genomics efforts are
generally classified in two categories: gene sequencing and positional cloning.
Most gene sequencing approaches use high-throughput methods to capture
partial sequences (known as expressed sequence tags or "ESTs") for many genes on
an essentially random basis. These ESTs are stored in public and proprietary
databases which, to date, contain an estimated three million ESTs, representing
partial and fragmentary sequence data for 50 to 60 percent of human genes.
Despite the widespread availability of a significant amount of sequence data,
these data have limited use in identifying targets for therapeutic or diagnostic
product development. This is because the gene sequence data by itself provides
limited information, if any, about a gene's relationship to a specific disease.
Also, the EST sequencing approach tends to capture, multiple times, those genes
which are abundantly expressed while missing the low-abundance, tissue-specific
genes which may code for useful drug targets.
Positional cloning is a method of identifying individual genes that, when
defective, cause or predispose individuals to particular diseases. The process
consists of genetic mapping, physical mapping and sequencing, and typically
requires an extensive collection of DNA samples from families affected by the
disease. Scientists test the DNA of both affected and non-affected members of
these families and, through statistical analysis, attempt to identify the region
or regions of the genome likely to contain a gene related to the disease.
Positional cloning requires large numbers of samples from the affected families
to demonstrate statistical significance and becomes much more complicated when
multiple genes are involved in the disease. The accumulation of such samples is
costly and time consuming. Although researchers are attempting to use other
methodologies, including animal models of disease, to speed the process of gene
discovery, the overall process may take several years.
THE GENE LOGIC SOLUTION
Gene Logic believes that its proprietary technologies for analysis of the
overall patterns of gene expression and regulation in specific diseases will
enable the Company to identify multiple, novel drug targets more rapidly than
competing technologies. Gene Logic's ACCELERATED DRUG DISCOVERY system allows
the Company to display the changes in gene expression patterns as a disease
develops and progresses. The Company uses this information, in conjunction with
its proprietary suite of genomics databases and bioinformatics tools, to
identify genes and their associated pathways implicated in disease and to
discover and prioritize individual drug targets. Pursuant to strategic alliances
with corporate partners and in independent programs, the Company is using its
system to identify drug targets for major common diseases, including heart
failure, renal disease, diseases of the central nervous system, osteoporosis and
prostate cancer. In addition, Gene Logic is developing a proprietary, reusable
Flow-thru Chip for high-throughput analysis of changes in the expression of
known genes. The Company believes the Flow-thru
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Chip will enable the development of high-throughput screening assays to evaluate
the effects of compounds on the expression of disease-associated genes
identified by READS. This technology represents a new approach to drug discovery
and has the potential to accelerate substantially the identification of drug
leads. By utilizing and further developing the portfolio of technologies,
genomics databases and bioinformatics tools in its ACCELERATED DRUG DISCOVERY
system, Gene Logic believes it can significantly enhance many critical steps in
the drug development process and accelerate the development of novel
pharmaceuticals for the Company and its partners.
GENE LOGIC'S STRATEGY
Gene Logic's objective is to provide to its pharmaceutical company partners
novel drug targets, drug leads and a suite of genomic database products in order
to reduce the time, cost and risk associated with drug discovery. The Company
believes that by building its portfolio of partnerships it will generate current
revenues and establish a long-term economic interest in the product pipelines of
multiple partners through milestone and royalty payments. The Company believes
that this portfolio approach will maximize the likelihood of drugs being
discovered and developed using its system. The Company's strategy for building
commercial value is to:
- PROVIDE AN INTEGRATED DRUG DISCOVERY PLATFORM. The Company has established
and intends to continue to build a broad technology platform, the
ACCELERATED DRUG DISCOVERY system, based on the analysis of gene
expression and gene regulation for the rapid discovery of multiple,
screenable drug targets and drug leads. The ACCELERATED DRUG DISCOVERY
system is designed to be integrated easily into the current drug discovery
processes of multiple partners.
- ESTABLISH DISEASE-SPECIFIC DRUG TARGET AND LEAD DISCOVERY ALLIANCES. Gene
Logic intends to continue to establish strategic alliances in specific
disease areas with pharmaceutical companies for drug target and drug lead
discovery programs. Such strategic alliances would generally provide the
Company technology license fees, research funding, milestone payments and
royalty or profit-sharing income from commercialization of products
resulting from the alliances. To date, Gene Logic has entered into a
target discovery alliance with Procter & Gamble in the field of heart
failure and a target and lead discovery alliance with Japan Tobacco in the
field of renal disease.
- ESTABLISH INDEPENDENT DRUG TARGET AND LEAD DISCOVERY PROGRAMS. Gene Logic
has established and intends to expand independent drug discovery programs
based on its proprietary technologies, including the Flow-thru Chip. The
Company plans to license drug leads discovered through its independent
programs to pharmaceutical companies for clinical development and
commercialization and expects to receive license fees, development
milestone payments and royalty or profit-sharing income from such
licensees.
- MARKET GENOMIC DATABASE PRODUCTS UNDER NON-EXCLUSIVE LICENSE. The Company
plans to market its suite of genomic database products, including its GENE
EXPRESS NORMAL and rare EST (rEST) databases, either in a single package
or as separate modules, to multiple pharmaceutical company partners. The
Company intends to grant non-exclusive licenses independent of, or in
conjunction with, strategic alliances. Such licenses would generally
provide the Company annual subscription fees, milestone payments and
royalties. To date, Gene Logic has granted Japan Tobacco a non-exclusive
license to its GENE EXPRESS NORMAL database.
- RETAIN SIGNIFICANT RIGHTS TO NEW PRODUCT OPPORTUNITIES. Under its
strategic alliances, Gene Logic retains certain rights to diagnostic,
therapeutic protein and gene therapy applications. In addition, the
Company intends to use its databases and technological capabilities to
develop products for the evolving fields of differential diagnosis,
molecular staging of disease and pharmacogenomic profiling. The Company
may pursue these applications independently or in alliances with
additional partners.
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GENE LOGIC'S ACCELERATED DRUG DISCOVERY SYSTEM
Gene Logic is employing its proprietary technologies and bioinformatics
system for the discovery of drug targets and drug leads and to accelerate the
development of drugs. The elements of Gene Logic's ACCELERATED DRUG DISCOVERY
system include:
ANALYSIS OF GENE EXPRESSION AND REGULATION
READS TECHNOLOGY
The Company has developed a proprietary, automated technology, known as
READS (Restriction Enzyme Analysis of Differentially-expressed Sequences), for
capturing and analyzing the overall gene expression profile of a given cell or
tissue type to identify drug targets. The Company has an exclusive license from
Yale University to patent applications covering the READS technology and has
received a notice of allowance for the original patent application, covering the
key aspects of the READS technology, from the United States Patent and Trademark
Office (the "USPTO"). Using READS, Gene Logic rapidly generates a gene
expression profile, or Molecular Topography, representing a quantitative
snapshot of the levels of expression of essentially all the genes in a tissue
sample. The Company compares normal and diseased tissues through a series of
Molecular Topography snapshots, a "molecular movie," to identify the changes in
gene expression patterns that occur as the disease develops and progresses and
to determine which genes are associated with the disease. The READS technology
is accurate and highly sensitive, capable of detecting essentially all mRNA
transcripts including rarely expressed genes, at the level of approximately one
mRNA copy per cell. By employing its READS technology in conjunction with its
proprietary bioinformatics system, the Company can then prioritize the proteins
encoded by these disease-associated genes as potential drug targets.
The READS process begins with the procurement of a relevant cell or tissue
sample, extraction of its total RNA content and preparation of complementary DNA
("cDNA") using standard techniques. By applying proprietary tagging and enzyme
cleavage procedures to the cDNA pool, the Company generates a unique set of
identifiable signature fragments (3' ESTs) for each mRNA species present in the
cell. The fragments are separated by size using gel-based, automated separation
techniques and quantified using proprietary image analysis software. The
quantity of each signature fragment correlates directly with the expression
levels of the corresponding gene. The Company uses its bioinformatics system to
compile these data into a Molecular Topography snapshot which represents the
levels of expression of genes active in the sample. This process typically takes
two days and is tracked by the Company's laboratory information management
system, which captures both process and quality control data.
The READS technology has been highly automated through the use of
commercially available robotic liquid handling stations, thermocyclers and
fragment separation instruments. A single production unit may be utilized for
two shifts per day and is capable of generating approximately 1,000 Molecular
Topography snapshots per year. Gene Logic has installed its first production
unit and has scaled up operations to two shifts per day. The Company expects to
install a second production unit during 1998. There can be no assurance,
however, that the Company will be able to increase its capacity as expected or
to realize the cost efficiencies of scale it anticipates.
MUST TECHNOLOGY
Gene Logic's proprietary MuST (Multiplex Selection of Transcription Factors)
technology enables the Company to identify the nucleotide sequences of the
transcription factors binding sites through which the expression of genes is
regulated. The Company believes that the information generated by MuST, in
combination with the information on gene expression levels generated by its
READS technology, will enable the Company to assign genes to functional pathways
based on the observation that genes in such pathways share common regulatory
mechanisms and are coordinately expressed. The Company has an exclusive license
from Yale University to patent applications covering the MuST technology and has
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received a notice of allowance for the original patent application, covering the
key aspects of the MuST technology, from the USPTO.
The MuST process starts with the extraction of nuclear proteins in the cell
or tissue sample. Proteins within this extract which exhibit sequence-specific
DNA binding properties are bound to a set of DNA probes and separated from all
unbound probes using electrophoretic separation techniques. After purification
and amplification, the binding sites are sequenced and entered into a database.
The result is a library of sequences which represent the binding sites for the
gene regulatory proteins contained in the original nuclear extract. The entire
process is tracked by the Company's laboratory information management system,
which captures both process and quality control data.
The Company has established the technical resources to construct a library
of transcription factor binding sequences for any given cell type in a period of
four weeks and has begun to process samples in order to expand the database.
Over 50% of the transcription factor binding sequences Gene Logic has identified
to date in a variety of different human cell types are not included in public
domain databases.
GENE LOGIC'S BIOINFORMATICS SYSTEM
The Company has designed and is continuing to develop a bioinformatics
system to manage and analyze the information it generates and to interface with
its databases, its partners' databases and databases in the public domain. This
system enables the functional integration of Gene Logic's genomic data content
with other proprietary or public genomic databases, protein databases and
strategic partners' chemical, screening and assay databases. Gene Logic's
bioinformatics system provides the analytical tools necessary to enable the
Company to discover and prioritize targets for drug discovery. Moreover, the
provision of Gene Logic's proprietary genomic data in conjunction with its
integrated bioinformatics system may enable the Company to introduce that system
into strategic partners' drug discovery process in a customized, expandable
format that is compatible with partners' current database architectures.
DATABASE INTEGRATION TOOLS
The Company's bioinformatics system was developed using scientific data
management tools based on the Object Protocol Model ("OPM") architecture. These
tools provide support for the rapid development of relational databases, the
integration of relational and flat file databases and the building of cross-
database query systems. The Company's bioinformatics system works through
customized and configurable Web interfaces, regardless of the structure of the
underlying databases and without having to redevelop each database. The
Company's bioinformatics system enables the integration of Gene Logic's
information content into the data management systems of its strategic partners,
and the Company believes that the system will also enhance the value of such
partners' existing databases by establishing interconnectivity of heterogeneous
data sources.
GENOMIC DATA ANALYTICAL TOOLS
The Company's bioinformatics system includes tools for the analysis of data
generated by READS and MuST for both normal and diseased cell and tissue types.
Gene expression data are analyzed using the Company's proprietary Molecular
Topography data tool. The tool allows intuitive "point and click" navigation
among the expressed genes and is also an analytical tool. The system can
identify genes as known (represented in the Company's databases of indexed 3'
ESTs and full-length sequences) or unknown, and provides a wide variety of
statistical analyses of expression levels and correlations both within and
across cell, tissue and disease types.
Underlying the Molecular Topography tool is the quEST software developed by
the Company. quEST comprises a reference set of indexed, human 3' ESTs,
representing the Company's universe of known genes. The Company processes these
ESTs to eliminate artifacts and redundancies which are commonly found in the
public data. The quEST tool also includes a searching and matching algorithm
which allows 3'
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EST signature fragments from READS to be correlated with known genes. The
Company routinely sequences signature fragments which are not in its databases
as they are identified by READS and is capable of sequencing over 1,000 such
fragments per week. Once the sequence of a gene is captured in the Company's
database, a fragment derived from that gene can thereafter be identified in a
Molecular Topography without the need for further sequencing.
Gene Logic has also developed proprietary methods to prioritize the
disease-associated genes it discovers as potential drug targets. This
prioritization depends upon a number of factors including: (i) a gene's temporal
association with the disease process; (ii) the tissue distribution of its
expression; (iii) any homology it may have with known target classes, such as
membrane receptors, enzymes or signaling proteins; (iv) its involvement in known
metabolic or signal transduction pathways; and (v) the feasibility of developing
a screening assay.
THE FLOW-THRU CHIP
Gene Logic is developing its proprietary, reusable Flow-thru Chip for
high-throughput analysis of changes in the expression of known genes. The
Company believes that the Flow-thru Chip will enable the development of
high-throughput screening assays to evaluate the effects of compounds on the
expression of disease associated genes identified by READS. This technology
represents a new approach to drug discovery and has the potential to accelerate
substantially the identification of drug leads. The Company has exclusive
licenses to the technology underlying the Flow-thru Chip from the United States
Department of Energy and the inventor of the technology.
In its drug discovery process, Gene Logic will use its READS technology to
identify which genes are associated with the disease. Once these genes are
known, the Company will design a customized Flow-thru Chip incorporating probes
specific for these genes and use the chip to test the effects of compounds in
cellular assays. Compounds that have the desired effect on expression of the
relevant genes, such as restoring the expression pattern to normal or mimicking
the effect of a known therapeutic, may be evaluated as drug leads.
The substrate of the Flow-thru Chip is a silicon or glass wafer traversed by
a grid of micro-channels. The current version of the chip is laid out in a
format which is compatible with current high-throughput cellular assay systems.
Each well is configured to contain an array of approximately 400 genes
identified using the Company's READS technology; the number of genes included in
each well is expected to be increased to approximately 1,000 in the second
version of the Flow-thru Chip. The Company expects to commence in-house testing
during 1998.
Based on disease-associated genes identified by READS, Gene Logic designs
and synthesizes custom oligonucleotide probes and binds them, using a
proprietary covalent attachment chemistry, within the micro-channels covering a
specific area of the chip. The function of each probe is to bind to its
complementary DNA or RNA in the sample being analyzed. The nucleic acid is
isolated from such a sample and fluorescently labeled by one of several standard
biochemical methods. The test sample is then flowed through the substrate of the
Flow-thru Chip where each attached probe captures, or hybridizes to, any labeled
nucleic acid present in the sample which is complementary to that probe. When
imaged using the Company's signal detection system, the hybridized test sample
generates a fluorescent signal which can be correlated with the expression in
the original sample of the gene captured by the probe because the sequence and
position of each complementary DNA probe on the Flow-thru Chip is known. The
level of signal is readily quantifiable and reflects the degree to which the
gene is expressed in the sample.
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FLOW-THRU CHIP-TM-
[graphical depiction of cross-sections of Flow-thru Chip]
Cut-away of a micro-channel containing covalent linked oligonucleotide
probes.
Area of chip containing probes for a single gene.
Portion of one cm2 chip with 400 sites containing probes for individual
genes.
Each high-throughput screening assay comprises 96 wells, each containing the
full 400 gene set.
The Company believes that several features make the Flow-thru Chip well
suited for monitoring the expression of known genes in high-throughput cellular
assays:
- SENSITIVITY. Because of the greater surface area available for attachment
of the oligonucleotide probes, the Company believes the Flow-thru Chip
will be sensitive enough to monitor changes in expression of low-abundance
transcripts.
- SPEED. The existence of the micro-channels accelerates the hybridization
reaction, reducing the time required for each assay. In addition, because
of focusing of the fluorescent signal by the walls of the micro-channels,
the Company is able to use a commercially available digital signal
detection system which provides an immediate read-out.
- COST. As a result of the proprietary covalent chemistry through which the
oligonucleotide probes are attached within the micro-channels, each
Flow-thru Chip can be used multiple times. Following each assay the chip
is washed to remove the hybridized material and is then ready for reuse.
The Company believes the reusability of the Flow-thru Chip will make it
suitable for use in high- throughput screening applications.
In addition to its use as part of the Company's drug lead discovery
programs, the Flow-thru Chip will also serve as a platform for the screening of
lead compounds against the data in the Toxicology EXPRESS and Pharmacology
EXPRESS databases being developed by the Company. Gene Logic will design
Flow-thru Chips using oligonucleotide probes representative of the genes that
comprise patterns of gene expression which typify known classes of toxic or
pharmacological effects identified using READS. The Company may sell Flow-thru
Chips to its strategic partners in conjunction with subscriptions to the
Toxicology EXPRESS or Pharmacology EXPRESS databases or provide screening
services in conjunction with an alliance.
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The Company has established relationships with several third parties for
manufacture of the chip substrates and oligonucleotide probes which constitute
its Flow-thru Chip arrays and for the robotic and signal detection systems
associated with running high-throughput screening assays using the chips. There
can be no assurance, however, that the Company will be able to maintain such
relationships on terms acceptable to the Company.
There can be no assurance that further development and scale-up of the
Flow-thru Chip will be successful or that the Company will be successful in
marketing the Flow-thru Chip to strategic partners or others.
GENE LOGIC PROGRAMS AND PRODUCTS
DRUG TARGET AND LEAD DISCOVERY PROGRAMS
The ACCELERATED DRUG DISCOVERY system is applicable to a broad range of
diseases. As part of its business strategy, Gene Logic focuses on large medical
markets that are poorly served by current drug treatments and intends to
establish strategic alliances in specific disease areas with pharmaceutical
companies for drug target and drug lead discovery programs. To date, the Company
has established two strategic alliances in the fields of heart failure and renal
disease. Gene Logic has established independent discovery programs to identify
drug targets for certain diseases of the central nervous system, osteoporosis
and prostate cancer. Gene Logic also intends to obtain access to compound
libraries from combinatorial chemistry and pharmaceutical companies for
screening using its Flow-thru Chip.
Gene Logic has collaborations with academic institutions and commercial
organizations for access to relevant normal and diseased human tissues and cell
types and animal disease models. The Company uses these tissues for analysis of
gene expression and gene regulation and to build its genomic databases. Under
the terms of these agreements, the Company generally retains all commercial
rights to gene discoveries made through the use of cells and tissues provided by
its collaborators.
HEART FAILURE
An estimated 4.8 million Americans suffer from heart failure. Heart failure
refers to a progressive reduction in the ability of the ventricles of the heart
to pump an adequate volume of blood. Although many causes for heart failure have
been identified, common to all is loss of the normal ability of the cells
comprising heart muscle to respond to stress. Normally, muscle becomes stronger
with exercise; in heart failure, increasing load on the heart muscle weakens
rather than strengthens the muscle. Better knowledge of altered patterns of gene
expression in the heart muscle cells as the disease progresses may offer insight
into the disease mechanism.
In May 1997, Gene Logic entered into a 4 1/2-year strategic alliance with
Procter & Gamble for the discovery of drug targets for heart failure. In
connection with this alliance, the Company has obtained access to muscle tissue
from normal and failing human hearts through several heart transplant programs.
Pursuant to the alliance research program, Gene Logic is using READS to identify
changes in the expression of genes which underlie the pathological process to
prioritize targets for the development of innovative drugs and prognostic
indicators. The Company has processed samples and generated Molecular Topography
snapshots for samples received to date from Procter & Gamble and is providing
Procter & Gamble with on-line access to such results. See "--Strategic
Alliances--Procter & Gamble Pharmaceuticals, Inc."
RENAL DISEASE
Approximately 200,000 Americans suffer from end-stage renal disease. The
management of chronic renal failure consumes a significant portion of the health
care budget in the United States. The major causes of renal failure are
glomerulonephritis, diabetes mellitus and hypertension.
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In September 1997, the Company entered into a five-year strategic alliance
with Japan Tobacco for the discovery of drug targets and drug leads for renal
disease. As part of the alliance, the Company granted Japan Tobacco a
non-exclusive license to the GENE EXPRESS NORMAL database and Gene Logic may
also use its Flow-thru Chip technology for screening for drug leads in renal
disease. Pursuant to the alliance, Gene Logic is establishing collaborations for
access to a broad range of human tissues and animal disease models relevant to
renal disease. The Company is focusing its ACCELERATED DRUG DISCOVERY system on
the identification of drug targets and leads for the development of novel
therapeutics and diagnostic and molecular staging products for renal disease.
See "--Strategic Alliances--Japan Tobacco Inc."
DISEASES OF THE CENTRAL NERVOUS SYSTEM
Gene Logic is employing its ACCELERATED DRUG DISCOVERY system to identify
drug targets for schizophrenia, affective disorders and Alzheimer's disease.
SCHIZOPHRENIA. Schizophrenia is a severe mental disorder affecting
approximately one percent of the worldwide population. Current treatments for
schizophrenia are inadequate because a significant percentage of schizophrenics
are resistant to all treatments and others respond only partially to drug
therapy and remain too affected to work or lead normal lives. The underlying
chemical alterations in the brain which cause schizophrenia are not well
understood.
Gene Logic is analyzing the patterns of gene expression in brain cells from
schizophrenics and animal treatment models to identify novel drug targets. Gene
Logic has entered into a collaboration with Johns Hopkins University School of
Medicine for access to POST MORTEM tissue samples from brains of schizophrenics.
These samples were obtained from both drug-treated and untreated individuals
shortly after death. The Company has also begun evaluating the effects of
established and experimental anti-
psychotic drugs on gene expression in the brain in animal models.
AFFECTIVE DISORDERS. There are two broad categories of affective disorders:
unipolar affective disorder, or depression, which affects an estimated 15
million Americans, and bipolar affective disorder, also known as
manic-depression, which affects an estimated two million people in the United
States. Although drug therapies exist for these disorders, pharmaceutical
companies are attempting to develop new products having a more rapid onset of
action and efficacy in a higher percentage of patients.
The Company is using READS to discover new antidepressant drug targets based
on changes in the patterns of gene expression in brain cells from patients with
affective disorders. The Company has entered into a collaboration with Johns
Hopkins University School of Medicine for access to POST MORTEM samples from
specific regions of the brains of both drug-treated and untreated
manic-depressives.
ALZHEIMER'S DISEASE. Between three and four million Americans suffer from
disabling age-related dementia, or Alzheimer's disease. The primary therapeutic
goal is postponement of the onset of disease in predisposed individuals and
slowing of disease progression.
Gene Logic has entered into a collaboration with Molecular Geriatrics
Corporation for access to micro-dissected samples of relevant regions of human
brain from patients with Alzheimer's disease ranging from early stage through
advanced degeneration. The samples have been characterized using proprietary
monoclonal antibodies to reveal cells affected at the onset of the disease. The
Company has exclusive rights to any genes useful in the development of
therapeutic products which are identified through the collaboration. The Company
may pursue such rights independently or in alliance with a strategic partner.
Molecular Geriatrics Corporation retains rights to develop diagnostic products.
OSTEOPOROSIS
Osteoporosis is a condition characterised by low bone mass and
susceptibility to fracture. Osteoporosis affects over 20 million American women,
a number which continues to grow as the average age of the population increases.
Loss of bone mass in postmenopausal women can be substantially retarded or
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prevented by hormone replacement therapy. However, there is no available
treatment that significantly restores bone mass that has already been lost.
Because effective prevention requires early diagnosis, there is also a large and
immediate market for more sensitive diagnostics.
Gene Logic has commenced its discovery program in osteoporosis with the
Center for Clinical and Basic Research and Johns Hopkins University School of
Medicine providing normal and osteoporotic bone samples. The Company intends to
develop drug targets identified through these programs independently or in
alliance with a strategic partner.
PROSTATE CANCER
Prostate cancer is the most commonly diagnosed cancer in American men with
317,000 new cases reported in 1996 and is the second leading cause of all male
cancer deaths in the United States.
Gene Logic has established a collaboration for access to staged and
characterized prostate cancer tissue samples, together with related clinical
treatment and outcomes data, with Baylor College of Medicine. In this program,
the Company is focusing on the identification of targets for the development of
novel therapeutics and diagnostic products. Gene Logic may develop these
independently or in alliance with strategic partners.
GENOMIC DATABASE PRODUCTS
Complementary to its disease-specific target discovery programs, the Company
is developing a suite of genomic database products designed to accelerate the
process of target identification and prioritization, the discovery of lead
compounds and the preclinical and clinical development of drugs. Gene Logic
intends to market its suite of genomic database products, in a single package or
as separate modules, to multiple partners on a non-exclusive basis both
independent of and in conjunction with drug target and drug lead discovery
alliances. The Company expects to receive annual database access subscription
fees, milestone payments based on utilization of the data in licensees' drug and
diagnostic discovery programs and royalties on net sales of resulting products.
GENE EXPRESS NORMAL DATABASE
The GENE EXPRESS NORMAL database is a reference set of gene expression
profiles for a wide variety of normal human tissues, which enables the Company
and its partners to determine rapidly the expression level of genes in normal
tissues. The database will also contain gene expression profiles for normal
tissues in rat and mouse, the experimental animals most commonly used by the
pharmaceutical industry. This information facilitates the prioritization of drug
targets. The database uses the Company's bioinformatics system to correlate
specific gene sequences to their expression levels and to interface with other
public or private sequence databases to which the licensee may have access. The
Company has granted the first non-exclusive license to the GENE EXPRESS NORMAL
database to Japan Tobacco.
RARE EST (REST) DATABASE
Approximately 80% of all human genes are rarely expressed (at the level of
fewer than five mRNA copies per cell), and fewer than an estimated 50% of such
genes are available in existing human EST databases. However, these
low-abundance, tissue-specific gene transcripts are those that the Company
believes will be most promising as drug targets. Gene Logic uses its READS
technology on tissue samples to identify rarely expressed genes. Unlike
traditional EST sequencing methods, Gene Logic's process is directed
(non-random) and has a low level of redundancy. The Company is developing a
database of rare ESTs, with the potential to provide promising drug targets not
otherwise available through other sources of sequence data. The Company
anticipates that such database will be commercially available in 1998, but there
can be no assurance that it will be available by such date, or at all.
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THE ANNOTATED GENOME (TAG) DATABASE
The Human Genome Project is forecast to complete the sequencing of the
entire genome by 2005. Using expression data derived from the GENE EXPRESS
NORMAL database and the transcription factor binding site sequence information
generated by the Company's MuST technology, Gene Logic intends to create a
database, the TAG database, of human genomic sequence information derived from
the Human Genome Project annotated with expression levels, tissue distribution
of expression and gene regulatory mechanisms. The Company believes the analysis
of this database will enable genes to be placed in their functional pathways
based upon coordinate expression and shared transcriptional control elements,
thereby allowing the selection and prioritization of appropriate drug targets at
multiple points along disease-associated pathways. The development of the TAG
database is at an early stage and Gene Logic expects that it will accelerate as
more human genomic sequence data becomes available.
PHARMACOLOGY EXPRESS DATABASE
The Company is using its READS technology to build a database of profiles of
gene expression that characterize the pharmacological effects in relevant target
organs of compounds of known therapeutic benefit. These patterns can be used as
references for the screening of new lead compounds in order to predict
therapeutic efficacy at the preclinical development stage. The Company believes
that this technology may substantially reduce the risks associated with clinical
development of new drugs and provide a rapid filter for the selection and
prioritization of lead compounds. In conjunction with its Pharmacology EXPRESS
database, Gene Logic plans to use its Flow-thru Chip for the screening of lead
compounds against the database. The construction of the Pharmacology EXPRESS
database is at an early stage. The Company anticipates that such database will
be commercially available in 1998, but there can be no assurance that it will be
available by such date, or at all.
TOXICOLOGY EXPRESS DATABASE
Gene Logic intends to use its READS technology to build a database of the
changes in gene expression that typify known toxicological effects of compounds
in the target organs subject to such effects. Patterns may be identified by
comparing gene expression in normal tissues to gene expression in similar
tissues exposed to known toxic substances. These patterns can be used as
references for the screening of new lead compounds for common classes of
toxicological effects in order to minimize the use of traditional animal
toxicology screening, which is both time-consuming and expensive. In conjunction
with the Toxicology EXPRESS database, Gene Logic plans to use its Flow-thru Chip
for the screening of lead compounds against the database. The Company believes
that screening against the Toxicology EXPRESS database will provide a filter for
the prioritization of lead compounds and will accelerate the selection of those
to be taken forward through full toxicological studies in animals and those to
be abandoned. The construction of the Toxicology EXPRESS database is at an early
stage. The Company anticipates that such database will be commercially available
in 1998, but there can be no assurance that it will be available by such date,
or at all.
The statements made in this Prospectus regarding anticipated dates for
commercial availability of certain of its products are forward-looking
statements, and the actual dates of commercialization could differ materially
from those projected as a result of a variety of factors, including progress of
the Company's technologies, changes in the Company's business priorities and
other factors discussed in "Risk Factors." There can be no assurance that the
Company will not experience difficulties that could delay or prevent the
successful development and commercialization of products or that the Company's
products will address the requirements of the market or achieve market
acceptance.
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NEW PRODUCT OPPORTUNITIES
Gene Logic intends to pursue commercial opportunities for diagnostic
applications of its discoveries, including molecular staging of disease,
differential diagnosis and pharmacogenomic profiling. The Company believes that
management of common diseases in the future will include gene expression-based
diagnostics to monitor the molecular evolution of the disease. Gene expression
analysis may enable differentiation among diseases which share clinical symptoms
but which differ at the level of molecular mechanism. Gene Logic believes that
pharmacogenomic profiling, using gene expression-based assays to predict an
individual's response to specific drugs, may be especially valuable in new drug
development and in modifying drug therapies of known efficacy but which have
toxic side effects in certain groups of patients.
STRATEGIC ALLIANCES
As part of its business strategy, Gene Logic intends to continue to
establish strategic alliances for drug target and lead discovery programs in
specific disease areas with pharmaceutical companies. Gene Logic may also enter
into strategic alliances or joint ventures with additional partners to develop
certain diagnostics, therapeutic proteins and gene therapy products for which it
has retained rights. The Company's strategic alliances would generally provide
for the Company to receive technology license fees, research funding, milestone
payments and royalty or profit-sharing income. To date, Gene Logic has entered
into a target discovery alliance with Procter & Gamble in the field of heart
failure and a target and lead discovery alliance with Japan Tobacco in the field
of renal disease.
Gene Logic's objective is to structure its alliances in a flexible manner.
Subject to a commitment by a strategic partner, the Company is able to allocate
a variable portion of its production capacity to any individual program. An
alliance might embrace a field as restricted as one specific project within a
single disease indication or as broad as an entire category of disease involving
several indications.
PROCTER & GAMBLE PHARMACEUTICALS, INC.
In May 1997, the Company and Procter & Gamble entered into a 4 1/2-year
strategic alliance for drug target discovery in heart failure. Payments by
Procter & Gamble to the Company in the form of committed technology access fees
and research funding will total a minimum of $10.1 million if the research
program continues for its full term and the Company performs its research
obligations under the agreement. The parties may agree to extend the research
program for additional one-year periods. At any time during the first 18 months
of the alliance, Procter & Gamble has the right to expand the alliance to
include drug target discovery programs in two additional disease indications
upon terms, including committed research funding, identical to those covering
the initial program in heart failure. Procter & Gamble will be obligated to make
additional payments to the Company for the achievement of specified target
discovery, product development and associated regulatory milestones. Procter &
Gamble will also pay the Company royalties on worldwide net sales of all
products that may result from the alliance.
The agreement provides Procter & Gamble with exclusive, worldwide,
royalty-bearing rights to develop and commercialize small molecule therapeutics,
therapeutic proteins and diagnostics based on the Company's discoveries in the
field of heart failure. Gene Logic has retained all rights to develop and
commercialize products discovered pursuant to the alliance outside of the
alliance field. Procter & Gamble has agreed to assign to Gene Logic any and all
interest it may have in inventions related to the Company's core technologies
and to products developed pursuant to the alliance to the extent necessary for
Gene Logic to exercise its retained commercial rights.
Procter & Gamble has the right to terminate the research program with
respect to heart failure by giving Gene Logic six months notice at any time
after 12 months from the date of commencement of the research program under the
agreement and has comparable rights to terminate the research program in the
options fields. Accordingly, the minimum duration of any research program is 18
months. If Procter & Gamble terminates the agreement, it may elect to recommence
the research program for up to two
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additional years. Each party also has the right to terminate the agreement upon
certain change of control events with respect to the other party. Unless earlier
terminated in accordance with its terms, the agreement will remain in effect
until the expiration of the last-to-expire obligations of Procter & Gamble to
pay royalties under the agreement.
There can be no assurance that the Company's research pursuant to the
agreement will be successful in discovering drug targets related to heart
failure or to either of the two option disease fields or that Procter & Gamble
will be successful in developing or commercializing any products based upon such
discoveries made by the Company. As a result, there can be no assurance that
Gene Logic will receive any milestone payments, royalties or other payments
contemplated by the agreement.
JAPAN TOBACCO INC.
In September 1997, the Company and Japan Tobacco entered into a five-year
strategic alliance for drug target and drug lead discovery in renal disease.
Payments by Japan Tobacco to the Company in the form of committed technology
access fees and research funding total a minimum of $15.0 million if the
research program continues for its full term and the Company performs its
research obligations under the Agreement. Japan Tobacco may extend the research
program for one additional year. At any time during the first two years of the
alliance, Japan Tobacco has the right to expand the alliance to include drug
target and drug lead discovery programs in two additional disease indications
upon terms, including committed research funding, identical to those covering
the initial program in renal disease. Japan Tobacco will be obligated to make
additional payments to the Company for the achievement of specified target
discovery and related product development and associated regulatory milestones.
Pursuant to the terms of the agreement, Japan Tobacco would pay a minimum of
$12.5 million for each therapeutic product if all milestones are achieved. Japan
Tobacco will also pay the Company royalties on worldwide net sales of all
products that may result from targets discovered pursuant to the alliance.
As part of the alliance and during the research term of the alliance
agreement, the Company granted Japan Tobacco a non-exclusive license to the GENE
EXPRESS NORMAL database, and Gene Logic intends to use its Flow-thru Chip
technology for screening for drug leads in renal disease or, if Japan Tobacco
has exercised its options to additional disease indications, such other disease
indications. In consideration for such license and access, Japan Tobacco has
agreed to purchase $3.0 million of Common Stock in a private transaction
concurrent with this offering at a price per share equal to the price per share
at which Common Stock is sold in this offering. Under the terms of the option,
Japan Tobacco will pay Gene Logic chip design fees, screening fees and a minimum
of $17.5 million for each therapeutic product based on a lead compound
identified through such assays if all milestones are achieved. The agreement
also entitles the Company to royalties on net sales of therapeutic products
based on lead compounds identified through such assays.
The agreement provides Japan Tobacco with exclusive, worldwide,
royalty-bearing rights to develop and commercialize small molecule therapeutics
and therapeutic antibodies and proteins based on the Company's discoveries in
the course of the alliance. Gene Logic has retained all rights to develop and
commercialize gene therapy and antisense drugs and diagnostic products
discovered pursuant to the alliance. Japan Tobacco has agreed to assign to Gene
Logic any and all interest it may have in inventions related to the Company's
core technologies and to products developed pursuant to the alliance to the
extent necessary for Gene Logic to exercise its retained commercial rights.
Japan Tobacco has the right to terminate the research program with respect
to renal disease by giving Gene Logic six months notice at any time after 12
months from the date of commencement of the research program under the agreement
and has comparable rights to terminate the research program in the option
fields. Accordingly, the minimum duration of any research program is 18 months.
Unless earlier terminated in accordance with its terms, the agreement will
remain in effect until the expiration of the last-to-expire obligations of Japan
Tobacco to pay royalties under the agreement.
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There can be no assurance that the Company's research pursuant to the
agreement will be successful in discovering drug targets or drug leads related
to renal disease or to either of the two option disease fields or that Japan
Tobacco will be successful in developing or commercializing any products based
upon such discoveries made by the Company. As a result, there can be no
assurance that Gene Logic will receive any milestone payments, royalties or
other payments contemplated by the agreement.
INTELLECTUAL PROPERTY
Gene Logic seeks United States and international patent protection for major
components of its technology platform, including elements of its READS, MuST,
Flow-thru Chip and bioinformatics technologies; it relies upon trade secret
protection for certain of its confidential and proprietary information; and it
uses license agreements both to access external technologies and assets and to
convey certain intellectual property rights to others. The Company's commercial
success will be dependent in part upon its ability to obtain commercially
valuable patent claims and to protect its intellectual property portfolio.
As of September 30, 1997, the Company had exclusive rights to eight United
States patent applications, as well as corresponding international and foreign
patent applications, relating to its technologies. The Company has received
notices of allowance for two United States patent applications covering the key
aspects of the READS and MuST technologies, however, no patents have issued to
date.
The patent positions of pharmaceutical, biopharmaceutical and biotechnology
companies, including Gene Logic, are generally uncertain and involve complex
legal and factual questions. There can be no assurance that any of the pending
patent applications to which the Company has exclusive rights will result in
issued patents, that the claims of any patents which do issue will provide
meaningful protection, that the Company will develop additional proprietary
technologies that are patentable, that any patents licensed or issued to the
Company or its strategic partners will provide a basis for commercially viable
products or will provide the Company with any competitive advantages or will not
be challenged by third parties, or that the patents of others will not have an
adverse effect on the ability of the Company to do business. In addition, patent
law relating to the scope of claims in the technology field in which the Company
operates is still evolving. The degree of future protection for the Company's
proprietary rights, therefore, is uncertain. Furthermore, there can be no
assurance that others will not independently develop similar or alternative
technologies, duplicate any of the Company's technologies, or, if patents are
licensed or issued to the Company, design around the patented technologies
licensed to or developed by the Company. In addition, the Company could incur
substantial costs in litigation if it is required to defend itself in patent
suits brought by third parties or if it initiates such suits.
The Company is aware of a number of United States patents and patent
applications and corresponding foreign patents and patent applications owned by
third parties relating to the analysis of gene expression or the manufacture and
use of DNA chips. There can be no assurance that these or other technologies
will not provide third parties with competitive advantages over the Company and
will not have a material adverse effect on the Company's business, financial
condition and results of operations. In addition, certain third party patent
applications contain broad claims, and it is not possible to determine whether
or not such claims will be narrowed during prosecution and/or will be allowed
and issued as patents, even if such claims appear to cover the prior art or have
other defects. There can be no assurance that an owner or licensee of a patent
in the field will not threaten or file an infringement action or that the
Company would prevail in any such action. There can be no assurance that the
cost of defending an infringement action would not be substantial and would not
have a material adverse effect on the Company's business, financial condition
and results of operations. Furthermore, there can be no assurance that any
required licenses would be made available on commercially viable terms, if at
all. Failure to obtain any required license could prevent the Company from
utilizing or commercializing one or more of its technologies and could have a
material adverse effect on the Company's business, financial condition and
results of operations.
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In general, the Company intends to apply for patent protection for methods
relating to gene expression and to apply for patent protection for the
individual disease genes and targets it discovers. Such patents may include
claims relating to novel genes and gene fragments and to novel uses for known
genes or gene fragments identified through its discovery programs. There can be
no assurance that the Company will be able to obtain meaningful patent
protection for its discoveries; even if patents are issued, the scope of the
coverage or protection afforded thereby is uncertain. Failure to secure such
meaningful patent protection could have a material adverse effect on the
Company's business, financial condition and results of operations.
Several groups are attempting to identify and patent gene fragments and
full-length genes, the functions of which have not been characterized, as well
as fully characterized genes. There is substantial uncertainty regarding the
possible patent protection for gene fragments or genes without known function or
correlation with specific diseases. To the extent any patents issue to other
parties on such partial or full-length genes, the risk increases that the
potential products and processes of the Company or its strategic partners may
give rise to claims of patent infringement. The public availability of partial
or full sequence information or the existence of patent applications related
thereto, even if not accompanied by relevant function or disease association,
prior to the time the Company applies for patent protection on a corresponding
gene could adversely affect the Company's ability to obtain patent protection
with respect to such gene or to the related expression patterns. Furthermore,
others may have filed, and in the future are likely to file, patent applications
covering genes or gene products that are similar, or identical to, any for which
the Company may seek patent protection. No assurance can be given that any such
patent application will not have priority over patent applications filed by the
Company. Any legal action against the Company or its strategic partners claiming
damages and seeking to enjoin commercial activities relating to the affected
products and processes could, in addition to subjecting the Company to potential
liability for damages, require the Company or its strategic partners to obtain a
license in order to continue to manufacture or market the affected products and
processes. There can be no assurance that the Company or its strategic partners
would prevail in any such action or that any license required under any such
patent would be made available on commercially acceptable terms, if at all. The
Company believes that there is likely to be significant litigation in the
industry regarding patent and other intellectual property rights. If the Company
becomes involved in such litigation, it could consume a substantial portion of
the Company's managerial and financial resources and have a material adverse
effect on the Company's business, financial condition and results of operations.
Enactment of legislation implementing the General Agreement on Tariffs and
Trade has resulted in certain changes to United States patent laws that became
effective on June 8, 1995. Most notably, the term of patent protection for
patent applications filed on or after June 8, 1995 is no longer a period of 17
years from the date of grant. The new term of United States patents will
commence on the date of issuance and terminate 20 years from the earliest
effective filing date of the application. Because the time from filing to
issuance of biotechnology patent applications is often more than three years, a
20-year term from the effective date of filing may result in a substantially
shortened period of patent protection which may adversely affect the Company's
patent position. If this change results in a shorter period of patent coverage,
the Company's business could be adversely affected to the extent that the
duration and level of the royalties it is entitled to receive from its strategic
partners are based on the existence of a valid patent covering the product
subject to the royalty obligation.
With respect to proprietary know-how that is not patentable and for
processes for which patents are difficult to enforce, the Company has chosen to
rely on trade secret protection and confidentiality agreements to protect its
interests. The Company believes that several elements of its ACCELERATED DRUG
DISCOVERY system involve proprietary know-how, technology or data which are not
covered by patents or patent applications. In addition, the Company has
developed a proprietary index of gene and gene fragment sequences which it
updates on an ongoing basis. Some of these data will be the subject of patent
applications whereas other data will be maintained as proprietary trade secret
information. The Company
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has taken security measures to protect its proprietary know-how and technologies
and confidential data and continues to explore further methods of protection.
While Gene Logic requires all employees, consultants and collaborators to enter
into confidentiality agreements, there can be no assurance that proprietary
information will not be disclosed, that others will not independently develop
substantially equivalent proprietary information and techniques or otherwise
gain access to the Company's trade secrets, or that the Company can meaningfully
protect its trade secrets. In the case of a strategic partnership or other
collaborative arrangement which requires the sharing of data, the Company's
policy is to make available to its partner only such data as are relevant to the
partnership or arrangement, under controlled circumstances, and only during the
contractual term of the strategic partnership or collaborative arrangement, and
subject to a duty of confidentiality on the part of its partner or collaborator.
There can be no assurance, however, that such measures will adequately protect
the Company's data. Any material leak of confidential data into the public
domain or to third parties may have a material adverse effect on the Company's
business, financial condition and results of operations.
The Company is a party to various license agreements which give it rights to
use certain technologies and biological materials in its research and
development processes. There can be no assurance that the Company will be able
to maintain such rights on commercially reasonable terms, if at all. Failure by
the Company to maintain such rights could have a material adverse effect on the
Company's business, financial condition and results of operations.
COMPETITION
Competition among entities attempting to identify the genes associated with
specific diseases and to develop products based on such discoveries is intense.
Gene Logic faces, and will continue to face, competition from pharmaceutical,
biotechnology and diagnostic companies, academic and research institutions and
government agencies, both in the United States and abroad. Several entities are
attempting to identify and patent randomly sequenced genes and gene fragments,
while others are pursuing a gene identification, characterization and product
development strategy based on positional cloning. The Company is aware that
certain entities are utilizing a variety of different gene expression analysis
methodologies, including the use of chip-based systems, to attempt to identify
disease-related genes. In addition, numerous pharmaceutical companies are
developing genomic research programs, either alone or in partnership with the
Company's competitors. Competition among such entities is intense and is
expected to increase. In order to compete against existing and future
technologies, the Company will need to demonstrate to potential customers that
its technologies and capabilities are superior to competing technologies.
Many of the Company's competitors have substantially greater capital
resources, research and development staffs, facilities, manufacturing and
marketing experience, distribution channels and human resources than the
Company. These competitors may discover, characterize or develop important
genes, drug targets or drug leads, drug discovery technologies or drugs in
advance of Gene Logic or which are more effective than those developed by Gene
Logic or its strategic partners, or may obtain regulatory approvals of their
drugs more rapidly than the Company and its strategic partners, any of which
could have a material adverse affect on any similar Gene Logic program.
Moreover, there can be no assurance that the Company's competitors will not
obtain patent protection or other intellectual property rights that would limit
the Company's or its strategic partners' ability to use the Company's drug
discovery technologies or commercialize therapeutic or diagnostic products,
which could have a material adverse effect on the Company's business, financial
condition and results of operations. The Company also faces competition from
these and other entities in gaining access to cells, tissues and nucleic acid
samples used in its discovery programs.
The Company will rely on its strategic partners for support of certain of
its discovery programs and intends to rely on its strategic partners for
preclinical and clinical development of related potential products and the
manufacturing and marketing of such products. Each of the Company's strategic
partners
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is conducting multiple product development efforts within each disease area
which is the subject of its strategic alliance with Gene Logic. Generally, the
Company's strategic alliance agreements do not preclude the strategic partner
from pursuing development efforts utilizing approaches distinct from that which
is the subject of the alliance. Any product candidate of the Company, therefore,
may be subject to competition with a potential product under development by a
strategic partner.
Future competition will come from existing competitors as well as other
companies seeking to develop new technologies for drug discovery based on gene
sequencing, target gene identification, bioinformatics and related technologies.
In addition, certain pharmaceutical and biotechnology companies have significant
needs for genomic information and may choose to develop or acquire competing
technologies to meet such needs. Genomic technologies have undergone and are
expected to continue to undergo rapid and significant change. The Company's
future success will depend in large part on its maintaining a competitive
position in the genomics field. Rapid technological development by the Company
or others may result in products or technologies becoming obsolete before the
Company recovers the expenses it incurs in connection with their development.
Products offered by the Company could be made obsolete by less expensive or more
effective drug target and drug lead technologies, including technologies which
may be unrelated to genomics. There can be no assurance that the Company will be
able to make the enhancements to its technology necessary to compete
successfully with newly emerging technologies.
GOVERNMENT REGULATION
The Company does not plan to conduct clinical trials in humans or
commercialize therapeutic products discovered as a result of its genes, drug
target and drug lead discovery programs but intends to rely on its strategic
partners to conduct such activities. Prior to marketing, any new drug developed
by the Company's strategic partners must undergo an extensive regulatory
approval process in the United States and other countries. This regulatory
process, which includes preclinical studies and clinical trials, and may include
post-marketing surveillance of each compound to establish its safety and
efficacy, can take many years and require the expenditure of substantial
resources. Data obtained from preclinical studies and clinical trials are
subject to varying interpretations that could delay, limit or prevent regulatory
approval. Delays or rejections may also be encountered based upon changes in FDA
policies for drug approval during the period of product development and FDA
regulatory review of each submitted NDA in the case of new pharmaceutical
agents, or PLA or BLA in the case of biological therapeutics. Similar delays may
also be encountered in the regulatory approval of any diagnostic product, where
such approval is required, and in obtaining regulatory approval in foreign
countries. Delays in obtaining regulatory approvals could adversely affect the
marketing of any drugs developed by the Company or its strategic partners,
impose costly procedures upon the Company's and its partners' activities,
diminish any competitive advantages that the Company or its partners may attain
and adversely affect the Company's receipt of royalties. There can be no
assurance that regulatory approval will be obtained for any drugs or diagnostic
products developed by the Company or its strategic partners. Furthermore,
regulatory approval may entail limitations on the indicated uses of a drug.
Because certain of the products likely to result from the Company's disease
research programs involve the application of new technologies and may be based
upon a new therapeutic approach, such products may be subject to substantial
additional review by various government regulatory authorities and, as a result,
regulatory approvals may be obtained more slowly than for products based upon
more conventional technologies.
Even if regulatory approval is obtained, a marketed product and its
manufacturer are subject to continuing review. Discovery of previously unknown
problems with a product may result in withdrawal of the product from the market,
and could have adverse effects on the Company's business, financial conditions
and results of operations. Violations of regulatory requirements at any stage
during the regulatory process, including preclinical studies and clinical
trials, the approval process, post-approval or in good manufacturing practices
manufacturing requirements, may result in various adverse consequences to the
Company, including the FDA's delay in approval or refusal to approve a product,
withdrawal of an
45
<PAGE>
approved product from the market or the imposition of criminal penalties against
the manufacturer and NDA, PLA or BLA holder. No IND has been submitted for any
product candidate resulting from the Company's discovery programs, and no
product candidate has been approved for commercialization in the United States
or elsewhere. The Company intends to rely on its strategic partners to file INDs
and generally direct the regulatory approval process. There can be no assurance
that the Company's strategic partners will be able to conduct clinical testing
or obtain necessary approvals from the FDA or other regulatory authorities for
any products. Failure to obtain required governmental approvals will delay or
preclude the Company's strategic partners from marketing drugs or diagnostic
products developed through the Company's research or limit the commercial use of
such products and could have a material adverse effect on the Company's
business, financial condition and results of operations.
The Company's research and development activities involve the controlled use
of certain biological and other hazardous materials, chemicals and various
radioactive materials. The Company is subject to federal, state and local laws
and regulations governing the use, storage, handling and disposal of such
materials and certain waste products. Although the Company believes that its
safety procedures for handling and disposing of such materials comply with the
standards prescribed by federal, state and local laws and regulations, the risk
of accidental contamination or injury from these materials cannot be eliminated.
In the event of such an accident, the Company could be held liable for any
damages that result, and any liability could exceed the resources of the
Company. Other than such laws and regulations governing the generation, use and
disposal of hazardous materials and wastes, and limiting workplace exposures to
such materials, the Company does not believe its current and proposed activities
are subject to any specific government regulation other than regulations
affecting the operations of companies generally.
SCIENTIFIC ADVISERS
The Company has established a select group of scientists and physicians to
advise it on scientific and technical matters in areas of the Company's
business. The scientific advisers are compensated by retainer and on a time and
expenses basis, and certain of them have received shares of Common Stock of the
Company. The Company has entered into consulting agreements with a number of the
scientific advisers.
None of the scientific advisers is employed by the Company, and they may
have other commitments to or consulting or advisory contracts with their
employers or other entities that may conflict or compete with their obligations
to the Company. Accordingly, such persons are expected to devote only a limited
portion of their time to the Company. The Company's scientific advisers include:
KENNETH L. BEATTIE, PH.D., Senior Research Staff Member, Oak Ridge National
Laboratory. Dr. Beattie, the inventor of the Flow-thru Chip, is an exclusive
consultant to the Company in its program for the development of analytical
microsystems for gene expression profiling. He is an inventor of several key
patents in the area of DNA probe and sequencing technologies and genome mapping.
Dr. Beattie holds a Ph.D. from the University of Tennessee.
G. STEVEN BORA, M.D., Assistant Professor of Pathology, Urology and
Oncology, Johns Hopkins University School of Medicine. Dr. Bora consults with
the Company in the field of prostate cancer. Dr. Bora directs the PELICAN
(Project to Eliminate Lethal Prostate Cancer) laboratory in the Johns Hopkins
Department of Pathology. Dr. Bora holds a M.D. from Cornell University Medical
College.
RONALD FALK, M.D., Professor of Medicine and Chief, Division of Nephrology,
University of North Carolina. Dr. Falk consults with the Company in the field of
kidney disease. He is co-director of the Glomerular Disease Collaboration
Network. Dr. Falk holds a M.D. from the University of North Carolina.
J. CHARLES JENNETTE, M.D., Professor of Medicine, Pathology and Laboratory
Medicine, University of North Carolina. Dr. Jennette consults with the Company
in the field of kidney disease. He is Director of
46
<PAGE>
the Nephropathology Laboratory at the University of North Carolina, Jennette
holds a M.D. from the University of North Carolina.
AARON KLUG, PH.D., Director, MRC Laboratory of Molecular Biology, University
of Cambridge, England and Fellow of Peterhouse College. Professor Klug, a
scientific founder of the Company, has been widely recognized for his
contributions to modern molecular biology. He was elected a fellow of the Royal
Society in 1969, received the Nobel Prize for Chemistry in 1982 and the Copley
Medal of the Royal Society in 1985 and was knighted in 1988.
RONALD A. MORTON, JR., M.D., Assistant Professor in Urology, Baylor College
of Medicine. Dr. Morton is Director of Laboratories at the Baylor Prostate
Center, one of three National Cancer Institute prostate cancer SPORE
(Specialized Programs of Research Excellence) centers, and is responsible for
developing and expanding its extensive library of normal and malignant human
prostate tissues. He is an exclusive consultant to Gene Logic in the field of
gene discovery in prostate cancer. Dr. Morton holds a M.D. from Johns Hopkins
University School of Medicine. He is an American Foundation for Urologic Disease
Research Scholar.
JAY R. SHAPIRO, M.D., Professor, Division of Geriatric Medicine, Johns
Hopkins University School of Medicine. Dr. Shapiro is an expert in human bone
diseases and an exclusive consultant to the Company in the field of
osteoporosis. He holds a M.D. from Boston University School of Medicine.
SHERMAN M. WEISSMAN, M.D., Sterling Professor of Genetics and Medicine, Yale
University School of Medicine. Dr. Weissman, the inventor of the READS and MuST
technologies, is a scientific founder of and a key adviser to the Company. Dr.
Weissman graduated with advanced degrees in mathematics from the University of
Chicago and a M.D. from Harvard Medical School. He is a member of the National
Academy of Sciences, a fellow of the American Association for the Advancement of
Science and sits on the editorial board of the PROCEEDINGS OF THE NATIONAL
ACADEMY OF SCIENCES and other eminent journals.
ROBERT H. YOLKEN, M.D., Professor of Pediatrics and Director, The Stanley
Laboratory for the Study of Schizophrenia and Bipolar Disorder, Johns Hopkins
University School of Medicine. Dr. Yolken consults with the Company in the
fields of gene target discovery in schizophrenia and affective disorders. Dr.
Yolken holds a M.D. from Harvard University.
EMPLOYEES
As of September 30, 1997, the Company had a total of 57 employees, 18 of
whom hold M.D., Ph.D or D.Sc. degrees and ten of whom hold other advanced
degrees, and one part-time employee. Of these, 46 were engaged in research and
development and 11 were engaged in business development, finance and general
administration. The Company's future success depends in significant part upon
the continued service of its key scientific, technical and senior management
personnel and its continuing ability to attract and retain highly qualified
technical and managerial personnel. None of the Company's employees is
represented by a labor union or covered by a collective bargaining agreement.
The Company has not experienced any work stoppages and considers its relations
with its employees to be good.
FACILITIES
The Company's facilities are located in Columbia, Maryland. The Company
leases approximately 21,000 square feet of laboratory and office space. These
facilities are leased through February 28, 1998. The Company recently entered
into a ten-year lease for approximately 50,000 square feet of laboratory and
office space in Gaithersburg, Maryland and plans to relocate its operations to
such facility in January 1998. The Company believes that, upon such relocation,
the Company's facilities will be adequate for its current and projected needs
and that additional space will be available as needed. The Company has leased
approximately 5,000 square feet of office space in Berkeley, California.
LEGAL PROCEEDINGS
Gene Logic is not a party to any material legal proceedings.
47
<PAGE>
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The following table sets forth certain information regarding the Company's
directors, executive officers and key employees as of September 30, 1997:
<TABLE>
<CAPTION>
NAME AGE POSITION
- - - ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Alan G. Walton, Ph.D., D.Sc.(1)...................... 61 Chairman of the Board of Directors
Michael J. Brennan, M.D., Ph.D. ..................... 40 President, Chief Executive Officer and Director
Keith O. Elliston, Ph.D. ............................ 36 Senior Vice President and Chief Scientific Officer
Mark D. Gessler...................................... 36 Senior Vice President, Corporate Development and
Chief Financial Officer
Eric M. Eastman, Ph.D. .............................. 45 Vice President, Technology Management
Gregory G. Lennon, Ph.D. ............................ 40 Vice President, Genomics Research
Victor M. Markowitz, D.Sc. .......................... 44 Vice President, Bioinformatics Systems
Daniel R. Passeri, J.D. ............................. 36 Vice President, Business Development and Intellectual
Property
Jules Blake, Ph.D. (1)(2)............................ 73 Director
Charles L. Dimmler III (1)(2)........................ 55 Director
G. Anthony Gorry, Ph.D. ............................. 56 Director
Jeffrey D. Sollender................................. 37 Director
</TABLE>
- - - ------------------------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
ALAN G. WALTON, PH.D., D.SC. has served as Chairman of the Board of
Directors of the Company since its inception in September 1994. He has been a
General Partner of Oxford Bioscience Partners, a private equity investment firm,
since 1991 and a member of the Board of Directors of Collaborative Clinical
Research since 1994. In 1981, Dr. Walton co-founded University Genetics Co., a
public corporation specializing in technology transfer from academic
institutions to industry and in the seed financing of high-technology start-ups,
and served as President and Chief Executive Officer until 1987. He has lectured
extensively at various universities, including Harvard Medical School, Indiana
University and Case Western Reserve University where he was Professor of
Macromolecular Science and Director of the Laboratory for Biological
Macromolecules. Dr. Walton received a Ph.D. in chemistry and a D.Sc. in
biological chemistry from Nottingham University, England.
MICHAEL J. BRENNAN, M.D., PH.D. has served as President, Chief Executive
Officer and a director of the Company since December 1995. From October 1993 to
November 1995, he was Vice President, Business Development for Corange
International Limited's worldwide therapeutics business, Boehringer Mannheim
Therapeutics. From June 1990 to October 1993, Dr. Brennan was a director and the
general manager of Boehringer Mannheim South Africa. Dr. Brennan received a
Ph.D. in neurobiology and a M.D. from the University of the Witwatersrand,
Johannesburg, South Africa. In 1985, he completed his residency in neurology at
Boston City Hospital.
KEITH O. ELLISTON, PH.D. has served as Senior Vice President and Chief
Scientific Officer of the Company since February 1997. From July 1996 to
February 1997, Dr. Elliston was Head of Genome Sciences at Bayer Corporation, a
pharmaceutical company, and also responsible for establishing and directing its
bioinformatics effort worldwide. From 1986 to July 1996, Dr. Elliston was
involved in a wide range of genomics and drug discovery programs at Merck & Co.,
Inc. ("Merck"), a pharmaceutical
48
<PAGE>
company. In 1993, he founded the Department of Bioinformatics at Merck. He also
co-founded and was the scientific director of the Merck Gene Index project,
involving the coordinated efforts of Merck, Washington University, Lawrence
Livermore National Laboratory, the University of Pennsylvania and the National
Center for Biotechnology Information. Dr. Elliston received his M.S. degree in
genetics from the University of Minnesota and a Ph.D. in molecular genetics from
Rutgers University. He is an advisory board member of the National Center for
Biotechnology Information, National Institutes of Health, and the National
Center for Genome Resources, and an Adjunct Professor at Rutgers University.
MARK D. GESSLER has served as Senior Vice President, Corporate Development
and Chief Financial Officer of the Company since June 1996. From February 1993
to June 1996, Mr. Gessler was with GeneMedicine, Inc., a gene therapy company,
most recently as Vice President, Corporate Development. From 1988 until January
1993, he was Director of Business Development at BCM Technologies, Inc., the
venture and technology subsidiary of Baylor College of Medicine. While in that
position, Mr. Gessler co-founded three biotechnology companies and a software
company. Mr. Gessler holds a MBA from the University of Tennessee and has been
an Adjunct Professor of Business Administration at Rice University since 1991.
ERIC M. EASTMAN, PH.D. has served as Vice President, Technology Management
of the Company since August 1997. He served as Vice President, Scientific
Operations of the Company from September 1996 to August 1997. From June 1993 to
September 1996, Dr. Eastman was Director of Gene Expression and Process Research
& Development at GeneMedicine, Inc. He was a founder and served as Vice
President and Chief Scientific Officer of Lark Sequencing Technologies, Inc., a
molecular biology services company, from 1989 to June 1993. Dr. Eastman holds a
M.S. from the University of Connecticut and received a M.Phil. degree and a
Ph.D. in human genetics and development from Columbia University College of
Physicians and Surgeons.
GREGORY G. LENNON, PH.D. has served as Vice President, Genomics Research
since September 1997. Prior to joining Gene Logic, Dr. Lennon was a senior
scientist of the Human Genome Center at Lawrence Livermore National Laboratory
and manager of the functional genomics research portfolio for the Department of
Energy's Joint Genome Institute from October 1991 to August 1997. Dr. Lennon is
a founder and the director of the I.M.A.G.E. (Integrated Molecular Analysis of
Gene Expression) Consortium funded by the Department of Energy. He was a
participant in both the Merck Gene Index project and the National Cancer
Institute's Cancer Genome Anatomy Project. Dr. Lennon holds a Ph.D. in genetics
from the University of Pennsylvania. He is an adviser to the National Cancer
Institute of the National Institutes of Health.
VICTOR M. MARKOWITZ, D.SC. has served as Vice President, Bioinformatics
Systems since September 1997. Prior to joining Gene Logic, Dr. Markowitz was a
staff scientist at Lawrence Berkeley National Laboratory from 1987 to August
1997, serving most recently as project leader of the Data Management Research
and Development Group. He is the principal architect of the Object Protocol
Model (OPM) software. Dr. Markowitz received his M.Sc. and D.Sc. in computer
science from the Israel Institute of Technology.
DANIEL R. PASSERI, J.D. has served as Vice President, Business Development
and Intellectual Property of the Company since March 1997. From March 1995 to
March 1997, he was Director of Technology Management for the Boehringer Mannheim
Group, responsible for the assessment and acquisition or licensing of new
biomedical technologies. From January 1992 to February 1995 he was Acting Chief,
Cellular Growth and Regulation Branch of the Office of Technology Transfer of
the National Institutes of Health and its Senior Licensing Specialist. He served
as a Patent Examiner in the biotechnology section of the USPTO. Mr. Passeri
holds a M.Sc. in biotechnology from the Imperial College of Science, Technology
and Medicine, University of London. He holds a J.D. from George Washington
University. He is registered to practice before the USPTO and in the State of
Maryland and has been an adjunct professor at George Washington University since
1995.
49
<PAGE>
JULES BLAKE, PH.D. has served as a director of the Company since its
inception. From 1973 until his retirement in 1989, Dr. Blake served as Vice
President of Research and Development and Vice President, Corporate Scientific
Affairs, for Colgate-Palmolive, Inc., a consumer products company. Dr. Blake was
appointed as an Industrial Research Institute Fellow at the United States Office
of Science and Technology Policy, Executive Office of the President, where he
served until 1991. Dr. Blake serves on the boards of directors of the public
companies Martek Biosciences Corporation and ProCyte Corporation. Dr. Blake
holds a Ph.D in organic chemistry from the University of Pennsylvania.
CHARLES L. DIMMLER III has served as a director of the Company since May
1996. Since 1988, Mr. Dimmler has been a General Partner of Hambro International
Equity Partners, an equity investment firm, and is currently also the principal
investment officer of Cross Atlantic Partners Funds, an equity investment firm,
and an operating officer of Hambro Health International, Inc., an affiliate of
Hambros Bank Limited, a global merchant bank based in London. Mr. Dimmler serves
as a director of SunPharm, Inc., a public company, and various private
companies. He holds an honors degree from the University of California at Davis.
G. ANTHONY GORRY, PH.D. has served as a director of the Company since
January 1997. Since April 1992, Dr. Gorry has been Vice President for
Information Technology and Professor of Computer Science at Rice University. He
is the Chairman and a founder of The Forefront Group, Inc., a public information
technology company. From 1975 to April 1992, he served as Vice President for
Information Technology and Professor of Medical Informatics and Neuroscience at
Baylor College of Medicine, as well as Director of the W. M. Keck Center for
Computational Biology and Adjunct Professor of Computer Science at Rice
University. Dr. Gorry holds a M.S. in chemical engineering from the University
of California at Berkeley and a Ph.D. in computer science from Massachusetts
Institute of Technology. He is a fellow of the American College of Medical
Informatics and a member of the Institute of Medicine and of the National
Academy of Sciences.
JEFFREY D. SOLLENDER has served as a director of the Company since July
1997. Mr. Sollender is a founder of and adviser to Biotechvest L.P., a venture
capital investment firm formed in 1993. From 1994 through December 1995, Mr.
Sollender served as an adviser to Forward Ventures, a venture capital investment
firm. Mr. Sollender became a venture partner of Forward Ventures in 1996 and a
general partner in September 1997. Mr. Sollender co-founded Triangle
Pharmaceuticals, Inc., a biopharmaceutical company, in 1994, CombiChem Inc., a
combinatorial chemistry company, in 1994 and GenQuest, Inc., a functional
genomics company, in 1996. He served as Vice President of Operations and
Business Development for CombiChem Inc. and GenQuest, Inc. until January 1996
and June 1996, respectively. Mr. Sollender co-founded AriZeke Pharmaceuticals,
an oral drug delivery company, in 1997 and continues to serve as Chairman and
Chief Executive Officer of the company. Mr. Sollender received his MBA from the
University of Chicago Graduate School of Business.
COMMITTEES OF THE BOARD OF DIRECTORS
The Compensation Committee consists of Dr. Walton, Dr. Blake and Mr.
Dimmler. The Compensation Committee makes recommendations regarding the
Company's 1997 Equity Incentive Plan, Non-Employee Directors' Stock Option Plan
and Employee Stock Purchase Plan and determines salaries for the executive
officers and incentive compensation for employees and consultants of the
Company.
The Audit Committee consists of Dr. Blake and Mr. Dimmler. The Audit
Committee makes recommendations to the Board of Directors regarding the
selection of independent auditors, reviews the results and scope of the audit
and other services provided by the Company's independent auditors and reviews
and evaluates the Company's audit and control functions.
DIRECTOR COMPENSATION
The Company's non-employee directors who are not affiliated with
stockholders of the Company currently receive $6,000 per year for their
attendance at Board meetings and all directors are reimbursed
50
<PAGE>
for certain expenses in connection with attendance at Board and committee
meetings. Non-employee directors receive automatic grants of options under the
Company's Non-employee Directors' Stock Option Plan as described below. See
"--Equity Incentive Plans."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No executive officer of the Company serves as a member of the board of
directors or compensation committee of any entity that has one or more executive
officers serving as a member of the Company's Board of Directors or Compensation
Committee. See "Certain Transactions" for a description of transactions between
the Company and entities affiliated with members of the Compensation Committee.
EXECUTIVE COMPENSATION
The following table sets forth summary information concerning compensation
paid by, or accrued for services rendered to, the Company during the fiscal year
ended December 31, 1996 to the Company's Chief Executive Officer and the two
other most highly compensated executive officers who earned in excess of
$100,000 in salary and bonus during the fiscal year ended December 31, 1996 (the
"Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION -------------
------------------------------------ SECURITIES ALL OTHER
SALARY UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($)(1) BONUS ($) OPTIONS(#) ($)
- - - -------------------------------------------------- --------- ------------ ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Michael J. Brennan, M.D. Ph.D. ................... 1996 $ 200,000 $ 30,000(2) 245,000 --
President, Chief Executive Officer and
Director
Mark D. Gessler................................... 1996 95,363 40,000 25,000 --
Senior Vice President, Corporate
Development and Chief Financial
Officer
Richard E. Kouri, Ph.D. (3)....................... 1996 106,875 30,000 -- 90,000(4)
Senior Vice President and Chief
Technical Officer
</TABLE>
- - - ------------------------
(1) In accordance with the rules of the Securities and Exchange Commission (the
"Commission"), the compensation described in this table does not include
medical, group life insurance or other benefits received by the Named
Executive Officers which are available generally to all salaried employees
of the Company, and certain perquisites and other personal benefits received
by the Named Executive Officers which do not exceed the lesser of $50,000 or
10% of any such officer's salary and bonus disclosed in this table.
(2) Includes an amount that was assigned to a corporation of which Dr. Brennan
is the sole stockholder.
(3) Dr. Kouri resigned from the Company effective on October 15, 1996.
(4) Represents a $90,000 severance payment to Dr. Kouri in connection with his
resignation from the Company.
51
<PAGE>
STOCK OPTION GRANTS
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth, for the fiscal year ended December 31, 1996,
certain information regarding options granted to each of the Named Executive
Officers:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------------- POTENTIAL REALIZABLE
PERCENTAGE VALUE AT ASSUMED
NUMBER OF OF TOTAL ANNUAL RATES
SECURITIES OPTIONS OF STOCK PRICE
UNDERLYING GRANTED TO APPRECIATION
OPTIONS EMPLOYEES IN EXERCISE PRICE FOR OPTION TERM (3)($)
GRANTED FISCAL PER SHARE EXPIRATION ----------------------
NAME (#) YEAR (1) ($)(2) DATE 5% 10%
- - - ------------------------------------- ----------- --------------- --------------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Michael J. Brennan, M.D., Ph.D....... 100,000 20.5% $ 0.01 2/28/06 1,790,784 2,852,117
145,000 29.8% 0.15 12/19/06 2,576,337 4,115,269
Mark D. Gessler...................... 25,000 5.1% 0.15 12/19/06 444,196 709,529
Richard E. Kouri, Ph.D............... -- -- -- -- -- --
</TABLE>
- - - ------------------------
(1) Based on options to purchase 487,000 shares granted to employees in fiscal
1996, including the Named Executive Officers. The options were granted under
the Company's 1997 Equity Incentive Plan. Options granted under such plan
generally vest monthly over four years. The foregoing options accelerate
upon achievement of certain performance-based goals, including vesting of
80% of such options upon completion of this offering and the remaining 20%
180 days thereafter.
(2) Represents the fair market value of the underlying Common Stock as
determined by the Board of Directors on the date of grant.
(3) The potential realizable value is calculated based on the term of the option
at its time of grant (10 years) and the assumed initial public offering
price of $11.00. It is calculated assuming that the stock price on the date
of grant appreciates at the indicated annual rate, compounded annually for
the entire term of the option and that the option is exercised and sold on
the last day of its term for the appreciated stock price. These amounts
represent certain assumed rates of appreciation only, in accordance with the
rules of the Commission, and do not reflect the Company's estimate or
projection of future stock price performance. Actual gains, if any, are
dependent on the actual future performance of the Company's Common Stock.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END VALUES
The following table sets forth, with respect to each of the Named Executive
Officers, information regarding the number and value of securities underlying
unexercised options held by the Named Executive Officers as of December 31,
1996.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
OPTIONS AT THE MONEY OPTIONS AT
FISCAL YEAR-END (#) FISCAL YEAR-END ($)(1)
SHARES ACQUIRED VALUE ---------------------------- --------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - - ------------------------------------- --------------- ----------- ------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael J. Brennan, M.D., Ph.D....... 100,000 14,000 3,021 141,979 32,778 1,540,472
Mark D. Gessler...................... -- -- 521 24,479 5,653 265,597
Richard E. Kouri, Ph.D............... -- -- -- -- -- --
</TABLE>
- - - ------------------------
(1) Based on the assumed initial public offering price of $11.00 per share, less
the exercise price.
EMPLOYMENT AGREEMENTS
On December 1, 1995, Michael J. Brennan, the President, Chief Executive
Officer and a director and stockholder of the Company, entered into an
employment agreement with the Company. Dr. Brennan will be paid $200,000 in
salary for 1997 under such agreement. The employment agreement has a five-year
term and provides, among other things, for the payment to Dr. Brennan of annual
bonuses and the acceleration of certain unvested options upon achievement of
certain performance-based goals, including vesting of 80% of such options upon
completion of this offering and the remaining 20% 180 days thereafter. Of Dr.
Brennan's total outstanding options to purchase 538,962 shares, options to
purchase
52
<PAGE>
131,000 shares will be exercisable upon completion of this offering. The
employment agreement also provides that Dr. Brennan will be offered the
opportunity to participate in any future equity financings on a pro rata basis,
provided that such right terminates upon the closing of this offering. Dr.
Brennan and the Company have also entered into an Equity Adjustment Agreement
whereby the Company agreed to pay Dr. Brennan a cash bonus upon the occurrence
of a change in control of the Company. The Equity Adjustment Agreement
terminates upon the closing of this offering.
On May 16, 1996, Mark D. Gessler, the Senior Vice President, Corporate
Development and Chief Financial Officer of the Company and a stockholder of the
Company, entered into an employment agreement with the Company. The employment
agreement has a four-year term and provides, among other things, for the payment
to Mr. Gessler of annual bonuses and the acceleration of certain unvested
options upon achievement of certain performance-based goals, including vesting
of 80% of such options upon completion of this offering and the remaining 20%
180 days thereafter. Of Mr. Gessler's total outstanding options to purchase
346,981 shares, options to purchase 140,000 shares will be exercisable upon
completion of this offering. Mr. Gessler will be paid $185,000 in salary for
1997 under such agreement.
EQUITY INCENTIVE PLANS
1997 EQUITY INCENTIVE PLAN
The Company adopted its 1996 Stock Plan in January 1996 and amended and
restated the 1996 Stock Plan in September 1997 as the 1997 Equity Incentive Plan
(the "Stock Plan"). An aggregate of 6,100,000 shares of the Company's Common
Stock have been reserved for issuance pursuant to the exercise of stock awards
granted to employees, directors and consultants under the Stock Plan. The Stock
Plan will terminate in September 2007, unless sooner terminated by the Board.
The Stock Plan permits the granting of options intended to qualify as
incentive stock options ("Incentive Stock Options") within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), to
employees (including officers and employee directors), and options that do not
so qualify ("Nonstatutory Stock Options," and, together with Incentive Stock
Options, the "Options") to employees (including officers and employee directors)
and consultants (including non- employee directors). In addition, the Stock Plan
permits the granting of stock appreciation rights (SARs) appurtenant to or
independently of Options, as well as stock bonuses and rights to purchase
restricted stock (Options, SARs, stock bonuses and rights to purchase restricted
stock are hereinafter referred to as "Stock Awards"). No person is eligible to
be granted Options and SARs covering more than 700,000 shares of the Company's
Common Stock in any 12-month period.
The Stock Plan is administered by the Board or a committee appointed by the
Board. Subject to the limitations set forth in the Stock Plan, the Board has the
authority to select the persons to whom grants are to be made, to designate the
number of shares to be covered by each Stock Award, to determine whether an
Option is to be an Incentive Stock Option or a Nonstatutory Stock Option, to
establish vesting schedules, to specify the Option exercise price and the type
of consideration to be paid to the Company upon exercise and, subject to certain
restrictions, to specify other terms of Stock Awards.
The maximum term of Options granted under the Stock Plan is ten years. The
aggregate fair market value, determined at the time of grant, of the shares of
Common Stock with respect to which Incentive Stock Options are exercisable for
the first time by an optionee during any calendar year (under all such plans of
the Company and its affiliates) may not exceed $100,000. Options granted under
the Stock Plan generally are non-transferable and expire three months after the
termination of an optionee's service to the Company. In general, if an optionee
is permanently disabled or dies during his or her service to the Company, such
person's Option may be exercised up to 12 months following such disability and
up to 18 months following such death.
The exercise price of Options granted under the Stock Plan is determined by
the Board of Directors in accordance with the guidelines set forth in the Stock
Plan. The exercise price of an Incentive Stock Option cannot be less than 100%
of the fair market value of the Common Stock on the date of the grant. The
exercise price of a Nonstatutory Stock Option cannot be less than 85% of the
fair market value of the Common Stock on the date of grant. Options granted
under the Stock Plan vest at the rate specified in the option agreement. The
exercise price of Incentive Stock Options granted to any person who at the time
of grant owns stock representing more than 10% of the total combined voting
power of all classes of the
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<PAGE>
Company's capital stock must be at least 110% of the fair market value of such
stock on the date of grant and the term of such Incentive Stock Options cannot
exceed five years.
Any stock bonuses or restricted stock purchase awards granted under the
Stock Plan will be in such form and will contain terms and conditions as the
Board deems appropriate. The purchase price under any restricted stock purchase
agreement will not be less than 85% of the fair market value of the Company's
Common Stock on the date of grant. Stock bonuses and restricted stock purchase
agreements awarded under the Stock Plan are generally non-transferable.
Pursuant to the Stock Plan, shares subject to Stock Awards that have expired
or otherwise terminated without having been exercised in full again become
available for the grant, but shares subject to exercised stock appreciation
rights will not again become available for the grant. The Board of Directors has
the authority to reprice outstanding Options and SARs and to offer optionees and
holders of SARs the opportunity to replace outstanding options and SARs with new
options or SARs for the same or a different number of shares.
Upon certain changes in control of the Company, all outstanding Stock Awards
under the Stock Plan must either be assumed or substituted by the surviving
entity. In the event the surviving entity determines not to assume or substitute
such Stock Awards, with respect to persons then performing services as
employees, directors or consultants, the time during which such Stock Awards may
be exercised will be accelerated and such Stock Awards terminated if not
exercised prior to such change in control. In the event that any person who was
providing services as an employee, director or consultant immediately prior to
the consummation of a change of control is terminated other than for cause
within 12 months following such change of control, any stock awards held by such
persons shall immediately become vested and exercisable or free from repurchase
rights.
As of September 30, 1997, the Company had issued 100,000 shares of Common
Stock pursuant to the exercise of purchase rights granted under the Stock Plan,
and had granted Incentive and Nonstatutory Stock Options to purchase an
aggregate of 2,716,881 shares of Common Stock. As of September 30, 1997,
3,334,887 shares of Common Stock remained available for future grants under the
Stock Plan.
NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
In September 1997, the Company adopted a Non-employee Directors' Stock
Option Plan (the "Directors' Plan") to provide for the automatic grant of
options to purchase shares of Common Stock to non-employee directors of the
Company. The Directors' Plan is administered by the Board, unless the Board
delegates administration to a committee of disinterested directors.
The maximum number of shares of Common Stock that may be issued pursuant to
options granted under the Directors' Plan is 125,000. Pursuant to the terms of
the Directors' Plan: (i) each person who after the effective date of this
offering for the first time becomes a Non-employee Director automatically will
be granted, upon the date of his or her initial appointment or election to be a
Non-employee Director, a one-time option to purchase 30,000 shares of Common
Stock (the "Initial Options"); and (ii) on the date of each annual meeting of
the stockholders of the Company after the effective date of this offering (other
than any such annual meeting held in 1997), each person who is a Non-employee
Director following such annual meeting (other than a person who receives a grant
in accordance with (i) above on or during the three-month period preceding such
date) automatically will be granted an option to purchase 7,500 shares of Common
Stock (the "Annual Options").
No options granted under the Directors' Plan may be exercised after the
expiration of ten years from the date it was granted. The Initial Options
granted under the Directors' Plan vest on an annual basis over four years. The
Annual Options vest on the anniversary of the date of grant. The exercise price
of options under the Directors' Plan will equal 100% of the fair market value of
the Common Stock on the date of grant. Options granted under the Directors' Plan
are generally non-transferable. Unless otherwise terminated by the Board of
Directors, the Directors' Plan automatically terminates in September 2007. As of
September 30, 1997, no options to purchase shares of Common Stock had been
granted under the Directors' Plan.
EMPLOYEE STOCK PURCHASE PLAN
In September 1997, the Company adopted an Employee Stock Purchase Plan (the
"Purchase Plan") covering an aggregate of 250,000 shares of Common Stock. The
Purchase Plan is intended to qualify as an
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<PAGE>
employee stock purchase plan within the meaning of Section 423 of the Code.
Under the Purchase Plan, the Board may authorize participation by eligible
employees, including officers, in periodic offerings following the commencement
of the Purchase Plan. The initial offering under the Purchase Plan will commence
on the date of this Prospectus and terminate on January 31, 2000.
Unless otherwise determined by the Board, employees are eligible to
participate in the Purchase Plan only if they are employed by the Company or a
subsidiary of the Company designated by the Board for at least 20 hours per week
and are customarily employed by the Company or a subsidiary of the Company
designated by the Board for at least five months per calendar year. Employees
who participate in an offering may have up to 15% of their earnings withheld
pursuant to the Purchase Plan. The amount withheld is then used to purchase
shares of the Common Stock on specified dates determined by the Board. The price
of Common Stock purchased under the Purchase Plan will be equal to 85% of the
lower of the fair market value of the Common Stock at the commencement date of
each offering period or the relevant purchase date. Employees may end their
participation in this offering at any time during this offering period, and
participation ends automatically on termination of employment with the Company.
In the event of a merger, reorganization, consolidation or liquidation
involving the Company, the Board has discretion to provide that each right to
purchase Common Stock will be assumed or an equivalent right substituted by the
successor corporation, or the Board may shorten this offering period and provide
for all sums collected by payroll deductions to be applied to purchase stock
immediately prior to such merger or other transaction. The Board has the
authority to amend or terminate the Purchase Plan, provided, however, that no
such action may adversely affect any outstanding rights to purchase Common
Stock.
401(K) PLAN
The Company has established a tax-qualified employee savings and retirement
plan (the "401(k) Plan"). The 401(k) Plan provides that each participant may
contribute between 2% and 15% of his or her pre-tax gross compensation (up to a
statutorily prescribed annual limit of $9,500 in 1997). Employees must be
twenty-one years old to participate and are eligible on the first day of the
quarter following six months as an employee of the Company. All amounts
contributed by employee participants and earnings on these contributions are
fully vested at all times. Employee participants may elect to invest their
contributions in various established funds.
LIMITATIONS OF DIRECTORS' AND EXECUTIVE OFFICERS' LIABILITY AND INDEMNIFICATION
The Company's Restated Certificate of Incorporation provides that directors
of the Company will not be personally liable to the Company or its stockholders
for monetary damages for any breach of fiduciary duty as a director, except to
the extent that such exemption from liability or limitation thereof is not
permitted by the Delaware General Corporation Law as currently in effect or as
the same is subsequently amended. Such limitation of liability does not apply to
liabilities arising under the federal securities laws and does not affect the
availability of equitable remedies such as injunctive relief or rescission.
The Company's Amended and Restated By-laws provide that the Company will
indemnify its directors and executive officers and may indemnify its other
officers, employees and agents to the fullest extent permitted by Delaware law.
The Company is also empowered under its Amended and Restated By-laws to enter
into indemnification contracts with its directors and officers and to purchase
insurance on behalf of any person it is required or permitted to indemnify.
Pursuant to this provision, the Company has entered into indemnification
agreements with each of its directors and executive officers.
55
<PAGE>
CERTAIN TRANSACTIONS
Between November 1994 and July 1997, the Company completed several equity
financings. The purchasers of the Company's stock included, among others, the
following affiliates of the Company's Directors.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
PURCHASER COMMON STOCK
- - - ------------------------------------------------------------------------- -------------------
<S> <C>
Biotechvest L.P. (1)..................................................... 333,334
Fruit of the Loom Senior Executive Officer Deferred
Compensation Trust (1)................................................. 333,333
Cross Atlantic Partners K/S (2).......................................... 880,233
Cross Atlantic Partners II K/S (2)....................................... 498,832
Cross Atlantic Partners III K/S (2)...................................... 173,334
Oxford Bioscience Partners (Adjunct) L.P. (3)............................ 138,952
Oxford Bioscience Partners (Bermuda) Limited Partnership (3)............. 276,119
Oxford Bioscience Partners L.P. (3)...................................... 995,282
Oxford Bioscience Management Partners (3)................................ 100,000
</TABLE>
- - - ------------------------
(1) Affiliated with Jeffrey D. Sollender, a Director.
(2) Affiliated with Charles L. Dimmler III, a Director.
(3) Affiliated with Alan G. Walton, a Director.
In February 1996, Dr. Kouri, formerly the Senior Vice President and Chief
Technical Officer of the Company, received 55,000 shares of Common Stock (the
"Shares") pursuant to his Employment Agreement. Pursuant to the terms of a Stock
Pledge Agreement, Dr. Kouri pledged the Shares as security for the Promissory
Note. Following Dr. Kouri's resignation from the Company on October 15, 1996,
the Promissory Note was canceled and the Company canceled the Shares effective
January 1, 1997.
To assist Mr. Gessler, the Company's Senior Vice President, Corporate
Development and Chief Financial Officer, with his relocation, the Company loaned
Mr. Gessler $50,000 in July 1996 pursuant to a Promissory Note. Pursuant to the
terms of a Stock Pledge Agreement, the Promissory Note is secured by certain
shares of Common Stock of the Company owned by Mr. Gessler. The Promissory Note
provides that the loan balance will be forgiven upon the completion of this
offering.
In March 1997, the Company loaned Dr. Eastman, the Company's Vice President,
Technology Management, $20,000, of which $11,000 remains outstanding. Such loan
is non-interest bearing and becomes due at the end of 1997.
The Company has entered employment agreements with each of its executive
officers. See "Management--Employment Agreements" for a description of the
employment agreements with Dr. Brennan and Mr. Gessler. The agreements with Dr.
Brennan, Mr. Gessler, Dr. Elliston, Dr. Eastman and Mr. Passeri provide, among
other things, for the acceleration of certain unvested options upon achievement
of certain performance-based goals (including 80% vesting upon completion of
this offering and the remaining 20% 180 days thereafter).
The Company has granted options to certain of its directors and executive
officers. The Company has also entered into an Indemnification Agreement with
each of its directors and executive officers.
The Company believes that all of the transactions set forth above were made
on terms no less favorable to the Company than could have been obtained from
unaffiliated third parties. All future transactions between the Company and its
officers, directors, principal stockholders and their affiliates will be
approved by a majority of the Board of Directors, including a majority of the
disinterested directors, and will continue to be on terms no less favorable to
the Company than could be obtained from unaffiliated third parties.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of September 30, 1997, and
as adjusted to reflect the sale of the shares of Common Stock offered hereby and
the sale of 272,727 shares of Common Stock to Japan Tobacco, by (i) each of the
Company's Named Executive Officers, (ii) each of the Company's directors, (iii)
each holder of more than 5% of the Company's Common Stock and (iv) all current
directors and executive officers as a group.
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
BENEFICIALLY OWNED (1)
SHARES ----------------------------
5% STOCKHOLDERS, DIRECTORS BENEFICIALLY BEFORE AFTER
AND NAMED EXECUTIVE OFFICERS OWNED (1) OFFERING OFFERING
- - - ----------------------------------------------------------------------------- ----------- ------------- -------------
<S> <C> <C> <C>
Alan G. Walton, Ph.D., D.Sc. (2)............................................. 1,565,353 15.4% 11.6%
Oxford Bioscience Partners
315 Post Road West
Westport, CT 06880
Oxford Bioscience Partners (3)............................................... 1,560,353 15.4 11.6
c/o Alan G. Walton, Ph.D., D.Sc.
315 Post Road West
Westport, CT 06880
Charles L. Dimmler III (4)................................................... 1,557,399 15.4 11.6
Hambro Health International, Inc.
650 Madison Avenue, 21st Floor
New York, NY 10022
Cross Atlantic Partners K/S (5).............................................. 1,552,399 15.4 11.6
c/o Charles L. Dimmler III
Hambro Health International, Inc.
650 Madison Avenue, 21st Floor
New York, NY 10022
New York Life Insurance Company.............................................. 676,767 6.7 5.1
c/o Mr. Dominique O. Semon
51 Madison Avenue
New York, NY 10010
Altamira Management Ltd. (6)................................................. 652,020 6.4 4.9
c/o Mr. Ian Ainsworth
250 Bloor Street West
Suite 300
Toronto M4W1E6
Canada
GIMV Investment Corporation.................................................. 526,465 5.2 3.9
Karel Oomsstraat 37, 2018
Antwerpen
Belgium
Michael J. Brennan, M.D., Ph.D. (7).......................................... 486,000 4.7 3.6
Gene Logic Inc.
10150 Columbia Road
Columbia, MD 21046
Mark D. Gessler (8).......................................................... 240,000 2.3 1.8
Jules Blake, Ph.D. (9)....................................................... 14,500 * *
G. Anthony Gorry, Ph.D. (10)................................................. 5,000 * *
</TABLE>
57
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
BENEFICIALLY OWNED (1)
SHARES ----------------------------
5% STOCKHOLDERS, DIRECTORS BENEFICIALLY BEFORE AFTER
AND NAMED EXECUTIVE OFFICERS OWNED (1) OFFERING OFFERING
- - - ----------------------------------------------------------------------------- ----------- ------------- -------------
<S> <C> <C> <C>
Jeffrey D. Sollender (11).................................................... 2,500 * *
All directors and executive officers as a group (12 persons) (12)............ 4,979,221 46.0 35.3
</TABLE>
- - - ------------------------
* Represents beneficial ownership of less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Commission and generally includes voting or investment power with respect to
securities. Except as indicated by footnote, and subject to community
property laws where applicable, the persons named in the table above have
sole voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by them. Percentage of beneficial ownership is
based on 10,109,650 shares of Common Stock outstanding as of September 30,
1997 and 13,382,377 shares of Common Stock outstanding after completion of
this offering.
(2) Includes an aggregate of 1,510,353 shares and warrants to purchase up to
50,000 shares held of record by Oxford Bioscience Partners, of which Dr.
Walton is a general partner, and by entities related thereto. Also includes
5,000 shares subject to options held by Dr. Walton exercisable within 60
days of September 30, 1997.
(3) Includes 100,000 shares held of record by Oxford Bioscience Management
Partners, 276,119 shares and warrants to purchase 10,859 shares held of
record by Oxford Bioscience Partners (Bermuda) Limited Partnership, 138,952
shares held of record by Oxford Bioscience Partners (Adjunct) L.P. and
warrants to purchase 39,141 shares held of record by Oxford Bioscience
Partners, L.P..
(4) Includes 880,233 shares held of record by Cross Atlantic Partners K/S,
498,832 shares held of record by Cross Atlantic Partners II K/S and 173,334
shares held of record by Cross Atlantic Partners III K/S. Also includes
5,000 shares subject to options held by Mr. Dimmler exercisable within 60
days of September 30, 1997. Mr. Dimmler is the Chief Investment Officer of
Cross Atlantic Partners.
(5) Includes 498,832 shares held of record by Cross Atlantic Partners II K/S and
173,334 shares held of record by Cross Atlantic Partners III K/S.
(6) Includes 90,909 shares held of record by Altamira Science & Technology Fund,
136,364 shares held of record by Altamira Pooled U.S. Equity Fund and
113,636 shares held of record by Altamira Special Growth Fund.
(7) Includes 100,000 shares held of record by the Brennan Family Limited
Partnership and 131,000 shares subject to options exercisable upon
completion of this offering.
(8) Includes 30,000 shares held of record by the Gessler Family Limited
Partnership and 140,000 shares subject to options exercisable upon
completion of this offering.
(9) Includes 14,500 shares subject to options exercisable within 60 days of
September 30, 1997.
(10) Includes 5,000 shares subject to options exercisable within 60 days of
September 30, 1997.
(11) Includes 2,500 shares subject to options held by Mr. Sollender exercisable
within 60 days of September 30, 1997.
(12) See footnotes (2), (4) and (7) through (11) above.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 60,000,000 shares of
Common Stock, $.01 par value, and 10,000,000 shares of Preferred Stock, $.01 par
value.
COMMON STOCK
As of September 30, 1997, there were 10,109,650 shares of Common Stock
outstanding, after giving effect to the conversion of all outstanding shares of
Preferred Stock into 9,281,185 shares of Common Stock.
The holders of Common Stock are entitled to one vote per share on all
matters to be voted on by the stockholders. Subject to preferences that may be
applicable to any outstanding shares of Preferred Stock, holders of Common Stock
are entitled to receive ratably such dividends as may be declared by the Board
of Directors out of funds legally available therefor. In the event of a
liquidation, dissolution or winding up of the Company, holders of Common Stock
are entitled to share ratably in all assets remaining after payment of
liabilities and the liquidation preferences of any outstanding shares of
Preferred Stock. Holders of Common Stock have no preemptive, conversion,
subscription or other rights. There are no redemption or sinking fund provisions
applicable to the Common Stock. All outstanding shares of Common Stock are, and
all shares of Common Stock to be outstanding upon completion of 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 9,281,185 shares of Common Stock. See Note 9 of Notes to
Financial Statements for a description of the currently outstanding Preferred
Stock. Following the conversion, the Company's Restated Certificate of
Incorporation will be amended and restated to delete all references to such
shares of Preferred Stock. Under the Certificate of Incorporation, as amended
and restated upon the closing of this offering (the "Restated Certificate"), the
Board has the authority, without further action by stockholders, to issue up to
10,000,000 shares of Preferred Stock in one or more series and to fix the
rights, preferences, privileges, qualifications and restrictions granted to or
imposed upon such Preferred Stock, including dividend rights, conversion rights,
voting rights, rights and terms of redemption, liquidation preference and
sinking fund terms, any or all of which may be greater than the rights of the
Common Stock. The issuance of Preferred Stock could adversely affect the voting
power of holders of Common Stock and reduce the likelihood that such holders
will receive dividend payments and payments upon liquidation. Such issuance
could have the effect of decreasing the market price of the Common Stock. The
issuance of Preferred Stock could have the effect of delaying, deterring or
preventing a change in control of the Company. The Company has no present plans
to issue any additional shares of Preferred Stock.
WARRANTS
As of September 30, 1997, there were warrants outstanding to purchase an
aggregate of 162,576 shares of the Company's Common Stock at a weighted average
exercise price of $3.10 per share. In August 1995, the Company issued warrants
to purchase an aggregate of 50,000 shares of Common Stock in connection with an
equity financing. Such warrants are exercisable for $1.60 per share and expire
August 31, 2005. In March 1997, the Company issued a warrant to purchase 25,758
shares of Common Stock at an exercise price of $2.20 per share with an
expiration date of December 31, 2002 in connection with an equipment loan
agreement. Such loan agreement provides for the grant of additional warrants in
the event the Company draws down on the loan. Pursuant to such provision, in
September 1997 the Company issued an additional warrant to purchase 4,293 shares
of Common Stock at an exercise price of $2.20 per share with an expiration date
of December 31, 2002. In April 1997, in connection with the establishment of
capital lease facilities, the Company issued a warrant to purchase 13,636 shares
of Common Stock at an
59
<PAGE>
exercise price of $2.20 per share. Such warrant expires November 2002. In August
1997, in connection with Company's facilities lease, the Company issued a
warrant to purchase 20,000 shares of Common Stock at an exercise price of $5.40.
Such warrant will expire upon the completion of this offering. The Company
issued a warrant to purchase 48,889 shares of its Common Stock at an exercise
price of $4.50 per share to Hambrecht & Quist LLC for services related to the
Company's most recent preferred stock financing which closed on July 15, 1997.
Such warrant expires upon completion of this offering.
REGISTRATION RIGHTS
After this offering, the holders of 9,281,185 shares of Common Stock and the
holders of warrants to purchase 30,051 shares of Common Stock will be entitled
to certain rights with respect to the registration of such shares under the
Securities Act, pursuant to an Amended and Restated Investor Rights Agreement
dated July 15, 1997 (the "Investor Rights Agreement"). Under the terms of the
Investor Rights Agreement, if the Company proposes to register any of its
securities under the Securities Act, either for its own account or for the
account of other security holders exercising registration rights, such holders
are entitled to notice of such registration and are entitled, subject to certain
limitations, to include shares therein. Commencing with the date that is three
months after this offering, the holders may also require the Company to file a
registration statement under the Securities Act with respect to their shares on
two occasions, and the Company is required to use its best efforts to effect
such registration. Furthermore, the holders may require the Company to register
their shares on Form S-3 when such form becomes available to the Company.
Generally, the Company is required to bear all registration expenses incurred in
connection with any such registrations, but not including any underwriting
discounts and selling commissions. These rights are subject to certain
conditions and limitations, among them the right of the underwriters of an
offering to limit the number of shares included in such registration.
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS
The Company is governed by the provisions of Section 203 of the Delaware
Law. In general, Section 203 prohibits a public Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless the business combination is approved in
a prescribed manner. A "business combination" includes mergers, asset sales or
other transactions resulting in a financial benefit to the stockholder. An
"interested stockholder" is a person who, together with affiliates and
associates, owns (or within three years, did own) 15% or more of the
corporation's voting stock. The existence of this provision would be expected to
have anti-takeover effects with respect to transactions not approved in advance
by the Board of Directors, such as discouraging takeover attempts that might
result in a premium over the market price of the Common Stock.
The Company's Restated Certificate provides for a Board of Directors that is
divided into three Classes. The Directors in Class I hold office until the first
annual meeting of stockholders following this offering, the Directors in Class
II hold office until the second annual meeting of stockholders following this
offering and the Directors in Class III hold office until the third annual
meeting of stockholders following this offering, (or, in each case, until their
successors are duly elected and qualified or until their earlier resignation,
removal from office or death), and, after each such election, the Directors in
each such class will then serve in succeeding terms of three years and until
their successors are duly elected and qualified. The classification system of
electing Directors may tend to discourage a third party from making a tender
offer or otherwise attempting to obtain control of the Company and may maintain
the incumbency of the Board of Directors, as the classification of the Board of
Directors generally increases the difficulty of replacing a majority of the
directors.
The Company's Restated Certificate provides further that any action required
or permitted to be taken by stockholders of the Company must be effected at a
duly called annual or special meeting of stockholders and may not be effected by
any consent in writing. The Company's Restated Certificate also
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<PAGE>
specifies that the authorized number of directors may be changed only by
resolution of the Board of Directors. In addition, the Company's Amended and
Restated By-laws provide that special meetings of the stockholders of the
Company may be called only by the Chairman of the Board, the President of the
Company or by the Board of Directors pursuant to a resolution adopted by a
majority of the total number of authorized directors. These and other provisions
contained in the Restated Certificate and the Company's Amended and Restated
By-laws could delay or make more difficult certain types of transactions
involving an actual or potential change in control of the Company or its
management (including transactions in which stockholders might otherwise receive
a premium for their shares over then current prices) and may limit the ability
of stockholders to remove current management of the Company or approve
transactions that stockholders may deem to be in their best interests and,
therefore, could adversely affect the price of the Company's Common Stock.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Company's Common Stock is Chase
Mellon Shareholder Services.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for the Common Stock
of the Company. Future sales of substantial amounts of Common Stock in the
public market could adversely affect prevailing market prices. Furthermore,
since only a limited number of shares will be available for sale shortly after
the offering because of certain contractual and legal restrictions on resale
described below, sales of substantial amounts of Common Stock of the Company in
the public market after the restrictions lapse could adversely affect the
prevailing market price and the ability of the Company to raise equity capital
in the future.
Upon completion of the offering, the Company will have 13,382,377 shares of
Common Stock outstanding, assuming no exercise of currently outstanding options.
Of these shares, the 3,000,000 shares sold in this offering (plus any additional
shares sold upon exercise of the Underwriters' over-allotment option) will be
freely transferable without restriction under the Securities Act, unless they
are held by "affiliates" of the Company as that term is used under the
Securities Act and the regulations promulgated thereunder ("Affiliates"). The
remaining 10,382,377 shares of Common Stock held by existing stockholders are
"restricted securities" as that term is defined in Rule 144 of the Securities
Act (the "Restricted Shares"). Restricted Shares may be sold in the public
market only if registered or if they qualify for an exemption from registration
under Rule 144 or Rule 701 under the Securities Act. As a result of contractual
restrictions and the provisions of Rules 144 and 701, additional shares will be
available for sale in the public market as follows: (i) no Restricted Shares
will be eligible for immediate sale on the date of this Prospectus; (ii)
approximately 5,732 Restricted Shares will be eligible for sale 90 days after
the date of this Prospectus; (iii) approximately 5,609,475 Restricted Shares
will be eligible for sale 180 days after the effective date of this offering
upon expiration of lock-up agreements and upon expiration of their respective
holding periods under Rule 144; and (iv) the remainder of the Restricted Shares
will be eligible for sale from time to time thereafter upon expiration of their
respective holding periods under Rule 144. In addition, 1,200,752 shares
issuable upon exercise of vested stock options will become eligible for sale 180
days after the effective date of this offering upon expiration of lock-up
agreements. The holders of 9,281,185 shares of Common Stock and the holders of
warrants to purchase 30,051 shares of Common Stock have the right in certain
circumstances to require the Company to register their shares under the
Securities Act for resale to the public beginning three months after the
effective date of this offering. If such holders, by exercising their demand
registration rights, cause a large number of shares to be registered and sold in
the public market, such sales could have an adverse effect on the market price
for the Company's Common Stock. If the Company were required to include in a
Company-initiated registration shares held by such holders pursuant to the
exercise of their piggyback registration rights, such sales may
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<PAGE>
have an adverse effect on the Company's ability to raise needed capital. In
addition, the Company expects to file a registration statement on Form S-8
registering a total of approximately 6,134,268 shares of Common Stock subject to
outstanding stock options or reserved for issuance under the Company's equity
incentive plans. Such registration statement is expected to be filed and to
become effective 180 days following the effective date of this offering. Shares
registered under such registration statement will, subject to Rule 144 volume
limitations applicable to Affiliates, be available for sale in the open market,
unless such shares are subject to vesting restrictions with the Company or the
lock-up agreements described above.
In general, under Rule 144 as currently in effect, beginning 90 days after
the effective date of the offering, an Affiliate of the Company, or person (or
persons whose shares are aggregated) who has beneficially owned restricted
shares (as defined under Rule 144) for at least one year is entitled to sell
within any three-month period a number of shares that does not exceed the
greater of (i) one percent of the then outstanding shares of the Company's
Common Stock or (ii) the average weekly trading volume of the Company's Common
Stock in the Nasdaq National Market during the four calendar weeks immediately
preceding the date on which notice of the sale is filed with the Commission.
Sales pursuant to Rule 144 are subject to certain requirements relating to the
manner of sale, notice, and the availability of current public information about
the Company. A person (or persons whose shares are aggregated) who was not an
Affiliate of the Company at any time during the 90 days immediately preceding
the sale and who has beneficially owned restricted shares for at least two years
is entitled to sell such shares under Rule 144(k) without regard to the
limitations described above.
An employee, officer or director of or consultant to the Company who
purchased or was awarded shares or options to purchase shares pursuant to a
written compensatory plan or contract is entitled to rely on the resale
provisions of Rule 701 under the Securities Act, which permits Affiliates and
non-Affiliates to sell their Rule 701 shares without having to comply with Rule
144's holding period restrictions, in each case commencing 90 days after the
date of this Prospectus. In addition, non-Affiliates may sell Rule 701 shares
without complying with the public information, volume and notice provisions of
Rule 144.
62
<PAGE>
UNDERWRITING
The Underwriters named below (the "Underwriters"), acting through their
representatives,
BancAmerica Robertson Stephens, Hambrecht & Quist LLC and UBS Securities LLC
(the "Representatives"), have severally agreed with the Company, subject to the
terms and conditions of the Underwriting Agreement, to purchase from the Company
the number of shares of Common Stock set forth opposite their respective names
below. The Underwriters are committed to purchase and pay for all such shares if
any are purchased.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- - - -------------------------------------------------------------------------------- ------------
<S> <C>
BancAmerica Robertson Stephens..................................................
Hambrecht & Quist LLC...........................................................
UBS Securities LLC..............................................................
------------
Total....................................................................... 3,000,000
------------
------------
</TABLE>
The Company has been advised by the Representatives that the Underwriters
propose to offer the shares of Common Stock to the public at the initial public
offering price set forth on the cover page of this Prospectus and to certain
dealers at such price, less a concession not in excess of $ per share,
of which $ may be reallowed to other dealers. After the initial public
offering, the public offering price, concession and reallowance to dealers may
be reduced by the Representatives. No such reduction shall change the amount of
proceeds to be received by the Company as set forth on the cover page of this
Prospectus.
The Company has granted to the Underwriters an option, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to 450,000
additional shares of Common Stock at the same price per share as the Company
will receive for the 3,000,000 shares that the Underwriters have agreed to
purchase. To the extent that the Underwriters exercise such option, each of the
Underwriters will have a firm commitment to purchase approximately the same
percentage of such additional shares that the number of shares of Common Stock
to be purchased by it shown in the above table represents as a percentage of the
3,000,000 shares offered hereby. If purchased, such additional shares will be
sold by the Underwriters on the same terms as those on which the 3,000,000
shares are being sold. The Company will be obligated, pursuant to the option, to
sell shares to the extent the option is exercised. The Underwriters may exercise
such option only to cover over-allotments made in connection with the sale of
shares of Common Stock offered hereby.
The Underwriting Agreement contains covenants of indemnity between the
Underwriters and the Company against certain civil liabilities, including
liabilities under the Securities Act and liabilities arising from breaches of
representations and warranties contained in the Underwriting Agreement.
Each officer and director of the Company and certain stockholders together
holding approximately 10,326,645 shares of Common Stock (including Japan
Tobacco) have agreed in writing with the Representatives (the "Lock-Up
Agreements") that, until 180 days after the Registration Statement is declared
effective by the Commission, subject to certain limited exceptions, they will
not, directly or indirectly, sell, offer, contract to sell, pledge, grant any
option to purchase or otherwise dispose of any shares of Common Stock, any
options or warrants to purchase any shares of Common Stock, or any securities
convertible into or exchangeable for, or any other rights to purchase or
acquire, Common Stock owned directly by them or acquired by them after the date
of the Lock-Up Agreements, or which may be deemed to be beneficially owned by
them, without the prior written consent of BancAmerica Robertson Stephens.
Approximately 5,609,475 of such shares will be eligible for immediate public
sale following expiration of the lock-up period pursuant to Rule 144.
BancAmerica Robertson Stephens may, in its sole discretion and at any time
without notice, release all or any portion of the securities subject to the
Lock-Up Agreements. In addition, the Company has agreed that, until 180 days
after the Registration Statement is declared effective by the
63
<PAGE>
Commission, the Company will not, without the prior written consent of
BancAmerica Robertson Stephens, subject to certain limited exceptions, sell,
offer, contract to sell, pledge, grant any option to purchase or otherwise
dispose of any shares of Common Stock, any options or warrants to purchase any
shares of Common Stock, or any securities convertible into or exchangeable for,
or any other rights to purchase or acquire, shares of Common Stock, other than
the Company's sale of shares in this offering and the sale of shares to Japan
Tobacco, the issuance of Common Stock upon the exercise of the outstanding
warrants or options, or the Company's grant of options and issuance of stock
under existing employee stock option or stock purchase plans. See "Shares
Eligible for Future Sale."
The Underwriters do not intend to confirm sales to any account over which
they exercise discretionary authority.
Prior to this offering, there has been no public market for the Common Stock
of the Company. Consequently, the initial public offering price for the Common
Stock offered hereby will be determined through negotiations among the Company
and the Representatives. Among the factors to be considered in such negotiations
include prevailing market conditions, certain financial information of the
Company, market valuations of other companies that the Company and the
Representatives believe to be comparable to the Company, estimates of the
business potential of the Company, the present stage of the Company's
development and other factors deemed relevant.
The Representatives have advised the Company that, pursuant to Regulation M
under the Securities Act, certain persons participating in the offering may
engage in transactions, including stabilizing bids, syndicate covering
transactions or the imposition of penalty bids which may have the effect of
stabilizing or maintaining the market price of the Common Stock at a level above
that which might otherwise prevail in the open market. A "stabilizing bid" is a
bid for or the purchase of the Common Stock. A "syndicate covering transaction"
is the bid for or the purchase of the Common Stock on behalf of the Underwriters
to reduce a short position incurred by the Underwriters in connection with the
offering. A "penalty bid" is an arrangement permitting the Representatives to
reclaim the selling concession otherwise accruing to an Underwriter or syndicate
member in connection with the offering if the Common Stock originally sold by
such Underwriter or syndicate member is purchased by the Representatives in a
syndicate covering transaction and has therefore not been effectively placed by
such Underwriter or syndicate member. The Representatives have advised the
Company that such transactions may be effected on the Nasdaq National Market or
otherwise and, if commenced, may be discontinued at any time.
H&Q Gene Logic Investors, LP, a California limited partnership and a related
party to Hambrecht & Quist LLC, one of the Representatives, owns 111,111 shares
of the Company's Series C Preferred Stock, $.01 par value per share, which will
automatically convert into 111,111 shares of the Company's Common Stock upon the
closing of this offering. In addition, Hambrecht & Quist LLC owns a warrant
which is exercisable for the purchase of 48,889 shares of the Company's Series C
Preferred Stock at an exercise price of $4.50 per share. Hambrecht & Quist LLC
received the warrant from the Company, in addition to a cash payment, as
compensation for Hambrecht & Quist LLC's services as placement agent in
connection with the Company's Series C Preferred Stock financing, which closed
on July 15, 1997. The warrant will expire upon the closing of this offering.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Cooley Godward LLP, San Diego, California. Certain legal
matters will be passed upon for the Underwriters by Testa, Hurwitz & Thibeault,
LLP, Boston, Massachusetts.
EXPERTS
The financial statements of the Company as of December 31, 1995 and 1996 and
for the period from September 22, 1994 (inception) through December 31, 1994,
and for the years ended December 31, 1995
64
<PAGE>
and 1996 included in this Prospectus and elsewhere in the Registration Statement
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included in reliance
upon the authority of said firm as experts in giving said reports.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act, with respect to the Common Stock offered hereby.
As permitted by the rules and regulations of the Commission, this Prospectus,
which is a part of the Registration Statement, omits certain information,
exhibits, schedules and undertakings set forth in the Registration Statement.
For further information pertaining to the Company and the Common Stock offered
hereby, reference is made to such Registration Statement and the exhibits and
schedules thereto. Statements contained in this Prospectus as to the contents or
provisions of any contract or other document referred to herein are not
necessarily complete, and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference. A copy of
the Registration Statement may be inspected without charge at the office of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's regional offices located at the Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade
Center, 13th Floor, New York, New York 10048. Copies of all or any part of the
Registration Statement may be obtained from such offices upon the payment of the
fees prescribed by the Commission. In addition, registration statements and
certain other filings made with the Commission through its Electronic Data
Gathering, Analysis and Retrieval ("EDGAR") system are publicly available
through the Commission's web site on the Internet's World Wide Web, located at
http://www.sec.gov. The Registration Statement, including all exhibits thereto
and amendments thereof, has been filed with the Commission through EDGAR.
65
<PAGE>
GENE LOGIC INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Independent Public Accountants................................................................... F-2
Balance Sheets as of December 31, 1995 and 1996 and June 30, 1997 (unaudited).............................. F-3
Statements of Operations for the period from September 22, 1994 (inception) through
December 31, 1994, the years ended December 31, 1995 and 1996 and the six months ended June 30, 1996 and
1997 (unaudited)......................................................................................... F-4
Statements of Stockholders' Equity for the period from September 22, 1994 (inception) through December 31,
1994, the years ended December 31, 1995 and 1996 and the six months ended June 30, 1997 (unaudited)...... F-5
Statements of Cash Flows for the period from September 22, 1994 (inception) through
December 31, 1994, the years ended December 31, 1995 and 1996 and the six months ended June 30, 1996 and
1997 (unaudited)......................................................................................... F-6
Notes to Financial Statements.............................................................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Gene Logic Inc.:
We have audited the accompanying balance sheets of Gene Logic Inc. (a
Delaware corporation) as of December 31, 1995 and 1996, and the related
statements of operations, stockholders' equity and cash flows for the period
from September 22, 1994 (inception) through December 31, 1994, and the years
ended December 31, 1995 and 1996. 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 generally accepted auditing
standards. 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 Gene Logic Inc. as of
December 31, 1995 and 1996, and the results of its operations and its cash flows
for the period from September 22, 1994 (inception) through December 31, 1994,
and the years ended December 31, 1995 and 1996, in conformity with generally
accepted accounting principles.
/s/ Arthur Andersen LLP
Baltimore, Maryland
October 6, 1997
F-2
<PAGE>
GENE LOGIC INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
EQUITY AS
DECEMBER 31, OF
-------------------- JUNE 30, JUNE 30,
1995 1996 1997 1997
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
ASSETS
Current Assets:
Cash and cash equivalents...................................... $ 348,478 $1,137,130 $4,899,522
Marketable securities available for sale....................... -- 4,534,353 199,859
Prepaid expenses............................................... -- 37,424 354,527
Other current assets........................................... -- 76,403 24,076
--------- --------- -----------
Total Current Assets......................................... 348,478 5,785,310 5,477,984
Property and Equipment, net...................................... 11,666 1,757,240 2,296,156
Notes Receivable from Employees.................................. -- 102,896 64,235
Intangibles and Other Assets, net................................ 62,444 171,506 371,361
--------- --------- -----------
Total Assets................................................. $ 422,588 $7,816,952 $8,209,736
--------- --------- -----------
--------- --------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable............................................... $ 17,294 $ 91,074 $ 137,852
Accrued expenses............................................... 86,249 997,710 322,726
Current portion of capital lease obligation.................... -- 106,195 110,512
Current portion of long-term debt.............................. -- -- 239,338
Deferred revenue............................................... -- -- 2,000,000
--------- --------- -----------
Total Current Liabilities.................................... 103,543 1,194,979 2,810,428
Deferred Revenue................................................. -- -- 833,333
Capital Lease Obligation......................................... -- 339,699 283,342
Long-Term Debt................................................... -- -- 807,181
--------- --------- -----------
Total Liabilities............................................ 103,543 1,534,678 4,734,284
--------- --------- -----------
Commitments and Contingencies
Series A Convertible Preferred Stock, $.01 par value; 333,333
shares authorized; 333,333 shares issued and outstanding as of
December 31, 1995 and 1996 and June 30, 1997, liquidation
preference of $1.50 per share.................................. 500,000 500,000 500,000 --
Series A-1 Convertible Preferred Stock, $.01 par value; 462,500
shares authorized; 412,500 shares issued and outstanding as of
December 31, 1995 and 1996 and June 30, 1997, liquidation
preference of $1.60 per share.................................. 652,825 653,722 654,170 --
Series B Convertible Preferred Stock, $.01 par value; 4,154,167
shares authorized; 4,090,909 shares issued and outstanding as
of December 31, 1996 and June 30, 1997, liquidation preference
of $2.20 per share............................................. -- 9,327,674 9,694,934 --
Series C Convertible Preferred Stock, $.01 par value; 4,600,000
shares authorized, liquidation preference of $4.50 per share... -- -- -- --
Stockholders' Equity:
Common stock, $.01 par value; 6,000,000 shares authorized;
280,000, 692,733 and 637,733 shares issued and outstanding as
of December 31, 1995 and 1996 and June 30, 1997,
respectively................................................. 2,800 6,927 6,377 99,189
Additional paid-in capital..................................... (1,100) 9,773 62,973 29,954,071
Deferred compensation on stock options, net.................... -- -- (55,886) (55,886)
Unrealized losses on marketable securities..................... -- (13,215) (1,321) (1,321)
Accumulated deficit............................................ (835,480) (4,202,607) (7,385,795) (7,385,795)
--------- --------- ----------- -----------
Total Stockholders' Equity................................... (833,780) (4,199,122) (7,373,652) 22,610,258
--------- --------- ----------- -----------
Total Liabilities and Stockholders' Equity................... $ 422,588 $7,816,952 $8,209,736
--------- --------- -----------
--------- --------- -----------
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-3
<PAGE>
GENE LOGIC INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
SEPTEMBER 22, 1994
(INCEPTION) YEAR ENDED SIX MONTHS ENDED
THROUGH DECEMBER 31, JUNE 30,
DECEMBER 31, ------------------------ --------------------------
1994 1995 1996 1996 1997
------------------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Revenues............................ $ -- $ -- $ -- $ -- $ 166,667
-------- ---------- ------------ ------------ ------------
Expenses:
Research and development.......... 44,438 485,688 1,747,128 491,266 1,836,829
General and administrative........ 45,966 258,491 1,349,226 386,208 1,236,089
-------- ---------- ------------ ------------ ------------
Total expenses................ 90,404 744,179 3,096,354 877,474 3,072,918
-------- ---------- ------------ ------------ ------------
Loss from operations.......... (90,404) (744,179) (3,096,354) (877,474) (2,906,251)
Interest Income, net................ -- -- 221,302 18,104 90,771
-------- ---------- ------------ ------------ ------------
Net loss...................... (90,404) (744,179) (2,875,052) (859,370) (2,815,480)
Accretion of Mandatory Redemption
Value of Preferred Stock.......... -- 897 492,075 157,736 367,708
-------- ---------- ------------ ------------ ------------
Net loss attributable to common
shareholders.................... $ (90,404) $ (745,076) $ (3,367,127) $ (1,017,106) $ (3,183,188)
-------- ---------- ------------ ------------ ------------
-------- ---------- ------------ ------------ ------------
Pro Forma Net Loss Per Common
Share............................. $ (0.60) $ (0.48)
------------ ------------
------------ ------------
Shares Used in Computing Pro Forma
Net Loss Per Common Share......... 4,753,217 5,807,265
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
GENE LOGIC INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
STOCKHOLDERS' EQUITY
----------------------------------------------------------------
PREFERRED COMMON
STOCK STOCK UNREALIZED
---------------------- --------------------- ADDITIONAL LOSSES ON
NUMBER NUMBER PAR PAID-IN DEFERRED MARKETABLE
OF SHARES AMOUNT OF SHARES VALUE CAPITAL COMPENSATION SECURITIES
---------- ---------- ---------- --------- ---------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Inception (September 22,
1994)......................... -- $ -- -- $ -- $ -- $ -- $ --
Issuance of common stock...... -- -- 100,000 1,000 (1,000) -- --
Issuance of Series A
Convertible Preferred
Stock....................... 266,666 400,000 -- -- -- -- --
Net Loss...................... -- -- -- -- -- -- --
---------- ---------- ---------- --------- ---------- ------------- --------------
Balance at December 31, 1994.... 266,666 400,000 100,000 1,000 (1,000) -- --
Issuance of common stock...... -- -- 180,000 1,800 (100) -- --
Issuance of Series A
Convertible Preferred
Stock....................... 66,667 100,000 -- -- -- -- --
Issuance of Series A-1
Convertible Preferred Stock,
net of issuance costs....... 412,500 651,928 -- -- -- -- --
Accretion of mandatory
redemption value of
preferred stock............. -- 897 -- -- -- -- --
Net Loss...................... -- -- -- -- -- -- --
---------- ---------- ---------- --------- ---------- ------------- --------------
Balance at December 31, 1995.... 745,833 1,152,825 280,000 2,800 (1,100) -- --
Issuance of common stock...... -- -- 412,733 4,127 10,873 -- --
Issuance of Series B
Convertible Preferred Stock,
net of issuance costs....... 4,090,909 8,836,496 -- -- -- -- --
Accretion of mandatory
redemption value of
preferred stock............. -- 492,075 -- -- -- -- --
Net change in unrealized
losses from marketable
securities.................. -- -- -- -- -- -- (13,215)
Net Loss...................... -- -- -- -- -- -- --
---------- ---------- ---------- --------- ---------- ------------- --------------
Balance at December 31, 1996.... 4,836,742 10,481,396 692,733 6,927 9,773 -- (13,215)
Cancellation of common stock
(unaudited)................. -- -- (55,000) (550) (7,700) -- --
Accretion of mandatory
redemption value of
preferred stock
(unaudited)................. -- 367,708 -- -- -- -- --
Net change in unrealized
losses from marketable
securities (unaudited)...... -- -- -- -- -- -- 11,894
Deferred compensation from
stock options (unaudited)... -- -- -- -- 60,900 (60,900) --
Amortization of deferred
compensation (unaudited).... -- -- -- -- -- 5,014 --
Net Loss (unaudited).......... -- -- -- -- -- -- --
---------- ---------- ---------- --------- ---------- ------------- --------------
Balance at June 30, 1997
(unaudited)................... 4,836,742 10,849,104 637,733 6,377 62,973 (55,886) (1,321)
Pro forma issuance of Series C
Convertible Preferred Stock,
net of issuance costs
(unaudited)................... 4,444,443 19,134,806 -- -- -- -- --
Pro forma conversion of
Preferred Stock to Common
Stock (unaudited)............. (9,281,185) (29,983,910) 9,281,185 92,812 29,891,098 -- --
---------- ---------- ---------- --------- ---------- ------------- --------------
Pro forma balance at June 30,
1997 (unaudited).............. -- $ -- 9,918,918 $ 99,189 $29,954,071 $ (55,886) $ (1,321)
---------- ---------- ---------- --------- ---------- ------------- --------------
---------- ---------- ---------- --------- ---------- ------------- --------------
<CAPTION>
ACCUMULATED
DEFICIT
------------
<S> <C>
Inception (September 22,
1994)......................... $ --
Issuance of common stock...... --
Issuance of Series A
Convertible Preferred
Stock....................... --
Net Loss...................... (90,404)
------------
Balance at December 31, 1994.... (90,404)
Issuance of common stock...... --
Issuance of Series A
Convertible Preferred
Stock....................... --
Issuance of Series A-1
Convertible Preferred Stock,
net of issuance costs....... --
Accretion of mandatory
redemption value of
preferred stock............. (897)
Net Loss...................... (744,179)
------------
Balance at December 31, 1995.... (835,480)
Issuance of common stock...... --
Issuance of Series B
Convertible Preferred Stock,
net of issuance costs....... --
Accretion of mandatory
redemption value of
preferred stock............. (492,075)
Net change in unrealized
losses from marketable
securities.................. --
Net Loss...................... (2,875,052)
------------
Balance at December 31, 1996.... (4,202,607)
Cancellation of common stock
(unaudited)................. --
Accretion of mandatory
redemption value of
preferred stock
(unaudited)................. (367,708)
Net change in unrealized
losses from marketable
securities (unaudited)...... --
Deferred compensation from
stock options (unaudited)... --
Amortization of deferred
compensation (unaudited).... --
Net Loss (unaudited).......... (2,815,480)
------------
Balance at June 30, 1997
(unaudited)................... (7,385,795)
Pro forma issuance of Series C
Convertible Preferred Stock,
net of issuance costs
(unaudited)................... --
Pro forma conversion of
Preferred Stock to Common
Stock (unaudited)............. --
------------
Pro forma balance at June 30,
1997 (unaudited).............. $(7,385,795)
------------
------------
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
GENE LOGIC INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
SEPTEMBER 22, 1994
(INCEPTION) YEAR ENDED SIX MONTHS ENDED
THROUGH DECEMBER 31, JUNE 30,
DECEMBER 31, --------------------- ----------------------
1994 1995 1996 1996 1997
------------------ --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Cash Flows From Operating Activities:
Net loss.................................... $ (90,404) $(744,179) $(2,875,052) $ (859,370) $(2,815,480)
Adjustments to reconcile net loss to net
cash flows from operating activities:
Depreciation and amortization............. -- 1,395 67,602 4,551 224,388
Write off of deferred financing fee....... -- -- 2,500 2,500 --
Cancellation of note receiveable.......... -- -- -- -- 43,258
Amortization of deferred compensation..... -- -- -- -- 5,014
Changes in operating assets and liabilities:
Prepaid expenses.......................... (11,445) 11,445 (37,424) (7,698) (317,103)
Other current assets...................... -- -- (76,403) (12,250) 52,327
Intangibles and other assets.............. -- (63,139) (114,385) (49,447) (201,266)
Accounts payable.......................... -- 17,294 73,780 34,512 46,778
Accrued expenses.......................... -- 86,249 911,461 32,953 (674,984)
Deferred revenue.......................... -- -- -- -- 2,833,333
-------- --------- ---------- ---------- ----------
Net Cash Flows From Operating
Activities............................ (101,849) (690,935) (2,047,921) (854,249) (803,735)
-------- --------- ---------- ---------- ----------
Cash Flows From Investing Activities:
Purchases of property and equipment......... -- (12,366) (1,339,207) (84,979) (761,893)
Increase in notes receivable from
employees................................. -- -- (102,896) -- (12,847)
Purchase of marketable securities available
for sale.................................. -- -- (4,547,568) (4,487,550) --
Proceeds from sale and maturity of
marketable securities available for
sale...................................... -- -- -- -- 4,346,388
-------- --------- ---------- ---------- ----------
Net Cash Flows From Investing
Activities............................ -- (12,366) (5,989,671) (4,572,529) 3,571,648
-------- --------- ---------- ---------- ----------
Cash Flows From Financing Activities:
Proceeds from issuance of common stock...... -- 1,700 15,000 11,366 --
Proceeds from issuance of preferred stock... 400,000 760,000 9,000,000 7,625,000 --
Payments for stock issuance costs........... -- (8,072) (163,504) (163,504) --
Proceeds from equipment loan................ -- -- -- -- 1,084,362
Repayments of capital lease obligation and
equipment loan............................ -- -- (25,252) -- (89,883)
-------- --------- ---------- ---------- ----------
Net Cash Flows From Financing
Activities............................ 400,000 753,628 8,826,244 7,472,862 994,479
-------- --------- ---------- ---------- ----------
Net Increase in Cash and Cash Equivalents..... 298,151 50,327 788,652 2,046,084 3,762,392
Cash and Cash Equivalents, beginning of
period...................................... -- 298,151 348,478 348,478 1,137,130
-------- --------- ---------- ---------- ----------
Cash and Cash Equivalents, end of period...... $ 298,151 $ 348,478 $1,137,130 $2,394,562 $4,899,522
-------- --------- ---------- ---------- ----------
-------- --------- ---------- ---------- ----------
Supplemental Disclosure:
Interest expense paid....................... $ -- $ -- $ 9,024 $ -- $ 32,495
-------- --------- ---------- ---------- ----------
-------- --------- ---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
GENE LOGIC INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1995 AND 1996
AND JUNE 30, 1996 AND 1997
NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION AND BUSINESS
Gene Logic Inc. (the "Company"), formerly Senatics Corporation, was
incorporated on September 22, 1994, to commercialize technologies for the
discovery of disease-associated genes for the development of therapeutic and
diagnostic products. The Company was previously in the development stage and has
yet to generate any significant revenues.
UNAUDITED INTERIM FINANCIAL INFORMATION
The interim financial statements of the Company for the six months ended
June 30, 1996 and 1997, included herein have been prepared by the Company,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. In the opinion of management, the accompanying unaudited interim
financial statements reflect all adjustments necessary to present fairly the
financial position of the Company at June 30, 1997, and the results of its
operations and cash flows for the six months ended June 30, 1996 and 1997.
The results of operations for the six months ended June 30, 1997 are not
necessarily indicative of results to be expected for the full year.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses in the financial statements and in the disclosures of contingent
assets and liabilities. While actual results could differ from those estimates,
management believes that actual results will not be materially different from
amounts provided in the accompanying financial statements.
NEW PRONOUNCEMENTS
In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS No. 128").
SFAS No. 128 simplifies the standards for computing earnings per share
previously found in Accounting Principles Board Opinion No. 15, "Earnings Per
Share" ("APB Opinion No. 15"). It replaces the presentation of primary EPS with
a presentation of basic EPS and requires a reconciliation of the numerator and
denominator of the basic EPS calculation to the numerator and denominator of the
diluted EPS calculation. Basic EPS excludes dilution and is computed by dividing
income available to common stockholders by the weighted average number of common
shares outstanding for the period. Diluted EPS is computed similarly to primary
EPS pursuant to APB Opinion No. 15.
SFAS No. 128 is effective for interim periods and fiscal years ending after
December 15, 1997, and early adoption is not permitted. When adopted, it will
require restatement of prior years' EPS. The adoption of SFAS No. 128 will have
no impact on the Company.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
No. 130"). SFAS No. 130 sets standards for
F-7
<PAGE>
GENE LOGIC INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
reporting and presentation of comprehensive income and its components in
financial statements. SFAS No. 130 is effective for fiscal years beginning after
December 15, 1997, and early adoption is permitted. When adopted, it will
require reclassification adjustments and changes in presentation for all prior
periods shown. The impact of the adoption of SFAS No. 130 on the Company has not
been determined.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are defined as liquid investments with original
maturities of 90 days or less that are readily convertible into cash. All other
investments are reported as marketable securities available for sale. Cash and
cash equivalents as of December 31, 1995 and 1996 and June 30, 1997, are
comprised of:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ JUNE 30,
1995 1996 1997
---------- ------------ ------------
<S> <C> <C> <C>
(UNAUDITED)
Cash...................................................................... $ 348,478 $ 117,407 $ 89,689
Money market mutual fund.................................................. -- 1,019,723 4,809,833
---------- ------------ ------------
$ 348,478 $ 1,137,130 $ 4,899,522
---------- ------------ ------------
---------- ------------ ------------
</TABLE>
MARKETABLE SECURITIES AVAILABLE FOR SALE
All marketable securities are classified as available for sale. Available
for sale securities are carried at fair value, with unrealized gains and losses
reported as a separate component of stockholder's equity. Realized gains and
losses and declines in value judged to be other than temporary for available for
sale securities are included in other income.
PROPERTY AND EQUIPMENT
Property and equipment is carried at cost, less accumulated depreciation.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets as follows:
<TABLE>
<S> <C>
Furniture and fixtures............................................ 10 years
Computers and office equipment.................................... 5 years
Lab equipment..................................................... 5 years
</TABLE>
Equipment under capital leases and leasehold improvements are depreciated
and amortized over their useful life, or the term of the lease, whichever is
shorter.
INTANGIBLES AND OTHER ASSETS
Other assets consists primarily of organization costs, patent costs,
trademarks and licenses. These amounts are being amortized over periods of five
to seventeen years. Accumulated amortization relating to other assets was $0,
$695, $3,518, $2,106, and $4,929 as of December 31, 1994, 1995, and 1996, and
June 30, 1996 and 1997, respectively. The Company's success is heavily dependent
upon its proprietary technologies. The Company depends upon a combination of
patents, trade secrets, copyright and trademark laws, license agreements,
nondisclosure and other contractual provisions and various other security
measures to protect its technology rights.
F-8
<PAGE>
GENE LOGIC INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
RESEARCH AND DEVELOPMENT
Research and development costs are charged to operations when incurred.
REVENUE RECOGNITION
The Company recognizes revenue from research and development support and
technology and database access fees as they are earned under the terms of the
agreement. Revenue is deferred for fees received before earned. Revenues related
to the achievement of certain milestones are recognized when earned.
INCOME TAXES
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No.
109"). Under the asset and liability method of SFAS No. 109, deferred tax assets
and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases and net operating loss and tax
credit carryforwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. Under SFAS
No. 109, the effect on deferred tax assets and liabilities of a change in tax
rates is recognized in operations in the period that includes the enactment
date.
STOCK OPTION PLANS
Prior to January 1, 1996, the Company's policy was to account for its stock
options plans in accordance with the provisions of Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB Opinion No.
25"), and related interpretations. As such, compensation expense is recorded on
the date of grant only if the current fair value of the underlying stock exceeds
the exercise price. On January 1, 1996, the Company adopted Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"), which permits entities to recognize as expense
over the vesting period the fair value of all stock-based awards on the date of
grant. Alternatively, SFAS No. 123 also allows entities to continue to apply the
provisions of APB Opinion No. 25 and provide pro forma net earnings and pro
forma earnings per share disclosures for employee stock option grants made in
1995 and future years as if the fair-value based method defined in SFAS No. 123
had been applied. The Company elected to continue to apply the provisions of APB
Opinion No. 25 and provide the pro forma disclosure provisions of SFAS No. 123.
The Company uses the Black-Scholes option pricing model to estimate the fair
value of options and warrants granted.
PRO FORMA NET LOSS PER COMMON SHARE
Pro forma net loss per common share is computed using the weighted average
number of shares of common stock outstanding giving effect to the conversion of
convertible preferred shares that will automatically convert upon completion of
the Company's initial public offering (using the if-converted method) from the
original date of issuance. Common equivalent shares from stock options and
warrants are excluded from the computation for all periods as their effect is
antidilutive, except that, pursuant to the Securities and Exchange Commission
Staff Accounting Bulletins, common and common equivalent shares issued during
the 12-month period prior to the initial filing of the proposed offering at
prices below the assumed public offering price have been included in the
calculation as if they were outstanding for all periods presented.
F-9
<PAGE>
GENE LOGIC INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
The conversion of preferred stock will significantly reduce the net loss per
common share, decreasing the relevance of historical net loss per common share
information. As a result, historical net loss per common share is not shown.
NOTE 2. MARKETABLE SECURITIES:
The following is a summary of the Company's investment portfolio as of
December 31, 1995 and 1996 and June 30, 1997:
<TABLE>
<CAPTION>
GROSS
AMORTIZED UNREALIZED
COST LOSSES FAIR VALUE
------------ ----------- ------------
<S> <C> <C> <C>
December 31, 1995
Unit Investment Trust................................................... $ -- $ -- $ --
Government Securities................................................... -- -- --
------------ ----------- ------------
Total................................................................. $ -- $ -- $ --
------------ ----------- ------------
------------ ----------- ------------
December 31, 1996
Unit Investment Trust................................................... $ 2,483,352 $ (13,215) $ 2,470,137
Government Securities................................................... 2,064,216 -- 2,064,216
------------ ----------- ------------
Total................................................................. $ 4,547,568 $ (13,215) $ 4,534,353
------------ ----------- ------------
------------ ----------- ------------
June 30, 1997 (unaudited)
Unit Investment Trust................................................... $ 201,180 $ (1,321) $ 199,859
Government Securities................................................... -- -- --
------------ ----------- ------------
Total................................................................. $ 201,180 $ (1,321) $ 199,859
------------ ----------- ------------
------------ ----------- ------------
</TABLE>
All marketable securities mature within one year or have no stated maturity.
As of December 31, 1996 and June 30, 1997, all of the Company's investments were
classified as current as the Company may not hold its investments until maturity
in order to take advantage of market conditions. During the six months ended
June 30, 1997, a portion of the Unit Investment Trust was sold for total
proceeds of $2,256,990, resulting in realized losses of $11,894.
NOTE 3. PROPERTY AND EQUIPMENT:
Property and equipment includes the following as of December 31, 1995 and
1996 and June 30, 1997:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- JUNE 30,
1995 1996 1997
--------- ------------ ------------
<S> <C> <C> <C>
(UNAUDITED)
Furniture and fixtures................................. $ -- $ 105,061 $ 134,068
Computers and office equipment......................... -- 276,912 659,170
Lab equipment.......................................... 12,366 932,479 1,278,747
Lab equipment under capital lease...................... -- 471,146 471,146
Leasehold improvements................................. -- 37,121 41,481
--------- ------------ ------------
12,366 1,822,719 2,584,612
Less--Accumulated depreciation......................... (700) (65,479) (288,456)
--------- ------------ ------------
Property and Equipment, net............................ $ 11,666 $ 1,757,240 $ 2,296,156
--------- ------------ ------------
--------- ------------ ------------
</TABLE>
F-10
<PAGE>
GENE LOGIC INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3. PROPERTY AND EQUIPMENT: (CONTINUED):
Depreciation expense was $0, $700, $64,779, $3,140, and $222,976 for the
period from September 22, 1994 (inception) through December 31, 1994, the years
ended December 31, 1995 and 1996, and for the six months ended June 30, 1996 and
1997, respectively.
NOTE 4. ACCRUED EXPENSES:
Accrued expenses consists of the following as of December 31, 1995 and 1996,
and June 30, 1997:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- JUNE 30,
1995 1996 1997
--------- ---------- -----------
<S> <C> <C> <C>
(UNAUDITED)
Consulting................................................ $ 68,155 $ -- $ 40,304
Property additions........................................ -- 877,962 109,808
Professional fees......................................... 18,094 56,039 101,151
Payroll taxes and benefits................................ -- 63,709 71,463
--------- ---------- -----------
Total................................................. $ 86,249 $ 997,710 $ 322,726
--------- ---------- -----------
--------- ---------- -----------
</TABLE>
NOTE 5. LICENSE ARRANGEMENTS:
The proprietary rights and technical information covered by various patent
applications have been licensed by the Company from third parties. These
licenses will continue for the life of the respective patent or until terminated
by either party. The license costs are being amortized over the useful life of
the related patents. The agreements call for the payment of royalties over the
life of the patents or a shorter life if no patents are issued.
NOTE 6. STRATEGIC ALLIANCES:
During May 1997, the Company entered into a strategic alliance with Procter
& Gamble Pharmaceuticals Inc., a division of Procter & Gamble Company ("Procter
& Gamble") for the discovery of drug targets in the field of heart failure. In
connection with the agreement, the Company received technology access fees and
research and development support of $3 million. Revenue from this initial
payment is being recognized ratably over the 18 month initial phase of the
agreement of which approximately $167,000 has been recognized as revenue for the
six months ended June 30, 1997. Payments by Procter & Gamble to the Company in
the form of committed technology access fees and research funding will total a
minimum of $10.1 million if the research program continues for its 4 1/2-year
term and the Company performs its research obligations under the agreement.
Procter & Gamble will be obligated to make additional payments to the Company
for the achievement of specified target discovery and related product
development and associated regulatory milestones. Proctor & Gamble will also pay
the Company royalties on worldwide net sales of all products that may result
from the alliance. Procter & Gamble also has the option to expand the alliance
to include two additional fields upon terms, including committed research
funding, identical to those covering the initial program in heart failure.
During September 1997, the Company entered into a strategic alliance with
Japan Tobacco Inc. ("Japan Tobacco") for discovery of drug targets and drug
leads in the field of renal disease. Payments by Japan Tobacco to the Company in
the form of committed technology access fees and research funding total a
minimum of $15.0 million if the research program continues for its five year
term and the Company performs its research obligations under the agreement. In
addition, Japan Tobacco will also make a $3 million investment in common stock
of the Company at the time of an initial public offering by the Company,
provided that an offering closes within two years of the agreement date. Japan
Tobacco will be obligated to make additional payments to the Company for the
achievement of specified target discovery and related product development and
associated regulatory milestones. Japan Tobacco will also pay the Company
royalties on worldwide net sales of all products
F-11
<PAGE>
GENE LOGIC INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 6. STRATEGIC ALLIANCES: (CONTINUED):
that may result from targets discovered pursuant to the alliance. Japan Tobacco
also has the option to expand the alliance to include two other fields upon
terms, including committed research funding, identical to those covering the
initial program in renal disease.
The Company's strategy for developing and commercializing pharmaceutical
products based on its target discoveries depends on the formation of strategic
alliances with pharmaceutical companies. The Company has established two such
alliances, both in 1997. There can be no assurance that the Company will be able
to establish additional strategic alliances or that any alliances established
will be successful.
NOTE 7. INCOME TAXES:
The actual income tax expense for the period from September 22, 1994
(inception) to December 31, 1994, and the years ended December 31, 1995 and
1996, is different from the amount computed by applying the statutory federal
income tax rates to losses before income tax expense. The reconciliation of
these differences is as follows:
<TABLE>
<CAPTION>
PERIOD FROM
SEPTEMBER 22, 1994 YEAR ENDED
(INCEPTION) DECEMBER 31,
THROUGH ----------------------
DECEMBER 31, 1994 1995 1996
------------------ ---------- ----------
<S> <C> <C> <C>
Tax benefit at statutory rate................... $ (30,737) $ (253,021) $ (977,518)
State income taxes, net of federal income tax
effect........................................ (4,177) (34,381) (132,827)
Other........................................... (4,420) 9,799 (49,813)
Increase in valuation allowance................. 39,334 277,603 1,160,158
------- ---------- ----------
Income tax expense.............................. $ -- $ -- $ --
------- ---------- ----------
------- ---------- ----------
</TABLE>
The tax effect of cumulative temporary differences at December 31, 1995 and
1996, follow:
<TABLE>
<CAPTION>
1995 1996
--------- ------------
<S> <C> <C>
Deferred Tax Assets:
Tax carryforwards.................................................. $ -- $ 1,128,927
Start-up costs..................................................... 316,937 403,889
Accrued vacation................................................... -- 7,457
--------- ------------
316,937 1,540,273
Less: Valuation allowance.......................................... (316,937) (1,477,095)
--------- ------------
Net deferred tax asset........................................... $ -- $ 63,178
--------- ------------
--------- ------------
Deferred Tax Liabilities:
Depreciation....................................................... $ -- $ 51,380
Prepaid expenses................................................... -- 2,046
Capital leases..................................................... -- 9,752
--------- ------------
Net deferred tax liabilities..................................... $ -- $ 63,178
--------- ------------
--------- ------------
</TABLE>
Net operating loss carryforwards for income tax purposes are approximately
$2,779,000, as of December 31, 1996. The Company also has research and
development tax credit carryforwards of approximately $56,000 as of December 31,
1996. The carryforwards, if not utilized, will expire in increments through
2011. Utilization of the
F-12
<PAGE>
GENE LOGIC INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 7. INCOME TAXES: (CONTINUED):
net operating losses and credits may be subject to an annual limitation, due to
the ownership change limitations provided by the Internal Revenue Code of 1986.
NOTE 8. LONG-TERM DEBT:
Long-term debt at June 30, 1997, consists of the following:
<TABLE>
<CAPTION>
JUNE 30,
1997
------------
<S> <C>
(UNAUDITED)
Equipment loan.................................................................. $ 1,046,519
Less--Current portion........................................................... (239,338)
------------
Total long-term debt............................................................ $ 807,181
------------
------------
</TABLE>
As of June 30, 1997, principal payments on long-term debt for the next five
years are as follows:
<TABLE>
<S> <C>
YEAR ENDING DECEMBER 31,
- - - ------------------------------------------
1997...................................... $ 116,987
1998...................................... 250,312
1999...................................... 273,795
2000...................................... 299,480
2001...................................... 105,945
------------
$ 1,046,519
------------
------------
</TABLE>
In March 1997, the Company entered into a loan agreement for the purchase of
laboratory and computer equipment. The Company may borrow up to $1.5 million,
bearing interest at 9.0%. In April 1997, the Company borrowed $1,084,362 under
this agreement. The loan will be repaid in 48 equal monthly installments. The
Company has granted the lender a security interest, collateralized by all of the
equipment and fixtures acquired under the loan. In conjunction with the
agreement, the Company granted warrants to the lender to purchase 30,051 shares
of the Company's Series B Convertible Preferred stock at an exercise price of
$2.20 per share.
NOTE 9. CONVERTIBLE PREFERRED STOCK:
Three series of mandatorily redeemable preferred stock have been
issued--Series A Convertible Preferred stock ("Series A"), Series A-1
Convertible Preferred stock ("Series A-1") and Series B Convertible Preferred
stock ("Series B"). Each holder of common and preferred stock is entitled to one
vote for each share held.
During 1994, the Company sold 266,666 shares of Series A stock for $400,000.
During 1995, the Company sold 66,667 shares of Series A stock for $100,000
and 412,500 shares of Series A-1 stock for $660,000. Warrants to purchase an
additional 50,000 shares of Series A-1 stock at an exercise price of $1.60 per
share were issued and expires August 2005.
During 1996, the Company sold 4,090,909 shares of Series B stock for
$9,000,000.
The preferred stock is convertible into an equal number of shares of common
stock at the option of the holder, with certain additional antidilutive
protection provided to the holder. Conversion is mandatory upon the closing of
an underwritten public offering that meets certain minimum conditions as to
offering price and net proceeds under the Securities Act of 1933. At the option
of a majority of the holders of outstanding preferred stock, the Company shall
redeem all preferred stock on March 31, 2002, 2003 and 2004, at a rate of
33-1/3%, 50%
F-13
<PAGE>
GENE LOGIC INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 9. CONVERTIBLE PREFERRED STOCK: (CONTINUED):
and 100%, respectively, and at a price of $1.50 per share of Series A, $1.60 per
share of Series A-1 and $2.20 per share of Series B, plus any declared, accrued
or unpaid dividends of Series A and Series A-1 and any accrued or unpaid
dividends of Series B whether declared or undeclared. If funds are insufficient
to redeem all outstanding shares, the Company will redeem as many shares as
funds are legally available to redeem on a pro-rata basis among all preferred
stockholders. The difference between the redemption value of the preferred stock
and its carrying value is being accreted through a charge to retained earnings
over the period until redemption.
With the approval of the holders of 66 2/3% of the outstanding shares of
preferred stock, the Company can declare or pay dividends in the amount of
$0.120, $0.128 and $0.176 per share of Series A, Series A-1 and Series B
preferred stock outstanding, respectively. Upon liquidation, Series A, Series
A-1 and Series B stockholders will receive $1.50, $1.60 and $2.20 per share plus
any accrued or unpaid dividends, whether or not declared, respectively, prior to
any other distributions.
During July 1997, the Company sold 4,444,443 shares of Series C Convertible
Preferred Stock for net proceeds of approximately $19.1 million. The Company
also agreed to issue warrants for an additional 48,889 shares of Series C stock
at an exercise price of $4.50.
NOTE 10. STOCKHOLDERS' EQUITY:
The Company is authorized to issue 6,000,000 shares of common stock and
4,950,000 shares of preferred stock as of June 30, 1997.
In October 1996, an officer of the Company resigned. In January 1997, in
connection with the resignation, the 55,000 shares of the Company's common stock
held by the officer were canceled in satisfaction of the $50,000 note receivable
and accrued interest obligation from the officer to the Company (see Note 14).
In July 1997, the Company amended and restated its Certificate of
Incorporation ("Restated Certificate"), changing the number of shares of common
stock and preferred stock authorized for issuance. Under the new Restated
Certificate, the Company may issue up to 17,000,000 shares of common stock,
333,333 shares of Series A preferred stock, 462,500 shares of Series A-1
preferred stock, 4,154,167 shares of Series B preferred stock and 4,600,000
shares of Series C preferred stock.
NOTE 11. COMMITMENTS AND CONTINGENCIES:
OPERATING LEASE
Subsequent to year-end, the Company renegotiated its current lease of
laboratory and office space under an agreement which expires September 30, 1997,
with an option to continue on a month-to-month basis with 60-days written notice
to terminate. The Company intends to renew on a month-to-month basis until the
relocation to the new facility is complete.
During August 1997, the Company entered into an operating lease for new
laboratory and office space. The Company is responsible for the design and
renovation of an existing facility owned by the lessor. These costs will be
funded by the lessor while the responsibility for performance and liability
during construction remains with the Company. The lease term is ten years with
monthly payments of $89,211 plus 3% annual inflation; however, monthly payments
could increase if construction costs exceed a certain amount. The lease also
requires the Company to pay for building operating costs. In addition to future
minimum lease payments, the Company has issued a warrant to purchase 20,000
shares of common stock at an exercise price of $5.40 per share in connection
with the lease. Such warrant will expire upon the completion of the Company's
initial public offering (see Note 15).
F-14
<PAGE>
GENE LOGIC INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 11. COMMITMENTS AND CONTINGENCIES: (CONTINUED):
Rent expense for the period from September 22, 1994 (inception) through
December 31, 1994, the years ended December 31, 1995 and 1996, and the six
months ended June 30, 1996 and 1997, was $0, $0, $238,930, $116,899 and
$139,732, respectively.
CAPITAL LEASE
During 1996, the Company entered into a capital lease to purchase equipment
for $471,146. Accumulated amortization for this equipment was $29,447 and
$88,340 at December 31, 1996 and June 30, 1997, respectively. Payments during
the year ended December 31, 1996 and the six months ended June 30, 1997, totaled
$25,252 and $52,039, respectively. Future minimum lease payments are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- - - ----------------------------------------------------------------------------------
<S> <C>
1997........................................................................ $ 137,104
1998........................................................................ 137,104
1999........................................................................ 137,104
2000........................................................................ 102,827
----------
Total minimum lease payments.................................................. 514,139
Less: Amounts representing imputed interest....................................... (68,245)
----------
Present value of net minimum payments......................................... 445,894
Less: Current portion............................................................. (106,195)
----------
Noncurrent portion of capital lease obligation.................................... $ 339,699
----------
----------
</TABLE>
In conjunction with this lease agreement, the Company granted a warrant to
the lessor to purchase 13,636 shares of the Company's Series B Convertible
Preferred stock at an exercise price of $2.20 per warrant. Such warrant expires
five years from the completion of the Company's initial public offering (see
Note 15).
Clinical trials, manufacturing, marketing and sale of any of the Company's
partners' potential therapeutic or diagnostic products may expose the Company to
liability claims from the use of such pharmaceutical products. The Company
currently does not carry product liability insurance.
NOTE 12. 401(K) RETIREMENT PLAN:
During 1996, the Company established the Gene Logic Inc. 401(k) Retirement
Plan (the "401(k) Plan") for its employees under Section 401(k) of the Internal
Revenue Service code. Under this plan, all employees over 21 years of age and
with at least six months of service with the Company are eligible to contribute
from 2% to 15% of their salary. Employee contributions are 100% vested. The
Company is not required to make any contributions to the 401(k) Plan and has not
made any contributions through June 30, 1997.
NOTE 13. STOCK BASED COMPENSATION:
During 1996, the Company instituted a stock plan (the "Plan") whereby the
Company's compensation committee (the "Committee"), at its discretion, can grant
options, award stock or provide opportunities to make direct purchases of stock
to employees, officers, directors and consultants of the company and related
corporations. The Plan is authorized to grant options of up to 6,100,000 shares
of common stock. Options are to be granted at the fair market value of the
common stock at the grant date. The options, awards and opportunities to
purchase stock expire at the earlier of termination or the date specified by the
Committee at the date of grant, but not more than ten years.
F-15
<PAGE>
GENE LOGIC INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 13. STOCK BASED COMPENSATION: (CONTINUED):
The following is a rollforward of option activity for the year ended
December 31, 1996 and the six months ended June 30, 1997:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1996 JUNE 30, 1997
---------------------- -----------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE EXERCISE
SHARES PRICE SHARES PRICE
--------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
(UNAUDITED)
Outstanding, beginning of period.................................... -- $ -- 424,000 $ 0.15
Granted........................................................... 524,000 0.12 890,000 0.15
Exercised......................................................... (100,000) 0.01 -- --
--------- ----------
Outstanding, end of period.......................................... 424,000 0.15 1,314,000 0.15
--------- ----------
Exercisable, end of period.......................................... 93,844 242,499
--------- ----------
--------- ----------
Weighted average fair value of options granted...................... $ 0.05 $ 0.10
--------- ----------
--------- ----------
Weighted average remaining contractual life (in years).............. 9.80 9.45
--------- ----------
--------- ----------
</TABLE>
During the six months ended June 30, 1997, the Company granted options with
exercise prices below fair value. The Company has recorded deferred compensation
of $60,900 at June 30, 1997, and compensation expense of $5,014 for the six
months then ended for these options.
Also, subsequent to June 30, 1997, the Company granted additional options
with exercise prices below fair value. In connection with these grants the
Company will record additional deferred compensation of $3,865,250 during the
three months ended September 30, 1997 which will be recognized as compensation
expense over the four year vesting period of the options.
During 1996, an officer of the Company purchased 100,000 shares of common
stock for $0.15 per share under the Plan, subject to a declining buy-back right
of the Company.
Had compensation cost for the Company's stock-based compensation plans been
determined based on the fair value at the grant dates for awards under the Plan,
consistent with the method of SFAS No. 123, the Company's net loss and loss per
share would have been changed to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
<S> <C> <C>
1995 1996
---------- ------------
Net loss:
As reported.......................................................................... $ (744,179) $ (2,875,072)
Pro forma............................................................................ (744,179) (2,883,749)
Net loss:
As reported.......................................................................... $ (0.50) $ (0.60)
Pro forma............................................................................ (0.50) (0.61)
</TABLE>
F-16
<PAGE>
GENE LOGIC INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 13. STOCK BASED COMPENSATION: (CONTINUED):
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model, with the following assumptions:
<TABLE>
<S> <C>
Expected volatility......................................................... 60.0%
Risk-free interest rates.................................................... 5.72% to 5.85%
Expected lives.............................................................. 1-3 years
Dividend rate............................................................... 0%
</TABLE>
NOTE 14. RELATED PARTY TRANSACTIONS:
During 1996, the Company made loans to two officers of the Company of
$50,000 each to offset relocation costs. These notes receivable were secured by
common stock previously issued to the officers. In January 1997, one of these
notes was cancelled (see Note 10). The remaining note is due in 2002 and bears
interest (see Note 15).
NOTE 15. CONTEMPLATED INITIAL PUBLIC OFFERING:
On October 6, 1997, the Company filed a registration statement with the
Securities and Exchange Commission for an initial public offering ("IPO") of
3,000,000 shares of common stock at an anticipated initial offering price of $11
per share. Net proceeds of the offering (not including the concurrent Japan
Tobacco investment previously described), after underwriting commissions and
expenses are expected to be approximately $30,090,000 ($37,693,500 if the
Underwriters' over-allotment option is exercised). Concurrent with the IPO, a
note receivable of $50,000 plus interest, from an officer of the Company will be
forgiven, the vesting of certain options will be accelerated and the authorized
capital stock of the Company will be increased to 60,000,000 shares of Common
Stock and 10,000,000 shares of Preferred Stock. The Company intends to use the
proceeds for working capital to support research and development, capital
expenditures and general corporate purposes.
F-17
<PAGE>
DRUG TARGET DISCOVERY
"MOLECULAR MOVIE"
[graphical depiction of series of Molecular Topography snapshots] 10,000 GENES
DIFFERENTIALLY EXPRESSED, DISEASE-ASSOCIATED GENES
[graphical depiction of differential expression of disease-associated
genes] 50-500 GENES
PRIORITIZATION OF POTENTIAL DRUG TARGETS
[numbers and letters representing gene sequences] 5-50 GENES
The drug target discovery process comprises the following steps:
1. The Company compares normal and diseased tissues through a series of
Molecular Topography snapshots, a "molecular movie," to identify the changes
in gene expression that occur as the disease develops and progresses.
2. Using its bioinformatics tools, Gene Logic analyzes these changes to
identify which expressed genes are associated with the disease.
3. Gene Logic prioritizes disease-associated genes as drug targets using its
bioinformatics system. This prioritization depends upon a number of factors
including: (i) a gene's temporal association with the disease process; (ii)
the tissue distribution of its expression; (iii) any homology it may have
with known target classes, such as membrane receptors, enzymes or ion
channels; (iv) its involvement in known metabolic or signal transduction
pathways; and (v) the feasibility of developing a screening assay.
<PAGE>
[LOGO]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses payable by the Registrant in
connection with the sale of the Common Stock being registered. All the amounts
shown are estimates except for the SEC registration fee and the NASD filing fee.
<TABLE>
<S> <C>
Registration fee.................................................................. $ 12,546
NASD filing fee................................................................... 4,640
Nasdaq Stock Market Listing Application fee....................................... *
Blue sky qualification fees and expenses.......................................... *
Printing and engraving expenses................................................... *
Legal fees and expenses........................................................... *
Accounting fees and expenses...................................................... *
Transfer agent and registrar fees................................................. *
Miscellaneous..................................................................... *
---------
Total......................................................................... $ 600,000
---------
---------
</TABLE>
* To be provided by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Section 145 of the Delaware General Corporation Law, the Registrant
has broad powers to indemnify its Directors and officers against liabilities
they may incur in such capacities, including liabilities under the Securities
Act.
The Registrant's Restated Certificate of Incorporation and Amended and
Restated By-laws include provisions to (i) eliminate the personal liability of
its directors for monetary damages resulting from breaches of their fiduciary
duty to the extent permitted by Section 102(b)(7) of the General Corporation Law
of Delaware (the "Delaware Law") and (ii) require the Registrant to indemnify
its Directors and officers to the fullest extent permitted by Section 145 of the
Delaware Law, including circumstances in which indemnification is otherwise
discretionary. Pursuant to Section 145 of the Delaware Law, a corporation
generally has the power to indemnify its present and former directors, officers,
employees and agents against expenses incurred by them in connection with any
suit to which they are or are threatened to be made a party by reason of their
serving in such positions so long as they acted in good faith and in a manner
they reasonably believed to be in or not opposed to, the best interests of the
corporation and with respect to any criminal action, they had no reasonable
cause to believe their conduct was unlawful. The Registrant believes that these
provisions are necessary to attract and retain qualified persons as Directors
and officers. These provisions do not eliminate the Directors' duty of care,
and, in appropriate circumstances, equitable remedies such as injunctive or
other forms of non-monetary relief will remain available under Delaware Law. In
addition, each Director will continue to be subject to liability for breach of
the Director's duty of loyalty to the Registrant, for acts or omissions not in
good faith or involving intentional misconduct, for knowing violations of law,
for acts or omissions that the Director believes to be contrary to the best
interests of the Registrant or its stockholders, for any transaction from which
the Director derived an improper personal benefit, for acts or omissions
involving a reckless disregard for the Director's duty to the Registrant or its
stockholders when the Director was aware or should have been aware of a risk of
serious injury to the Registrant or its stockholders, for acts or omissions that
constitute an unexcused pattern of inattention that amounts to an abdication of
the Director's duty to the Registrant or its stockholders, for improper
transactions between the Director and the Registrant and for improper
II-1
<PAGE>
distributions to stockholders and loans to Directors and officers. The provision
also does not affect a Director's responsibilities under any other law, such as
the federal securities law or state or federal environmental laws.
The Registrant has entered into indemnity agreements with each of its
Directors and executive officers that require the Registrant to indemnify such
persons against expenses, judgments, fines, settlements and other amounts
incurred (including expenses of a derivative action) in connection with any
proceeding, whether actual or threatened, to which any such person may be made a
party by reason of the fact that such person is or was a Director or an
executive officer of the Registrant or any of its affiliated enterprises,
provided that such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
Registrant and, with respect to any criminal proceeding, had no reasonable cause
to believe his conduct was unlawful. The indemnification agreements also set
forth certain procedures that will apply in the event of a claim for
indemnification thereunder.
At present, there is no pending litigation or proceeding involving a
Director, officer or key employee of the Registrant as to which indemnification
is being sought nor is the Registrant aware of any threatened litigation that
may result in claims for indemnification by any officer or Director.
The Registrant has an insurance policy covering the officers and Directors
of the Registrant with respect to certain liabilities, including liabilities
arising under the Securities Act or otherwise.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since September 22, 1994 (inception), the Registrant has sold and issued the
following unregistered securities:
1. During the period, the Registrant granted incentive stock options to
employees, officers and directors of the Registrant under its 1996 Stock
Plan (the "Stock Plan") covering an aggregate of 2,538,654 shares of the
Registrant's Common Stock. Certain of these options vest over a period of
time following their respective date of grant.
2. During the period, the Registrant granted non-statutory stock
options to employees, officers and directors of the Registrant under the
Stock Plan covering an aggregate of 239,227 shares of the Registrant's
Common Stock. Certain of these options vest over a period of time following
their respective date of grant.
3. During the period, the Registrant issued 642,733 shares of its
Common Stock to employees and consultants for $16,700 in cash and $3,227 in
services. An additional 240,732 shares were issued pursuant to the exercise
of incentive stock options granted under the Stock Plan.
4. In November 1994 and May 1995, pursuant to the terms of an equity
financing of the Registrant, the Registrant issued 333,333 shares of Series
A Preferred Stock for $500,000 to certain investors.
5. In September 1995, pursuant to the terms of an equity financing of
the Registrant, the Registrant issued 412,500 shares of Series A-1 Preferred
Stock for $660,000 to certain investors. In connection with such financing,
the Registrant issued warrants to purchase 50,000 shares of Series A-1
Preferred Stock at an exercise price of $1.60 per share to certain of such
investors.
6. In April through October 1996, pursuant to the terms of an equity
financing of the Registrant, the Registrant issued 4,090,909 shares of
Series B Preferred Stock for $9,000,000 to certain investors.
7. In April 1997, the Registrant issued a warrant to purchase 25,758
shares of Series B Preferred Stock at an exercise price of $2.20 per share
in connection with an equipment loan agreement.
II-2
<PAGE>
8. In April 1997, the Registrant issued a warrant to purchase 13,636
shares of Series B Preferred Stock at an exercise price of $2.20 per share
in connection with the establishment of a capital lease facility.
9. In July 1997, pursuant to the terms of an equity financing of the
Registrant, the Registrant issued 4,444,443 shares of Series C Preferred
Stock for $19,999,993.50 to certain investors.
10. In August 1997, in connection with the Registrant's facilities
lease, the Registrant issued a warrant to purchase 20,000 shares of the
Registrant's Common Stock at an exercise price of $5.40 per share.
11. In September 1997, the Registrant issued 50,000 shares of its Common
Stock to Genaissance Pharmaceuticals, Inc. in connection with a negotiated
settlement.
12. The Registrant issued a warrant to purchase 48,889 shares of its
Common Stock at an exercise price of $4.50 per share to Hambrecht & Quist
LLC for services as placement agent for Registrant's Series C Preferred
Stock financing, which closed on July 15, 1997.
13. In September 1997, the Registrant issued a warrant to purchase 4,293
shares of Series B Preferred Stock at an exercise price of $2.20 per share
in connection with an equipment loan agreement.
The sales and issuances of securities in the transactions described in
paragraphs (1), (2) and (3) above were deemed to be exempt from registration
under the Securities Act by virtue of Rule 701 promulgated thereunder in that
they were offered and sold either pursuant to written compensatory benefit plans
or pursuant to a written contract relating to compensation, as provided by Rule
701.
With respect to the grant of stock options described in paragraphs (1) and
(2) above exemption from registration under the Securities Act was unnecessary
in that none of such transactions involved a "sale" of securities as such term
is used in Section 2(3) of the Securities Act.
The sales and issuances of securities in the transactions described in
paragraphs (4) through (13) above were deemed to be exempt from registration
under the Securities Act by virtue of Section 4(2) and/ or Regulation D
promulgated thereunder.
The recipients represented their intention to acquire the securities for
investment purposes only and not with a view to the distribution thereof.
Appropriate legends are affixed to the stock certificates issued in such
transactions. Similar legends were imposed in connection with any subsequent
sales of any such securities. All recipients either received adequate
information about the Registrant of had access, though employment or other
relationships, to such information.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- - - ---------- --------------------------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement.
3.1 Restated Certificate of Incorporation.
3.2 Amended and Restated Certificate of Incorporation, to be filed and become effective immediately
following this offering.
3.3* By-laws, as amended.
3.4 By-laws, as amended and restated, to become effective immediately following this offering.
4.1 References made to Exhibits 3.1, 3.2 and 3.3.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- - - ---------- --------------------------------------------------------------------------------------------------------
<C> <S>
4.2* Specimen Stock Certificate.
5.1* Opinion of Cooley Godward LLP.
10.1 Form of Indemnity Agreement entered into between Registrant and its directors and executive officers.
10.2 Registrant's 1997 Equity Incentive Plan (the "Stock Plan").
10.3 Form of Stock Option Agreement under the Stock Plan.
10.4 Form of Stock Option Grant Notice.
10.5 Registrant's Employee Stock Purchase Plan and related offering document.
10.6 Registrant's Non-Employee Directors' Stock Option Plan.
10.7 Form of Nonstatutory Stock Option under the Non-Employee Directors' Stock Option Plan.
10.8 Stock Restriction Agreement, dated July 31, 1996, between the Registrant and Mark D. Gessler.
10.9 Stock Restriction Agreement, dated December 20, 1996, between the Registrant and Mark D. Gessler.
10.10 Stock Restriction Agreement, dated February 29, 1996, between the Registrant and Michael J. Brennan.
10.11 Amended and Restated Investor Rights Agreement, dated July 15, 1997, between the Registrant and certain
investors.
10.12 Employment Agreement, dated October 31, 1995, between the Registrant and Michael J. Brennan.
10.13 Amendment to Employment Agreement, dated July 9, 1997, between the Registrant and Michael J. Brennan.
10.14 Employment Agreement, dated May 16, 1996, between the Registrant and Mark D. Gessler.
10.15 Amendment to Employment Agreement, dated July 9, 1997, between the Registrant and Mark D. Gessler.
10.16 Series A-1 Convertible Preferred Stock Purchase Warrant, dated August 1, 1995, issued to Oxford
Bioscience Partners L.P.
10.17 Series A-1 Convertible Preferred Stock Purchase Warrant, dated August 1, 1995, issued to Oxford
Bioscience Partners (Bermuda) Limited Partnership.
10.18 Warrant for the purchase of shares of Common Stock, dated August 29, 1997, between Registrant and
ARE-708 Quince Orchard, LLC.
10.19 Warrant, dated April 24, 1997, issued to Venture Lending & Leasing, Inc.
10.20 Warrant issued to Hambrecht & Quist LLC.
10.21* Lease Agreement, dated May 7, 1997, between Registrant and M.O.R. XVIII Associates Limited Partnership.
10.22 Lease Agreement, dated August 22, 1997, between Registrant and ARE-708 Quince Orchard, LLC.
10.23* Lease Agreement, dated March 18, 1996, between Registrant and Comdisco, Inc.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- - - ---------- --------------------------------------------------------------------------------------------------------
<C> <S>
10.24+ Target Discovery Collaboration and License Agreement, dated May 27, 1997, between Registrant and Procter
& Gamble Pharmaceuticals, Inc. ("Procter & Gamble").
10.25+ Promissory Note, dated May 27, 1997, between Registrant and Procter & Gamble.
10.26+ Drug Target and Drug Lead Discovery Collaboration Agreement, dated September 9, 1997, between Registrant
and Japan Tobacco Inc.
10.27 Share Purchase Agreement, dated September 9, 1997, between Registrant and Japan Tobacco Inc.
10.28+ License Agreement, dated May 22, 1996, between Registrant and Yale University.
10.29+ Amendment, dated October 1, 1997, to the License Agreement between Registrant and Yale University.
10.30+ Sole Commercial Patent License Agreement, dated June 15, 1997, between Registrant and Lockheed Martin
Energy Research Company.
10.31+ License Agreement, dated May 30, 1997, between Registrant and Dr. Kenneth L. Beattie.
11.1 Statement Re Computation of Per Share Earnings.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.
24.1 Power of Attorney. Reference is made to page II-6.
27.1 Financial Data Schedule
</TABLE>
- - - ------------------------
* To be filed by amendment.
+ Confidential Treatment has been requested with respect to certain portions
of this exhibit. Omitted portions will be filed separately with the
Securities and Exchange Commission.
(B) SCHEDULES
All schedules are omitted because they are not required, are not applicable
or the information is included in the financial statements or notes thereto.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to provisions described in Item 15 or otherwise, the registrant has
been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the 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 a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-5
<PAGE>
The undersigned Registrant hereby undertakes:
(1) That, for purposes of determining any liability under the Act, each
filing of the registrant's annual report pursuant to Section 13(a) or 15(d)
of the Exchange Act (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the Exchange Act)
that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(2) That, for purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(3) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, 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 Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Columbia, County of Columbia, State of Maryland, on
the 6th day of October, 1997.
<TABLE>
<S> <C> <C>
By: /s/ MICHAEL J. BRENNAN
------------------------------------------
Michael J. Brennan, M.D., Ph.D.
PRESIDENT, CHIEF EXECUTIVE OFFICER AND
DIRECTOR
</TABLE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Michael J. Brennan and Mark D. Gessler, and each
of them, as his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place, and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments, exhibits thereto and other documents in connection therewith) to
this Registration Statement and any subsequent registration statement filed by
the registrant pursuant to Rule 462(b) of the Securities Act of 1933, as
amended, which relates to this Registration Statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- - - ------------------------------------------------------ --------------------------------- ----------------------
<C> <S> <C>
/s/ MICHAEL J. BRENNAN President, Chief Executive October 6, 1997
------------------------------------------- Officer and Director (PRINCIPAL
Michael J. Brennan, M.D., Ph.D. EXECUTIVE OFFICER)
/s/ MARK D. GESSLER Senior Vice President, Corporate October 6, 1997
------------------------------------------- Development and Chief Financial
Mark D. Gessler Officer (PRINCIPAL FINANCIAL
AND ACCOUNTING OFFICER)
/s/ ALAN G. WALTON Chairman of the Board of October 6, 1997
------------------------------------------- Directors
Alan G. Walton, Ph.D., D.Sc.
/s/ JULES BLAKE Director October 6, 1997
-------------------------------------------
Jules Blake, Ph.D.
/s/ CHARLES L. DIMMLER III Director October 6, 1997
-------------------------------------------
Charles L. Dimmler III
/s/ G. ANTHONY GORRY Director October 6, 1997
-------------------------------------------
G. Anthony Gorry, Ph.D.
/s/ JEFFREY D. SOLLENDER Director October 6, 1997
-------------------------------------------
Jeffrey D. Sollender
</TABLE>
II-7
<PAGE>
Exhibit 1.1
DRAFT DATED 10/7/97
3,000,000 Shares (1)
GENE LOGIC INC.
Common Stock
UNDERWRITING AGREEMENT
______________, 1997
BANCAMERICA ROBERTSON STEPHENS
HAMBRECHT & QUIST LLC
UBS SECURITIES LLC
As Representatives of the several Underwriters
c/o BancAmerica Robertson Stephens
555 California Street
Suite 2600
San Francisco, California 94104
Ladies/Gentlemen:
GENE LOGIC INC., a Delaware corporation (the "Company"), addresses you as
the Representatives of each of the persons, firms and corporations listed in
Schedule A hereto (herein collectively called the "Underwriters") and hereby
confirms its agreement with the several Underwriters as follows:
1. Description of Shares. The Company proposes to issue and sell
3,000,000 shares of its authorized and unissued Common Stock, $.01 par value
per share (the "Firm Shares"), to the several Underwriters. The Company also
proposes to grant to the Underwriters an option to purchase up to 450,000
additional shares of the Company's Common Stock, $.01 par value per share
(the "Option Shares"), as provided in Section 7 hereof. As used in this
Agreement, the term "Shares" shall include the Firm Shares and the Option
Shares. All shares of Common Stock, $.01 par value per share, of the Company
to be outstanding after giving effect to the sales contemplated hereby,
including the Shares, are hereinafter referred to as "Common Stock."
2. Representations, Warranties and Agreements of the Company. The
Company represents and warrants to and agrees with each Underwriter that:
___________________
(1) Plus an option to purchase up to 450,000 additional
shares from the Company to cover over-allotments.
<PAGE>
(a) A registration statement on Form S-1 (File No. 333-_______)
with respect to the Shares, including a prospectus subject to completion, has
been prepared by the Company in conformity with the requirements of the
Securities Act of 1933, as amended (the "Act"), and the applicable rules and
regulations (the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") under the Act and has been filed with the
Commission; such amendments to such registration statement, such amended
prospectuses subject to completion and such abbreviated registration
statements pursuant to Rule 462(b) of the Rules and Regulations as may have
been required prior to the date hereof have been similarly prepared and filed
with the Commission; and the Company will file such additional amendments to
such registration statement, such amended prospectuses subject to completion
and such abbreviated registration statements as may hereafter be required.
Copies of such registration statement and amendments, of each related
prospectus subject to completion (the "Preliminary Prospectuses") and of any
abbreviated registration statement pursuant to Rule 462(b) of the Rules and
Regulations have been delivered to you or your counsel and, to the extent
applicable, were identical to the electronically transmitted copies thereof
filed with the Commission pursuant to the Commission's Electronic Data
Gathering, Analysis and Retrieval System ("EDGAR"), except to the extent
permitted by Regulation S-T.
If the registration statement relating to the Shares has been
declared effective under the Act by the Commission, the Company will prepare
and promptly file with the Commission the information omitted from the
registration statement pursuant to Rule 430A(a) or, if BancAmerica Robertson
Stephens, on behalf of the several Underwriters, shall agree to the
utilization of Rule 434 of the Rules and Regulations, the information
required to be included in any term sheet filed pursuant to Rule 434(b) or
(c), as applicable, of the Rules and Regulations pursuant to subparagraph
(1), (4) or (7) of Rule 424(b) of the Rules and Regulations or as part of a
post-effective amendment to the registration statement (including a final
form of prospectus). If the registration statement relating to the Shares
has not been declared effective under the Act by the Commission, the Company
will prepare and promptly file an amendment to the registration statement,
including a final form of prospectus, or, if BancAmerica Robertson Stephens,
on behalf of the several Underwriters, shall agree to the utilization of Rule
434 of the Rules and Regulations, the information required to be included in
any term sheet filed pursuant to Rule 434(b) or (c), as applicable, of the
Rules and Regulations. The term "Registration Statement" as used in this
Agreement shall mean such registration statement, including financial
statements, schedules and exhibits, in the form in which it became or
becomes, as the case may be, effective (including, if the Company omitted
information from the registration statement pursuant to Rule 430A(a) or files
a term sheet pursuant to Rule 434 of the Rules and Regulations, the
information deemed to be a part of the registration statement at the time it
became effective pursuant to Rule 430A(b) or Rule 434(d) of the Rules and
Regulations) and, in the event of any amendment thereto or the filing of any
abbreviated registration statement pursuant to Rule 462(b) of the Rules and
Regulations relating thereto after the effective date of such registration
statement, shall also mean (from and after the effectiveness of such
amendment or the filing of such abbreviated registration statement) such
registration statement as so amended, together with any such abbreviated
registration statement. The term "Prospectus" as used in this Agreement
shall mean the prospectus relating to the Shares as included in such
Registration Statement at the time it
2
<PAGE>
becomes effective (including, if the Company omitted information from the
Registration Statement pursuant to Rule 430A(a) of the Rules and Regulations,
the information deemed to be a part of the Registration Statement at the time
it became effective pursuant to Rule 430A(b) of the Rules and Regulations);
provided, however, that if in reliance on Rule 434 of the Rules and
Regulations and with the consent of BancAmerica Robertson Stephens, on behalf
of the several Underwriters, the Company shall have provided to the
Underwriters a term sheet pursuant to Rule 434(b) or (c), as applicable,
prior to the time that a confirmation is sent or given for purposes of
Section 2(10)(a) of the Act, the term "Prospectus" shall mean the "prospectus
subject to completion" (as defined in Rule 434(g) of the Rules and
Regulations) last provided to the Underwriters by the Company and circulated
by the Underwriters to all prospective purchasers of the Shares (including
the information deemed to be a part of the Registration Statement at the time
it became effective pursuant to Rule 434(d) of the Rules and Regulations).
Notwithstanding the foregoing, if any revised prospectus shall be provided to
the Underwriters by the Company for use in connection with the offering of
the Shares that differs from the prospectus referred to in the immediately
preceding sentence (whether or not such revised prospectus is required to be
filed with the Commission pursuant to Rule 424(b) of the Rules and
Regulations), the term "Prospectus" shall refer to such revised prospectus
from and after the time it is first provided to the Underwriters for such
use. If in reliance on Rule 434 of the Rules and Regulations and with the
consent of BancAmerica Robertson Stephens, on behalf of the several
Underwriters, the Company shall have provided to the Underwriters a term
sheet pursuant to Rule 434(b) or (c), as applicable, prior to the time that a
confirmation is sent or given for purposes of Section 2(10)(a) of the Act,
the Prospectus and the term sheet, together, will not be materially different
from the prospectus in the Registration Statement. For purposes of this
Agreement, all references to the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any amendment or supplement to any of the
foregoing shall be deemed to include the respective copies thereof filed with
the Commission pursuant to EDGAR.
(b) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus or instituted proceedings
for that purpose, and each such Preliminary Prospectus has conformed in all
material respects to the requirements of the Act and the Rules and
Regulations and, as of its date, has not included any untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; and at the time the Registration Statement became or
becomes, as the case may be, effective and at all times subsequent thereto up
to and on the Closing Date (hereinafter defined) and on any later date on
which Option Shares are to be purchased, (i) the Registration Statement and
the Prospectus, and any amendments or supplements thereto, contained and will
contain all material information required to be included therein by the Act
and the Rules and Regulations and will in all material respects conform to
the requirements of the Act and the Rules and Regulations, (ii) the
Registration Statement, and any amendments or supplements thereto, did not
and will not include any 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 not misleading, and (iii) the Prospectus, and any
amendments or supplements thereto, did not and will not include any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein, in the light of the circumstances under
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which they were made, not misleading; provided, however, that none of the
representations and warranties contained in this subparagraph (b) shall apply
to information contained in or omitted from the Registration Statement or
Prospectus, or any amendment or supplement thereto, in reliance upon, and in
conformity with, written information relating to any Underwriter furnished to
the Company by such Underwriter specifically for use in the preparation
thereof.
(c) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the jurisdiction of its
incorporation with full power and authority (corporate and other) to own,
lease and operate its properties and conduct its business as described in the
Prospectus; the Company is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the
ownership or leasing of its properties or the conduct of its business
requires such qualification, except where the failure to be so qualified or
be in good standing would not have a material adverse effect on the condition
(financial or otherwise), earnings, operations, business or business
prospects of the Company; no proceeding has been instituted in any such
jurisdiction, revoking, limiting or curtailing, or seeking to revoke, limit
or curtail, such power and authority or qualification; the Company is in
possession of and operating in compliance with all authorizations, licenses,
approvals, certificates, consents, orders and permits from state, federal and
other regulatory authorities including, without limitation, the United States
Food and Drug Administration (the "FDA"), the Drug Enforcement Agency (the
"DEA") and the United States Environment Protection Agency (the "EPA"), which
are material to the conduct of its business, all of which are valid and in
full force and effect; there are no FDA, DEA or EPA enforcement actions
pending or, to the best knowledge of the Company, threatened against the
Company; the Company is not in violation of its charter or bylaws or in
default in the performance or observance of any material obligation,
agreement, covenant or condition contained in any material bond, debenture,
note or other evidence of indebtedness, or in any material lease, contract,
indenture, mortgage, deed of trust, loan agreement, joint venture or other
agreement or instrument to which the Company is a party or by which it or its
properties may be bound; and the Company is not in material violation of any
law, order, rule, regulation, writ, injunction, judgment or decree of any
court, government or governmental agency or body, domestic or foreign, having
jurisdiction over the Company or over itsproperties of which it has
knowledge. The Company does not own or control, directly or indirectly, any
corporation,
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association or other entity.
(d) The Company has full legal right, power and authority to enter
into this Agreement and perform the transactions contemplated hereby. This
Agreement has been duly authorized, executed and delivered by the Company and
is a valid and binding agreement on the part of the Company, enforceable in
accordance with its terms, except as rights to indemnification hereunder may
be limited by applicable law and except as the enforcement hereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights generally or by
general equitable principles; the performance of this Agreement and the
consummation of the transactions herein contemplated will not result in a
material breach or violation of any of the terms and provisions of, or
constitute a default under, (i) any bond, debenture, note or other evidence
of indebtedness, or under any lease, contract, indenture, mortgage, deed of
trust, loan agreement, joint venture or other agreement or instrument to
which the Company is a party or by which it or any of its properties may be
bound, (ii) the charter or bylaws of the Company, or (iii) any law, order,
rule, regulation, writ, injunction, judgment or decree of any court,
government or governmental agency or body, domestic or foreign, having
jurisdiction over the Company or over its properties. No consent, approval,
authorization or order of or qualification with any court, government or
governmental agency or body, domestic or foreign, having jurisdiction over
the Company or over its properties is required for the execution and delivery
of this Agreement and the consummation by the Company of the transactions
herein contemplated, except such as may be required under the Act, the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (if
applicable), under state or other securities or Blue Sky laws, or under the
rules and regulations of the National Association of Securities Dealers, Inc.
(the "NASD"), all of which requirements have been satisfied in all material
respects.
(e) There is not any pending or, to the best of the Company's
knowledge, threatened action, suit, claim or proceeding against the Company
or any of its officers or any of its properties, assets or rights before any
court, government or governmental agency or body, domestic or foreign, having
jurisdiction over the Company or over its officers or properties or otherwise
which (i) might result in any material adverse change in the condition
(financial or otherwise), earnings, operations, business or business
prospects of the Company or might materially and adversely affect its
properties, assets or rights, (ii) might prevent consummation of the
transactions contemplated hereby or (iii) is required to be disclosed in the
Registration Statement or Prospectus and is not so disclosed; and there are
no agreements, contracts, leases or documents of the Company of a character
required to be described or referred to in the Registration Statement or
Prospectus or to be filed as an exhibit to the Registration Statement by the
Act or the Rules and Regulations which have not been accurately described in
all material respects in the Registration Statement or Prospectus or filed as
exhibits to the Registration Statement.
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(f) All outstanding shares of capital stock of the Company have
been duly authorized and validly issued and are fully paid and nonassessable,
have been issued in compliance with all federal and state securities laws,
were not issued in violation of or subject to any preemptive rights or other
rights to subscribe for or purchase securities, and the authorized and
outstanding capital stock of the Company is as set forth in the Prospectus
under the caption "Capitalization" and conforms in all material respects to
the statements relating thereto contained in the Registration Statement and
the Prospectus (and such statements correctly state the substance of the
instruments defining the capitalization of the Company); the Firm Shares and
the Option Shares have been duly authorized for issuance and sale to the
Underwriters pursuant to this Agreement and, when issued and delivered by the
Company against payment therefor in accordance with the terms of this
Agreement, will be duly and validly issued and fully paid and nonassessable,
and will be sold free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest; and no preemptive right, co-sale
right, registration right, right of first refusal or other similar right of
stockholders exists with respect to any of the Firm Shares or Option Shares
or the issuance and sale thereof other than those that have been expressly
waived prior to the date hereof and those that will automatically expire upon
and/or will not apply to the consummation of the transactions contemplated on
the Closing Date. No further approval or authorization of any stockholder,
the Board of Directors of the Company or others is required for the issuance
and sale or transfer of the Shares except as may be required under the Act or
under state or other securities or Blue Sky laws or pursuant to the rules and
regulations of the NASD. Except as disclosed in or contemplated by the
Prospectus and the financial statements of the Company, and the related notes
thereto, included in the Prospectus, there are no outstanding options to
purchase, or preemptive rights or other rights to subscribe for or to
purchase, any securities or obligations convertible into, or any contracts or
commitments to issue or sell, shares of the capital stock of the Company or
any such options, rights, convertible securities or obligations. The
description of the Company's stock option, stock bonus and other stock plans
or arrangements, and the options or other rights granted and exercised
thereunder, set forth in the Prospectus accurately and fairly presents the
information required to be shown with respect to such plans, arrangements,
options and rights.
(g) Arthur Andersen LLP, which has examined the consolidated
financial statements of the Company, together with the related schedules and
notes, as of December 31, 1995 and 1996 and for the period from September 22,
1994 (inception) through December 31, 1994 and the years ended December 31,
1995 and 1996 filed with the Commission as a part of the Registration
Statement, which are included in the Prospectus, are independent accountants
within the meaning of the Act and the Rules and Regulations; the audited
consolidated financial statements of the Company, together with the related
schedules and notes, and the unaudited consolidated financial information,
forming part of the Registration Statement and Prospectus, fairly present the
financial position and the results of operations of the Company at the
respective dates and for the respective periods to which they
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<PAGE>
apply; and all audited consolidated financial statements of the Company,
together with the related schedules and notes, and the unaudited consolidated
financial information, filed with the Commission as part of the Registration
Statement, have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods involved
except as may be otherwise stated therein. The selected and summary
financial and statistical data included in the Registration Statement present
fairly the information shown therein and have been compiled on a basis
consistent with the audited financial statements presented therein. No other
financial statements or schedules are required to be included in the
Registration Statement.
(h) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, there has not been (i)
any material adverse change in the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company, (ii) any
transaction that is material to the Company, except transactions entered into
in the ordinary course of business, (iii) any obligation, direct or
contingent, that is material to the Company, incurred by the Company, except
obligations incurred in the ordinary course of business, (iv) any change in
the capital stock or outstanding indebtedness of the Company that is material
to the Company, (v) any dividend or distribution of any kind declared, paid
or made on the capital stock of the Company, or (vi) any loss or damage
(whether or not insured) to the property of the Company which has been
sustained or will have been sustained which has a material adverse effect on
the condition (financial or otherwise), earnings, operations, business or
business prospects of the Company.
(i) Except as set forth in the Registration Statement and
Prospectus, (i) the Company has good and marketable title to all properties
and assets described in the Registration Statement and Prospectus as owned by
it, free and clear of any pledge, lien, security interest, encumbrance, claim
or equitable interest, other than such as would not have a material adverse
effect on the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company, (ii) the agreements to which
the Company is a party described in the Registration Statement and Prospectus
are valid agreements, enforceable by the Company, except as the enforcement
thereof may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors' rights
generally or by general equitable principles and, to the best of the
Company's knowledge, the other contracting party or parties thereto are not
in material breach or material default under any of such agreements, and
(iii) the Company has valid and enforceable leases for all properties
described in the Registration Statement and Prospectus as leased by it,
except as the enforcement thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally or by general equitable principles.
Except as set forth in the Registration Statement and Prospectus, the Company
owns or leases all such properties as are necessary to its operations as now
conducted or as proposed to be conducted.
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(j) The Company has timely filed all necessary federal, state and
foreign income and franchise tax returns and has paid all taxes shown
thereon as due, and there is no tax deficiency that has been or, to the best
of the Company's knowledge, might be asserted against the Company that might
have a material adverse effect on the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company; and all
tax liabilities are adequately provided for on the books of the Company.
(k) The Company maintains insurance with insurers of recognized
financial responsibility of the types and in the amounts generally deemed
adequate for its business and consistent with insurance coverage maintained
by similar companies in similar businesses, including, but not limited to,
insurance covering real and personal property owned or leased by the Company
against theft, damage, destruction, acts of vandalism and all other risks
customarily insured against, all of which insurance is in full force and
effect; the Company has not been refused any insurance coverage sought or
applied for; and the Company does not have any reason to believe that it will
not be able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business at a cost that would not materially and
adversely affect the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company.
(l) To the best of Company's knowledge, no labor disturbance by the
employees of the Company exists or is imminent; and the Company is not aware
of any existing or imminent labor disturbance by the employees of any of its
principal suppliers, subassemblers, value added resellers, subcontractors,
original equipment manufacturers, authorized dealers or international
distributors that might be expected to result in a material adverse change in
the condition (financial or otherwise), earnings, operations, business or
business prospects of the Company. No collective bargaining agreement exists
with any of the Company's employees and, to the best of the Company's
knowledge, no such agreement is imminent.
(m) The Company owns or possesses adequate rights to use all
patents, patent rights, patent applications, inventions, trade secrets,
know-how, trademarks, trademark applications, service marks, service mark
applications, trade names, copyrights or other information (collectively,
"Intellectual Property") which are necessary to conduct its businesses as
now, or as proposed to be, conducted by it as described in the Registration
Statement and Prospectus; the expiration of any Intellectual Property would
not have a material adverse effect on the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company; the
Company has not received any notice of, and has no knowledge of, any
infringement of or conflict with asserted rights of the Company by others
with respect to any Intellectual Property (except as disclosed in the
Prospectus); the Company has not received any notice of, and has no knowledge
of, any infringement of or conflict with asserted rights of others with
respect to any Intellectual Property which, singly or in the aggregate, if
the subject of an unfavorable decision,
8
<PAGE>
ruling or finding, might have a material adverse effect on the condition
(financial or otherwise), earnings, operations, business or business
prospects of the Company; and to the knowledge of the Company, none of the
patents owned or licensed by the Company are unenforceable or invalid. The
Company has duly and properly filed or caused to be filed with the United
States Patent and Trademark Office (the "PTO") and applicable foreign and
international patent authorities all patent applications described or
referred to in the Prospectus, and believes it has complied with the PTO's
duty of candor and disclosure for each of the United States patent and patent
applications described or referred to in the Prospectus; to the best of the
Company's knowledge, all assignments from each named inventor to the Company
or Licensor (as defined below), as the case may be, have been executed and
recorded with the PTO for each patent and patent application; the Company is
unaware of any facts which would preclude the grant of a patent from each of
the patent applications described or referred to in the Prospectus; the
Company has no knowledge of any facts which would preclude it from having
clear title to its patents and patent applications referenced in the
Prospectus; and the Company has not terminated or breached any material
agreement covering its Intellectual Property rights, except where such breach
would not have a material adverse effect on the condition (financial or
otherwise), earnings, operations, business or business prospects of the
Company. The Company is not aware of the granting of any patents to third
parties or the filing of patent applications by third parties or any other
rights of third parties to any of the Company's Intellectual Property. The
Company is not aware of any pending U.S. or foreign patent applications
which, if issued, would limit materially or prohibit the business now
conducted or proposed to be conducted by the Company as described in the
Registration Statement and the Prospectus (except as described therein).
(n) The Common Stock has been approved for quotation on The Nasdaq
National Market, subject to official notice of issuance.
(o) The Company has been advised concerning the Investment Company
Act of 1940, as amended (the "1940 Act"), and the rules and regulations
thereunder, and has in the past conducted, and intends in the future to
conduct, its affairs in such a manner as to ensure that it will not become an
"investment company" or a company "controlled" by an "investment company"
within the meaning of the 1940 Act and such rules and regulations.
(p) The Company has not distributed and will not distribute prior
to the later of (i) the Closing Date, or any date on which Option Shares are
to be purchased, as the case may be, and (ii) completion of the distribution
of the Shares, any offering material in connection with the offering and sale
of the Shares other than any Preliminary Prospectuses, the Prospectus, the
Registration Statement and other materials, if any, permitted by the Act.
(q) The Company has not at any time during the last five (5) years
(i) made any unlawful contribution to any candidate for foreign office or
failed to disclose fully any contribution in violation of law, or (ii) made
any payment to any federal or state governmental officer or official, or
other person charged with similar public
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<PAGE>
or quasi-public duties, other than payments required or permitted by the laws
of the United States or any jurisdiction thereof.
(r) The Company has not taken and will not take, directly or
indirectly, any action designed to or that might reasonably be expected to
cause or result in stabilization or manipulation of the price of the Common
Stock to facilitate the sale or resale of the Shares.
(s) (i) Each of the individuals listed in Exhibit 2(s) hereto,
including each officer and director of the Company and each beneficial owner
of greater than 1% of the outstanding shares of capital stock of the Company,
and certain additional securityholders of the Company, has agreed in writing
that such person will not, directly or indirectly, without the prior written
consent of BancAmerica Robertson Stephens, sell, offer, contract to sell,
pledge, grant any option to purchase or otherwise dispose of (collectively, a
"Disposition") any shares of Common Stock, any options or warrants to
purchase any shares of Common Stock, or any securities convertible into or
exchangeable for, or any other rights to purchase or acquire, Common Stock
(collectively, "Securities") held by such person, acquired by such person
after the date of the lock-up letter agreement (the "Lock-Up Agreement") or
which may be deemed to be beneficially owned by such person pursuant to the
Rules and Regulations promulgated under the Act, for a period commencing on
the date of the execution of the Lock-Up Agreement and ending 180 days after
the date the Registration Statement is declared effective by the Commission
(the "Lock-Up Period"). The foregoing restriction has been expressly agreed
to preclude the holder of Securities from engaging in any hedging or other
transaction which is designed to or reasonably expected to lead to or result
in a Disposition of Securities during the Lock-Up Period, even if such
Securities would be disposed of by someone other than such holder. Such
prohibited hedging or other transactions would include, without limitation,
any short sale (whether or not against the box) or any purchase, sale or
grant of any right (including, without limitation, any put or call option)
with respect to any Securities or with respect to any security (other than a
broad-based market basket or index) that includes, relates to or derives any
significant part of its value from Securities. Notwithstanding the
foregoing, such person may transfer any or all of the Securities (i) as a
bona fide gift or gifts (including, but not limited to, a transfer without
consideration to any trust for the benefit of any member of the immediate
family of such person or to any partnership or other entity all of whose
beneficial ownership is held by such person or members of his or her
immediate family) or (ii) as a distribution to limited partners or
shareholders of such person; provided, however, that in any case it shall be
a condition to the transfer that the transferee execute an agreement stating
that the transferee is receiving and holding the Securities subject to the
foregoing restrictions. Such person has also agreed to notify BancAmerica
Robertson Stephens in writing prior to any transfer of Securities.
Furthermore, such person has also agreed and consented to the entry of stop
transfer instructions with the Company's transfer agent against the transfer
of the Securities held by such person except in compliance with this
restriction. The Company has provided to counsel for the Underwriters a
complete and accurate list of all securityholders of the Company and the
number and type of securities held by each securityholder. The Company has
provided to counsel for the Underwriters true, accurate and complete copies
of all of the Lock-Up Agreements presently in effect or effected hereby.
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The Company hereby represents and warrants that it will not release any of
its officers, directors or shareholders from any Lock-Up Agreements currently
existing or hereafter effected without the prior written consent of
BancAmerica Robertson Stephens.
(ii) Each holder of an option or warrant to purchase Common
Stock is either subject to a Lock-Up Agreement, or is required to execute a
Lock-Up Agreement before receiving any shares of Common Stock from the
Company during the Lock-Up Period. The Company hereby represents and
warrants that during the Lock-Up Period, it will obtain an executed Lock-Up
Agreement from each person who wishes to exercise an option or warrant to
purchase Common Stock prior to the issuance of such Common Stock.
(t) Except as set forth in the Registration Statement and
Prospectus, (i) the Company is in compliance with all rules, laws and
regulations relating to the use, treatment, storage and disposal of toxic
substances and protection of health or the environment ("Environmental Laws")
which are applicable to its business, except where the failure to be in
compliance would not have a material adverse effect on the condition
(financial or otherwise), earnings, operations, business or business
prospects of the Company, (ii) the Company has received no notice from any
governmental authority or third party of an asserted claim under
Environmental Laws, which claim is required to be disclosed in the
Registration Statement and the Prospectus, (iii) the Company will not be
required to make future material capital expenditures to comply with
Environmental Laws and (iv) no property which is owned, leased or occupied by
the Company has been designated as a Superfund site pursuant to the
Comprehensive Response, Compensation, and Liability Act of 1980, as amended
(42 U.S.C. Section 9601, et seq), or otherwise designated as a contaminated
site under applicable state or local law.
(u) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets, (iii) access to assets
is permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accountability for assets is compared
with existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
(v) There are no outstanding loans, advances (except normal
advances for business expenses in the ordinary course of business) or
guarantees of indebtedness by the Company to or for the benefit of any of the
officers or directors of the Company or any of the members of the families of
any of them, except as disclosed in the Registration Statement and the
Prospectus.
3. Purchase, Sale and Delivery of Shares. On the basis of the
representations, warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, the Company agrees to sell to the
Underwriters, and each Underwriter agrees, severally and not jointly, to
purchase from the Company, at a purchase price of $_____ per share, the
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respective number of Firm Shares as hereinafter set forth. The obligation of
each Underwriter to the Company shall be to purchase from the Company that
number of Firm Shares which is set forth opposite the name of such
Underwriter in Schedule A hereto (subject to adjustment as provided in
Section 10).
Delivery of definitive certificates for the Firm Shares to be purchased
by the Underwriters pursuant to this Section 3 shall be made against payment
of the purchase price therefor by the several Underwriters by certified or
official bank check or checks drawn in next-day funds, payable to the order
of the Company (and the Company agrees not to deposit any such check in the
bank on which it is drawn, and not to take any other action with the purpose
or effect of receiving immediately available funds, until the business day
following the date of its delivery to the Company, and, in the event of any
breach of the foregoing, the Company shall reimburse the Underwriters for the
interest lost and any other expenses borne by them by reason of such breach),
at the offices of Cooley Godward LLP, 4365 Executive Drive, Suite 1100, San
Diego, CA 92121-2128 (or at such other place as may be agreed upon among the
Representatives and the Company), at 7:00 A.M., San Francisco time (a) on the
third (3rd) full business day following the first day that Shares are traded,
(b) if this Agreement is executed and delivered after 1:30 P.M., San
Francisco time, the fourth (4th) full business day following the day that
this Agreement is executed and delivered or (c) at such other time and date
not later than seven (7) full business days following the first day that
Shares are traded as the Representatives and the Company may determine (or at
such time and date to which payment and delivery shall have been postponed
pursuant to Section 10 hereof), such time and date of payment and delivery
being herein called the "Closing Date" provided, however, that if the Company
has not made available to the Representatives copies of the Prospectus within
the time provided in Section 4(d) hereof, the Representatives may, in their
sole discretion, postpone the Closing Date until no later than two (2) full
business days following delivery of copies of the Prospectus to the
Representatives. The certificates for the Firm Shares to be so delivered
will be made available to you at such office or such other location
including, without limitation, in New York City, as you may reasonably
request for checking at least one (1) full business day prior to the Closing
Date and will be in such names and denominations as you may request, such
request to be made at least two (2) full business days prior to the Closing
Date. If the Representatives so elect, delivery of the Firm Shares may be
made by credit through full fast transfer to the accounts at The Depository
Trust Company designated by the Representatives.
It is understood that you, individually, and not as the Representatives
of the several Underwriters, may (but shall not be obligated to) make payment
of the purchase price on behalf of any Underwriter or Underwriters whose
check or checks shall not have been received by you prior to the Closing Date
for the Firm Shares to be purchased by such Underwriter or Underwriters. Any
such payment by you shall not relieve any such Underwriter or Underwriters of
any of its or their obligations hereunder.
After the Registration Statement becomes effective, the several
Underwriters intend to make an initial public offering (as such term is
described in Section 11 hereof) of the Firm Shares at an initial public
offering price of $____ per share. After the initial public offering, the
several Underwriters may, in their discretion, vary the initial public
offering price.
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The information set forth in the last paragraph on the front cover page
(insofar as such information relates to the Underwriters), on the inside
front cover page of the Prospectus concerning stabilization and
over-allotment by the Underwriters, and under the second, seventh and ninth
paragraphs under the caption "Underwriting" in any Preliminary Prospectus and
in the Final Prospectus constitutes the only information furnished by the
Underwriters to the Company for inclusion in any Preliminary Prospectus, the
Prospectus or the Registration Statement, and you, on behalf of the
respective Underwriters, represent and warrant to the Company that the
statements made therein do not include any 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 the light of the circumstances
under which they were made, not misleading.
4. Further Agreements of the Company. The Company agrees with the
several Underwriters that:
(a) The Company will use its best efforts to cause the Registration
Statement and any amendment thereof, if not effective at the time and date
that this Agreement is executed and delivered by the parties hereto, to
become effective as promptly as possible; the Company will use its best
efforts to cause any abbreviated registration statement pursuant to Rule
462(b) of the Rules and Regulations as may be required subsequent to the date
the Registration Statement is declared effective to become effective as
promptly as possible; the Company will notify you, promptly after it shall
receive notice thereof, of the time when the Registration Statement, any
subsequent amendment to the Registration Statement or any abbreviated
registration statement has become effective or any supplement to the
Prospectus has been filed; if the Company omitted information from the
Registration Statement at the time it was originally declared effective in
reliance upon Rule 430A(a) of the Rules and Regulations, the Company will
provide evidence satisfactory to you that the Prospectus contains such
information and has been filed, within the time period prescribed, with the
Commission pursuant to subparagraph (1) or (4) of Rule 424(b) of the Rules
and Regulations or as part of a post-effective amendment to such Registration
Statement as originally declared effective which is declared effective by the
Commission; if the Company files a term sheet pursuant to Rule 434 of the
Rules and Regulations, the Company will provide evidence satisfactory to you
that the Prospectus and term sheet meeting the requirements of Rule 434(b) or
(c), as applicable, of the Rules and Regulations, have been filed, within the
time period prescribed, with the Commission pursuant to subparagraph (7) of
Rule 424(b) of the Rules and Regulations; if for any reason the filing of the
final form of Prospectus is required under Rule 424(b)(3) of the Rules and
Regulations, it will provide evidence satisfactory to you that the Prospectus
contains such information and has been filed with the Commission within the
time period prescribed; it will notify you promptly of any request by the
Commission for the amending or supplementing of the Registration Statement or
the Prospectus or for additional information; promptly upon your request, it
will prepare and file with the Commission any amendments or supplements to
the Registration Statement or Prospectus which, in the opinion of counsel for
the several Underwriters ("Underwriters' Counsel"), may be necessary or
advisable in connection with the distribution of the Shares by the
Underwriters; it will promptly prepare and file with the Commission, and
promptly notify you of the filing of, any amendments or supplements to the
Registration Statement or Prospectus which may be necessary to correct any
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statements or omissions, if, at any time when a prospectus relating to the
Shares is required to be delivered under the Act, any event shall have
occurred as a result of which the Prospectus or any other prospectus relating
to the Shares as then in effect would include any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; in case any Underwriter is required to deliver a
prospectus nine (9) months or more after the effective date of the
Registration Statement in connection with the sale of the Shares, it will
prepare promptly upon request, but at the expense of such Underwriter, such
amendment or amendments to the Registration Statement and such prospectus or
prospectuses as may be necessary to permit compliance with the requirements
of Section 10(a)(3) of the Act; and it will file no amendment or supplement
to the Registration Statement or Prospectus which shall not previously have
been submitted to you a reasonable time prior to the proposed filing thereof
or to which you shall reasonably object in writing, subject, however, to
compliance with the Act and the Rules and Regulations, and the provisions of
this Agreement.
(b) The Company will advise you, promptly after it shall receive
notice or obtain knowledge, of the issuance of any stop order by the
Commission suspending the effectiveness of the Registration Statement or of
the initiation or threat of any proceeding for that purpose; and it will
promptly use its best efforts to prevent the issuance of any stop order or to
obtain its withdrawal at the earliest possible moment if such stop order
should be issued.
(c) The Company will use its best efforts to qualify the Shares for
offering and sale under the securities laws of such jurisdictions as you may
designate and to continue such qualifications in effect for so long as may be
required for purposes of the distribution of the Shares, except that the
Company shall not be required in connection therewith or as a condition
thereof to qualify as a foreign corporation or to execute a general consent
to service of process in any jurisdiction in which it is not otherwise
required to be so qualified or to so execute a general consent to service of
process. In each jurisdiction in which the Shares shall have been qualified
as above provided, the Company will make and file such statements and reports
in each year as are or may be required by the laws of such jurisdiction.
(d) The Company will furnish to you, as soon as available, and, in
the case of the Prospectus and any term sheet or abbreviated term sheet under
Rule 434, in no event later than the first (1st) full business day following
the first day that Shares are traded, copies of the Registration Statement
(three of which will be signed and which will include all exhibits), each
Preliminary Prospectus, the Prospectus and any amendments or supplements to
such documents, including any prospectus prepared to permit compliance with
Section 10(a)(3) of the Act, all in such quantities as you may from time to
time reasonably request. Notwithstanding the foregoing, if BancAmerica
Robertson Stephens, on behalf of the several Underwriters, shall agree to the
utilization of Rule 434 of the Rules and Regulations, the Company shall
provide to you copies of a Preliminary Prospectus updated in all respects
through the date specified by you in such quantities as you may from time to
time reasonably request. To the extent applicable, such documents shall be
identical to the electronically transmitted copies thereof filed with the
Commission pursuant to EDGAR, except to the extent permitted by Regulation
S-T.
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(e) The Company will make generally available to its
securityholders as soon as practicable, but in any event not later than the
forty-fifth (45th) day following the end of the fiscal quarter first
occurring after the first anniversary of the effective date of the
Registration Statement, an earnings statement (which will be in reasonable
detail but need not be audited) complying with the provisions of Section
11(a) of the Act and covering a twelve (12) month period beginning after the
effective date of the Registration Statement. To the extent applicable, such
reports or documents shall be identical to the electronically transmitted
copies thereof filed with the Commission pursuant to EDGAR, except to the
extent permitted by Regulation S-T.
(f) During a period of five (5) years after the date hereof, the
Company will furnish to its stockholders as soon as practicable after the end
of each respective period, annual reports (including financial statements
audited by independent certified public accountants) and unaudited quarterly
reports of operations for each of the first three quarters of the fiscal
year, and will furnish to you and the other several Underwriters hereunder,
upon request (i) concurrently with furnishing such reports to its
stockholders, statements of operations of the Company for each of the first
three (3) quarters in the form furnished to the Company's stockholders, (ii)
concurrently with furnishing to its stockholders, a balance sheet of the
Company as of the end of such fiscal year, together with statements of
operations, of stockholders' equity, and of cash flows of the Company for
such fiscal year, accompanied by a copy of the certificate or report thereon
of independent certified public accountants, (iii) as soon as they are
available, copies of all reports (financial or other) mailed to stockholders,
(iv) as soon as they are available, copies of all reports and financial
statements furnished to or filed with the Commission, any securities exchange
or the NASD, (v) every material press release and every material news item or
article in respect of the Company or its affairs which was generally released
to stockholders or prepared by the Company, and (vi) any additional
information of a public nature concerning the Company, or its business which
you may reasonably request. During such five (5) year period, if the Company
shall have active subsidiaries, the foregoing financial statements shall be
on a consolidated basis to the extent that the accounts of the Company and
its subsidiaries are consolidated, and shall be accompanied by similar
financial statements for any significant subsidiary which is not so
consolidated.
(g) The Company will apply the net proceeds from the sale of the
Shares being sold by it in the manner set forth under the caption "Use of
Proceeds" in the Prospectus.
(h) The Company will maintain a transfer agent and, if necessary
under the jurisdiction of incorporation of the Company, a registrar (which
may be the same entity as the transfer agent) for its Common Stock.
(i) If the transactions contemplated hereby are not consummated by
reason of any failure, refusal or inability on the part of the Company to
perform any agreement on its part to be performed hereunder or to fulfill any
condition of the Underwriters' obligations hereunder, or if the Company shall
terminate this Agreement pursuant to Section 11(a) hereof, or if the
Underwriters shall terminate this Agreement pursuant to Section 11(b)(i), the
Company will
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reimburse the several Underwriters for all out-of-pocket expenses (including
fees and disbursements of Underwriters' Counsel) incurred by the Underwriters
in investigating or preparing to market or marketing the Shares.
(j) If at any time during the ninety (90) day period after the
Registration Statement becomes effective, any rumor, publication or event
relating to or affecting the Company shall occur as a result of which in your
opinion the market price of the Common Stock has been or is likely to be
materially affected (regardless of whether such rumor, publication or event
necessitates a supplement to or amendment of the Prospectus), the Company
will, after written notice from you advising the Company to the effect set
forth above, forthwith prepare, consult with you concerning the substance of
and disseminate a press release or other public statement, reasonably
satisfactory to you, responding to or commenting on such rumor, publication
or event.
(k) During the Lock-Up Period, the Company will not, without the
prior written consent of BancAmerica Robertson Stephens, effect the
Disposition of, directly or indirectly, any securities other than (i) the
sale of the Firm Shares and the Option Shares hereunder, (ii) the sale of
shares of Common Stock to Japan Tobacco Inc. as described in the Prospectus,
(iii) the sale of shares of Common Stock, or securities convertible into
Common Stock, in connection with any corporate partnership or strategic
alliance of the Company, provided that the recipient of such shares or
securities agrees in writing not to effect the Disposition of, directly or
indirectly, such shares or securities during the Lock-Up Period, without the
prior written consent of BancAmercia Robertson Stephens, (iv) the issuance of
shares of Common Stock, or securities convertible into Common Stock, in
connection with the acquisition by the Company of any assets or other
businesses, provided that the recipient of such shares or
securities agrees in writing not to effect the Disposition of, directly or
indirectly, such shares or securities during the Lock-Up Period, without the
prior written consent of BancAmercia Robertson Stephens, (v) the Company's
issuance of options or Common Stock under the Company's 1997 Equity Incentive
Plan and Non-Employee Directors' Stock Option Plan (the "Option Plans"),
(vi) the issuance of Common Stock upon the exercise of stock options issued
under the Option Plans by directors, employees, or consultants of the Company,
(vii) the issuance of Common Stock under the Company's Employee Stock Purchase
Plan, or (viii) the issuance of Common Stock upon the exercise of warrants
outstanding as of the date hereof, as described in the Prospectus, provided,
however, that during the Lock-Up Period, the Company will obtain an executed
Lock-Up Agreement from each person who wishes to exercise an option or warrant
to purchase Common Stock prior to the issuance of such Common Stock.
(l) During the Lock-Up Period, the Company will not file or cause
to become effective any registration statement relating to any securities of
the Company, including a registration statement registering shares under the
Option Plan or other employee benefit plan, without the prior written consent
of BancAmerica Robertson Stephens.
5. Expenses.
(a) The Company agrees with each Underwriter that:
(i) The Company will pay and bear all costs and expenses in
connection with the preparation, printing and filing of the Registration
Statement
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(including financial statements, schedules and exhibits),
Preliminary Prospectuses and the Prospectus and any amendments or
supplements thereto; the printing of this Agreement, the Agreement Among
Underwriters, the Selected Dealer Agreement, the Preliminary Blue Sky
Survey and any Supplemental Blue Sky Survey, the Underwriters'
Questionnaire and Power of Attorney, and any instruments related to any of
the foregoing; the issuance and delivery of the Shares hereunder to the
several Underwriters, including transfer taxes, if any, the cost of all
certificates representing the Shares and transfer agents' and registrars'
fees; the fees and disbursements of counsel for the Company; all fees and
other charges of the Company's independent certified public accountants;
the cost of furnishing to the several Underwriters copies of the
Registration Statement (including appropriate exhibits), Preliminary
Prospectus and the Prospectus, and any amendments or supplements to any of
the foregoing; NASD filing fees and the cost of qualifying the Shares under
the laws of such jurisdictions as you may designate (including filing fees
and fees and disbursements of Underwriters' Counsel in connection with such
NASD filings and Blue Sky qualifications); and all other expenses directly
incurred by the Company in connection with the performance of their
obligations hereunder.
(ii) In addition to its other obligations under Section 8(a)
hereof, the Company agrees that, as an interim measure during the pendency
of any claim, action, investigation, inquiry or other proceeding described
in Section 8(a) hereof, it will reimburse the Underwriters on a monthly
basis for all reasonable legal or other expenses incurred in connection
with investigating or defending any such claim, action, investigation,
inquiry or other proceeding, notwithstanding the absence of a judicial
determination as to the propriety and enforceability of the Company's
obligation to reimburse the Underwriters for such expenses and the
possibility that such payments might later be held to have been improper by
a court of competent jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, the Underwriters
shall promptly return such payment to the Company together with interest,
compounded daily, determined on the basis of the prime rate (or other
commercial lending rate for borrowers of the highest credit standing)
listed from time to time in The Wall Street Journal which represents the
base rate on corporate loans posted by a substantial majority of the
nation's thirty (30) largest banks (the "Prime Rate"). Any such interim
reimbursement payments which are not made to the Underwriters within thirty
(30) days of a request for reimbursement shall bear interest at the Prime
Rate from the date of such request.
(b) In addition to their other obligations under Section 8(b)
hereof, the Underwriters severally and not jointly agree that, as an interim
measure during the pendency of any claim, action, investigation, inquiry or
other proceeding described in Section 8(b) hereof, they will reimburse the
Company on a monthly basis for all reasonable legal or other expenses
incurred in connection with investigating or defending any such claim,
action, investigation, inquiry or other proceeding, notwithstanding the
absence of a judicial determination as to the propriety and enforceability of
the Underwriters' obligation to reimburse the Company for such expenses and
the possibility that such payments might later be held to have been improper
by a
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court of competent jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, the Company shall
promptly return such payment to the Underwriters together with interest,
compounded daily, determined on the basis of the Prime Rate. Any such
interim reimbursement payments which are not made to the Company within
thirty (30) days of a request for reimbursement shall bear interest at the
Prime Rate from the date of such request.
(c) It is agreed that any controversy arising out of the operation
of the interim reimbursement arrangements set forth in Sections 5(a)(ii) and
5(b) hereof, including the amounts of any requested reimbursement payments,
the method of determining such amounts and the basis on which such amounts
shall be apportioned among the reimbursing parties, shall be settled by
arbitration conducted under the provisions of the Constitution and Rules of
the Board of Governors of the New York Stock Exchange, Inc. or pursuant to
the Code of Arbitration Procedure of the NASD. Any such arbitration must be
commenced by service of a written demand for arbitration or a written notice
of intention to arbitrate, therein electing the arbitration tribunal. In the
event the party demanding arbitration does not make such designation of an
arbitration tribunal in such demand or notice, then the party responding to
said demand or notice is authorized to do so. Any such arbitration will be
limited to the operation of the interim reimbursement provisions contained in
Sections 5(a)(ii) and 5(b) hereof and will not resolve the ultimate propriety
or enforceability of the obligation to indemnify for expenses which is
created by the provisions of Sections 8(a) and 8(b) hereof or the obligation
to contribute to expenses which is created by the provisions of Section 8(d)
hereof.
6. Conditions of Underwriters' Obligations. The obligations of the
several Underwriters to purchase and pay for the Shares as provided herein
shall be subject to the accuracy, as of the date hereof and the Closing Date
and any later date on which Option Shares are to be purchased, as the case
may be, of the representations and warranties of the Company herein, to the
performance by the Company of their respective obligations hereunder and to
the following additional conditions:
(a) The Registration Statement shall have become effective not
later than 2:00 P.M., San Francisco time, on the date of this Agreement or
such later date as shall be consented to in writing by you; and no stop order
suspending the effectiveness thereof shall have been issued and no
proceedings for that purpose shall have been initiated or, to the knowledge
of the Company or any Underwriter, threatened by the Commission, and any
request of the Commission for additional information (to be included in the
Registration Statement or the Prospectus or otherwise) shall have been
complied with to the satisfaction of Underwriters' Counsel.
(b) All corporate proceedings and other legal matters in connection
with this Agreement, the form of Registration Statement and the Prospectus,
and the registration, authorization, issue, sale and delivery of the Shares,
shall have been reasonably satisfactory to Underwriters' Counsel, and such
counsel shall have been furnished with such papers and information as they
may reasonably have requested to enable them to pass upon the matters
referred to in this Section.
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(c) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date, or any later date on which Option Shares are to be
purchased, as the case may be, there shall not have been any change in the
condition (financial or otherwise), earnings, operations, business or
business prospects of the Company from that set forth in the Registration
Statement or Prospectus, which, in your sole judgment, is material and
adverse and that makes it, in your sole judgment, impracticable or
inadvisable to proceed with the initial public offering of the Shares as
contemplated by the Prospectus; and
(d) You shall have received on the Closing Date and on any later
date on which Option Shares are purchased, as the case may be, the following
opinion of counsel for the Company, dated the Closing Date or such later date
on which Option Shares are purchased, addressed to the Underwriters and with
reproduced copies or signed counterparts thereof for each of the
Underwriters, to the effect that:
(i) The Company and each Significant Subsidiary (as that term is
defined in Regulation S-X of the Act) (if any) has been duly incorporated
and is validly existing as a corporation in good standing under the laws of
the jurisdiction of its incorporation;
(ii) The Company and each Significant Subsidiary (if any) has
the corporate power and authority to own, lease and operate its properties
and to conduct its business as described in the Prospectus;
(iii) To such counsel's knowledge, the Company and each
Significant Subsidiary (if any) is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction, if
any, in which the ownership or leasing of its properties or the conduct of
its business requires such qualification, except where the failure to be
so qualified or be in good standing would not have a material adverse
effect on the financial condition, earnings, operations or business of the
Company and its subsidiaries considered as one enterprise. To such counsel's
knowledge, the Company does not own or control, directly or indirectly,
any corporation, association or other entity.
(iv) The authorized, issued and outstanding capital stock of the
Company was as set forth in the Prospectus under the caption
"Capitalization" as of the date stated therein, the issued and outstanding
shares of capital stock of the Company have been duly and validly issued
and are fully paid and nonassessable, and, to such counsel's knowledge,
have not been issued in violation of or subject to any preemptive right,
co-sale right granted by the Company, right of first refusal or other
similar right;
(v) All issued and outstanding shares of capital stock of each
Significant Subsidiary of the Company (if any) have been duly authorized
and validly issued and are fully paid and nonassessable, and, to such
counsel's knowledge, have not been issued in violation of or subject to any
preemptive right, co-sale right granted by the Company or such Significant
Subsidiary,
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right of first refusal or other similar right and are owned by the
Company free and clear of any pledge, lien, security interest, encumbrance,
claim or equitable interest;
(vi) The Firm Shares or the Option Shares, as the case may be,
have been duly authorized and, upon issuance and delivery against payment
therefor in accordance with the terms hereof, will be duly and validly
issued and fully paid and nonassessable, and will not have been issued in
violation of or subject to any preemptive right, co-sale right granted by
the Company, or, to such counsel's knowledge, right of first refusal, or
other similar right;
(vii) The Company has the corporate power and authority to
enter into this Agreement and to issue, sell and deliver to the
Underwriters the Shares to be issued and sold by it hereunder;
(viii) This Agreement has been duly authorized by all
necessary corporate action on the part of the Company and has been duly
executed and delivered by the Company and, assuming due authorization,
execution and delivery by you, is a valid and binding agreement of the
Company, enforceable in accordance with its terms, except insofar as
indemnification and contribution provisions may be limited by applicable
law and except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting
creditors' rights generally or by general equitable principles and
limitations on the availability of equitable remedies;
(ix) The Registration Statement has become effective under the
Act and, to such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been instituted or are pending or
threatened under the Act;
(x) The Registration Statement and the Prospectus, and each
amendment or supplement thereto (other than the financial statements
(including supporting schedules), financial data and statistical data
derived therefrom as to which such counsel need express no opinion), as of
the effective date of the Registration Statement, complied as to form in
all material respects with the requirements of the Act and the applicable
Rules and Regulations;
(xi) The terms and provisions of the capital stock of the
Company conform in all material respects to the description thereof
contained in the Registration Statement and the Prospectus under the
caption "Description of Capital Stock", the conversion of all of the
Company's outstanding preferred stock into Common Stock has been duly
completed as of the Closing Date, and the statements in the Prospectus
under the captions "Capitalization" and "Description of Capital Stock," to
the extent that they constitute summaries of matters of law or legal
conclusions, have been reviewed by such counsel, are accurate, and fairly
and correctly summarize such matters and conclusions to the extent required
by the Act and applicable Rules and Regulations , and the form of
certificate
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evidencing the Common Stock filed as an exhibit to the Registration
Statement complies with Delaware law;
(xii) The descriptions in the Registration Statement and the
Prospectus of the certificate of incorporation and bylaws of the Company
and of specified sections of the Delaware General Corporation Law and of
Rules 144 and 701 under the the Act are accurate and fairly present
the information required to be presented with respect thereto by the Act
and the applicable Rules and Regulations;
(xiii) To such counsel's knowledge, there are no agreements,
contracts, leases or documents to which the Company is a party of a
character required to be described or referred to in the Registration
Statement or Prospectus under the Act and applicable Rules and Regulations
or to be filed as an exhibit to the Registration Statement which are not
described or referred to therein or filed as required;
(xiv) The performance of this Agreement and the consummation
of the transactions herein contemplated (other than performance of the
Company's indemnification and contribution obligations hereunder,
concerning which no opinion need be expressed) will not (a) result in any
violation of the Company's certificate of incorporation or bylaws or (b) to
such counsel's knowledge, result in a material breach or violation of any
of the terms and provisions of, or constitute a default under, any bond,
debenture, note or other evidence of indebtedness, or any lease, contract,
indenture, mortgage, deed of trust, loan agreement, joint venture or other
agreement or instrument to which the Company is a party or by which its
properties are bound and which is filed as an exhibit to the Registration
Statement, or any applicable statute, rule or regulation known to such
counsel (other than state securities or blue sky laws concerning which no
opinion need be expressed) or, to such counsel's knowledge, any order,
writ or decree of any court, government or governmental agency or body
having jurisdiction over the Company or any Significant Subsidiaries, or
over any of their properties or operations;
(xv) No consent, approval, authorization or order of or
qualification with any court, government or governmental agency or body
having jurisdiction over the Company or any of its subsidiaries, or over
any of their properties or operations is necessary in connection with the
consummation by the Company of the transactions herein contemplated, except
such as have been obtained under the Act or such as may be required under
state or other securities or Blue Sky laws in connection with the purchase
and the distribution of the Shares by the Underwriters;
(xvi) To such counsel's knowledge, there are no legal or
governmental proceedings pending or threatened against the Company or any
of its subsidiaries of a character required to be disclosed in the
Registration Statement or the Prospectus by the Act or the Rules and
Regulations, other than those described therein;
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(xvii) To such counsel's knowledge, except as set forth in the
Registration Statement and Prospectus, no holders of Common Stock or other
securities of the Company have registration rights with respect to
securities of the Company, and all holders of securities of the Company
having rights known to such counsel to registration of such shares of
Common Stock or other securities, because of the filing of the Registration
Statement by the Company have, with respect to the offering contemplated
thereby, waived such rights, or such rights have expired by reason of lapse
of time following notification of the Company's intent to file the
Registration Statement, or such rights do not apply to this offering as a
result of notification of the underwriters' cutback of such registration
rights in accordance with the agreement granting such registration
rights.
(xviii) The issuance of shares of Common Stock in the amount of
$3,000,000 to Japan Tobacco Inc. in a private placement to close
concurrently with the Closing, pursuant to the terms and conditions of the
SharePurchase Agreement dated as of September 9, 1997 between the Company
and Japan Tobacco Inc., is exempt from all registration requirements
under the Act.
In addition, such counsel shall state that such counsel has
participated in conferences with officials and other representatives of the
Company, the Representatives, Underwriters' Counsel and the independent
public accountants of the Company, at which such conferences the contents of
the Registration Statement and Prospectus and related matters were discussed,
and although they have not verified and are not passing on the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or the Prospectus, on the basis of the foregoing, nothing has come
to the attention of such counsel which leads them to believe that, at the
time the Registration Statement became effective, the Registration Statement,
and any amendment thereto, when such amendment became effective (other than
the financial statements
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including supporting schedules, other financial information and statistical
information derived therefrom, as to which such counsel need express no
comment) contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, or that as of its date or at the Closing
Date or any later date on which the Option Shares are to be purchased, as the
case may be, the Prospectus, and any amendment or supplement thereto (except
as aforesaid), contained any untrue statement of a material fact or omitted
to state material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
Counsel rendering the foregoing opinion may rely as to
questions of law not involving the laws of the United States or the States of
California or Delaware upon opinions of local counsel, and as to questions of
fact upon representations or certificates of officers of the Company and of
government officials, in which case their opinion is to state that they are
so relying and that they have no knowledge of any material misstatement or
inaccuracy in any such opinion, representation or certificate. Copies of any
opinion, representation or certificate so relied upon shall be delivered to
you, as Representatives of the Underwriters, and to Underwriters' Counsel.
(e) You shall have received on the Closing Date and on any
later date on which Option Shares are to be purchased, as the case may be, an
opinion of Testa, Hurwitz & Thibeault, LLP, in form and substance
satisfactory to you, with respect to the sufficiency of all such corporate
proceedings and other legal matters relating to this Agreement and the
transactions contemplated hereby as you may reasonably require, and the
Company shall have furnished to such counsel such documents as they may have
requested for the purpose of enabling them to pass upon such matters.
(f) You shall have received on the Closing Date and on any
later date on which Option Shares are to be purchased, as the case may be, a
letter from Arthur Andersen LLP addressed to the Company and the
Underwriters, dated the Closing Date or such later date on which Option
Shares are to be purchased, as the case may be, confirming that they are
independent certified public accountants with respect to the Company within
the meaning of the Act and the applicable published Rules and Regulations and
based upon the procedures described in such letter delivered to you
concurrently with the execution of this Agreement (herein called the
"Original Letter"), but carried out to a date not more than five (5) business
days prior to the Closing Date or such later date on which Option Shares are
to be purchased, as the case may be, (i) confirming, to the extent true, that
the statements and conclusions set forth in the Original Letter are accurate
as of the Closing Date or such later date on which Option Shares are to be
purchased, as the case may be, and (ii) setting forth any revisions and
additions to the statements and conclusions set forth in the Original Letter
which are necessary to reflect any changes in the facts described in the
Original Letter since the date of such letter, or to reflect the availability
of more recent financial statements, data or information. The letter shall
not disclose any change in the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company and its
subsidiaries considered as one enterprise from that set forth in the
Registration Statement or Prospectus, which, in your sole judgment, is
material and adverse and that makes it,
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in your sole judgment, impracticable or inadvisable to proceed with the
initial public offering of the Shares as contemplated by the Prospectus. The
Original Letter from Arthur Andersen LLP shall be addressed to or for the use
of the Underwriters in form and substance satisfactory to the Underwriters
and shall (i) represent, to the extent true, that they are independent
certified public accountants with respect to the Company within the meaning
of the Act and the applicable published Rules and Regulations, (ii) set forth
their opinion with respect to their examination of the consolidated balance
sheet of the Company as of December 31, 1996 and related consolidated
statements of operations, stockholders' equity, and cash flows for the twelve
(12) months ended December 31, 1996, (iii) state that Arthur Andersen LLP has
performed the procedure set out in Statement on Auditing Standards No. 71
("SAS 71") for a review of interim financial information and providing the
report of Arthur Andersen LLP as described in SAS 71 on the financial
statements for the nine months ended September 30, 1997 (the "Quarterly
Financial Statements"), (iv) state that in the course of such review, nothing
came to their attention that leads them to believe that any material
modifications need to be made to any of the Quarterly Financial Statements in
order for them to be in compliance with generally accepted accounting
principles consistently applied across the periods presented, and (v) address
other matters agreed upon by Arthur Andersen LLP and you. In addition, you
shall have received from Arthur Andersen LLP a letter addressed to the
Company and made available to you for the use of the Underwriters stating
that their review of the Company's system of internal accounting controls, to
the extent they deemed necessary in establishing the scope of their
examination of the Company's consolidated financial statements as of December
31, 1996, did not disclose any weaknesses in internal controls that they
considered to be material weaknesses.
(g) You shall have received on the Closing Date and on any
later date on which Option Shares are to be purchased, as the case may be, a
certificate of the Company, dated the Closing Date or such later date on
which Option Shares are to be purchased, as the case may be, signed by the
Chief Executive Officer and Chief Financial Officer of the Company, to the
effect that, and you shall be satisfied that:
(i) The representations and warranties of the Company in this
Agreement are true and correct, as if made on and as of the Closing Date or
any later date on which Option Shares are to be purchased, as the case may
be, and the Company has complied with all the agreements and satisfied all
the conditions on its part to be performed or satisfied at or prior to the
Closing Date or any later date on which Option Shares are to be purchased,
as the case may be;
(ii) No stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose
have been instituted or are pending or threatened under the Act;
(iii) When the Registration Statement became effective and at
all times subsequent thereto up to the delivery of such certificate, the
Registration Statement and the Prospectus, and any amendments or
supplements thereto, contained all material information required to be
included therein by the Act and the Rules and Regulations and
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in all material respects conformed to the requirements of the Act and the
Rules and Regulations, the Registration Statement, and any amendment or
supplement thereto, did not and does not include any 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 not misleading, the
Prospectus, and any amendment or supplement thereto, did not and does not
include any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and, since the
effective date of the Registration Statement, there has occurred no event
required to be set forth in an amended or supplemented Prospectus which has
not been so set forth; and
(iv) Subsequent to the respective dates as of which information
is given in the Registration Statement and Prospectus, there has not been
(a) any material adverse change in the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company and its
subsidiaries considered as one enterprise, (b) any transaction that is
material to the Company and its subsidiaries considered as one enterprise,
except transactions entered into in the ordinary course of business, (c)
any obligation, direct or contingent, that is material to the Company and
its subsidiaries considered as one enterprise, incurred by the Company or
its subsidiaries, except obligations incurred in the ordinary course of
business, (d) any change in the capital stock or outstanding indebtedness
of the Company or any of its subsidiaries that is material to the Company
and its subsidiaries considered as one enterprise, (e) any dividend or
distribution of any kind declared, paid or made on the capital stock of the
Company or any of its subsidiaries, or (f) any loss or damage (whether or
not insured) to the property of the Company or any of its subsidiaries
which has been sustained or will have been sustained which has a material
adverse effect on the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company and its
subsidiaries considered as one enterprise.
(h) You shall have received on the Closing Date, and on any later
date on which Option Shares are to be purchased, the opinions of Seed &
Berry, LLP and Larry S. Millstein, Esq., patent counsel to the Company, dated
the Closing Date and such later date on which Option Shares are to be
purchased, addressed to the Underwriters and with reproduced copies or signed
counterparts thereof for each of the Underwriters, to the effect that they
serve as patent counsel to the Company with respect to the Company's
Intellectual Property, including those patents and patent applications
referred to or described in the Registration Statement and Prospectus, which
in some cases are licensed to the Company from various licensors
(individually, a "Licensor"), and that:
(i) There are no facts which would preclude the Company from having
clear title to the Company's patents and patent applications referred to or
described in the Prospectus, or a valid license to the patents and patent
applications licensed from third parties referred to or described in the
Registration Statement and Prospectus, and identified in such opinion. To
the best of such counsel's knowledge, the Company and each Licensor has
complied with the Patent and Trademark Office ("PTO") duty of
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candor and good faith in dealing with the PTO, including the duty to
disclose to the PTO all information known to be material to the
patentability of each of such United States patents and patent
applications. To the best of such counsel's knowledge, all assignments
from each named inventor to the Company or Licensor, as the case may be,
have been executed and recorded with the PTO for each patent and patent
application. Such counsel has no knowledge that the Company lacks any
rights or licenses to use all patents and know-how necessary to conduct
the business now conducted or proposed to be conducted by the Company as
described in the Registration Statement and Prospectus, except as described
therein. Such counsel has no knowledge of any facts which would form a
basis for a finding that any of the claims of the patents or patent
applications owned or licensed by the Company is unpatentable, unenforceable
or invalid. Such counsel is not aware of any pending U.S. or foreign patent
applications which, if issued, would limit or prohibit the business now
conducted or proposed to be conducted by the Company as described in the
Registration Statement and the Prospectus, except as described therein.
Such counsel is not aware of any patents of others which are or would be
infringed by specific products or processes referred to in the Registration
Statement and Prospectus in such manner as to materially and adversely
affect the Company, except as described therein. Such counsel knows of no
pending or threatened action, suit, proceeding or claim by others that the
Company is infringing any patent which could result in any material adverse
effect on the Company, except as described in the Registration Statement and
the Prospectus;
(ii) there are no legal or governmental proceedings pending relating
to the Patent Rights, other than PTO review of pending applications for
patents, including appeal proceedings, and, to the best of such counsel's
knowledge, no such proceedings are threatened or contemplated by
governmental authorities or others; and
(iii) there are no contracts or other documents material to the
Company's patents or proprietary information other than those described in
the Registration Statement and the Prospectus.
In addition, such counsel shall state that although they have not
verified the accuracy or completeness of the statements contained in the
Registration Statement and Prospectus, nothing has come to the attention of
such counsel that caused them to believe that, at the time the Registration
Statement became effective, or at the Closing Date or at any later date on
which Option Shares are purchased, as the case may be, the Registration
Statement or Prospectus contained any untrue statement of a material fact or
omitted to state a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(i) The Company shall have obtained and delivered to you an
agreement from each officer and director and each beneficial owner of greater
than 1% of the outstanding shares of capital stock of the Company, and
certain additional securityholders of the Company, in writing prior to the
date hereof that such person will not, during the Lock-Up Period, effect a
Disposition of any Securities, otherwise than (i) as a bona fide gift or
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gifts (including, but not limited to, a transfer without consideration to any
trust for the benefit of any member of the immediate family of such person or
to any partnership or other entity all of whose beneficial ownership is held
by such person or members of his or her immediate family), provided the donee
or donees thereof agree in writing to be bound by this restriction, (ii) as a
distribution to limited partners or shareholders of such person, provided
that the distributees thereof agree in writing to be bound by the terms of
this restriction, or (iii) with the prior written consent of BancAmerica
Robertson Stephens. The foregoing restriction shall have been expressly
agreed to preclude the holder of the Securities from engaging in any hedging
or other transaction which is designed to or reasonably expected to lead to
or result in a Disposition of Securities during the Lock-Up Period, even if
such Securities would be disposed of by someone other than the such holder.
Such prohibited hedging or other transactions would including, without
limitation, any short sale (whether or not against the box) or any purchase,
sale or grant of any right (including, without limitation, any put or call
option) with respect to any Securities or with respect to any security (other
than a broad-based market basket or index) that includes, relates to or
derives any significant part of its value from Securities. Furthermore, such
person will have also agreed and consented to the entry of stop transfer
instructions with the Company's transfer agent against the transfer of the
Securities held by such person except in compliance with this restriction.
(j) The Company shall have furnished to you such further
certificates and documents as you shall reasonably request, including
certificates of officers of the Company as to the accuracy of the
representations and warranties of the Company herein, as to the performance
by the Company of its obligations hereunder and as to the other conditions
concurrent and precedent to the obligations of the Underwriters hereunder.
All such opinions, certificates, letters and documents will be in
compliance with the provisions hereof only if they are reasonably
satisfactory to Underwriters' Counsel. The Company will furnish you with
such number of conformed copies of such opinions, certificates, letters and
documents as you shall reasonably request.
7. Option Shares.
(a) On the basis of the representations, warranties and
agreements herein contained, but subject to the terms and conditions herein
set forth, the Company hereby grants to the several Underwriters, for the
purpose of covering over-allotments in connection with the distribution and
sale of the Firm Shares only, a nontransferable option to purchase up to an
aggregate of 450,000 Option Shares at the purchase price per share for
the Firm Shares set forth in Section 3 hereof. Such option may be exercised
by the Representatives on behalf of the several Underwriters on one (1) or
more occasions in whole or in part during the period of thirty (30) days
after the date on which the Firm Shares are initially offered to the public,
by giving written notice to the Company. The number of Option Shares to be
purchased by each Underwriter upon the exercise of such option shall be the
same proportion of the total number of Option Shares to be purchased by the
several Underwriters pursuant to the exercise of such option as the number of
Firm Shares purchased by such Underwriter (set forth in Schedule A
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<PAGE>
hereto) bears to the total number of Firm Shares purchased by the several
Underwriters (set forth in Schedule A hereto), adjusted by the
Representatives in such manner as to avoid fractional shares.
Delivery of definitive certificates for the Option Shares to be
purchased by the several Underwriters pursuant to the exercise of the option
granted by this Section 7 shall be made against payment of the purchase price
therefor by the several Underwriters by certified or official bank check or
checks drawn in next-day funds, payable to the order of the Company (and the
Company agrees not to deposit any such check in the bank on which it is
drawn, and not to take any other action with the purpose or effect of
receiving immediately available funds, until the business day following the
date of its delivery to the Company). In the event of any breach of the
foregoing, the Company shall reimburse the Underwriters for the interest lost
and any other expenses borne by them by reason of such breach. Such delivery
and payment shall take place at the offices of Cooley Godward LLP, 4365
Executive Drive, Suite 1100, San Diego, CA 92121-2128, or at such other place
as may be agreed upon among the Representatives and the Company (i) on the
Closing Date, if written notice of the exercise of such option is received by
the Company at least two (2) full business days prior to the Closing Date, or
(ii) on a date which shall not be later than the third (3rd) full business
day following the date the Company receives written notice of the exercise of
such option, if such notice is received by the Company less than two (2) full
business days prior to the Closing Date.
The certificates for the Option Shares to be so delivered will
be made available to you at such office or such other location including,
without limitation, in New York City, as you may reasonably request for
checking at least one (1) full business day prior to the date of payment and
delivery and will be in such names and denominations as you may request, such
request to be made at least two (2) full business days prior to such date of
payment and delivery. If the Representatives so elect, delivery of the
Option Shares may be made by credit through full fast transfer to the
accounts at The Depository Trust Company designated by the Representatives.
It is understood that you, individually, and not as the
Representatives of the several Underwriters, may (but shall not be obligated
to) make payment of the purchase price on behalf of any Underwriter or
Underwriters whose check or checks shall not have been received by you prior
to the date of payment and delivery for the Option Shares to be purchased by
such Underwriter or Underwriters. Any such payment by you shall not relieve
any such Underwriter or Underwriters of any of its or their obligations
hereunder.
(b) Upon exercise of any option provided for in Section 7(a)
hereof, the obligations of the several Underwriters to purchase such Option
Shares will be subject (as of the date hereof and as of the date of payment
and delivery for such Option Shares) to the accuracy of and compliance with
the representations, warranties and agreements of the Company herein, to the
accuracy of the statements of the Company and officers of the Company made
pursuant to the provisions hereof, to the performance by the Company of its
obligations hereunder, to the conditions set forth in Section 7 hereof and to
the condition that all proceedings taken at or prior to the payment date in
connection with the sale and transfer of such Option
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Shares shall be satisfactory in form and substance to you and to
Underwriters' Counsel, and you shall have been furnished with all such
documents, certificates and opinions as you may request in order to evidence
the accuracy and completeness of any of the representations, warranties or
statements, the performance of any of the covenants or agreements of the
Company or the satisfaction of any of the conditions herein contained.
8. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject (including, without
limitation, in its capacity as an Underwriter or as a "qualified independent
underwriter" within the meaning of Rule 2720(a)(15) of the Conduct Rules
promulgated by the NASD), under the Act, the Exchange Act or otherwise,
specifically including, but not limited to, losses, claims, damages or
liabilities, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon (i) any breach of
any representation, warranty, agreement or covenant of the Company herein
contained, (ii) any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement or any amendment or
supplement thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, or (iii) any untrue statement or alleged
untrue statement of any material fact contained in any Preliminary Prospectus
or the Prospectus or any amendment or supplement thereto, or the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and agrees to
reimburse each Underwriter for any legal or other expenses reasonably
incurred by it in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Company shall
not be liable in any such case to the extent that any such loss, claim,
damage, liability or action arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
the Registration Statement, such Preliminary Prospectus or the Prospectus, or
any such amendment or supplement thereto, in reliance upon, and in conformity
with, written information relating to any Underwriter furnished to the
Company by such Underwriter, directly or through you, specifically for use in
the preparation thereof and, provided further, that the indemnity agreement
provided in this Section 8(a) with respect to any Preliminary Prospectus
shall not inure to the benefit of any Underwriter from whom the person
asserting any losses, claims, damages, liabilities or actions based upon any
untrue statement or alleged untrue statement of material fact or omission or
alleged omission to state therein a material fact purchased Shares, if a copy
of the Prospectus in which such untrue statement or alleged untrue statement
or omission or alleged omission was corrected had not been sent or given to
such person within the time required by the Act and the Rules and
Regulations, unless such failure is the result of noncompliance by the
Company with Section 4(d) hereof.
The indemnity agreement in this Section 8(a) shall extend upon
the same terms and conditions to, and shall inure to the benefit of, each
person, if any, who controls any Underwriter within the meaning of the Act or
the Exchange Act. This indemnity agreement shall be in addition to any
liabilities which the Company may otherwise have.
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(b) Each Underwriter, severally and not jointly, agrees to
indemnify and hold harmless the Company against any losses, claims, damages
or liabilities, joint or several, to which the Company may become subject
under the Act or otherwise, specifically including, but not limited to,
losses, claims, damages or liabilities, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon (i) any breach of any representation, warranty, agreement or
covenant of such Underwriter herein contained, (ii) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement or any amendment or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (iii) any untrue
statement or alleged untrue statement of any material fact contained in any
Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto, or the omission or alleged omission to state therein a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, in the case of subparagraphs (ii)
and (iii) of this Section 8(b) to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished to the Company by such Underwriter, directly or through you,
specifically for use in the preparation thereof, and agrees to reimburse the
Company for any legal or other expenses reasonably incurred by the Company in
connection with investigating or defending any such loss, claim, damage,
liability or action.
The indemnity agreement in this Section 8(b) shall extend upon
the same terms and conditions to, and shall inure to the benefit of, each
officer of the Company who signed the Registration Statement and each
director of the Company, and each person, if any, who controls the Company
within the meaning of the Act or the Exchange Act. This indemnity agreement
shall be in addition to any liabilities which each Underwriter may otherwise
have.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against any indemnifying
party under this Section 8, notify the indemnifying party in writing of the
commencement thereof but the omission so to notify the indemnifying party
will not relieve it from any liability which it may have to any indemnified
party otherwise than under this Section 8. In case any such action is
brought against any indemnified party, and it notified the indemnifying party
of the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it shall elect by written notice
delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified party; provided, however,
that if the defendants in any such action include both the indemnified party
and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those available
to the indemnifying party, the indemnified party or parties shall have the
right to select separate counsel to assume such legal defenses and to
otherwise participate in the defense of such action on behalf of such
indemnified party or parties. Upon receipt of notice from the indemnifying
party to such indemnified party of
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the indemnifying party's election so to assume the defense of such action and
approval by the indemnified party of counsel, the indemnifying party will not
be liable to such indemnified party under this Section 8 for any legal or
other expenses subsequently incurred by such indemnified party in connection
with the defense thereof unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso to the next preceding
sentence (it being understood, however, that the indemnifying party shall not
be liable for the expenses of more than one separate counsel (together with
appropriate local counsel) approved by the indemnifying party representing
all the indemnified parties under Section 8(a) or 8(b) hereof who are parties
to such action), (ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party
within a reasonable time after notice of commencement of the action or (iii)
the indemnifying party has authorized the employment of counsel for the
indemnified party at the expense of the indemnifying party. In no event
shall any indemnifying party be liable in respect of any amounts paid in
settlement of any action unless the indemnifying party shall have approved
the terms of such settlement; provided that such consent shall not be
unreasonably withheld. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is
or could have been a party and indemnification could have been sought
hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
(d) In order to provide for just and equitable contribution in any
action in which a claim for indemnification is made pursuant to this Section
8 but it is judicially determined (by the entry of a final judgment or decree
by a court of competent jurisdiction and the expiration of time to appeal or
the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 8 provides
for indemnification in such case, all the parties hereto shall contribute to
the aggregate losses, claims, damages or liabilities to which they may be
subject (after contribution from others) in such proportion so that the
Underwriters severally and not jointly are responsible pro rata for the
portion represented by the percentage that the underwriting discount bears to
the initial public offering price, and the Company is responsible for the
remaining portion, provided, however, that (i) no Underwriter shall be
required to contribute any amount in excess of the amount by which the
underwriting discount applicable to the Shares purchased by such Underwriter
exceeds the amount of damages which such Underwriter is otherwise required to
pay and (ii) no person guilty of a fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who is not guilty of such fraudulent misrepresentation. The
contribution agreement in this Section 8(d) shall extend upon the same terms
and conditions to, and shall inure to the benefit of, each person, if any,
who controls any Underwriter or the Company within the meaning of the Act or
the Exchange Act and each officer of the Company who signed the Registration
Statement and each director of the Company.
(e) The parties to this Agreement hereby acknowledge that they are
sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof including, without limitation,
the provisions of this Section 8, and are fully informed regarding said
provisions. They further acknowledge that the provisions
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of this Section 8 fairly allocate the risks in light of the ability of the
parties to investigate the Company and its business in order to assure that
adequate disclosure is made in the Registration Statement and Prospectus as
required by the Act and the Exchange Act.
9. Representations, Warranties, Covenants and Agreements to Survive
Delivery. All representations, warranties, covenants and agreements of the
Company and the Underwriters herein or in certificates delivered pursuant
hereto, and the indemnity and contribution agreements contained in Section 8
hereof shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any Underwriter or any person
controlling any Underwriter within the meaning of the Act or the Exchange
Act, or by or on behalf of the Company or any of its officers, directors or
controlling persons within the meaning of the Act or the Exchange Act, and
shall survive the delivery of the Shares to the several Underwriters
hereunder or termination of this Agreement.
10. Substitution of Underwriters. If any Underwriter or Underwriters
shall fail to take up and pay for the number of Firm Shares agreed by such
Underwriter or Underwriters to be purchased hereunder upon tender of such
Firm Shares in accordance with the terms hereof, and if the aggregate number
of Firm Shares which such defaulting Underwriter or Underwriters so agreed
but failed to purchase does not exceed 10% of the Firm Shares, the remaining
Underwriters shall be obligated, severally in proportion to their respective
commitments hereunder, to take up and pay for the Firm Shares of such
defaulting Underwriter or Underwriters.
If any Underwriter or Underwriters so defaults and the aggregate
number of Firm Shares which such defaulting Underwriter or Underwriters
agreed but failed to take up and pay for exceeds 10% of the Firm Shares, the
remaining Underwriters shall have the right, but shall not be obligated, to
take up and pay for (in such proportions as may be agreed upon among them)
the Firm Shares which the defaulting Underwriter or Underwriters so agreed
but failed to purchase. If such remaining Underwriters do not, at the
Closing Date, take up and pay for the Firm Shares which the defaulting
Underwriter or Underwriters so agreed but failed to purchase, the Closing
Date shall be postponed for twenty-four (24) hours to allow the several
Underwriters the privilege of substituting within twenty-four (24) hours
(including non-business hours) another underwriter or underwriters (which may
include any nondefaulting Underwriter) satisfactory to the Company. If no
such underwriter or underwriters shall have been substituted as aforesaid by
such postponed Closing Date, the Closing Date may, at the option of the
Company, be postponed for a further twenty-four (24) hours, if necessary, to
allow the Company the privilege of finding another underwriter or
underwriters, satisfactory to you, to purchase the Firm Shares which the
defaulting Underwriter or Underwriters so agreed but failed to purchase. If
it shall be arranged for the remaining Underwriters or substituted
underwriter or underwriters to take up the Firm Shares of the defaulting
Underwriter or Underwriters as provided in this Section 10, (i) the Company
shall have the right to postpone the time of delivery for a period of not
more than seven (7) full business days, in order to effect whatever changes
may thereby be made necessary in the Registration Statement or the
Prospectus, or in any other documents or arrangements, and the Company agrees
promptly to file any amendments to the Registration Statement, supplements to
the Prospectus or other such documents which may thereby be made necessary,
and (ii) the
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respective number of Firm Shares to be purchased by the remaining
Underwriters and substituted underwriter or underwriters shall be taken as
the basis of their underwriting obligation. If the remaining Underwriters
shall not take up and pay for all such Firm Shares so agreed to be purchased
by the defaulting Underwriter or Underwriters or substitute another
underwriter or underwriters as aforesaid and the Company shall not find or
shall not elect to seek another underwriter or underwriters for such Firm
Shares as aforesaid, then this Agreement shall terminate.
In the event of any termination of this Agreement pursuant to the
preceding paragraph of this Section 10, neither the Company shall be liable
to any Underwriter (except as provided in Sections 5 and 8 hereof) nor shall
any Underwriter (other than an Underwriter who shall have failed, otherwise
than for some reason permitted under this Agreement, to purchase the number
of Firm Shares agreed by such Underwriter to be purchased hereunder, which
Underwriter shall remain liable to the Company and the other Underwriters for
damages, if any, resulting from such default) be liable to the Company
(except to the extent provided in Sections 5 and 8 hereof).
The term "Underwriter" in this Agreement shall include any person
substituted for an Underwriter under this Section 10.
11. Effective Date of this Agreement and Termination.
(a) This Agreement shall become effective at the earlier of (i)
6:30 A.M., San Francisco time, on the first full business day following the
effective date of the Registration Statement, or (ii) the time of the initial
public offering of any of the Shares by the Underwriters after the
Registration Statement becomes effective. The time of the initial public
offering shall mean the time of the release by you, for publication, of the
first newspaper advertisement relating to the Shares, or the time at which
the Shares are first generally offered by the Underwriters to the public by
letter, telephone, telegram or telecopy, whichever shall first occur. By
giving notice as set forth in Section 12 before the time this Agreement
becomes effective, you, as Representatives of the several Underwriters, or
the Company, may prevent this Agreement from becoming effective without
liability of any party to any other party, except as provided in Sections
4(i), 5 and 8 hereof.
(b) You, as Representatives of the several Underwriters, shall have
the right to terminate this Agreement by giving notice as hereinafter
specified at any time on or prior to the Closing Date or on or prior to any
later date on which Option Shares are to be purchased, as the case may be,
(i) if the Company shall have failed, refused or been unable to perform any
agreement on its part to be performed, or because any other condition of the
Underwriters' obligations hereunder required to be fulfilled is not
fulfilled, including, without limitation, any change in the condition
(financial or otherwise), earnings, operations, business or business
prospects of the Company and its subsidiaries considered as one enterprise
from that set forth in the Registration Statement or Prospectus, which, in
your sole judgment, is material and adverse, or (ii) if additional material
governmental restrictions, not in force and effect on the date hereof, shall
have been imposed upon trading in securities generally or minimum or maximum
prices
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shall have been generally established on the New York Stock Exchange or on
the American Stock Exchange or in the over the counter market by the NASD, or
trading in securities generally shall have been suspended on either such
exchange or in the over the counter market by the NASD, or if a banking
moratorium shall have been declared by federal, New York or California
authorities, or (iii) if the Company shall have sustained a loss by strike,
fire, flood, earthquake, accident or other calamity of such
character as to interfere materially with the conduct of the business and
operations of the Company regardless of whether or not such loss shall have
been insured, or (iv) if there shall have been a material adverse change in
the general political or economic conditions or financial markets as in your
reasonable judgment makes it inadvisable or impracticable to proceed with the
offering, sale and delivery of the Shares, or (v) if there shall have been an
outbreak or escalation of hostilities or of any other insurrection or armed
conflict or the declaration by the United States of a national emergency
which, in the reasonable opinion of the Representatives, makes it
impracticable or inadvisable to proceed with the initial public offering of
the Shares as contemplated by the Prospectus. In the event of termination
pursuant to subparagraph (i) above, the Company shall remain obligated to pay
costs and expenses pursuant to Sections 4(i), 5 and 8 hereof. Any
termination pursuant to any of subparagraphs (ii) through (v) above shall be
without liability of any party to any other party except as provided in
Sections 5 and 8 hereof.
If you elect to prevent this Agreement from becoming effective or to
terminate this Agreement as provided in this Section 11, you shall promptly
notify the Company by telephone, telecopy or telegram, in each case confirmed
by letter. If the Company shall elect to prevent this Agreement from
becoming effective, the Company shall promptly notify you by telephone,
telecopy or telegram, in each case, confirmed by letter.
12. Notices. All notices or communications hereunder, except as herein
otherwise specifically provided, shall be in writing and if sent to you shall
be mailed, delivered, telegraphed (and confirmed by letter) or telecopied
(and confirmed by letter) to you c/o BancAmerica Robertson Stephens, 555
California Street, Suite 2600, San Francisco, California 94104, telecopier
number (415) 781-0278, Attention: General Counsel; if sent to the Company,
such notice shall be mailed, delivered, telegraphed (and confirmed by letter)
or telecopied (and confirmed by letter) to 10150 Old Columbia Road, Columbia,
Maryland 21046, telecopier number (410) 309-3111, Attention: Chief Executive
Officer.
13. Parties. This Agreement shall inure to the benefit of and be
binding upon the several Underwriters and the Company and their respective
executors, administrators, successors and assigns. Nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any
person or entity, other than the parties hereto and their respective
executors, administrators, successors and assigns, and the controlling
persons within the meaning of the Act or the Exchange Act, officers and
directors referred to in Section 8 hereof, any legal or equitable right,
remedy or claim in respect of this Agreement or any provisions herein
contained, this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of the parties
hereto and their respective executors, administrators, successors and assigns
and said controlling persons and said officers and directors, and for the
34
<PAGE>
benefit of no other person or entity. No purchaser of any of the Shares from
any Underwriter shall be construed a successor or assign by reason merely of
such purchase.
In all dealings with the Company under this Agreement, you shall act
on behalf of each of the several Underwriters, and the Company shall be
entitled to act and rely upon any statement, request, notice or agreement
made or given by you jointly or by BancAmerica Robertson Stephens on behalf
of you.
14. Applicable Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of California.
15. Counterparts. This Agreement may be signed in several counterparts,
each of which will constitute an original.
35
<PAGE>
If the foregoing correctly sets forth the understanding among the Company
and the several Underwriters, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement among
the Company and the several Underwriters.
Very truly yours,
GENE LOGIC INC.
By: _____________________________
Michael J. Brennan, M.D., Ph.D.
President and Chief Executive Officer
Accepted as of the date first above written:
BANCAMERICA ROBERTSON STEPHENS
HAMBRECHT & QUIST LLC
UBS SECURITIES LLC
On their behalf and on behalf of each of the
several Underwriters named in Schedule A hereto.
BANCAMERICA ROBERTSON STEPHENS
By: ____________________________________
Authorized Signatory
36
<PAGE>
SCHEDULE A
Number of
Firm Shares
To Be
Underwriters Purchased
BancAmerica Robertson Stephens..............................
Hambrecht & Quist LLC.......................................
UBS Securities LLC..........................................
[NAMES OF OTHER UNDERWRITERS]
-----------
Total....................................................... 3,000,000
-----------
-----------
37
<PAGE>
Exhibit 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
GENE LOGIC INC.
(Pursuant to Sections 242 and 245 of the
General Corporation Law of the State of Delaware)
Gene Logic Inc., a Delaware corporation, hereby certifies as follows:
1. The name of the corporation is Gene Logic Inc. The date of filing of
its original Certificate of Incorporation with the Secretary of State was
September 22, 1994, under the name Senatics Corporation.
2. This Restated Certificate of Incorporation amends, restates and
integrates the provisions of the Certificate of Incorporation, as amended, of
said corporation and has been duly adopted pursuant to a resolution adopted by
the Board of Directors and by the holders of (a) at least 66 2/3% of the
outstanding shares of Series A Preferred Stock, Series A-1 Preferred Stock and
Series B Preferred Stock, voting together as a single class, (b) at least 66
2/3% of the outstanding shares of Series A Preferred Stock, Series A-1 Preferred
Stock and Series B Preferred Stock, each series of Preferred Stock voting as a
separate class, (c) not less than a majority of the outstanding shares of Common
Stock, Series A Preferred Stock, Series A-1 Preferred Stock and Series B
Preferred Stock, voting together as a single class, and (d) not less than a
majority of the outstanding shares of Common Stock, voting as a separate class,
acting by written consent in accordance with the provisions of Section 228 of
the General Corporation Law of the State of Delaware. Written notice of the
taking of such action has been given in accordance with Section 228(d) of the
General Corporation Law of the State of Delaware.
3. The text of the Certificate of Incorporation is hereby amended and
restated to read in full as follows:
FIRST. The name of the Corporation is Gene Logic Inc.
SECOND. The address, including street, number, city, and county, of
the registered office of the Corporation in the State of Delaware is 1209 Orange
Street, Wilmington, New Castle County, Delaware; and the name of the registered
agent of the Corporation in the State of Delaware is The Corporation Trust
Company.
THIRD. The nature of the business to be conducted and the purposes
of the Corporation are:
To purchase or otherwise acquire, invest in, own, lease, mortgage,
pledge, sell, assign and transfer or otherwise dispose of, trade and deal in and
with real property and personal property of every kind, class and description
(including, without limitation, goods,
1.
<PAGE>
wares and merchandise of every kind, class and description), to manufacture
goods, wares and merchandise of every kind, class and description, both on its
own account and for others;
To make and perform agreements and contracts of every kind and
description;
To develop and acquire, manage, exploit, license and alienate
patents, processes or formulas, trademarks and copyrights, including all related
rights;
To purchase or otherwise acquire, invest in, own, lease, mortgage,
pledge, sell, assign and transfer or otherwise dispose of, trade and deal in and
with real property and personal property of every kind, class and description
(including, without limitation, goods, wares and merchandise of every kind,
class and description), to manufacture goods, wares and merchandise of every
kind, class and description, both on its own account and for others;
To borrow or lend money, and to make and issue notes, bonds,
debentures, obligations and evidences of indebtedness of all kinds, whether or
not secured by mortgage, pledge, or otherwise, without limit as to amount, and
to secure the same by mortgage, pledge, or otherwise, and generally to make and
perform agreements and contracts of every kind and description; and
Generally to engage in any lawful act or activity or carry on any
business for which corporations may be organized under the Delaware General
Corporation law or any successor statue.
FOURTH. The Corporation shall be authorized to issue a total of
26,550,000 shares of capital stock, which shall be divided into two classes as
follows: (i) 17,000,000 shares of Common Stock, with a par value of one cent
($.01) per share (the "Common Stock"), and (ii) 9,550,000 shares of Preferred
Stock, divided into (a) 333,333 shares of Series A Convertible Preferred Stock,
with a par value of one cent ($.01) per share (the "Series A Preferred Stock"),
(b) 462,500 shares of Series A-1 Convertible Preferred Stock, with a par value
of one cent ($.01) per share (the "Series A-1 Preferred Stock"), (c) 4,154,167
shares of Series B Convertible Preferred Stock, with a par value of one cent
($.01) per share (the "Series B Preferred Stock"), and (d) 4,600,000 shares of
Series C Convertible Preferred Stock, with a par value of one cent ($.01) per
share (the "Series C Preferred Stock"). The Series A Preferred Stock, the Series
A-1 Preferred Stock, the Series B Preferred Stock and the Series C Preferred
Stock shall be collectively known herein as the "Preferred Stock".
The following is a statement of the designations, preferences,
voting powers, qualifications, special or relative rights and privileges in
respect of the authorized capital stock of the Corporation.
2.
<PAGE>
A. Description and Designation of Series A Preferred Stock, Series A-1
Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock.
1. Designation.
(a) Series A Preferred Stock. A total of 333,333 shares of the
Corporation's Preferred Stock shall be designated the "Series A Preferred
Stock".
(b) Series A-1 Preferred Stock. A total of 462,500 shares of the
Corporation's Preferred Stock shall be designated the "Series A-1 Preferred
Stock".
(c) Series B Preferred Stock. A total of 4,154,167 shares of the
Corporation's Preferred Stock shall be designated the "Series B Preferred
Stock".
(d) Series C Preferred Stock. A total of 4,600,000 shares of the
Corporation's Preferred Stock shall be designated the "Series C Preferred
Stock".
2. Dividends.
(a) Restrictions on Distributions. Except to the extent in any
instance approval is provided in writing by the holders of 66 2/3% of the
outstanding shares of Preferred Stock (voting together as a single class), the
Corporation shall not declare or pay any dividends, or purchase, redeem, retire,
or otherwise acquire for value any shares of its capital stock (or rights,
options or warrants to purchase such shares) now or hereafter outstanding,
return any capital to its stockholders as such, or make any distribution of
assets to its stockholders as such, or permit any Subsidiary to do any of the
foregoing. "Subsidiary" or "Subsidiaries" means any corporation, partnership or
joint venture of which the Corporation and/or any of its other Subsidiaries (as
herein defined) directly or indirectly owns at the time at least fifty percent
(50%) of the outstanding voting shares or similar interests other than
directors' qualifying shares.
Notwithstanding the foregoing, nothing herein contained shall
prevent the Corporation from: (i) effecting a stock split or declaring or paying
any dividend consisting of shares of any class of capital stock paid to the
holders of shares of such class of capital stock; (ii) complying with any
specific provision of the terms of the Series A Preferred Stock, the Series A-1
Preferred Stock, the Series B Preferred Stock or the Series C Preferred Stock
(including, without limitation, redemption of the Series A Preferred Stock, the
Series A-1 Preferred Stock, the Series B Preferred Stock or the Series C
Preferred Stock in accordance with their respective terms), (iii) declaring and
paying dividends on the Series B Preferred Stock and/or Series C Preferred Stock
as provided in subsection (b) below; (iv) redeeming any stock of a deceased
stockholder out of insurance held by the Corporation on that stockholder's life;
or (v) repurchasing any stock of any director, officer, employee, consultant
3.
<PAGE>
or other person or entity, subject to a stock repurchase agreement or stock
restriction agreement under which the Corporation has the right or obligation to
repurchase such shares in the event of termination of employment or of the
consulting arrangement, or other similar discontinuation of a business
relationship; provided, however, that any such repurchase under this clause (v)
shall not exceed $50,000 in any twelve-month period without the consent of a
majority of the Preferred Stock Directors (as defined in Section C below).
Furthermore, Subsidiaries may declare and make payment of cash and stock
dividends, return capital and make distributions of assets to the Corporation,
and if such Subsidiary is not wholly-owned, pari passu to other owners.
(b) Preferred Stock Dividends. The holders of Preferred Stock shall
be entitled to receive, out of funds legally available therefore, when and if
declared by the Board of Directors of the Corporation, dividends at the rate per
annum of (i) $0.360 per share of Series C Preferred Stock, (ii) $0.176 per share
of Series B Preferred Stock, (iii) $0.128 per share of Series A-1 Preferred
Stock, and (iv) $0.120 per share of Series A Preferred Stock, each subject to
adjustment for subdivisions (whether by stock split, stock dividend or
otherwise), combinations (by reverse stock split or otherwise), or
recapitalizations (the "Preferred Accruing Dividends"). Only for purposes of the
application of the provisions Section A.3 and A.7 of this Article FOURTH as
applicable, the Preferred Accruing Dividends shall accrue from day to day,
commencing (w) for each share of Series C Preferred Stock on the date of
original issuance of such share (x) for each share of Series B Preferred Stock
on the date of original issuance of such share, (y) for each share of Series A-1
Preferred Stock, on the later of the date of issuance of such share or the date
of filing of this Certificate of Incorporation, and (z) for each share of Series
A Preferred Stock, on the date of filing of this Certificate of Incorporation.
Except as provided in the immediately preceding sentence, the Preferred Accruing
Dividends shall not accrue and shall not be cumulative and the holders of
Preferred Stock shall have no right thereto except if and to the extent the
Board of Directors, in its discretion, shall declare Preferred Accruing
Dividends. In no event may Preferred Accruing Dividends be declared or paid on
any Series of Preferred Stock unless Preferred Accruing Dividends in
proportionate amounts are declared and paid at the same time as for all Series
of Preferred Stock.
(c) Participating Dividends. In the event that the Board of
Directors of the Corporation shall declare a dividend payable upon the then
outstanding shares of Common Stock (other than a stock dividend on the Common
Stock distributed solely in the form of additional shares of Common Stock), the
holders of the Preferred Stock shall be entitled to the amount of dividends per
share of Preferred Stock as would be declared payable on the largest number of
whole shares of Common Stock into which each share of Preferred Stock held by
each holder thereof could be converted pursuant to the provisions of Section A.5
hereof, such number determined as of the record date for the determination of
holders of Common Stock entitled to receive such dividend.
4.
<PAGE>
3. Liquidation, Dissolution or Winding Up.
(a) Treatment at Liquidation, Dissolution or Winding Up
(i) In the event of any liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, or in the event of its
insolvency, before any distribution or payment is made to any holders of Common
Stock or any other class or Series of capital stock of the Corporation
designated to be junior to the Preferred Stock, the holders of each share of
Preferred Stock shall be entitled to be paid, on a pari passu basis, first out
of the assets of the Corporation available for distribution to holders of the
Corporation's capital stock of all classes whether such assets are capital,
surplus or earnings (the "Available Assets"), an amount equal to:
(A) $1.50 per share of Series A Preferred Stock then
outstanding plus an amount per share equal to the Preferred Accruing Dividends
for such share (as defined in Section A.2(b) of this Article FOURTH) unpaid
thereon (whether or not declared), computed to the date payment thereof is made
available, and any other declared but unpaid dividends thereon;
(B) $1.60 per share of Series A-1 Preferred Stock then
outstanding plus an amount per share equal to the Preferred Accruing Dividends
for such share (as defined in Section A.2(b) of this Article FOURTH) unpaid
thereon (whether or not declared), computed to the date payment thereof is made
available, and any other declared but unpaid dividends thereon;
(C) $2.20 per share of Series B Preferred Stock then
outstanding plus an amount per share equal to the Preferred Accruing Dividends
for such share (as defined in Section A.2(b) of this Article FOURTH) unpaid
thereon (whether or not declared), computed to the date payment thereof is made
available, and any other declared but unpaid dividends thereon; and
(D) $4.50 per share of Series C Preferred Stock then
outstanding plus an amount per share equal to the Preferred Accruing Dividends
for such share (as defined in Section A.2(b) of this Article FOURTH) unpaid
thereon (whether or not declared), computed to the date payment thereof is made
available, and any other declared but unpaid dividends thereon.
The amounts set forth above shall be subject to equitable adjustment
whenever there shall occur a stock dividend, stock split, combination,
reorganization, recapitalization, reclassification or other similar event
involving a change in the Series A Preferred Stock, the Series A-1 Preferred
Stock, the Series B Preferred Stock or the Series C Preferred Stock, as the case
may be.
5.
<PAGE>
If, upon liquidation, dissolution or winding up of the Corporation, the
Available Assets shall be insufficient to pay the holders of Preferred Stock the
full amount to which they otherwise would be entitled, the holders of Preferred
Stock shall share ratably in any distribution of Available Assets pro rata in
proportion to the respective liquidation preference amounts which would
otherwise be payable upon liquidation with respect to the outstanding shares of
Preferred Stock if all liquidation preference dollar amounts with respect to
such shares were paid in full.
(ii) After payment has been made in full to the holders of the
Preferred Stock as provided in (i) above or funds necessary for such payment
shall have been set aside by the Corporation in trust for the account of the
holders of Preferred Stock so as to be available for such payment, the remaining
Available Assets available for distribution shall be distributed ratably among
the holders of Preferred Stock and Common Stock, assuming for such purpose that
each share of Preferred Stock had been converted to Common Stock immediately
prior to such event of liquidation, dissolution or winding up pursuant to the
provisions of Section A.5 hereof.
(b) Treatment of Reorganizations, Consolidations, Mergers, and Sales
of Assets. A Reorganization (as defined in Section A.5(i)) shall be regarded as
a liquidation, dissolution or winding up of the affairs of the Corporation
within the meaning of this Section 3; provided, however, that the holders of at
least 66 2/3% of the outstanding shares of Preferred Stock, voting together as a
single class, shall have the right to elect the benefits of the provisions of
Section A.5(i) hereof for the Preferred Stock in lieu of receiving payment in
liquidation, dissolution or winding up of the Corporation pursuant to this
Section 3.
The provisions of this Section 3(b) shall not apply to any
Reorganization involving (1) only a change in the state of incorporation of the
Corporation, (2) a merger of the Corporation with or into a wholly-owned
Subsidiary of the Corporation that is incorporated in the United States of
America, or (3) an acquisition by merger, reorganization or consolidation, of
which the Corporation is substantively the acquiring corporation and operates as
a going concern, of another corporation that is engaged in a business similar or
related to the business of the Corporation and which does not involve a change
in the terms of the Series A Preferred Stock, the Series A-1 Preferred Stock,
the Series B Preferred Stock or the Series C Preferred Stock.
(c) Distributions Other than Cash. Whenever the distribution
provided for in this Section 3 shall be payable in property other than cash, the
value of such distribution shall be the fair market value of such property as
determined in good faith by the Board of Directors of the Corporation. All
distributions (including distributions other than cash) made hereunder shall be
made pro rata with respect to the holders of Series A Preferred Stock, Series
A-1 Preferred Stock, Series B Preferred Stock and Series C Preferred Stock in
proportion to their respective liquidation preference amounts as set forth in
Section 3(a)
6.
<PAGE>
above. In the event of any dispute between the holders of Preferred Stock on the
one hand, and the Corporation, on the other hand, regarding the determination of
the fair market value of non-cash distributions, at the election of the holders
of 66 2/3% of the outstanding shares of Preferred Stock, voting together as a
single class, the Corporation shall engage a consulting or investment banking
firm selected by the Board of Directors and approved (which approval shall not
be unreasonably withheld) by the holders of 66 2/3% of the outstanding shares of
Preferred Stock, voting together as a single class, to prepare an independent
appraisal of the fair market value of such property to be distributed. The
expenses of any appraisal by such consulting or investment banking firm shall be
borne by the Corporation.
4. Voting Rights. Except as otherwise expressly provided in this Restated
Certificate of Incorporation, including, without limitation, Section A.6 and
Section C of this Article FOURTH, or as otherwise required by law, each holder
of Preferred Stock shall be entitled to vote on all matters and shall be
entitled to that number of votes equal to the largest number of whole shares of
Common Stock into which such holder's shares of Preferred Stock could be
converted, pursuant to the provisions of Section A.5 hereof, at the record date
for the determination of stockholders entitled to vote on such matter or, if no
such record date is established, at the date such vote is taken or any written
consent of stockholders is solicited. Except as otherwise expressly provided in
this instrument or as otherwise required by law, the holders of shares of
Preferred Stock and Common Stock shall vote together (or render written consents
in lieu of a vote) as a single class on all matters submitted to the
stockholders of the Corporation.
5. Conversion Rights. The holders of shares of Preferred Stock shall have
the following rights with respect to the conversion of such shares into shares
of Common Stock:
(a) General. Subject to and in compliance with the provisions of
this Section 5, any shares of Preferred Stock may, at the option of any holder,
be converted at any time and from time to time into fully-paid and
non-assessable shares of Common Stock. The number of shares of Common Stock to
which a holder of shares of Preferred Stock shall be entitled to receive upon
conversion shall be the product obtained by multiplying the Applicable
Conversion Rate (determined as provided in Section A.5(b)) by the number of
shares of the applicable Series of Preferred Stock being converted at any time.
(b) Applicable Conversion Rate.
(i) The conversion rate in effect at any time for the Series A
Preferred Stock shall be the quotient obtained by dividing $1.50 by the Series A
Applicable Conversion Value, calculated as provided in Section A.5(c)(i) (the
"Series A Applicable Conversion Rate");
7.
<PAGE>
(ii) The conversion rate in effect at any time for the Series
A-1 Preferred Stock shall be the quotient obtained by dividing $1.60 by the
Series A-1 Applicable Conversion Value, calculated as provided in Section
A.5(c)(ii) (the "Series A-1 Applicable Conversion Rate");
(iii) The conversion rate in effect at any time for the Series
B Preferred Stock shall be the quotient obtained by dividing $2.20 by the Series
B Applicable Conversion Value, calculated as provided in Section A.5(c)(iii)
(the "Series B Applicable Conversion Rate"); and
(iv) The conversion rate in effect at any time for the Series
C Preferred Stock shall be the quotient obtained by dividing $4.50 by the Series
C Applicable Conversion Value, calculated as provided in Section A.5(c)(iv) (the
"Series C Applicable Conversion Rate").
(c) Applicable Conversion Value.
(i) The Series A Applicable Conversion Value in effect from
time to time except as adjusted in accordance with Section A.5(d) or Section
A.5(e)(i) hereof, shall be $1.50 (the "Series A Applicable Conversion Value");
(ii) The Series A-1 Applicable Conversion Value in effect from
time to time, except as adjusted in accordance with Section A.5(d) or Section
A.5(e)(ii) hereof, shall be $1.60 (the "Series A-1 Applicable Conversion
Value");
(iii) The Series B Applicable Conversion Value in effect from
time to time, except as adjusted in accordance with Section A.5(d) or Section
A.5(e)(iii) hereof, shall be $2.20 (the "Series B Applicable Conversion Value");
and
(iv) The Series C Applicable Conversion Value in effect from
time to time, except as adjusted in accordance with Section A.5(d) or Section
A.5(e)(iv) hereof, shall be $4.50 (the "Series C Applicable Conversion Value").
The Series A Applicable Conversion Value, the Series A-1 Applicable Conversion
Value, the Series B Applicable Conversion Value and the Series C Applicable
Conversion Value may hereinafter be called, individually, the "Applicable
Conversion Value".
(d) Adjustments to Applicable Conversion Value.
(i) Upon Dilutive Issuances of Common Stock or Convertible
Securities.
(A) If the Corporation shall, while there are any shares
of Preferred Stock outstanding, issue or sell shares of its Common Stock or
Common Stock
8.
<PAGE>
Equivalents, without consideration or at a price per share less than the
Applicable Conversion Value for a particular Series of Preferred Stock in effect
immediately prior to such issuance or sale, then in each such case the
Applicable Conversion Value for such Series of Preferred Stock, upon each such
issuance or sale, except as hereinafter provided, shall be lowered so as to be
equal to an amount determined by multiplying the Applicable Conversion Value for
such Series of Preferred Stock by a fraction:
(1) the numerator of which shall be (a) the number of
shares of Common Stock outstanding immediately prior to the issuance of such
additional shares of Common Stock or Common Stock Equivalents (calculated on a
fully diluted basis assuming the exercise or conversion of all presently
exercisable options, warrants, purchase rights or convertible securities), plus
(b) the number of shares of Common Stock which the net aggregate consideration,
if any, received by the Corporation for the total number of such additional
shares of Common Stock or Common Stock Equivalents so issued would purchase at
the Applicable Conversion Value for such Series of Preferred Stock in effect
immediately prior to such issuance; and
(2) the denominator of which shall be (a) the number of
shares of Common Stock outstanding immediately prior to the issuance of such
additional shares of Common Stock or Common Stock Equivalents (calculated on a
fully diluted basis assuming the exercise or conversion of all presently
exercisable options, warrants, purchase rights or convertible securities) plus
(b) the number of such additional shares of Common Stock or Common Stock
Equivalents so issued.
(ii) Upon Other Dilutive Issuances of Warrants, Options and
Purchase Rights to Common Stock or Convertible Securities.
(A) (1) Common Stock Equivalents. For the purposes of
this Section A.5(d), the issuance of any warrants, options, subscription
or purchase rights with respect to shares of Common Stock and the issuance
of any securities convertible into or exchangeable for shares of Common
Stock, or the issuance of any warrants, options, subscription or purchase
rights with respect to such convertible or exchangeable securities
(collectively, "Common Stock Equivalents"), shall be deemed an issuance of
Common Stock with respect to a Series of Preferred Stock if the Net
Consideration Per Share (as hereinafter determined) which may be received
by the Corporation for such Common Stock shall be less than the Applicable
Conversion Value for such Series of Preferred Stock in effect at the time
of such issuance. Any obligation, agreement or undertaking to issue Common
Stock Equivalents at any time in the future shall be deemed to be an
issuance at the time such obligation, agreement or undertaking is made or
arises. No adjustment of any Applicable Conversion Value shall be made
under this Section 5(d) upon the issuance of any shares of Common Stock
which are issued pursuant to the exercise, conversion or exchange of any
9.
<PAGE>
Common Stock Equivalents if any adjustment shall previously have been made
upon the issuance of any such Common Stock Equivalents as above provided.
(2) Adjustments for Cancellation or Expiration of Common
Stock Equivalents. Should the Net Consideration Per Share of any such
Common Stock Equivalents be increased or decreased from time to time,
then, upon the effectiveness of each such change, the Applicable
Conversion Value for each Series of Preferred Stock will be that which
would have been obtained (i) had the adjustments made upon the issuance of
such Common Stock Equivalents been made upon the basis of the actual Net
Consideration Per Share (as so increased or decreased) of such securities,
and (ii) had adjustments made to such Applicable Conversion Value since
the date of issuance of such Common Stock Equivalents been made to such
Applicable Conversion as adjusted pursuant to (i) above. Any adjustment of
any Applicable Conversion Value with respect to this paragraph which
relates to Common Stock Equivalents shall be disregarded if, as, and when
all of such Common Stock Equivalents expire or are canceled without being
exercised, so that the Applicable Conversion Value (for a particular
Series of Preferred Stock) effective immediately upon cancellation or
expiration shall be equal to the Applicable Conversion Value in effect at
the time of the issuance of the expired or canceled Common Stock
Equivalents, with such additional adjustments as would have been made to
such Applicable Conversion Value had the expired or canceled Common Stock
Equivalents not been issued.
(B) Net Consideration Per Share. For purposes of this Section
A.5(d), the "Net Consideration Per Share" which may be received by the
Corporation shall be determined as follows:
(1) The "Net Consideration Per Share" shall mean the
amount equal to the total amount of consideration, if any, received by the
Corporation for the issuance of such Common Stock Equivalents, plus the
minimum amount of consideration, if any, payable to the Corporation upon
exercise, or conversion or exchange thereof, divided by the aggregate
number of shares of Common Stock that would be issued if all such Common
Stock Equivalents were exercised, exchanged or converted.
(2) The "Net Consideration Per Share" which may be
received by the Corporation shall be determined in each instance as of the
date of issuance of Common Stock Equivalents, giving effect to any
possible future rate adjustments which may be applicable with respect to
such Common Stock Equivalents only upon the effectiveness of such rate
adjustments.
10.
<PAGE>
(iii) Stock Dividends for Holders of Capital Stock Other than
Common Stock. In the event that the Corporation shall make or issue, or shall
fix a record date for the determination of holders of any capital stock of the
Corporation, other than holders of Common Stock entitled to receive a dividend
or other distribution payable in Common Stock or securities of the Corporation
convertible into or otherwise exchangeable for the Common Stock of the
Corporation, then such Common Stock or other securities issued in payment of
such dividend shall be deemed to have been issued for a consideration of $.01,
except for (i) dividends payable in shares of Common Stock payable pro rata to
holders of Preferred Stock and to holders of any other class of stock (whether
or not paid to holders of any other class of stock), or (ii) with respect to the
Preferred Stock, dividends payable in shares of Preferred Stock; provided,
however, that holders of any shares of Preferred Stock shall be entitled to
receive such shares of Common Stock for which the shares of Preferred Stock are
then convertible.
(iv) Consideration Other than Cash. For purposes of this
Section 5(d), if a part or all of the consideration received by the Corporation
in connection with the issuance of shares of the Common Stock or the issuance of
any of the securities described in this Section 5(d) consists of property other
than cash, such consideration shall be deemed to have a fair market value as is
reasonably determined in good faith by the Board of Directors of the
Corporation. In the event of any dispute between the holders of the Preferred
Stock as to the fair market value of the consideration, at the option of the
holders of a majority of the outstanding shares of Preferred Stock, the
Corporation shall engage a consulting firm or investment banking firm selected
by the holders of a majority of the outstanding shares of Preferred Stock to
prepare an independent appraisal of the fair market value of such property to be
distributed. The expenses of such appraisal shall be borne by the Corporation.
(v) Exceptions to Anti-dilution; Basket for Reserved Employee
Shares. This Section 5(d) shall not apply under any of the circumstances which
would constitute an Extraordinary Common Stock Event (as defined in Section
A.5(e) below). Further, this Section 5(d) shall not apply with respect to:
(A) the issuance or sale of 2,000,000 shares of Common
Stock or such additional number of shares of Common Stock as authorized by the
Board of Directors (including the Preferred Stock Directors), or the grant of
options exercisable therefor, to directors, officers, employees and consultants
of the Corporation or any subsidiary pursuant to any qualified or non-qualified
stock option plan or agreement, stock purchase plan or agreement, stock
restriction agreement, employee stock ownership plan (ESOP), consulting
agreement, or such other options, issuances, arrangements, agreements or plans
approved by a majority of the members of the Board of Directors.
(B) shares of Common Stock issued or issuable upon the
exercise of outstanding warrants for an aggregate of 50,000 shares of Series A-1
Preferred
11.
<PAGE>
Stock issued to the holders of Series A-1 Preferred Stock in connection with the
acquisition of such shares;
(C) shares of Common Stock issued or issuable upon the
exercise of warrants issued in connection with the establishment or maintenance
by the Corporation of credit facilities or equipment financing transactions,
approved in each case by the Board of Directors of the Corporation;
(D) shares of Common Stock issued or deemed issued in
connection with that certain Equity Adjustment Agreement dated March 29, 1996,
by and between the Corporation and Michael J. Brennan, M.D., Ph.D.;
(E) shares of Common Stock issued or issuable in
connection with the acquisition of operating assets (including patents, licenses
and other intellectual property rights) or other businesses or the establishment
of joint ventures or strategic business relationships approved in each case by
the Board of Directors of the Corporation; and
(F) 66,666 shares of Common Stock issued or issuable to
BIOS Laboratories, Inc., provided, that, if less than 66,666 shares are issued
to BIOS Laboratories, Inc., the remaining shares may be issued under (A) above.
All such numbers shall be subject to equitable adjustment in the event of any
stock dividend, stock split, combination, reorganization, recapitalization,
reclassification or other similar event involving a change in the capital
structure of the Corporation.
(e) Adjustments to Applicable Conversion Value of Each Series of
Preferred Stock for Extraordinary Common Stock Events.
(i) Upon the happening of an Extraordinary Common Stock Event
(as hereinafter defined), the Series A Applicable Conversion Value shall,
simultaneously with the happening of such Extraordinary Common Stock Event, be
adjusted by multiplying the Series A Applicable Conversion Value by a fraction,
the numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such Extraordinary Common Stock Event and the denominator
of which shall be the number of shares of Common Stock outstanding immediately
after such Extraordinary Common Stock Event, and the product so obtained shall
thereafter be the Series A Applicable Conversion Value. The Series A Applicable
Conversion Value, as so adjusted, shall be readjusted in the same manner upon
the happening of any successive Extraordinary Common Stock Event or Events.
(ii) Upon the happening of an Extraordinary Common Stock
Event, the Series A-1 Applicable Conversion Value shall, simultaneously with the
happening of such Extraordinary Common Stock Event, be adjusted by multiplying
the Series A-1 Applicable Conversion Value by a fraction, the numerator of which
shall be the number of shares of
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Common Stock outstanding immediately prior to such Extraordinary Common Stock
Event and the denominator of which shall be the number of shares of Common Stock
outstanding immediately after such Extraordinary Common Stock Event, and the
product so obtained shall thereafter be the Series A-1 Applicable Conversion
Value. The Series A-1 Applicable Conversion Value, as so adjusted, shall be
readjusted in the same manner upon the happening of any successive Extraordinary
Common Stock Event or Events.
(iii) Upon the happening of an Extraordinary Common Stock
Event, the Series B Applicable Conversion Value shall, simultaneously with the
happening of such Extraordinary Common Stock Event, be adjusted by multiplying
the Series B Applicable Conversion Value by a fraction, the numerator of which
shall be the number of shares of Common Stock outstanding immediately prior to
such Extraordinary Common Stock Event and the denominator of which shall be the
number of shares of Common Stock outstanding immediately after such
Extraordinary Common Stock Event, and the product so obtained shall thereafter
be the Series B Applicable Conversion Value. The Series B Applicable Conversion
Value, as so adjusted, shall be readjusted in the same manner upon the happening
of any successive Extraordinary Common Stock Event or Events.
(iv) Upon the happening of an Extraordinary Common Stock
Event, the Series C Applicable Conversion Value shall, simultaneously with the
happening of such Extraordinary Common Stock Event, be adjusted by multiplying
the Series C Applicable Conversion Value by a fraction, the numerator of which
shall be the number of shares of Common Stock outstanding immediately prior to
such Extraordinary Common Stock Event and the denominator of which shall be the
number of shares of Common Stock outstanding immediately after such
Extraordinary Common Stock Event, and the product so obtained shall thereafter
be the Series C Applicable Conversion Value. The Series C Applicable Conversion
Value, as so adjusted, shall be readjusted in the same manner upon the happening
of any successive Extraordinary Common Stock Event or Events.
An "Extraordinary Common Stock Event" shall mean (i) the issue of
additional shares of Common Stock as a dividend or other distribution on
outstanding shares of Common Stock, (ii) a subdivision of outstanding shares of
Common Stock into a greater number of shares of Common Stock, or (iii) a
combination or reverse stock split of outstanding shares of Common Stock into a
smaller number of shares of the Common Stock.
(f) Mandatory Conversion Upon Public Offering or Election of
Preferred Stock.
(i) Mandatory Conversion of Preferred Stock. Immediately (A)
prior to the closing of an underwritten public offering on a firm commitment
basis pursuant to an effective registration statement filed pursuant to the
Securities Act of 1933, as amended, covering the offer and sale of Common Stock
for the account of the Corporation in which the
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Corporation actually receives gross proceeds equal to or greater than
$20,000,000 (calculated after deducting underwriters' discounts and commissions
but before calculation of expenses), and in which the price per share of Common
Stock equals or exceeds $10.00 (such price subject to equitable adjustment in
the event of any stock dividend, stock split, combination, reorganization,
recapitalization, reclassification or other similar event involving a change in
the Common Stock) all outstanding shares of all Series of Preferred Stock shall
be converted automatically into the number of shares of Common Stock into which
such shares of Preferred Stock are then convertible pursuant to this Section 5
as of the stated date of approval of such holders of Preferred Stock, without
any further action by the holders of such shares and whether or not the
certificates representing such shares are surrendered to the Corporation or its
transfer agent, or (B) upon the election, set forth in a written notice to the
Corporation, of the holders of at least 66 2/3% of the then outstanding shares
of Preferred Stock, voting as a single class, of an election to convert the
outstanding shares of Preferred Stock into Common Stock, all outstanding shares
of all Series of Preferred Stock shall be converted automatically into the
number of shares of Common Stock into which such shares of Preferred Stock are
then convertible pursuant to this Section 5 as of the stated date of election of
such holders of Preferred Stock, without any further action by the holders of
such shares and whether or not the certificates representing such shares are
surrendered to the Corporation or its transfer agent.
(ii) Surrender of Certificates Upon Mandatory Conversion. Upon
the occurrence of the applicable conversion events specified in the preceding
paragraph (i), the holders of the Preferred Stock so converting shall, upon
notice from the Corporation, surrender the certificates representing such shares
at the office of the Corporation or of its transfer agent for the Common Stock.
Thereupon, there shall be issued and delivered to such holders a certificate or
certificates for the number of shares of Common Stock into which the shares of
Preferred Stock so surrendered were convertible on the date on which such
conversion occurred. The Corporation shall not be obligated to issue such
certificates unless certificates evidencing the shares of Preferred Stock being
converted are either delivered to the Corporation or any such transfer agent, or
the holder notifies the Corporation that such certificates have been lost,
stolen or destroyed and executes an agreement satisfactory to the Corporation to
indemnify the Corporation from any loss incurred by it in connection therewith.
After any such conversion in accordance with Section 5(f)(i), all certificates
evidencing the shares of Preferred Stock so converted shall be deemed to
represent the number of shares of Common Stock into which such shares of
Preferred Stock have been so convertible.
(g) Dividends. In the event the Corporation shall make or issue, or
shall fix a record date for the determination of holders of Common Stock
entitled to receive a dividend or other distribution (other than a distribution
in liquidation or other distribution otherwise provided for herein) with respect
to the Common Stock payable in (i) securities of the Corporation other than
shares of Common Stock, or (ii) other assets (excluding cash
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dividends or distributions), then and in each such event, provision shall be
made so that the holders of shares of Preferred Stock shall receive upon
conversion thereof in addition to the number of shares of Common Stock
receivable thereupon, the number of securities or such other assets of the
Corporation which they would have received had their shares of Preferred Stock
been converted into Common Stock on the date of such event and had they
thereafter, during the period from the date of such event to and including the
Conversion Date (as that term is hereafter defined in Section 5(k)), retained
such securities or such other assets receivable by them during such period,
giving application to all other adjustments called for during such period under
this Section 5 with respect to the rights of the holders of the Preferred Stock.
(h) Capital Reorganization or Reclassification. If the Common Stock
issuable upon the conversion of the Preferred Stock shall be changed into the
same or different number of shares of any class or classes of capital stock,
whether by capital reorganization, recapitalization, reclassification or
otherwise (other than a subdivision or combination of shares or stock dividend
provided for elsewhere in this Section 5, or the sale of all or substantially
all of the Corporation's capital stock or assets to any other person), then and
in each such event the holder of each share of Preferred Stock shall have the
right thereafter to convert such share into the kind and amount of shares of
capital stock and other securities and property receivable upon such
reorganization, recapitalization, reclassification or other change by the
holders of the number of shares of Common Stock into which such shares of
Preferred Stock might have been converted immediately prior to such
reorganization, recapitalization, reclassification or change, all subject to
further adjustment as provided herein; provided that the Corporation shall not
effect any such reorganization, recapitalization, reclassification or change
involving another corporation or entity without the prior written agreement of
such other corporation or entity to be bound by and give effect to the
provisions of this Section 5(h).
(i) Capital Reorganization, Merger or Sale of Assets. If at any time
or from time to time there shall be a capital reorganization of the Common Stock
(other than a subdivision, combination, recapitalization, reclassification or
exchange of shares provided for elsewhere in this Section 5) or a merger, or
consolidation of the Corporation with or into another corporation, or the sale
of all or substantially all of the Corporation's capital stock or assets to any
other person, or any other form of business combination or reorganization in
which control of the Corporation is transferred (a "Reorganization"), then, as a
part of and as a condition to such Reorganization, provision shall be made so
that the holders of shares of Preferred Stock shall thereafter be entitled to
receive upon conversion of the Preferred Stock the same kind and amount of stock
or other securities or property (including cash) of the Corporation, or of the
successor corporation resulting from such Reorganization to which such holder
would have been entitled if such holder had converted its shares of Preferred
Stock immediately prior to the effective time of such Reorganization. In any
such case, appropriate adjustment shall be made in the application of the
provisions of this Section 5 to
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the end that the provisions of this Section 5 (including adjustment of the
Series A Applicable Conversion Value, the Series A-1 Applicable Conversion
Value, the Series B Applicable Conversion Value and the Series C Applicable
Conversion Value then in effect and the number of shares of Common Stock or
other securities issuable upon conversion of shares of Series A Preferred Stock,
Series A-1 Preferred Stock, Series B Preferred Stock and Series C Preferred
Stock) shall be applicable after that event in as nearly equivalent a manner as
may be reasonably practicable.
In the case of a transaction to which both this Section 5(i) and
Section A.3(b) apply, the holders of at least 66 2/3% of the outstanding shares
of Preferred Stock, voting together as a single class, upon the occurrence of a
Reorganization shall have the option of electing treatment for the shares of
Preferred Stock under either this Section 5(i) or Section A.3(b) hereof, notice
of which election shall be submitted in writing to the Corporation at its
principal office no later than five (5) business days before the effective date
of such event. If no such election shall be made, the provisions of Section
A.3(b), and not this Section 5(i), shall apply.
The provisions of this Section 5(i) shall not apply to any
reorganization, merger or consolidation involving (1) only a change in the state
of incorporation of the Corporation, (2) a merger of the Corporation with or
into a wholly-owned subsidiary of the Corporation, that is incorporated in the
United States of America, or (3) an acquisition by merger, reorganization or
consolidation, of which the Corporation is substantively the surviving
corporation and operates as a going concern, of another corporation that is
engaged in a business similar or related to the business of the Corporation and
which does not involve a change in the terms of the Series A Preferred Stock,
the Series A-1 Preferred Stock, the Series B Preferred Stock, the Series C
Preferred Stock or Common Stock.
(j) Certificate as to Adjustments; Notice by Corporation. In each
case of an adjustment or readjustment of the Series A Applicable Conversion
Rate, the Series A-1 Applicable Conversion Rate, the Series B Applicable
Conversion Rate or the Series C Applicable Conversion Rate, the Corporation at
its expense will furnish each holder of the applicable shares of Preferred Stock
so affected with a certificate prepared by the Treasurer or Chief Financial
Officer of the Corporation, showing such adjustment or readjustment, and stating
in detail the facts upon which such adjustment or readjustment is based.
(k) Exercise of Conversion Privilege. To exercise its conversion
privilege, a holder of Preferred Stock shall surrender the certificate or
certificates representing the shares being converted to the Corporation at its
principal office, and shall give written notice to the Corporation at that
office that such holder elects to convert such shares. Such notice shall also
state the name or names (with address or addresses) in which the certificate or
certificates for shares of Common Stock issuable upon such conversion shall be
issued. The certificate or certificates for shares of Preferred Stock
surrendered for conversion shall be accompanied by
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proper assignment thereof to the Corporation or in blank. The date when such
written notice is received by the Corporation, together with the certificate or
certificates representing the shares of Preferred Stock being converted, shall
be the "Conversion Date." As promptly as practicable after the Conversion Date,
the Corporation shall issue and deliver to the holder of the shares of Preferred
Stock being converted, or on such holder's written order, such certificate or
certificates as it may request for the number of whole shares of Common Stock
issuable upon the conversion of such shares of Preferred Stock in accordance
with the provisions of this Section 5, and cash, as provided in Section 5(l), in
respect of any fraction of a share of Common Stock issuable upon such
conversion. Such conversion shall be deemed to have been effected immediately
prior to the close of business on the Conversion Date, and at such time the
rights of the holder as holder of the converted shares of Preferred Stock shall
cease and the person(s) in whose name(s) any certificate(s) for shares of Common
Stock shall be issuable upon such conversion shall be deemed to have become the
holder or holders of record of the shares of Common Stock represented thereby.
(l) Cash in Lieu of Fractional Shares. No fractional shares of
Common Stock or scrip representing fractional shares shall be issued upon the
conversion of shares of Preferred Stock. Instead of any fractional shares of
Common Stock which would otherwise be issuable upon conversion any shares of
Preferred Stock, the Corporation shall pay to the holder of the shares of
Preferred Stock which were converted, a cash adjustment in respect of such
fractional shares in an amount equal to the same fraction of the market price
per share of the Common Stock (as determined in a reasonable manner prescribed
by the Board of Directors) at the close of business on the Conversion Date. The
determination as to whether or not any fractional shares are issuable shall be
based upon the aggregate number of shares of Preferred Stock being converted at
any one time by any holder thereof, not upon each share of Preferred Stock being
converted.
(m) Partial Conversion. In the event some but not all of the shares
of Series A Preferred Stock, Series A-1 Preferred Stock, Series B Preferred
Stock or Series C Preferred Stock, as applicable, represented by a
certificate(s) surrendered by a holder are converted, the Corporation shall
execute and deliver to or on the order of the holder, at the expense of the
Corporation, a new certificate representing the number of shares of Series A
Preferred Stock, Series A-1 Preferred Stock, Series B Preferred Stock or Series
C Preferred Stock, as applicable, which were not converted.
(n) Reservation of Common Stock. The Corporation shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the conversion of the shares of
Preferred Stock, such number of its shares of Common Stock as shall from time to
time be sufficient to effect the conversion of all outstanding shares of
Preferred Stock (including any shares of Preferred Stock represented by any
warrants, options, subscription or purchase rights for Preferred Stock) and if
at any time the number of authorized but unissued shares of Common Stock shall
not be sufficient to
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effect the conversion of all then outstanding shares of Preferred Stock
(including any shares of Preferred Stock represented by any warrants, options,
subscriptions or purchase rights for such Preferred Stock), the Corporation
shall take such action as may be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purpose.
(o) No Reissuance of Preferred Stock. No share or shares of
Preferred Stock acquired by the Corporation by reason of redemption, purchase,
conversion or otherwise shall be reissued, and all such shares shall be
canceled, retired and eliminated from the shares which the Corporation shall be
authorized to issue. The Corporation shall from time to time take such
appropriate corporate action as may be necessary to reduce the authorized number
of shares of Series A Preferred Stock, Series A-1 Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock.
6. Restrictions and Limitations. The holders of the Preferred Stock shall
have the following rights with respect to corporate action by the Corporation:
(a) The Corporation shall not take any corporate action or otherwise
amend its Restated Certificate of Incorporation without the approval by vote or
written consent of the holders of at least 66 2/3% of the then outstanding
shares of Preferred Stock, each share of Series A Preferred Stock, Series A-1
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock to be
entitled to one vote in each instance, if such corporate action or amendment
would change any of the rights, preferences, privileges of or limitations
provided for herein for the benefit of any shares of Preferred Stock or
materially adversely affect the rights of the holders of the Preferred Stock,
provided, however, that if such action or amendment would impact only the Series
A Preferred Stock, the Series A-1 Preferred Stock, the Series B Preferred Stock
or the Series C Preferred Stock, or impact such Series in a different manner,
such action or amendment shall be governed by paragraph (b), (c), (d) or (e)
below. Without limiting the generality of the foregoing, the Corporation will
not amend its Restated Certificate of Incorporation or take any other corporate
action without the approval by the holders of at least 66 2/3% of the then
outstanding shares of Preferred Stock, voting together as a single class, if
such amendment or corporate action would:
(i) cause or authorize the Corporation to redeem, purchase or
otherwise acquire for value (or pay into or set aside for a sinking fund for
such purpose) or to distribute or sell any assets to the holders of, any share
or shares of equity securities of the Corporation in their capacity as such,
other than (A) as provided for in Sections A.2, A.3 or A.7 hereof, (B)
repurchases from employees, officers or consultants pursuant to stock repurchase
agreements or similar vesting arrangements approved by the Board of Directors
and (C) other than as provided in that certain Stock Repurchase Agreement, dated
as of April 2, 1996, by and between the Corporation and the State of
Maryland/Department of Business and Economic Development; or
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(ii) authorize, create or issue, or obligate the Corporation
to authorize, create or issue, additional shares of any class of stock ranking
senior to or on a parity with the Preferred Stock with respect to liquidation
preferences, redemption rights or dividend rights; or
(iii) provide for the voluntary liquidation, dissolution,
recapitalization, reorganization or winding up of the Corporation; or
(iv) cause or authorize any Reorganization transaction,
whether by merger, consolidation, reorganization, sale of capital stock or sale
of substantially all of the Corporation's assets, in which control of the voting
securities or assets of the Corporation is transferred in any way to persons or
entities who were not stockholders of the Corporation immediately prior to any
such event; or
(v) otherwise amend the Corporation's Restated Certificate of
Incorporation.
(b) The Corporation shall not take any corporate action or otherwise
amend its Restated Certificate of Incorporation without the approval by vote or
written consent of the holders of at least 66 2/3% of the then outstanding
shares of Series A Preferred Stock, each share of Series A Preferred Stock to be
entitled to one vote in each instance, if such corporate action or amendment
would change any of the rights, preferences, privileges of or limitations
provided for herein for the benefit of any shares of Series A Preferred Stock or
materially adversely affect the rights of the holders of the Series A Preferred
Stock. Without limiting the generality of the foregoing, the Corporation will
not amend its Certificate of Incorporation or take any other corporate action
without the approval by the holders of at least 66 2/3% of the then outstanding
shares of Series A Preferred Stock voting as a separate class, if such amendment
or corporate action would:
(i) reduce the amount payable to the holders of the Series A
Preferred Stock upon the voluntary or involuntary liquidation, dissolution or
winding up of the Corporation; or
(ii) adversely affect the liquidation preferences, redemption
rights, dividend rights or voting rights of the holders of the Series A
Preferred Stock; or
(iii) cancel or modify the conversion rights of the holders of
the Series A Preferred Stock provided for in Section A.5 herein; or
(iv) amend or modify the rights of the holders of Series A-1
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock to confer
on the holders of the shares of any such Series of Preferred Stock rights or
preferences that are not held by the holders of Series A Preferred Stock.
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(c) The Corporation shall not take any corporate action or otherwise
amend its Restated Certificate of Incorporation without the approval by vote or
written consent of the holders of at least 66 2/3% of the then outstanding
shares of Series A-1 Preferred Stock, each share of Series A-1 Preferred Stock
to be entitled to one vote in each instance, if such corporate action or
amendment would change any of the rights, preferences, privileges of or
limitations provided for herein for the benefit of any shares of Series A-1
Preferred Stock or materially adversely affect the rights of the holders of the
Series A-1 Preferred Stock. Without limiting the generality of the foregoing,
the Corporation will not amend its Certificate of Incorporation or take any
other corporate action without the approval by the holders of at least 66 2/3%
of the then outstanding shares of Series A-1 Preferred Stock voting as a
separate class, if such amendment or corporate action would:
(i) reduce the amount payable to the holders of the Series A-1
Preferred Stock upon the voluntary or involuntary liquidation, dissolution or
winding up of the Corporation; or
(ii) adversely affect the liquidation preferences, redemption
rights, dividend rights or voting rights of the holders of the Series A-1
Preferred Stock; or
(iii) cancel or modify the conversion rights of the holders of
the Series A-1 Preferred Stock provided for in Section A.5 herein; or
(iv) amend or modify the rights of the holders of Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock to confer
on the holders of the shares of any such Series of Preferred Stock rights or
preferences that are not held by the holders of Series A-1 Preferred Stock.
(d) The Corporation shall not take any corporate action or otherwise
amend its Restated Certificate of Incorporation without the approval by vote or
written consent of the holders of at least 66 2/3% of the then outstanding
shares of Series B Preferred Stock, each share of Series B Preferred Stock to be
entitled to one vote in each instance, if such corporate action or amendment
would change any of the rights, preferences, privileges of or limitations
provided for herein for the benefit of any shares of Series B Preferred Stock or
materially adversely affect the rights of the holders of the Series B Preferred
Stock. Without limiting the generality of the foregoing, the Corporation will
not amend its Certificate of Incorporation or take any other corporate action
without the approval by the holders of at least 66 2/3% of the then outstanding
shares of Series B Preferred Stock voting as a separate class, if such amendment
or corporate action would:
(i) reduce the amount payable to the holders of the Series B
Preferred Stock upon the voluntary or involuntary liquidation, dissolution or
winding up of the Corporation; or
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(ii) adversely affect the liquidation preferences, redemption
rights, dividend rights or voting rights of the holders of the Series B
Preferred Stock; or
(iii) cancel or modify the conversion rights of the holders of
the Series B Preferred Stock provided for in Section A.5 herein; or
(iv) amend or modify the rights of the holders of Series A
Preferred Stock, Series A-1 Preferred Stock or Series C Preferred Stock to
confer on the holders of the shares of any such Series of Preferred Stock rights
or preferences that are not held by the holders of Series B Preferred Stock.
(e) The Corporation shall not take any corporate action or otherwise
amend its Restated Certificate of Incorporation without the approval by vote or
written consent of the holders of at least a majority of the then outstanding
shares of Series C Preferred Stock, each share of Series C Preferred Stock to be
entitled to one vote in each instance, if such corporate action or amendment
would change any of the rights, preferences, privileges of or limitations
provided for herein for the benefit of any shares of Series C Preferred Stock or
materially adversely affect the rights of the holders of the Series C Preferred
Stock. Without limiting the generality of the foregoing, the Corporation will
not amend its Certificate of Incorporation or take any other corporate action
without the approval by the holders of at least a majority of the then
outstanding shares of Series C Preferred Stock voting as a separate class, if
such amendment or corporate action would:
(i) reduce the amount payable to the holders of the Series C
Preferred Stock upon the voluntary or involuntary liquidation, dissolution or
winding up of the Corporation; or
(ii) adversely affect the liquidation preferences, redemption
rights, dividend rights or voting rights of the holders of the Series C
Preferred Stock; or
(iii) cancel or modify the conversion rights of the holders of
the Series C Preferred Stock provided for in Section A.5 herein; or
(iv) amend or modify the rights of the holders of Series A
Preferred Stock, Series A-1 Preferred Stock or Series B Preferred Stock to
confer on the holders of the shares of any such Series of Preferred Stock rights
or preferences that are not held by the holders of Series C Preferred Stock; or
(v) change any of the rights, preferences or privileges of or
materially adversely affect the rights of the Series C Preferred Stock; or
(vi) cause or authorize the Corporation to redeem, purchase or
otherwise acquire for value (or pay into or set aside for a sinking fund for
such purpose) or to
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distribute or sell any assets to the holders of, any share or shares of equity
securities of the Corporation in their capacity as such, other than (A) as
provided for in Sections A.2, A.3 or A.7 hereof, (B) repurchases from employees,
officers or consultants pursuant to stock repurchase agreements or similar
vesting arrangements approved by the Board of Directors and (C) other than as
provided in that certain Stock Repurchase Agreement dated as of April 2, 1996,
by and between the Corporation and the State of Maryland/Department of Business
and Economic Development; or
(vii) authorize, create or issue, or obligate the Corporation
to authorize, create or issue, shares of any class of stock ranking senior to or
in parity with the Series C Preferred Stock with respect to liquidation
preferences, redemption rights or dividend rights; or
(viii) provide for the voluntary liquidation, dissolution,
recapitalization, reorganization or winding up of the Corporation; or
(ix) cause or authorize a reorganization transaction, whether
by merger, consolidation, reorganization, sale of capital stock or sale of
substantially all of the Corporation's assets, in which control of the voting
securities or assets of the Corporation is transferred in any way to persons or
entities who were not stockholders of the Corporation immediately prior to such
event; or
(x) otherwise amend the Corporation's Restated Certificate of
Incorporation.
7. Redemption of Preferred Stock.
(a) At the option and written election of the holders of at least a
majority of the outstanding shares of Preferred Stock, on March 31, 2002 (the
"First Redemption Date"), and on the 31st day of March in 2003 and 2004 (each, a
"Redemption Date"), the Corporation shall call for redemption and shall redeem,
according to the percentages listed below, any unconverted shares of Preferred
Stock:
Percentage of Shares
Date of Redemption then Outstanding to be Redeemed
------------------ -------------------------------
March 31, 2002 33 1/3%
March 31, 2003 50%
March 31, 2004 100%
The redemption price for each share of each Series of Preferred Stock redeemed
pursuant to this Section A.7 shall be (i) $1.50 per share of Series A Preferred
Stock plus all declared and unpaid dividends thereon, if any, (ii) $1.60 per
share of Series A-1 Preferred stock plus all
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declared and unpaid dividends thereon, if any, (iii) $2.20 per share of Series B
Preferred Stock plus an amount per share equal to the Series B Accruing
Dividends (as defined in Section A.2(b), unpaid thereon (whether or not
declared), computed to the date payment thereof is made available), and (iv)
$4.50 per share of Series C Preferred Stock plus an amount per share equal to
the Series C Accruing Dividends (as defined in Section A.2(b), unpaid thereon
(whether or not declared), computed to the date payment thereof is made
available), and any other dividends declared but unpaid thereon (the "Redemption
Price"). The Redemption Price shall be subject to equitable adjustment whenever
there shall occur a stock dividend, stock split, combination, reorganization,
recapitalization, reclassification or other similar event involving a change in
the Series A Preferred Stock, the Series A-1 Preferred Stock, the Series B
Preferred Stock or the Series C Preferred Stock, as the case may be.
Each redemption of Preferred Stock shall be made so that the number
of shares of Preferred Stock held by each registered owner shall be reduced in
an amount which shall bear the same ratio to the total number of shares of
Preferred Stock being so redeemed as the number of shares of Preferred Stock
then held by such registered owner bears to the aggregate number of shares of
Preferred Stock then outstanding.
(b) If the holders of a majority of the outstanding shares of
Preferred Stock elect to have the Corporation redeem all of the outstanding
shares of Preferred Stock as aforesaid, notice to that effect shall be given by
such holders to the Corporation at least 45 days prior to the Initial Redemption
Date. If such notice is given, then notice of redemption shall be sent by the
Corporation by first class mail, postage prepaid, to each holder of record of
the Preferred Stock to be redeemed, not less than 30 days nor more than 45 days
prior to each Redemption Date, at his, her or its address as it appears on the
books of the Corporation; provided, however, that the Corporation's failure to
give such notice shall in no way affect its obligation to redeem the shares of
Preferred Stock as provided in Section 7(a) hereof. Such notice shall set forth
(i) the date and place of redemption; (ii) the number of shares to be redeemed
and (iii) the Redemption Price.
(c) If, on or before any Redemption Date, the funds necessary for
such redemption shall have been set aside by the Corporation and deposited with
a bank or trust company, in trust for the pro rata benefit of the holders of the
Preferred Stock, then, notwithstanding that any certificates for shares that
have been called for redemption shall not have been surrendered for
cancellation, the shares represented thereby shall no longer be deemed
outstanding from and after such Redemption Date, and all rights of holders of
such shares so called for redemption shall forthwith, after such Redemption
Date, cease and terminate, excepting only the right to receive the redemption
funds therefor to which they are entitled, but without interest. Any interest
accrued on funds so deposited and unclaimed by stockholders entitled thereto
shall be paid to such stockholders at the time their respective shares are
redeemed or to the Corporation at the time unclaimed amounts are paid to it. In
23.
<PAGE>
case any holder of Preferred Stock which shall have been called for redemption
shall not, within six years after the final Redemption Date, claim the amounts
so deposited with respect to the redemption thereof, any such bank or trust
company shall, upon demand, pay over to the Corporation such unclaimed amounts
and thereupon such bank or trust company shall be relieved of all responsibility
in respect thereof to such holder and such holder shall look only to the
Corporation for the payment thereof. Any funds so deposited with a bank or trust
company which shall not be required for such redemption by reason of the
exercise subsequent to the date of such deposit of the right of conversion of
any shares of Preferred Stock shall be returned to the Corporation forthwith.
(d) If the funds of the Corporation legally available for redemption
of shares of Preferred Stock on any Redemption Date are insufficient to redeem
the total number of shares of Preferred Stock submitted for redemption, those
funds which are legally available shall be used to redeem the maximum possible
number of whole shares ratably among the holders of such shares in proportion to
the full amount such holders would otherwise be entitled to receive in
redemption of such shares. The shares of Preferred Stock not redeemed shall
remain outstanding and entitled to all rights and preferences provided herein.
At any time thereafter when additional funds of the Corporation are legally
available for the redemption of such shares of Preferred Stock, such funds shall
be used, at the end of the next succeeding fiscal quarter, to redeem the balance
of such shares, or such portion thereof for which funds are then legally
available.
8. No Dilution or Impairment. The Corporation will not, by amendment of
its Restated Certificate of Incorporation or through any reorganization,
transfer of capital stock or assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of the Preferred Stock set forth
herein, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the holders of the Preferred Stock
against dilution or other impairment. Without limiting the generality of the
foregoing, the Corporation (a) will not increase the par value of any shares of
stock receivable on the conversion of the Preferred Stock above the amount
payable therefor on such conversion, and (b) will take all such action as may be
necessary or appropriate in order that the Corporation may validly and legally
issue fully paid and nonassessable shares of stock on the conversion of all
Preferred Stock from time to time outstanding.
9. Notices of Record Date. In the event of:
(a) any taking by the Corporation of a record of the holders of any
class of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any
24.
<PAGE>
shares of capital stock of any class or any other securities or property or to
receive any other right, or
(b) any capital reorganization of the Corporation, any
reclassification or recapitalization of the capital stock of the Corporation,
any merger or consolidation of the Corporation, or any transfer of all or
substantially all of the assets of the Corporation to any other Corporation, or
any other entity or person, or
(c) any voluntary or involuntary dissolution, liquidation or winding
up of the Corporation, then and in each such event the Corporation shall deliver
or cause to be delivered to each holder of Preferred Stock a notice specifying
(i) the date on which any such record is to be taken for the purpose of such
dividend, distribution or right and a description of such dividend, distribution
or right, (ii) the date on which any such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding up is expected to become effective, and (iii) the time, if any, that is
to be fixed, as to when the holders of record of Common Stock (or other
securities) shall be entitled to exchange their shares of Common Stock (or other
securities) for securities or other property deliverable upon such
reorganization, reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation or winding up. Such notice shall be delivered
by facsimile transmission, hand delivery or overnight courier service to the
holders of the Preferred Stock at the address given to the Corporation for
notice purposes, at least ten (10) days prior to the date specified in such
notice on which such action is to be taken, except in the case of an involuntary
dissolution, which notice shall be provided within three (3) days following the
date upon which the Corporation receives notice of such event.
10. Amendments and Waivers. Subject to the provisions of Paragraph A.6
hereof, any term hereof may be amended and the observance of any term hereof may
be waived (either generally or in a particular instance and either retroactively
or prospectively), with the written consent of the Corporation and the written
consent of the holders of 66 2/3% of the then outstanding shares of Preferred
Stock, taken together as a class for this purpose, provided that if such
amendment or waiver would affect only one such Series of Preferred Stock, only
the written consent of the holders of 66 2/3% of the then outstanding shares of
such Series shall be required. Any amendment or waiver so effected shall be
binding upon the Corporation and any holder of Preferred Stock.
B. Common Stock
1. Priority. All preferences, voting powers, relative, participating,
optional or other special rights and privileges, and qualifications, limitations
or restrictions of the Common Stock are expressly made subject to and
subordinate to those that may be fixed with respect to the Preferred Stock.
25.
<PAGE>
2. Voting Rights. Each holder of record of Common Stock shall be
entitled to one vote for each share of Common Stock standing in his name on the
books of the Corporation. Except as otherwise required by law, this Restated
Certificate of Incorporation, and any Certificate of Designation with respect to
any Preferred Stock, the holders of Common Stock and Preferred Stock shall vote
together as a single class on all matters submitted to stockholders for a vote.
3. Dividends. Subject to provisions of law, this Restated Certificate
of Incorporation and any Certificate of Designation with respect to any
Preferred Stock, the holders of Common Stock shall be entitled to receive
dividends out of funds legally available therefor at such times and in such
amounts as the Board of Directors may determine in their sole discretion.
4. Liquidation. Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, after the payment or provision
for payment of all debts and liabilities of the Corporation and all preferential
amounts to which the holders of the Preferred Stock are entitled with respect to
the distribution of assets in liquidation, the holders of Common stock shall be
entitled to share ratably in the remaining assets of the Corporation available
for distribution, subject to any rights of holders of Preferred Stock to
participate with the holders of Common Stock in any such distribution of
remaining assets.
C. Board of Directors
1. Size and Election of the Board of Directors. The number of directors
constituting the Board of Directors of the Corporation shall at all times be set
at six (6). The members of the Board of Directors shall be elected in accordance
with this Section C. The rights in this Section C shall terminate at such time
as the Corporation closes an underwritten public offering of Common Stock
pursuant to an offering registered under the Securities Act of 1933 and filed
with the Securities and Exchange Commission on Form S-1 in which the aggregate
gross proceeds to the Corporation equals or exceeds $20,000,000 and in which the
price per share of such Common Stock equals or exceeds $10.00 (such price
subject to equitable adjustment in the event of any stock split, stock dividend,
combination, reorganization, reclassification or other similar event).
2. Series A and Series A-1 Director Election Right.
(a) The holders of at least a majority of the outstanding shares of
Series A Preferred Stock and Series A-1 Preferred Stock, voting together as a
single class, shall be entitled to elect one (1) director of the Corporation
(the "Series A Director"). At any annual or special meeting of the Corporation
(or in a written consent in lieu thereof) held for the purpose of electing
directors the presence in person or by proxy (or by written consent) of the
26.
<PAGE>
holders of least a majority of the outstanding shares of Series A Preferred
Stock and Series A-1 Preferred Stock shall constitute a quorum for the election
of the Series A Director.
(b) Any Series A Director may be removed during his or her term of
office, without cause, by and only by, the affirmative vote or written consent
of the holders of at least a majority of the outstanding shares of the Series A
Preferred Stock and Series A-1 Preferred Stock, voting together as a single
class. A vacancy in the seat held by the Series A Director shall be filled by
vote or written consent of the holders of at least a majority of the outstanding
shares of Series A Preferred Stock and Series A-1 Preferred Stock, voting
together as a single class.
3. Series B Director Election Right.
(a) The holders of at least a majority of the outstanding shares of
Series B Preferred Stock, voting together as a separate class, shall be entitled
to elect one (1) director of the Corporation (the "Series B Director"). At any
annual or special meeting of the Corporation (or in a written consent in lieu
thereof) held for the purpose of electing directors, the presence in person or
by proxy (or by written consent) of the holders of at least a majority of the
outstanding shares of Series B Preferred Stock shall constitute a quorum for the
election of the Series B Director.
(b) Any Series B Director may be removed during his or her term of
office, without cause, by and only by, the affirmative vote or written consent
of the holders of at least a majority of the outstanding shares of the Series B
Preferred Stock, voting together as a separate class. A vacancy in the seat held
by any Series B Director shall be filled by vote or written consent of the
holders of at least a majority of the outstanding shares of Series B Preferred
Stock, voting together as a separate class.
4. Series C Director Election Right.
(a) The holders of at least a majority of the outstanding shares of
Series C Preferred Stock, voting together as a separate class, shall be entitled
to elect one (1) director of the Corporation (the "Series C Director") (the
Series A Director, the Series B Director and the Series C Director may be
referred to herein as the "Preferred Stock Directors"). At any annual or special
meeting of the Corporation (or in a written consent in lieu thereof) held for
the purpose of electing directors, the presence in person or by proxy (or by
written consent) of the holders of at least a majority of the outstanding shares
of Series C Preferred Stock shall constitute a quorum for the election of the
Series C Director.
(b) Any Series C Director may be removed during his or her term of
office, without cause, by and only by, the affirmative vote or written consent
of the holders of at least a majority of the outstanding shares of the Series C
Preferred Stock, voting together as a separate class. A vacancy in the seat held
by any Series C Director shall be filled by vote or
27.
<PAGE>
written consent of the holders of at least a majority of the outstanding shares
of Series C Preferred Stock, voting together as a separate class.
5. Remaining Directors.
(a) The holders of at least a majority of the outstanding shares of
Common Stock and Preferred Stock, voting together as a single class, shall be
entitled to elect three (3) directors of the Corporation (the "Remaining
Directors"). At any annual or special meeting of the Corporation (or in a
written consent in lieu thereof) held for the purpose of electing directors, the
presence in person or by proxy (or by written consent) of the holders of a
majority of the outstanding shares of Common Stock and Preferred Stock shall
constitute a quorum for the election of the Remaining Directors.
(b) Any Remaining Director may be removed during his or her term of
office, without cause, by and only by, the affirmative vote or written consent
of the holders of at least a majority of the outstanding shares of the Common
Stock and Preferred Stock, voting together as a single class. A vacancy in the
seat held by any Remaining Director shall be filled by vote or written consent
of the holders of at least a majority of the outstanding shares of Common Stock
and Preferred Stock, voting together as a single class.
FIFTH. The Board of Directors of the Corporation is expressly
authorized to adopt, amend or repeal the by-laws of the Corporation with the
vote or written consent of two-thirds of the members of the Board of Directors.
SIXTH. The Corporation shall, to the maximum extent permitted from
time to time under the laws of the State of Delaware, indemnify and upon request
shall advance expenses to any person who is or was a party or is threatened to
be made a party to any threatened, pending or completed action, suit, proceeding
or claim, whether civil, criminal, administrative or investigative, by reason of
the fact that he is or was or has agreed to be a director, officer of the
Corporation or while a director or officer is or was serving at the request of
the Corporation as a director, officer, partner, trustee, employee or agent of
any corporation, partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, against any and all
expenses (including attorney's fees and expenses), judgments, fines, penalties
and amounts paid in settlement or incurred in connection with the investigation,
preparation to defend or defense of such action, suit, proceeding or claim;
provided, however, that the foregoing shall not require the Corporation to
indemnify or advance expenses to any person in connection with any action, suit,
proceeding, claim or counterclaim initiated by or on behalf of such person. Such
indemnification shall not be exclusive of other indemnification rights arising
under any by-law, agreement, vote of directors or stockholders or otherwise and
shall inure to the benefit of the heirs and legal representatives of such
person. Any repeal or modification of the
28.
<PAGE>
foregoing provisions of this Article SIXTH shall not adversely affect any right
or protection of a director or officer of this Corporation existing at the time
of such repeal or modification.
SEVENTH. A director of the Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except to the extent that such exemption from liability or
limitation thereof is not permitted under the Delaware General Corporation Law
as currently in effect or as the same may hereafter be amended. No amendment,
modification or repeal of this Article SEVENTH shall adversely affect any right
or protection of a director that exists at the time of such amendment,
modification or repeal.
EIGHTH. The Corporation is to have perpetual existence.
IN WITNESS WHEREOF, GENE LOGIC INC., has caused this Restated
Certificate of Incorporation to be signed by its President and Chief Executive
Officer, Michael J. Brennan, this 15th day of July, 1997.
/s/ Michael J. Brennan
----------------------------------
Michael J. Brennan
<PAGE>
Exhibit 3.2
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
GENE LOGIC INC., a corporation organized and existing under and by virtue
of the General Corporation Law of the State of Delaware, hereby certifies as
follows:
1. The name of the corporation is GENE LOGIC INC.
2. The corporation's original Certificate of Incorporation was filed with
the Secretary of State on September 22, 1994.
3. The Amended and Restated Certificate of Incorporation of this
corporation, in the form attached hereto as Exhibit A, has been duly adopted by
the Board of Directors and by the stockholders of the corporation in accordance
with Sections 228, 242 and 245 of the General Corporation Law of the State of
Delaware.
4. The Amended and Restated Certificate of Incorporation so adopted reads
in full as set forth in Exhibit A attached hereto and hereby incorporated by
reference.
IN WITNESS WHEREOF, GENE LOGIC INC. has caused this Amended and Restated
Certificate of Incorporation to be signed by its President and Chief Executive
Officer and attested to by its Senior Vice President and Chief Financial Officer
this ____ day of ______________, 1997.
-----------------------------------------
MICHAEL J. BRENNAN, M.D., Ph.D.
President and Chief Executive Officer
Attest:
-----------------------------------------
MARK D. GESSLER
Senior Vice President and Chief Financial
Officer
<PAGE>
Exhibit A
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
GENE LOGIC INC.
I.
The name of this corporation is GENE LOGIC INC.
II.
The address of the registered office of the corporation in the State
of Delaware is 1209 Orange Street, City of Wilmington, County of New Castle, and
the name of the registered agent of the corporation in the State of Delaware at
such address is The Corporation Trust Company.
III.
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware.
IV.
A. This corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares which the corporation is authorized to issue is Seventy Million
(70,000,000) shares. Sixty Million (60,000,000) shares shall be Common Stock,
each having a par value of one cent ($.01). Ten Million (10,000,000) shares
shall be Preferred Stock, each having a par value of one cent ($.01).
The Preferred Stock may be issued from time to time in one or more series.
The Board of Directors is hereby authorized, by filing a certificate (a
"Preferred Stock Designation") pursuant to the Delaware General Corporation Law,
to fix or alter from time to time the designation, powers, preferences and
rights of the shares of each such series and the qualifications, limitations or
restrictions of any wholly unissued series of Preferred Stock, and to establish
from time to time the number of shares constituting any such series or any of
them; and to increase or decrease the number of shares of any series subsequent
to the issuance of shares of that series, but not below the number of shares of
1.
<PAGE>
such series then outstanding. In case the number of shares of any series shall
be decreased in accordance with the foregoing sentence, the shares constituting
such decrease shall resume the status that they had prior to the adoption of the
resolution originally fixing the number of shares of such series.
V.
For the management of the business and for the conduct of the affairs of
the corporation, and in further definition, limitation and regulation of the
powers of the corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
A.
1. The management of the business and the conduct of the affairs of
the corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be fixed
exclusively by one or more resolutions adopted by the Board of Directors.
2. Subject to the rights of the holders of any series of Preferred
Stock to elect additional directors under specified circumstances, the directors
shall be divided into three classes designated as Class I, Class II and Class
III, respectively. Directors shall be assigned to each class in accordance with
a resolution or resolutions adopted by the Board of Directors. At the first
annual meeting of stockholders following the adoption and filing of this
Certificate of Incorporation, the term of office of the Class I directors shall
expire and Class I directors shall be elected for a full term of three years. At
the second annual meeting of stockholders following the adoption and filing of
this Certificate of Incorporation, the term of office of the Class II directors
shall expire and Class II directors shall be elected for a full term of three
years. At the third annual meeting of stockholders following the adoption and
filing of this Certificate of Incorporation, the term of office of the Class III
directors shall expire and Class III directors shall be elected for a full term
of three years. At each succeeding annual meeting of stockholders, directors
shall be elected for a full term of three years to succeed the directors of the
class whose terms expire at such annual meeting.
Notwithstanding the foregoing provisions of this Article, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
3. Subject to the rights of the holders of any series of Preferred
Stock, no director shall be removed without cause. Subject to any limitations
imposed by law,
2.
<PAGE>
the Board of Directors or any individual director may be removed from office at
any time with cause by the affirmative vote of the holders of a majority of the
voting power of all the then-outstanding shares of voting stock of the
corporation entitled to vote at an election of directors (the "Voting Stock").
4. Subject to the rights of the holders of any series of Preferred
Stock, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by the stockholders, except as
otherwise provided by law, be filled only by the affirmative vote of a majority
of the directors then in office, even though less than a quorum of the Board of
Directors, and not by the stockholders. Any director elected in accordance with
the preceding sentence shall hold office for the remainder of the full term of
the director for which the vacancy was created or occurred and until such
director's successor shall have been elected and qualified.
B.
1. Subject to paragraph (h) of Section 43 of the By-laws, the
By-laws may be altered or amended or new By-laws adopted by the affirmative vote
of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of
all of the then-outstanding shares of the Voting Stock. The Board of Directors
shall also have the power to adopt, amend or repeal By-laws.
2. The directors of the corporation need not be elected by written
ballot unless the By-laws so provide.
3. No action shall be taken by the stockholders of the corporation
except at an annual or special meeting of stockholders called in accordance with
the By-laws, and no action shall be taken by the stockholders by written
consent.
4. Advance notice of stockholder nominations for the election of
directors and of business to be brought by stockholders before any meeting of
the stockholders of the corporation shall be given in the manner provided in the
By-laws of the corporation.
VI.
A. A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for any breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the
3.
<PAGE>
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law, or (iv) for any transaction
from which the director derived an improper personal benefit. If the Delaware
General Corporation Law is amended after approval by the stockholders of this
Article to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director shall be
eliminated or limited to the fullest extent permitted by the Delaware General
Corporation Law, as so amended.
B. Any repeal or modification of this Article VI shall be prospective and
shall not affect the rights under this Article VI in effect at the time of the
alleged occurrence of any act or omission to act giving rise to liability or
indemnification.
VII.
A. The corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, except as provided in paragraph B of this
Article VII, and all rights conferred upon the stockholders herein are granted
subject to this reservation.
B. Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the Voting Stock required by law, this Certificate
of Incorporation or any Preferred Stock Designation, the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting
power of all of the then-outstanding shares of the Voting Stock, voting together
as a single class, shall be required to alter, amend or repeal Articles V, VI
and VII.
4.
<PAGE>
Exhibit 3.4
BY-LAWS
OF
GENE LOGIC INC.
<PAGE>
ARTICLE I. OFFICES................................................1
Section 1. Registered Office................................1
Section 2. Other Offices....................................1
ARTICLE II. CORPORATE SEAL.........................................1
Section 3. Corporate Seal...................................1
ARTICLE III. STOCKHOLDERS' MEETINGS.................................1
Section 4. Place Of Meetings................................1
Section 5. Annual Meetings..................................1
Section 6. Special Meetings.................................3
Section 7. Notice Of Meetings...............................4
Section 8. Quorum...........................................4
Section 9. Adjournment And Notice Of Adjourned Meetings.....4
Section 10. Voting Rights....................................5
Section 11. Joint Owners Of Stock............................5
Section 12. List Of Stockholders.............................5
Section 13. Action Without Meeting...........................5
Section 14. Organization.....................................6
ARTICLE IV. DIRECTORS..............................................6
Section 15. Number And Term Of Office........................6
Section 16. Powers...........................................6
Section 17. Classes Of Directors.............................6
Section 18. Vacancies........................................7
Section 19. Resignation......................................7
Section 20. Removal..........................................7
Section 21. Meetings.........................................7
(a) Annual Meetings..................................8
(b) Regular Meetings.................................8
(c) Special Meetings.................................8
(d) Telephone Meetings...............................8
(e) Notice Of Meetings...............................8
(f) Waiver Of Notice.................................8
Section 22. Quorum And Voting................................8
Section 23. Action Without Meeting...........................9
Section 24. Fees And Compensation............................9
Section 25. Committees......................................10
(a) Executive Committee.............................10
(b) Other Committees................................10
i
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(c) Term............................................10
(d) Meetings........................................11
Section 26. Organization....................................11
ARTICLE V. OFFICERS..............................................11
Section 27. Officers Designated.............................11
Section 28. Tenure And Duties Of Officers...................11
(a) General.........................................12
(b) Duties Of Chairman Of The Board Of Directors....12
(c) Duties Of President.............................12
(d) Duties Of Vice Presidents.......................12
(e) Duties Of Secretary.............................12
(f) Duties Of Chief Financial Officer...............12
Section 29. Delegation Of Authority.........................13
Section 30. Resignations....................................13
Section 31. Removal.........................................13
ARTICLE VI. EXECUTION OF CORPORATE INSTRUMENTS AND VOTING
OF SECURITIES OWNED BY THE CORPORATION................13
Section 32. Execution Of Corporate Instruments..............13
Section 33. Voting Of Securities Owned By The Corporation...14
ARTICLE VII. SHARES OF STOCK.......................................14
Section 34. Form And Execution Of Certificates..............14
Section 35. Lost Certificates...............................15
Section 36. Transfers.......................................15
Section 37. Fixing Record Dates.............................15
Section 38. Registered Stockholders.........................16
ARTICLE VIII. OTHER SECURITIES OF THE CORPORATION...................16
Section 39. Execution Of Other Securities...................16
ARTICLE IX. DIVIDENDS.............................................16
Section 40. Declaration Of Dividends........................16
Section 41. Dividend Reserve................................17
ARTICLE X. FISCAL YEAR...........................................17
Section 42. Fiscal Year.....................................17
ARTICLE XI. INDEMNIFICATION.......................................17
Section 43. Indemnification Of Directors, Executive Officers,
Other Officers, Employees And Other Agents......17
ii
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(a) Directors And Executive Officers................17
(b) Other Officers, Employees and Other Agents......17
(c) Expenses........................................17
(d) Enforcement.....................................18
(e) Non-Exclusivity Of Rights.......................19
(f) Survival Of Rights..............................19
(g) Insurance.......................................19
(h) Amendments......................................19
(i) Saving Clause...................................19
(j) Certain Definitions.............................19
NOTICES...............................................20
Section 44. Notices.........................................20
(a) Notice To Stockholders..........................20
(b) Notice To Directors.............................20
(c) Affidavit Of Mailing............................20
(d) Time Notices Deemed Given.......................21
(e) Methods Of Notice...............................21
(f) Failure To Receive Notice.......................21
(g) Notice To Person With Whom Communication Is
Unlawful........................................21
(h) Notice To Person With Undeliverable Address.....21
ARTICLE XIII. AMENDMENTS............................................22
Section 45. Amendments......................................22
ARTICLE XIV. LOANS TO OFFICERS.....................................22
Section 46. Loans To Officers...............................22
iii
<PAGE>
BY-LAWS
OF
GENE LOGIC INC.
(A DELAWARE CORPORATION)
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the corporation in
the State of Delaware shall be in the City of Wilmington, County of New Castle
Section 2. Other Offices. The corporation shall also have and maintain an
office or principal place of business at such place as may be fixed by the Board
of Directors, and may also have offices at such other places, both within and
without the State of Delaware as the Board of Directors may from time to time
determine or the business of the corporation may require.
ARTICLE II
CORPORATE SEAL
Section 3. Corporate Seal. The corporate seal shall consist of a die
bearing the name of the corporation and the inscription, "Corporate
Seal-Delaware." Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE III
STOCKHOLDERS' MEETINGS
Section 4. Place Of Meetings. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the office of the corporation required to be
maintained pursuant to Section 2 hereof.
Section 5. Annual Meetings.
(a) The annual meeting of the stockholders of the corporation, for
the purpose of election of directors and for such other business as may lawfully
come before it, shall be held on such date and at such time as may be designated
from time to time by the Board of Directors.
(b) At an annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting. To be
properly brought
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before an annual meeting, business must be: (A) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the Board of
Directors, (B) otherwise properly brought before the meeting by or at the
direction of the Board of Directors, or (C) otherwise properly brought before
the meeting by a stockholder. For business to be properly brought before an
annual meeting by a stockholder, the stockholder must have given timely notice
thereof in writing to the Secretary of the corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the corporation not later than the close of
business on the sixtieth (60th) day nor earlier than the close of business on
the ninetieth (90th) day prior to the first anniversary of the preceding year's
annual meeting; provided, however, that in the event that no annual meeting was
held in the previous year or the date of the annual meeting has been changed by
more than thirty (30) days from the date contemplated at the time of the
previous year's proxy statement, notice by the stockholder to be timely must be
so received not earlier than the close of business on the ninetieth (90th) day
prior to such annual meeting and not later than the close of business on the
later of the sixtieth (60th) day prior to such annual meeting or, in the event
public announcement of the date of such annual meeting is first made by the
corporation fewer than seventy (70) days prior to the date of such annual
meeting, the close of business on the tenth (10th) day following the day on
which public announcement of the date of such meeting is first made by the
corporation. A stockholder's notice to the Secretary shall set forth as to each
matter the stockholder proposes to bring before the annual meeting: (i) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (ii) the name
and address, as they appear on the corporation's books, of the stockholder
proposing such business, (iii) the class and number of shares of the corporation
which are beneficially owned by the stockholder, (iv) any material interest of
the stockholder in such business and (v) any other information that is required
to be provided by the stockholder pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), in his capacity as
a proponent to a stockholder proposal. Notwithstanding the foregoing, in order
to include information with respect to a stockholder proposal in the proxy
statement and form of proxy for a stockholder's meeting, stockholders must
provide notice as required by the regulations promulgated under the 1934 Act.
Notwithstanding anything in these By-laws to the contrary, no business shall be
conducted at any annual meeting except in accordance with the procedures set
forth in this paragraph (b). The chairman of the annual meeting shall, if the
facts warrant, determine and declare at the meeting that business was not
properly brought before the meeting and in accordance with the provisions of
this paragraph (b), and, if he should so determine, he shall so declare at the
meeting that any such business not properly brought before the meeting shall not
be transacted.
(c) Only persons who are nominated in accordance with the procedures
set forth in this paragraph (c) shall be eligible for election as directors.
Nominations of persons for election to the Board of Directors of the corporation
may be made at a meeting of stockholders by or at the direction of the Board of
Directors or by any stockholder of the corporation entitled to vote in the
election of directors at the meeting who complies with the notice procedures set
forth in this paragraph (c). Such nominations, other than those made by or at
the direction of the Board of Directors, shall be made pursuant to timely notice
in writing to the Secretary of the corporation in accordance with the provisions
of paragraph (b) of this Section 5. Such
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stockholder's notice shall set forth (i) as to each person, if any, whom the
stockholder proposes to nominate for election or re-election as a director: (A)
the name, age, business address and residence address of such person, (B) the
principal occupation or employment of such person, (C) the class and number of
shares of the corporation which are beneficially owned by such person, (D) a
description of all arrangements or understandings between the stockholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nominations are to be made by the stockholder, and (E) any
other information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the 1934 Act (including without
limitation such person's written consent to being named in the proxy statement,
if any, as a nominee and to serving as a director if elected); and (ii) as to
such stockholder giving notice, the information required to be provided pursuant
to paragraph (b) of this Section 5. At the request of the Board of Directors,
any person nominated by a stockholder for election as a director shall furnish
to the Secretary of the corporation that information required to be set forth in
the stockholder's notice of nomination which pertains to the nominee. No person
shall be eligible for election as a director of the corporation unless nominated
in accordance with the procedures set forth in this paragraph (c). The chairman
of the meeting shall, if the facts warrant, determine and declare at the meeting
that a nomination was not made in accordance with the procedures prescribed by
these By-laws, and if he should so determine, he shall so declare at the
meeting, and the defective nomination shall be disregarded.
(d) For purposes of this Section 5, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the 1934 Act.
Section 6. Special Meetings.
(a) Special meetings of the stockholders of the corporation may be
called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive Officer, or (iii) the Board of Directors
pursuant to a resolution adopted by a majority of the total number of authorized
directors (whether or not there exist any vacancies in previously authorized
directorships at the time any such resolution is presented to the Board of
Directors for adoption) and shall be held at such place, on such date, and at
such time as the Board of Directors, shall fix.
(b) If a special meeting is called by any person or persons other
than the Board of Directors, the request shall be in writing, specifying the
general nature of the business proposed to be transacted, and shall be delivered
personally or sent by registered mail or by telegraphic or other facsimile
transmission to the Chairman of the Board of Directors, the Chief Executive
Officer, or the Secretary of the corporation. No business may be transacted at
such special meeting otherwise than specified in such notice. The Board of
Directors shall determine the time and place of such special meeting, which
shall be held not less than thirty-five (35) nor more than one hundred twenty
(120) days after the date of the receipt of the request. Upon determination of
the time and place of the meeting, the officer receiving the request shall cause
notice to be given to the stockholders entitled to vote, in accordance with the
provisions of
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Section 7 of these By-laws. If the notice is not given within sixty (60) days
after the receipt of the request, the person or persons requesting the meeting
may set the time and place of the meeting and give the notice. Nothing contained
in this paragraph (b) shall be construed as limiting, fixing, or affecting the
time when a meeting of stockholders called by action of the Board of Directors
may be held.
Section 7. Notice Of Meetings. Except as otherwise provided by law or the
Certificate of Incorporation, written notice of each meeting of stockholders
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting, such
notice to specify the place, date and hour and purpose or purposes of the
meeting. Notice of the time, place and purpose of any meeting of stockholders
may be waived in writing, signed by the person entitled to notice thereof,
either before or after such meeting, and will be waived by any stockholder by
his attendance thereat in person or by proxy, except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Any stockholder so waiving notice of such meeting shall be
bound by the proceedings of any such meeting in all respects as if due notice
thereof had been given.
Section 8. Quorum. At all meetings of stockholders, except where otherwise
provided by statute or by the Certificate of Incorporation, or by these By-laws,
the presence, in person or by proxy duly authorized, of the holders of a
majority of the outstanding shares of stock entitled to vote shall constitute a
quorum for the transaction of business. In the absence of a quorum, any meeting
of stockholders may be adjourned, from time to time, either by the chairman of
the meeting or by vote of the holders of a majority of the shares represented
thereat, but no other business shall be transacted at such meeting. The
stockholders present at a duly called or convened meeting, at which a quorum is
present, may continue to transact business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum. Except as
otherwise provided by law, the Certificate of Incorporation or these By-laws,
all action taken by the holders of a majority of the vote cast, excluding
abstentions, at any meeting at which a quorum is present shall be valid and
binding upon the corporation; provided, however, that directors shall be elected
by a plurality of the votes of the shares present in person or represented by
proxy at the meeting and entitled to vote on the election of directors. Where a
separate vote by a class or classes or series is required, except where
otherwise provided by the statute or by the Certificate of Incorporation or
these By-laws, a majority of the outstanding shares of such class or classes or
series, present in person or represented by proxy, shall constitute a quorum
entitled to take action with respect to that vote on that matter and, except
where otherwise provided by the statute or by the Certificate of Incorporation
or these By-laws, the affirmative vote of the majority (plurality, in the case
of the election of directors) of the votes cast, including abstentions, by the
holders of shares of such class or classes or series shall be the act of such
class or classes or series.
Section 9. Adjournment And Notice Of Adjourned Meetings. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
casting votes, excluding
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abstentions. When a meeting is adjourned to another time or place, notice need
not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting, the corporation may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than thirty
(30) days or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 10. Voting Rights. For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the stock
records of the corporation on the record date, as provided in Section 12 of
these By-laws, shall be entitled to vote at any meeting of stockholders. Every
person entitled to vote shall have the right to do so either in person or by an
agent or agents authorized by a proxy granted in accordance with Delaware law.
An agent so appointed need not be a stockholder. No proxy shall be voted after
three (3) years from its date of creation unless the proxy provides for a longer
period.
Section 11. Joint Owners Of Stock. If shares or other securities having
voting power stand of record in the names of two (2) or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety, or otherwise, or if two (2) or more persons have the same
fiduciary relationship respecting the same shares, unless the Secretary is given
written notice to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect: (a) if only
one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the
majority so voting binds all; (c) if more than one (1) votes, but the vote is
evenly split on any particular matter, each faction may vote the securities in
question proportionally, or may apply to the Delaware Court of Chancery for
relief as provided in the General Corporation Law of Delaware, Section 217(b).
If the instrument filed with the Secretary shows that any such tenancy is held
in unequal interests, a majority or even-split for the purpose of subsection (c)
shall be a majority or even-split in interest.
Section 12. List Of Stockholders. The Secretary shall prepare and make, at
least ten (10) days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at said meeting, arranged in alphabetical order,
showing the address of each stockholder and the number of shares registered in
the name of each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten (10) days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not specified, at the place where
the meeting is to be held. The list shall be produced and kept at the time and
place of meeting during the whole time thereof and may be inspected by any
stockholder who is present.
Section 13. Action Without Meeting. No action shall be taken by the
stockholders except at an annual or special meeting of stockholders called in
accordance with these By-laws, and no action shall be taken by the stockholders
by written consent.
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Section 14. Organization.
(a) At every meeting of stockholders, the Chairman of the Board of
Directors, or, if a Chairman has not been appointed or is absent, the President,
or, if the President is absent, a chairman of the meeting chosen by a majority
in interest of the stockholders entitled to vote, present in person or by proxy,
shall act as chairman. The Secretary, or, in his absence, an Assistant Secretary
directed to do so by the President, shall act as secretary of the meeting.
(b) The Board of Directors of the corporation shall be entitled to
make such rules or regulations for the conduct of meetings of stockholders as it
shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business for the meeting,
rules and procedures for maintaining order at the meeting and the safety of
those present, limitations on participation in such meeting to stockholders of
record of the corporation and their duly authorized and constituted proxies and
such other persons as the chairman shall permit, restrictions on entry to the
meeting after the time fixed for the commencement thereof, limitations on the
time allotted to questions or comments by participants and regulation of the
opening and closing of the polls for balloting on matters which are to be voted
on by ballot. Unless and to the extent determined by the Board of Directors or
the chairman of the meeting, meetings of stockholders shall not be required to
be held in accordance with rules of parliamentary procedure.
ARTICLE IV
DIRECTORS
Section 15. Number And Term Of Office. The authorized number of directors
of the corporation shall be fixed in accordance with the Certificate of
Incorporation. Directors need not be stockholders unless so required by the
Certificate of Incorporation. If for any cause, the directors shall not have
been elected at an annual meeting, they may be elected as soon thereafter as
convenient at a special meeting of the stockholders called for that purpose in
the manner provided in these By-laws.
Section 16. Powers. The powers of the corporation shall be exercised, its
business conducted and its property controlled by the Board of Directors, except
as may be otherwise provided by statute or by the Certificate of Incorporation.
Section 17. Classes Of Directors. Subject to the rights of the holders of
any series of Preferred Stock to elect additional directors under specified
circumstances, the directors shall be divided into three classes designated as
Class I, Class II and Class III, respectively. Directors shall be assigned to
each class in accordance with a resolution or resolutions adopted by the Board
of Directors. At the first annual meeting of stockholders following the closing
of the initial public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended (the "1933 Act"), covering the
offer and sale of Common Stock of the
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corporation (the "Initial Public Offering"), the term of office of the Class I
directors shall expire and Class I directors shall be elected for a full term of
three years. At the second annual meeting of stockholders following the closing
of the Initial Public Offering, the term of office of the Class II directors
shall expire and Class II directors shall be elected for a full term of three
years. At the third annual meeting of stockholders following the closing of the
Initial Public Offering, the term of office of the Class III directors shall
expire and Class III directors shall be elected for a full term of three years.
At each succeeding annual meeting of stockholders, directors shall be elected
for a full term of three years to succeed the directors of the class whose terms
expire at such annual meeting.
Notwithstanding the foregoing provisions of this Section 17, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
Section 18. Vacancies. Unless otherwise provided in the Certificate of
Incorporation, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by stockholders, be filled only
by the affirmative vote of a majority of the directors then in office, even
though less than a quorum of the Board of Directors. Any director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the director for which the vacancy was created or occurred and
until such director's successor shall have been elected and qualified. A vacancy
in the Board of Directors shall be deemed to exist under this By-law in the case
of the death, removal or resignation of any director.
Section 19. Resignation. Any director may resign at any time by delivering
his written resignation to the Secretary, such resignation to specify whether it
will be effective at a particular time, upon receipt by the Secretary or at the
pleasure of the Board of Directors. If no such specification is made, it shall
be deemed effective at the pleasure of the Board of Directors. When one or more
directors shall resign from the Board of Directors, effective at a future date,
a majority of the directors then in office, including those who have so
resigned, shall have power to fill such vacancy or vacancies, the vote thereon
to take effect when such resignation or resignations shall become effective, and
each Director so chosen shall hold office for the unexpired portion of the term
of the Director whose place shall be vacated and until his successor shall have
been duly elected and qualified.
Section 20. Removal. Subject to the rights of the holders of any series of
Preferred Stock, no director shall be removed without cause. Subject to any
limitations imposed by law, the Board of Directors or any individual director
may be removed from office at any time with cause by the affirmative vote of the
holders of a majority of the voting power of all the then-outstanding shares of
voting stock of the corporation entitled to vote at an election of directors
(the "Voting Stock").
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Section 21. Meetings.
(a) Annual Meetings. The annual meeting of the Board of Directors
shall be held immediately before or after the annual meeting of stockholders and
at the place where such meeting is held. No notice of an annual meeting of the
Board of Directors shall be necessary and such meeting shall be held for the
purpose of electing officers and transacting such other business as may lawfully
come before it.
(b) Regular Meetings. Except as hereinafter otherwise provided,
regular meetings of the Board of Directors shall be held in the office of the
corporation required to be maintained pursuant to Section 2 hereof. Unless
otherwise restricted by the Certificate of Incorporation, regular meetings of
the Board of Directors may also be held at any place within or without the State
of Delaware which has been designated by resolution of the Board of Directors or
the written consent of all directors.
(c) Special Meetings. Unless otherwise restricted by the Certificate
of Incorporation, special meetings of the Board of Directors may be held at any
time and place within or without the State of Delaware whenever called by the
Chairman of the Board, the President or any two of the directors
(d) Telephone Meetings. Any member of the Board of Directors, or of
any committee thereof, may participate in a meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
by such means shall constitute presence in person at such meeting.
(e) Notice Of Meetings. Notice of the time and place of all special
meetings of the Board of Directors shall be orally or in writing, by telephone,
including a voice messaging system or other system or technology designed to
record and communicate messages, facsimile, telegraph or telex, or by electronic
mail or other electronic means, during normal business hours, at least
twenty-four (24) hours before the date and time of the meeting, or sent in
writing to each director by first class mail, charges prepaid, at least three
(3) days before the date of the meeting. Notice of any meeting may be waived in
writing at any time before or after the meeting and will be waived by any
director by attendance thereat, except when the director attends the meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
(f) Waiver Of Notice. The transaction of all business at any meeting
of the Board of Directors, or any committee thereof, however called or noticed,
or wherever held, shall be as valid as though had at a meeting duly held after
regular call and notice, if a quorum be present and if, either before or after
the meeting, each of the directors not present shall sign a written waiver of
notice. All such waivers shall be filed with the corporate records or made a
part of the minutes of the meeting.
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Section 22. Quorum And Voting.
(a) Unless the Certificate of Incorporation requires a greater
number and except with respect to indemnification questions arising under
Section 43 hereof, for which a quorum shall be one-third of the exact number of
directors fixed from time to time in accordance with the Certificate of
Incorporation, a quorum of the Board of Directors shall consist of a majority of
the exact number of directors fixed from time to time by the Board of Directors
in accordance with the Certificate of Incorporation; provided, however, at any
meeting whether a quorum be present or otherwise, a majority of the directors
present may adjourn from time to time until the time fixed for the next regular
meeting of the Board of Directors, without notice other than by announcement at
the meeting.
(b) At each meeting of the Board of Directors at which a quorum is
present, all questions and business shall be determined by the affirmative vote
of a majority of the directors present, unless a different vote be required by
law, the Certificate of Incorporation or these By-laws.
Section 23. Action Without Meeting. Unless otherwise restricted by the
Certificate of Incorporation or these By-laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
Section 24. Fees And Compensation. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and at any meeting of a committee of the Board
of Directors. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise and receiving compensation therefor.
Section 25. Committees.
(a) Executive Committee.The Board of Directors may by resolution
passed by a majority of the whole Board of Directors appoint an Executive
Committee to consist of one (1) or more members of the Board of Directors. The
Executive Committee, to the extent permitted by law and provided in the
resolution of the Board of Directors shall have and may exercise all the powers
and authority of the Board of Directors in the management of the business and
affairs of the corporation, including without limitation the power or authority
to declare a dividend, to authorize the issuance of stock and to adopt a
certificate of ownership and merger, and may authorize the seal of the
corporation to be affixed to all papers which may require it; but no such
committee shall have the power or authority in reference to amending the
Certificate of Incorporation (except that a committee may, to the extent
authorized in the resolution or resolutions providing for the issuance of shares
of stock adopted by the Board of Directors fix the designations and any of the
preferences or rights of such shares relating to dividends,
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redemption, dissolution, any distribution of assets of the corporation or the
conversion into, or the exchange of such shares for, shares of any other class
or classes or any other series of the same or any other class or classes of
stock of the corporation or fix the number of shares of any series of stock or
authorize the increase or decrease of the shares of any series), adopting an
agreement of merger or consolidation, recommending to the stockholders the sale,
lease or exchange of all or substantially all of the corporation's property and
assets, recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the by-laws of the corporation.
(b) Other Committees. The Board of Directors may, by resolution
passed by a majority of the whole Board of Directors, from time to time appoint
such other committees as may be permitted by law. Such other committees
appointed by the Board of Directors shall consist of one (1) or more members of
the Board of Directors and shall have such powers and perform such duties as may
be prescribed by the resolution or resolutions creating such committees, but in
no event shall such committee have the powers denied to the Executive Committee
in these By-laws.
(c) Term. Each member of a committee of the Board of Directors shall
serve a term on the committee coexistent with such member's term on the Board of
Directors. The Board of Directors, subject to the provisions of subsections (a)
or (b) of this By-law may at any time increase or decrease the number of members
of a committee or terminate the existence of a committee. The membership of a
committee member shall terminate on the date of his death or voluntary
resignation from the committee or from the Board of Directors. The Board of
Directors may at any time for any reason remove any individual committee member
and the Board of Directors may fill any committee vacancy created by death,
resignation, removal or increase in the number of members of the committee. The
Board of Directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of the committee, and, in addition, in the absence or disqualification of any
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member.
(d) Meetings. Unless the Board of Directors shall otherwise provide,
regular meetings of the Executive Committee or any other committee appointed
pursuant to this Section 25 shall be held at such times and places as are
determined by the Board of Directors, or by any such committee, and when notice
thereof has been given to each member of such committee, no further notice of
such regular meetings need be given thereafter. Special meetings of any such
committee may be held at any place which has been determined from time to time
by such committee, and may be called by any director who is a member of such
committee, upon written notice to the members of such committee of the time and
place of such special meeting given in the manner provided for the giving of
written notice to members of the Board of Directors of the time and place of
special meetings of the Board of Directors. Notice of any special meeting of any
committee may be waived in writing at any time before or after the meeting and
will be waived by any director by attendance thereat, except when the director
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attends such special meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. A majority of the authorized number of
members of any such committee shall constitute a quorum for the transaction of
business, and the act of a majority of those present at any meeting at which a
quorum is present shall be the act of such committee.
Section 26. Organization. At every meeting of the directors, the Chairman
of the Board of Directors, or, if a Chairman has not been appointed or is
absent, the President, or if the President is absent, the most senior Vice
President, or, in the absence of any such officer, a chairman of the meeting
chosen by a majority of the directors present, shall preside over the meeting.
The Secretary, or in his absence, an Assistant Secretary directed to do so by
the President, shall act as secretary of the meeting.
ARTICLE V
OFFICERS
Section 27. Officers Designated. The officers of the corporation shall
include, if and when designated by the Board of Directors, the Chairman of the
Board of Directors, the Chief Executive Officer, the President, one or more Vice
Presidents, the Secretary, the Chief Financial Officer, the Treasurer, the
Controller, all of whom shall be elected at the annual organizational meeting of
the Board of Directors. The Board of Directors may also appoint one or more
Assistant Secretaries, Assistant Treasurers, Assistant Controllers and such
other officers and agents with such powers and duties as it shall deem
necessary. The Board of Directors may assign such additional titles to one or
more of the officers as it shall deem appropriate. Any one person may hold any
number of offices of the corporation at any one time unless specifically
prohibited therefrom by law. The salaries and other compensation of the officers
of the corporation shall be fixed by or in the manner designated by the Board of
Directors.
Section 28. Tenure And Duties Of Officers.
(a) General. All officers shall hold office at the pleasure of the
Board of Directors and until their successors shall have been duly elected and
qualified, unless sooner removed. Any officer elected or appointed by the Board
of Directors may be removed at any time by the Board of Directors. If the office
of any officer becomes vacant for any reason, the vacancy may be filled by the
Board of Directors.
(b) Duties Of Chairman Of The Board Of Directors. The Chairman of
the Board of Directors, when present, shall preside at all meetings of the
stockholders and the Board of Directors. The Chairman of the Board of Directors
shall perform other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time. If there is no President, then the Chairman
of the Board of Directors shall also serve as the Chief Executive Officer of the
corporation and shall have the powers and duties prescribed in paragraph (c) of
this Section 28.
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(c) Duties Of President. The President shall preside at all meetings
of the stockholders and at all meetings of the Board of Directors, unless the
Chairman of the Board of Directors has been appointed and is present. Unless
some other officer has been elected Chief Executive Officer of the corporation,
the President shall be the chief executive officer of the corporation and shall,
subject to the control of the Board of Directors, have general supervision,
direction and control of the business and officers of the corporation. The
President shall perform other duties commonly incident to his office and shall
also perform such other duties and have such other powers as the Board of
Directors shall designate from time to time.
(d) Duties Of Vice Presidents. The Vice Presidents may assume and
perform the duties of the President in the absence or disability of the
President or whenever the office of President is vacant. The Vice Presidents
shall perform other duties commonly incident to their office and shall also
perform such other duties and have such other powers as the Board of Directors
or the President shall designate from time to time.
(e) Duties Of Secretary. The Secretary shall attend all meetings of
the stockholders and of the Board of Directors and shall record all acts and
proceedings thereof in the minute book of the corporation. The Secretary shall
give notice in conformity with these By-laws of all meetings of the stockholders
and of all meetings of the Board of Directors and any committee thereof
requiring notice. The Secretary shall perform all other duties given him in
these By-laws and other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time. The President may direct any Assistant
Secretary to assume and perform the duties of the Secretary in the absence or
disability of the Secretary, and each Assistant Secretary shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time.
(f) Duties Of Chief Financial Officer. The Chief Financial Officer
shall keep or cause to be kept the books of account of the corporation in a
thorough and proper manner and shall render statements of the financial affairs
of the corporation in such form and as often as required by the Board of
Directors or the President. The Chief Financial Officer, subject to the order of
the Board of Directors, shall have the custody of all funds and securities of
the corporation. The Chief Financial Officer shall perform other duties commonly
incident to his office and shall also perform such other duties and have such
other powers as the Board of Directors or the President shall designate from
time to time. The President may direct the Treasurer or any Assistant Treasurer,
or the Controller or any Assistant Controller to assume and perform the duties
of the Chief Financial Officer in the absence or disability of the Chief
Financial Officer, and each Treasurer and Assistant Treasurer and each
Controller and Assistant Controller shall perform other duties commonly incident
to his office and shall also perform such other duties and have such other
powers as the Board of Directors or the President shall designate from time to
time.
Section 29. Delegation Of Authority. The Board of Directors may from time
to time delegate the powers or duties of any officer to any other officer or
agent, notwithstanding any provision hereof.
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Section 30. Resignations. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer.
Section 31. Removal. Any officer may be removed from office at any time,
either with or without cause, by the affirmative vote of a majority of the
directors in office at the time, or by the unanimous written consent of the
directors in office at the time, or by any committee or superior officers upon
whom such power of removal may have been conferred by the Board of Directors.
ARTICLE VI
EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES OWNED BY THE
CORPORATION
Section 32. Execution Of Corporate Instruments. The Board of Directors
may, in its discretion, determine the method and designate the signatory officer
or officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into contracts on behalf of
the corporation, except where otherwise provided by law or these By-laws, and
such execution or signature shall be binding upon the corporation.
Unless otherwise specifically determined by the Board of Directors or
otherwise required by law, promissory notes, deeds of trust, mortgages and other
evidences of indebtedness of the corporation, and other corporate instruments or
documents requiring the corporate seal, and certificates of shares of stock
owned by the corporation, shall be executed, signed or endorsed by the Chairman
of the Board of Directors, or the President or any Vice President, and by the
Secretary or Treasurer or any Assistant Secretary or Assistant Treasurer. All
other instruments and documents requiring the corporate signature, but not
requiring the corporate seal, may be executed as aforesaid or in such other
manner as may be directed by the Board of Directors.
All checks and drafts drawn on banks or other depositaries on funds to the
credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.
Unless authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall have any power
or authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount.
Section 33. Voting Of Securities Owned By The Corporation. All stock and
other securities of other corporations owned or held by the corporation for
itself, or for other parties in
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any capacity, shall be voted, and all proxies with respect thereto shall be
executed, by the person authorized so to do by resolution of the Board of
Directors, or, in the absence of such authorization, by the Chairman of the
Board of Directors, the Chief Executive Officer, the President, or any Vice
President.
ARTICLE VII
SHARES OF STOCK
Section 34. Form And Execution Of Certificates. Certificates for the
shares of stock of the corporation shall be in such form as is consistent with
the Certificate of Incorporation and applicable law. Every holder of stock in
the corporation shall be entitled to have a certificate signed by or in the name
of the corporation by the Chairman of the Board of Directors, or the President
or any Vice President and by the Treasurer or Assistant Treasurer or the
Secretary or Assistant Secretary, certifying the number of shares owned by him
in the corporation. Any or all of the signatures on the certificate may be
facsimiles. In case any officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent, or registrar before such certificate is
issued, it may be issued with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue. Each certificate shall state
upon the face or back thereof, in full or in summary, all of the powers,
designations, preferences, and rights, and the limitations or restrictions of
the shares authorized to be issued or shall, except as otherwise required by
law, set forth on the face or back a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, designations,
preferences and relative, participating, optional, or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights. Within a reasonable time after
the issuance or transfer of uncertificated stock, the corporation shall send to
the registered owner thereof a written notice containing the information
required to be set forth or stated on certificates pursuant to this section or
otherwise required by law or with respect to this section a statement that the
corporation will furnish without charge to each stockholder who so requests the
powers, designations, preferences and relative participating, optional or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights. Except as
otherwise expressly provided by law, the rights and obligations of the holders
of certificates representing stock of the same class and series shall be
identical.
Section 35. Lost Certificates. A new certificate or certificates shall be
issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. The corporation may require, as a condition
precedent to the issuance of a new certificate or certificates, the owner of
such lost, stolen, or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require or to
give the corporation a surety bond in such form and amount as it may direct as
indemnity against any claim that may be made against the corporation with
respect to the certificate alleged to have been lost, stolen, or destroyed.
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Section 36. Transfers.
(a) Transfers of record of shares of stock of the corporation shall
be made only upon its books by the holders thereof, in person or by attorney
duly authorized, and upon the surrender of a properly endorsed certificate or
certificates for a like number of shares.
(b) The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the corporation to restrict the transfer of shares of stock of the corporation
of any one or more classes owned by such stockholders in any manner not
prohibited by the General Corporation Law of Delaware.
Section 37. Fixing Record Dates.
(a) In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix, in advance, a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors, and which record date
shall not be more than sixty (60) nor less than ten (10) days before the date of
such meeting. If no record date is fixed by the Board of Directors, the record
date for determining stockholders entitled to notice of or to vote at a meeting
of stockholders shall be at the close of business on the day next preceding the
day on which notice is given, or if notice is waived, at the close of business
on the day next preceding the day on which the meeting is held. A determination
of stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
(b) In order that the corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than sixty (60)
days prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.
Section 38. Registered Stockholders. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of Delaware.
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ARTICLE VIII
OTHER SECURITIES OF THE CORPORATION
Section 39. Execution Of Other Securities. All bonds, debentures and
other corporate securities of the corporation, other than stock certificates
(covered in Section 34), may be signed by the Chairman of the Board of
Directors, the President or any Vice President, or such other person as may be
authorized by the Board of Directors, and the corporate seal impressed thereon
or a facsimile of such seal imprinted thereon and attested by the signature of
the Secretary or an Assistant Secretary, or the Chief Financial Officer or
Treasurer or an Assistant Treasurer; provided, however, that where any such
bond, debenture or other corporate security shall be authenticated by the manual
signature, or where permissible facsimile signature, of a trustee under an
indenture pursuant to which such bond, debenture or other corporate security
shall be issued, the signatures of the persons signing and attesting the
corporate seal on such bond, debenture or other corporate security may be the
imprinted facsimile of the signatures of such persons. Interest coupons
appertaining to any such bond, debenture or other corporate security,
authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an
Assistant Treasurer of the corporation or such other person as may be authorized
by the Board of Directors, or bear imprinted thereon the facsimile signature of
such person. In case any officer who shall have signed or attested any bond,
debenture or other corporate security, or whose facsimile signature shall appear
thereon or on any such interest coupon, shall have ceased to be such officer
before the bond, debenture or other corporate security so signed or attested
shall have been delivered, such bond, debenture or other corporate security
nevertheless may be adopted by the corporation and issued and delivered as
though the person who signed the same or whose facsimile signature shall have
been used thereon had not ceased to be such officer of the corporation.
ARTICLE IX
DIVIDENDS
Section 40. Declaration Of Dividends. Dividends upon the capital stock of
the corporation, subject to the provisions of the Certificate of Incorporation,
if any, may be declared by the Board of Directors pursuant to law at any regular
or special meeting. Dividends may be paid in cash, in property, or in shares of
the capital stock, subject to the provisions of the Certificate of
Incorporation.
Section 41. Dividend Reserve. Before payment of any dividend, there may be
set aside out of any funds of the corporation available for dividends such sum
or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Board of Directors shall think
conducive to the interests of the corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
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ARTICLE X
FISCAL YEAR
Section 42. Fiscal Year. The fiscal year of the corporation shall be fixed
by resolution of the Board of Directors.
ARTICLE XI
INDEMNIFICATION
Section 43. Indemnification Of Directors, Executive Officers, Other
Officers, Employees And Other Agents.
(a) Directors And Executive Officers. The corporation shall
indemnify its directors and executive officers (for the purposes of this Article
XI, executive officers shall have the meaning defined in Rule 3b-7 promulgated
under the 1934 Act) to the fullest extent not prohibited by the Delaware General
Corporation Law; provided, however, that the corporation may modify the extent
of such indemnification by individual contracts with its directors and executive
officers; and, provided, further, that the corporation shall not be required to
indemnify any director or executive officer in connection with any proceeding
(or part thereof) initiated by such person unless (i) such indemnification is
expressly required to be made by law, (ii) the proceeding was authorized by the
Board of Directors of the corporation, (iii) such indemnification is provided by
the corporation, in its sole discretion, pursuant to the powers vested in the
corporation under the Delaware General Corporation Law or (iv) such
indemnification is required to be made under subsection (d).
(b) Other Officers, Employees and Other Agents. The corporation
shall have power to indemnify its other officers, employees and other agents as
set forth in the Delaware General Corporation Law.
(c) Expenses. The corporation shall advance to any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director or executive
officer, of the corporation, or is or was serving at the request of the
corporation as a director or executive officer of another corporation,
partnership, joint venture, trust or other enterprise, prior to the final
disposition of the proceeding, promptly following request therefor, all expenses
incurred by any director or executive officer in connection with such proceeding
upon receipt of an undertaking by or on behalf of such person to repay said
amounts if it should be determined ultimately that such person is not entitled
to be indemnified under this By-law or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to
paragraph (e) of this By-law, no advance shall be made by the corporation to an
executive officer of the corporation (except by reason of the fact that such
executive officer is or was a director of the corporation in which event this
paragraph shall not apply) in any action, suit or proceeding,
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whether civil, criminal, administrative or investigative, if a determination is
reasonably and promptly made (i) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to the proceeding, or (ii)
if such quorum is not obtainable, or, even if obtainable, a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, that the facts known to the decision-making party at the time such
determination is made demonstrate clearly and convincingly that such person
acted in bad faith or in a manner that such person did not believe to be in or
not opposed to the best interests of the corporation.
(d) Enforcement. Without the necessity of entering into an express
contract, all rights to indemnification and advances to directors and executive
officers under this By-law shall be deemed to be contractual rights and be
effective to the same extent and as if provided for in a contract between the
corporation and the director or executive officer. Any right to indemnification
or advances granted by this By-law to a director or executive officer shall be
enforceable by or on behalf of the person holding such right in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. The claimant in such enforcement action,
if successful in whole or in part, shall be entitled to be paid also the expense
of prosecuting his claim. In connection with any claim for indemnification, the
corporation shall be entitled to raise as a defense to any such action that the
claimant has not met the standards of conduct that make it permissible under the
Delaware General Corporation Law for the corporation to indemnify the claimant
for the amount claimed. In connection with any claim by an executive officer of
the corporation (except in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that such
executive officer is or was a director of the corporation) for advances, the
corporation shall be entitled to raise a defense as to any such action clear and
convincing evidence that such person acted in bad faith or in a manner that such
person did not believe to be in or not opposed to the best interests of the
corporation, or with respect to any criminal action or proceeding that such
person acted without reasonable cause to believe that his conduct was lawful.
Neither the failure of the corporation (including its Board of Directors,
independent legal counsel or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant is
proper in the circumstances because he has met the applicable standard of
conduct set forth in the Delaware General Corporation Law, nor an actual
determination by the corporation (including its Board of Directors, independent
legal counsel or its stockholders) that the claimant has not met such applicable
standard of conduct, shall be a defense to the action or create a presumption
that claimant has not met the applicable standard of conduct. In any suit
brought by a director or executive officer to enforce a right to indemnification
or to an advancement of expenses hereunder, the burden of proving that the
director or executive officer is not entitled to be indemnified, or to such
advancement of expenses, under this Article XI or otherwise shall be on the
corporation.
(e) Non-Exclusivity Of Rights. The rights conferred on any person by
this By-law shall not be exclusive of any other right which such person may have
or hereafter acquire under any statute, provision of the Certificate of
Incorporation, By-laws, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office. The corporation is specifically
authorized
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to enter into individual contracts with any or all of its directors, officers,
employees or agents respecting indemnification and advances, to the fullest
extent not prohibited by the Delaware General Corporation Law.
(f) Survival Of Rights. The rights conferred on any person by this
By-law shall continue as to a person who has ceased to be a director, officer,
employee or other agent and shall inure to the benefit of the heirs, executors
and administrators of such a person.
(g) Insurance. To the fullest extent permitted by the Delaware
General Corporation Law, the corporation, upon approval by the Board of
Directors, may purchase insurance on behalf of any person required or permitted
to be indemnified pursuant to this By-law.
(h) Amendments. Any repeal or modification of this By-law shall only
be prospective and shall not affect the rights under this By-law in effect at
the time of the alleged occurrence of any action or omission to act that is the
cause of any proceeding against any agent of the corporation.
(i) Saving Clause. If this By-law or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director and executive officer to
the full extent not prohibited by any applicable portion of this By-law that
shall not have been invalidated, or by any other applicable law.
(j) Certain Definitions. For the purposes of this By-law, the
following definitions shall apply:
(1) The term "proceeding" shall be broadly construed and shall
include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of testimony in,
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative.
(2) The term "expenses" shall be broadly construed and shall
include, without limitation, court costs, attorneys' fees, witness fees, fines,
amounts paid in settlement or judgment and any other costs and expenses of any
nature or kind incurred in connection with any proceeding.
(3) The term the "corporation" shall include, in addition to
the resulting corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger which, if
its separate existence had continued, would have had power and authority to
indemnify its directors, officers, and employees or agents, so that any person
who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
the provisions of this By-law with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
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(4) References to a "director," "executive officer,"
"officer," "employee," or "agent" of the corporation shall include, without
limitation, situations where such person is serving at the request of the
corporation as, respectively, a director, executive officer, officer, employee,
trustee or agent of another corporation, partnership, joint venture, trust or
other enterprise.
(5) References to "other enterprises" shall include employee
benefit plans; references to "fines" shall include any excise taxes assessed on
a person with respect to an employee benefit plan; and references to "serving at
the request of the corporation" shall include any service as a director,
officer, employee or agent of the corporation which imposes duties on, or
involves services by, such director, officer, employee, or agent with respect to
an employee benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this By-law.
ARTICLE XII
NOTICES
Section 44. Notices.
(a) Notice To Stockholders. Whenever, under any provisions of these
By-laws, notice is required to be given to any stockholder, it shall be given in
writing, timely and duly deposited in the United States mail, postage prepaid,
and addressed to his last known post office address as shown by the stock record
of the corporation or its transfer agent.
(b) Notice To Directors. Any notice required to be given to any
director may be given by the method stated in subsection (a), or by facsimile,
telex or telegram, except that such notice other than one which is delivered
personally shall be sent to such address as such director shall have filed in
writing with the Secretary, or, in the absence of such filing, to the last known
post office address of such director.
(c) Affidavit Of Mailing. An affidavit of mailing, executed by a
duly authorized and competent employee of the corporation or its transfer agent
appointed with respect to the class of stock affected, specifying the name and
address or the names and addresses of the stockholder or stockholders, or
director or directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall in the absence of fraud, be prima
facie evidence of the facts therein contained.
(d) Time Notices Deemed Given. All notices given by mail, as above
provided, shall be deemed to have been given as at the time of mailing, and all
notices given by facsimile, telex or telegram shall be deemed to have been given
as of the sending time recorded at time of transmission.
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(e) Methods Of Notice. It shall not be necessary that the same
method of giving notice be employed in respect of all directors, but one
permissible method may be employed in respect of any one or more, and any other
permissible method or methods may be employed in respect of any other or others.
(f) Failure To Receive Notice. The period or limitation of time
within which any stockholder may exercise any option or right, or enjoy any
privilege or benefit, or be required to act, or within which any director may
exercise any power or right, or enjoy any privilege, pursuant to any notice sent
him in the manner above provided, shall not be affected or extended in any
manner by the failure of such stockholder or such director to receive such
notice.
(g) Notice To Person With Whom Communication Is Unlawful. Whenever
notice is required to be given, under any provision of law or of the Certificate
of Incorporation or By-laws of the corporation, to any person with whom
communication is unlawful, the giving of such notice to such person shall not be
required and there shall be no duty to apply to any governmental authority or
agency for a license or permit to give such notice to such person. Any action or
meeting which shall be taken or held without notice to any such person with whom
communication is unlawful shall have the same force and effect as if such notice
had been duly given. In the event that the action taken by the corporation is
such as to require the filing of a certificate under any provision of the
Delaware General Corporation Law, the certificate shall state, if such is the
fact and if notice is required, that notice was given to all persons entitled to
receive notice except such persons with whom communication is unlawful.
(h) Notice To Person With Undeliverable Address. Whenever notice is
required to be given, under any provision of law or the Certificate of
Incorporation or By-laws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of the
taking of action by written consent without a meeting to such person during the
period between such two consecutive annual meetings, or (ii) all, and at least
two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve-month period, have been mailed addressed to such
person at his address as shown on the records of the corporation and have been
returned undeliverable, the giving of such notice to such person shall not be
required. Any action or meeting which shall be taken or held without notice to
such person shall have the same force and effect as if such notice had been duly
given. If any such person shall deliver to the corporation a written notice
setting forth his then current address, the requirement that notice be given to
such person shall be reinstated. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the Delaware General Corporation Law, the certificate need not
state that notice was not given to persons to whom notice was not required to be
given pursuant to this paragraph.
ARTICLE XIII
AMENDMENTS
Section 45. Amendments. Subject to paragraph (h) of Section 43 of the
By-laws, the By-laws may be altered or amended or new By-laws adopted by the
affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of the
voting power of all of the then-outstanding
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shares of the Voting Stock. The Board of Directors shall also have the power to
adopt, amend, or repeal By-laws.
ARTICLE XIV
LOANS TO OFFICERS
Section 46. Loans To Officers. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a director of the corporation or its subsidiaries, whenever, in the judgment
of the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the corporation. The loan, guarantee or other assistance may
be with or without interest and may be unsecured, or secured in such manner as
the Board of Directors shall approve, including, without limitation, a pledge of
shares of stock of the corporation. Nothing in these By-laws shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
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Exhibit 10.1
INDEMNITY AGREEMENT
THIS AGREEMENT is made and entered into this ____ day of _____________,
1997 by and between GENE LOGIC INC., a Delaware corporation (the "Company"), and
______________ ("Agent").
RECITALS
WHEREAS, Agent performs a valuable service to the Company in Agent's
capacity as an officer or director of the Company;
WHEREAS, the stockholders of the Company have adopted by-laws (the
"By-laws") providing for the indemnification of the directors, officers,
employees and other agents of the Company, including persons serving at the
request of the Company in such capacities with other corporations or
enterprises, as authorized by the Delaware General Corporation Law, as amended
(the "Code");
WHEREAS, the By-laws and the Code, by their non-exclusive nature, permit
contracts between the Company and its agents, officers, employees and other
agents with respect to indemnification of such persons; and
WHEREAS, in order to induce Agent to continue to serve as an officer or
director of the Company, the Company has determined and agreed to enter into
this Agreement with Agent;
NOW, THEREFORE, in consideration of Agent's continued service as an
officer or director after the date hereof, the parties hereto agree as follows:
AGREEMENT
1. Services to the Company. Agent will serve, at the will of the Company
or under separate contract, if any such contract exists, as an officer or
director of the Company or as a director, officer or other fiduciary of an
affiliate of the Company (including any employee benefit plan of the Company)
faithfully and to the best of Agent's ability so long as Agent is duly elected
and qualified in accordance with the provisions of the By-laws or other
applicable charter documents of the Company or such affiliate; provided,
however, that Agent may at any time and for any reason resign from such position
(subject to any contractual obligation that Agent may have assumed apart from
this Agreement) and that the Company or any affiliate shall have no obligation
under this Agreement to continue Agent in any such position.
1.
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2. Indemnity of Agent. The Company hereby agrees to hold harmless and
indemnify Agent to the fullest extent authorized or permitted by the provisions
of the By-laws and the Code, as the same may be amended from time to time (but,
only to the extent that such amendment permits the Company to provide broader
indemnification rights than the By-laws or the Code permitted prior to adoption
of such amendment).
3. Additional Indemnity. In addition to and not in limitation of the
indemnification otherwise provided for herein, and subject only to the
exclusions set forth in Section 4 hereof, the Company hereby further agrees to
hold harmless and indemnify Agent:
(a) against any and all expenses (including attorneys' fees),
witness fees, damages, judgments, fines and amounts paid in settlement and any
other amounts that Agent becomes legally obligated to pay because of any claim
or claims made against or by Agent in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative (including an action by or in the right of the
Company) to which Agent is, was or at any time becomes a party, or is threatened
to be made a party, by reason of the fact that Agent is, was or at any time
becomes a director, officer, employee or other agent of Company, or is or was
serving or at any time serves at the request of the Company as a director,
officer, employee or other agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise; and
(b) otherwise to the fullest extent as may be provided to Agent by
the Company under the non-exclusivity provisions of the Code and Section 43 of
the By-laws.
4. Limitations on Additional Indemnity. No indemnity pursuant to Section 3
hereof shall be paid by the Company:
(a) on account of any claim against Agent for an accounting of
profits made from the purchase or sale by Agent of securities of the Company
pursuant to the provisions of Section 16(b) of the Securities Exchange Act of
1934 and amendments thereto or similar provisions of any federal, state or local
statutory law;
(b) on account of Agent's conduct that was knowingly fraudulent or
deliberately dishonest or that constituted willful misconduct;
(c) on account of Agent's conduct that constituted a breach of
Agent's duty of loyalty to the Company or resulted in any personal profit or
advantage to which Agent was not legally entitled;
2.
<PAGE>
(d) for which payment is actually made to Agent under a valid and
collectible insurance policy or under a valid and enforceable indemnity clause,
by-law or agreement, except in respect of any excess beyond payment under such
insurance, clause, by-law or agreement;
(e) if indemnification is not lawful (and, in this respect, both the
Company and Agent have been advised that the Securities and Exchange Commission
believes that indemnification for liabilities arising under the federal
securities laws is against public policy and is, therefore, unenforceable and
that claims for indemnification should be submitted to appropriate courts for
adjudication); or
(f) in connection with any proceeding (or part thereof) initiated by
Agent, or any proceeding by Agent against the Company or its directors,
officers, employees or other agents, unless (i) such indemnification is
expressly required to be made by law, (ii) the proceeding was authorized by the
Board of Directors of the Company, (iii) such indemnification is provided by the
Company, in its sole discretion, pursuant to the powers vested in the Company
under the Code, or (iv) the proceeding is initiated pursuant to Section 9
hereof.
5. Continuation of Indemnity. All agreements and obligations of the
Company contained herein shall continue during the period Agent is a director,
officer, employee or other agent of the Company (or is or was serving at the
request of the Company as a director, officer, employee or other agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise) and shall continue thereafter so long as Agent shall be
subject to any possible claim or threatened, pending or completed action, suit
or proceeding, whether civil, criminal, arbitrational, administrative or
investigative, by reason of the fact that Agent was serving in the capacity
referred to herein.
6. Partial Indemnification. Agent shall be entitled under this Agreement
to indemnification by the Company for a portion of the expenses (including
attorneys' fees), witness fees, damages, judgments, fines and amounts paid in
settlement and any other amounts that Agent becomes legally obligated to pay in
connection with any action, suit or proceeding referred to in Section 3 hereof
even if not entitled hereunder to indemnification for the total amount thereof,
and the Company shall indemnify Agent for the portion thereof to which Agent is
entitled.
7. Notification and Defense of Claim. Not later than thirty (30) days
after receipt by Agent of notice of the commencement of any action, suit or
proceeding, Agent will, if a claim in respect thereof is to be made against the
Company under this Agreement, notify the Company of the commencement thereof;
but the omission to so notify the Company will not relieve it from any liability
which it may have to Agent
3.
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otherwise than under this Agreement. With respect to any such action, suit or
proceeding as to which Agent notifies the Company of the commencement thereof:
(a) the Company will be entitled to participate therein at its own
expense;
(b) except as otherwise provided below, the Company may, at its
option and jointly with any other indemnifying party similarly notified and
electing to assume such defense, assume the defense thereof, with counsel
reasonably satisfactory to Agent. After notice from the Company to Agent of its
election to assume the defense thereof, the Company will not be liable to Agent
under this Agreement for any legal or other expenses subsequently incurred by
Agent in connection with the defense thereof except for reasonable costs of
investigation or otherwise as provided below. Agent shall have the right to
employ separate counsel in such action, suit or proceeding but the fees and
expenses of such counsel incurred after notice from the Company of its
assumption of the defense thereof shall be at the expense of Agent unless (i)
the employment of counsel by Agent has been authorized by the Company, (ii)
Agent shall have reasonably concluded that there may be a conflict of interest
between the Company and Agent in the conduct of the defense of such action or
(iii) the Company shall not in fact have employed counsel to assume the defense
of such action, in each of which cases the fees and expenses of Agent's separate
counsel shall be at the expense of the Company. The Company shall not be
entitled to assume the defense of any action, suit or proceeding brought by or
on behalf of the Company or as to which Agent shall have made the conclusion
provided for in clause (ii) above; and
(c) the Company shall not be liable to indemnify Agent under this
Agreement for any amounts paid in settlement of any action or claim effected
without its written consent, which shall not be unreasonably withheld. The
Company shall be permitted to settle any action except that it shall not settle
any action or claim in any manner which would impose any penalty or limitation
on Agent without Agent's written consent, which may be given or withheld in
Agent's sole discretion.
8. Expenses. The Company shall advance, prior to the final disposition of
any proceeding, promptly following request therefor, all expenses incurred by
Agent in connection with such proceeding upon receipt of an undertaking by or on
behalf of Agent to repay said amounts if it shall be determined ultimately that
Agent is not entitled to be indemnified under the provisions of this Agreement,
the By-laws, the Code or otherwise.
9. Enforcement. Any right to indemnification or advances granted by this
Agreement to Agent shall be enforceable by or on behalf of Agent in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request
4.
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therefor. Agent, in such enforcement action, if successful in whole or in part,
shall be entitled to be paid also the expense of prosecuting Agent's claim. It
shall be a defense to any action for which a claim for indemnification is made
under Section 3 hereof (other than an action brought to enforce a claim for
expenses pursuant to Section 8 hereof, provided that the required undertaking
has been tendered to the Company) that Agent is not entitled to indemnification
because of the limitations set forth in Section 4 hereof. Neither the failure of
the Company (including its Board of Directors or its stockholders) to have made
a determination prior to the commencement of such enforcement action that
indemnification of Agent is proper in the circumstances, nor an actual
determination by the Company (including its Board of Directors or its
stockholders) that such indemnification is improper shall be a defense to the
action or create a presumption that Agent is not entitled to indemnification
under this Agreement or otherwise.
10. Subrogation. In the event of payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the rights of
recovery of Agent, who shall execute all documents required and shall do all
acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.
11. Non-Exclusivity of Rights. The rights conferred on Agent by this
Agreement shall not be exclusive of any other right which Agent may have or
hereafter acquire under any statute, provision of the Company's Certificate of
Incorporation or By-laws, agreement, vote of stockholders or directors, or
otherwise, both as to action in Agent's official capacity and as to action in
another capacity while holding office.
12. Survival of Rights.
(a) The rights conferred on Agent by this Agreement shall continue
after Agent has ceased to be a director, officer, employee or other agent of the
Company or to serve at the request of the Company as a director, officer,
employee or other agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise and shall inure to the benefit
of Agent's heirs, executors and administrators.
(b) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company, expressly to assume
and agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform if no such succession had taken
place.
13. Separability. Each of the provisions of this Agreement is a separate
and distinct agreement and independent of the others, so that if any provision
hereof shall be held to be invalid for any reason, such invalidity or
unenforceability shall not affect the
5.
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validity or enforceability of the other provisions hereof. Furthermore, if this
Agreement shall be invalidated in its entirety on any ground, then the Company
shall nevertheless indemnify Agent to the fullest extent provided by the
By-laws, the Code or any other applicable law.
14. Entire Agreement. This Agreement and the agreements referenced herein
constitute the entire agreement between the parties hereto pertaining to the
subject matter hereof, and any and all other written or oral agreements existing
between the parties hereto pertaining to the subject matters hereof are
superseded and expressly canceled.
15. Governing Law. This Agreement shall be interpreted and enforced in
accordance with the laws of the State of Delaware.
16. Amendment and Termination. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless in writing signed by
both parties hereto.
17. Identical Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
but all of which together shall constitute but one and the same Agreement. Only
one such counterpart need be produced to evidence the existence of this
Agreement.
18. Headings. The headings of the sections of this Agreement are inserted
for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction hereof.
19. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given (i)
upon delivery if delivered by hand to the party to whom such communication was
directed or (ii) upon the third business day after the date on which such
communication was mailed if mailed by certified or registered mail with postage
prepaid:
(a) If to Agent, at the address indicated on the signature page
hereof.
(b) If to the Company, to
GENE LOGIC INC.
10150 Old Columbia Road
Columbia, MD 21046
or to such other address as may have been furnished to Agent by the Company.
6.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and as of
the day and year first above written.
GENE LOGIC INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
AGENT
--------------------------------------
Address:
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INDEMNITY AGREEMENT
<PAGE>
Exhibit 10.2
GENE LOGIC INC.
1997 EQUITY INCENTIVE PLAN
Adopted October 1, 1997
Approved By Stockholders ______________, 1997
INTRODUCTION.
This Plan is an amendment and restatement of the Company's existing 1996
Stock Plan (the "1996 Plan"), and shall become effective on the date of the
initial public offering (the "IPO") of the Company's common stock (the
"Effective Date"). No options shall be granted under the 1996 Plan from and
after the Effective Date.
1. PURPOSES.
(a) The purpose of the Plan is to provide a means by which selected
Employees and Directors of and Consultants to the Company and its Affiliates may
be given an opportunity to benefit from increases in value of the common stock
of the Company ("Common Stock") through the granting of (i) Incentive Stock
Options, (ii) Nonstatutory Stock Options, (iii) stock bonuses and (iv) rights to
purchase restricted stock, all as defined below.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees, Directors or Consultants, to secure and retain
the services of new Employees, Directors and Consultants, and to provide
incentives for such persons to exert maximum efforts for the success of the
Company and its Affiliates.
(c) The Company intends that the Stock Awards issued under the Plan shall,
in the discretion of the Board or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c), be
either (i) Options granted pursuant to Section 6 hereof, including Incentive
Stock Options and Nonstatutory Stock Options, or (ii) stock bonuses or rights to
purchase restricted stock granted pursuant to Section 7 hereof. All Options
shall be separately designated Incentive Stock Options or Nonstatutory Stock
Options at the time of grant, and a separate certificate or certificates will be
issued for shares purchased on exercise of each type of Option.
2. DEFINITIONS.
(a) "Affiliate" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f) respectively, of the Code.
(b) "Board" means the Board of Directors of the Company.
1.
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(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means a Committee appointed by the Board in accordance
with subsection 3(c) of the Plan.
(e) "Company" means Gene Logic Inc., a Delaware corporation.
(f) "Consultant" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated for
such services, provided that the term "Consultant" shall not include Directors
who are paid only a director's fee by the Company or who are not compensated by
the Company for their services as Directors.
(g) "Continuous Service" means the employment or relationship as a
Director or Consultant is not interrupted or terminated. The Board, in its sole
discretion, may determine whether Continuous Service shall be considered
interrupted in the case of: (i) any leave of absence approved by the Board,
including sick leave, military leave, or any other personal leave; or (ii)
transfers between locations of the Company or between the Company, Affiliates or
their successors.
(h) "Director" means a member of the Board.
(i) "Employee" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(k) "Fair Market Value" means, as of any date, the value of the Common
Stock of the Company determined as follows:
(1) If the Common Stock is listed on any established stock exchange,
or traded on the Nasdaq National Market or The Nasdaq SmallCap Market, the Fair
Market Value of a share of Common Stock shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on such
exchange or market (or the exchange or market with the greatest volume of
trading in Common Stock) on the last market trading day prior to determination,
as reported in The Wall Street Journal or such other source as the Board deems
reliable;
(2) In the absence of such markets for the Common Stock, the Fair
Market Value shall be determined in good faith by the Board.
(l) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
2.
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(m) "Listing Date" means the first date upon which any security of the
Company is listed (or approved for listing) upon notice of issuance on any
securities exchange, or designated (or approved for designation) upon notice of
issuance as a national market security on an interdealer quotation system if
such securities exchange or interdealer quotation system has been certified in
accordance with the provisions of Section 25100(o) of the California Corporate
Securities Law of 1968.
(n) "Non-Employee Director" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act
of 1933 ("Regulation S-K"), does not possess an interest in any other
transaction as to which disclosure would be required under Item 404(a) of
Regulation S-K, and is not engaged in a business relationship as to which
disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is
otherwise considered a "non-employee director" for purposes of Rule 16b-3.
(o) "Nonstatutory Stock Option" means an Option not intended to qualify
as an Incentive Stock Option.
(p) "Officer" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(q) "Option" means a stock option granted pursuant to the Plan.
(r) "Option Agreement" means a written agreement between the Company and
an Optionee evidencing the terms and conditions of an individual Option grant.
Each Option Agreement shall be subject to the terms and conditions of the Plan.
(s) "Optionee" means a person to whom an Option is granted pursuant to
the Plan.
(t) "Outside Director" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time, and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director, or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(u) "Plan" means this 1997 Equity Incentive Plan.
3.
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(v) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor
to Rule 16b-3, as in effect when discretion is being exercised with respect to
the Plan.
(w) "Stock Award" means any right granted under the Plan, including any
Option, any stock bonus, and any right to purchase restricted stock.
(x) "Stock Award Agreement" means a written agreement between the
Company and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Board unless and until the Board
delegates administration to a Committee, as provided in subsection 3(c).
(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(1) To determine from time to time which of the persons eligible
under the Plan shall be granted Stock Awards; when and how each Stock Award
shall be granted; whether a Stock Award will be an Incentive Stock Option, a
Nonstatutory Stock Option, a stock bonus, a right to purchase restricted stock,
or a combination of the foregoing; the provisions of each Stock Award granted
(which need not be identical), including the time or times when a person shall
be permitted to receive stock pursuant to a Stock Award; and the number of
shares with respect to which a Stock Award shall be granted to each such person.
(2) To construe and interpret the Plan and Stock Awards granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.
(3) To amend the Plan or a Stock Award as provided in Section 12.
(4) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.
(c) The Board may delegate administration of the Plan to a committee or
committees ("Committee") of two or more members of the Board. In the discretion
of the Board, a Committee may consist solely of two (2) or more Outside
Directors, in accordance with Code Section 162(m), or solely of two (2) or more
Non-Employee Directors, in accordance with Rule 16b-3. If administration is
delegated to a Committee, the Committee shall have, in connection with the
administration of the Plan, the powers theretofore possessed by the Board (and
4.
<PAGE>
references in this Plan to the Board shall thereafter be to the Committee),
subject, however, to such resolutions, not inconsistent with the provisions of
the Plan, as may be adopted from time to time by the Board. The Board may
abolish the Committee at any time and revest in the Board the administration of
the Plan.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 11 relating to adjustments upon
changes in stock, the stock that may be issued pursuant to Stock Awards shall
not exceed in the aggregate Six Million One Hundred Thousand (6,100,000) shares
of Common Stock. Such share reserve shall consist of (i) the options granted
under the 1996 Plan which are outstanding as of the Effective Date plus (ii) the
shares available for grant under the 1996 Plan as of the Effective Date plus
(iii) an additional Three Million (3,000,000) shares of common stock. If any
Stock Award shall for any reason expire or otherwise terminate, in whole or in
part, without having been exercised in full, the stock not acquired under such
Stock Award shall revert to and again become available for issuance under the
Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) Incentive Stock Options may be granted only to Employees. Stock
Awards other than Incentive Stock Options may be granted only to Employees,
Directors or Consultants.
(b) No person shall be eligible for the grant of an Incentive Stock
Option if, at the time of grant, such person owns (or is deemed to own pursuant
to Section 424(d) of the Code) stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or of any
of its Affiliates unless the exercise price of such Option is at least one
hundred ten percent (110%) of the Fair Market Value of such stock at the date of
grant and the Option is not exercisable after the expiration of five (5) years
from the date of grant.
(c) Subject to the provisions of Section 11 relating to adjustments
upon changes in stock, no person shall be eligible to be granted Stock Awards
covering more than seven hundred thousand (700,000) shares of Common Stock in
any calendar year.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option Agreement or
otherwise) the substance of each of the following provisions:
5.
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(a) Term. No Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.
(b) Price. The exercise price of each Incentive Stock Option shall be
not less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted, and the exercise price
of each Nonstatutory Stock Option shall be not less than eighty-five percent
(85%) of the Fair Market Value of the stock subject to the Option on the date
the Option is granted. Notwithstanding the foregoing, an Option may be granted
with an exercise price lower than that set forth in the preceding sentence if
such Option is granted pursuant to an assumption or substitution for another
option in a manner satisfying the provisions of Section 424(a) of the Code.
(c) Consideration. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii) at
the discretion of the Board or Committee, at the time of the grant of the
Option, (A) by delivery to the Company of other Common Stock of the Company, (B)
according to a deferred payment or other arrangement (which may include, without
limiting the generality of the foregoing, the use of other Common Stock of the
Company) with the person to whom the Option is granted or to whom the Option is
transferred pursuant to subsection 6(d), or (C) in any other form of legal
consideration that may be acceptable to the Board. In the case of any deferred
payment arrangement, interest shall be payable at least annually and shall be
charged at the minimum rate of interest necessary to avoid the treatment as
interest, under any applicable provisions of the Code, of any amounts other than
amounts stated to be interest under the deferred payment arrangement. In
addition, the "par value" of stock acquired under an Option may not be paid
pursuant to a deferred compensation arrangement.
(d) Transferability. An Incentive Stock Option shall not be transferable
except by will or by the laws of descent and distribution, and shall be
exercisable during the lifetime of the person to whom the Incentive Stock Option
is granted only by such person. A Nonstatutory Stock Option may be transferred
to the extent provided in the Option Agreement; provided that if the Option
Agreement does not expressly permit transfer, then such Nonstatutory Stock
Option shall not be transferable except by will, by the laws of descent and
distribution or pursuant to a domestic relations order satisfying the
requirements of Rule 16b-3, and shall be exercisable during the lifetime of the
person to whom the Option is granted only by such person or any transferee
pursuant to a domestic relations order. Notwithstanding the foregoing, the
person to whom the Option is granted may, by delivering written notice to the
Company, in a form satisfactory to the Company, designate a third party who, in
the event of the death of the Optionee, shall thereafter be entitled to exercise
the Option.
(e) Vesting. The total number of shares of stock subject to an Option
may, but need not, be allotted in periodic installments (which may, but need
not, be equal). The Option Agreement may provide that from time to time during
each of such installment periods, the Option may become exercisable ("vest")
with respect to some or all of the shares allotted to that
6.
<PAGE>
period, and may be exercised with respect to some or all of the shares allotted
to such period and/or any prior period as to which the Option became vested but
was not fully exercised. The Option may be subject to such other terms and
conditions on the time or times when it may be exercised (which may be based on
performance or other criteria) as the Board may deem appropriate. The provisions
of this subsection 6(e) are subject to any Option provisions governing the
minimum number of shares as to which an Option may be exercised.
(f) Termination of Continued Service. In the event an Optionee's
Continuous Service terminates (other than upon the Optionee's death or
disability), the Optionee may exercise his or her Option within such period of
time designated by the Board, which shall in no event be later than the
expiration of the term of the Option as set forth in the Option Agreement (the
"Post-Termination Exercise Period") and only to the extent that the Optionee was
entitled to exercise the Option on the date Optionee's Continuous Service
terminates. In the case of an Incentive Stock Option, the Board shall determine
the Post-Termination Exercise Period at the time the Option is granted, and the
term of such Post-Termination Exercise Period shall in no event exceed three (3)
months from the date of termination. In addition, the Board may at any time,
with the consent of the Optionee, extend the Post-Termination Exercise Period
and provide for continued vesting; provided however, that any extension of such
period by the Board in excess of three (3) months from the date of termination
shall cause an Incentive Stock Option so extended to become a Nonstatutory Stock
Option, effective as of the date of Board action. If, at the date of
termination, the Optionee is not entitled to exercise his or her entire Option,
the shares covered by the unexercisable portion of the Option shall revert to
the Plan. If, after termination, the Optionee does not exercise his or her
Option within the time specified in the Option Agreement or as otherwise
determined above, the Option shall terminate, and the shares covered by such
Option shall revert to the Plan. Notwithstanding the foregoing, the Board shall
have the power to permit an Option to continue to vest during the
Post-Termination Exercise Period.
(g) Disability of Optionee. In the event an Optionee's Continuous
Service terminates as a result of the Optionee's disability, the Optionee may
exercise his or her Option (to the extent that the Optionee was entitled to
exercise it at the date of termination), but only within such period of time
ending on the earlier of (i) the date twelve (12) months following such
termination (or such longer or shorter period specified in the Option
Agreement), or (ii) the expiration of the term of the Option as set forth in the
Option Agreement. If, at the date of termination, the Optionee is not entitled
to exercise his or her entire Option, the shares covered by the unexercisable
portion of the Option shall revert to and again become available for issuance
under the Plan. If, after termination, the Optionee does not exercise his or her
Option within the time specified herein, the Option shall terminate, and the
shares covered by such Option shall revert to and again become available for
issuance under the Plan.
(h) Death of Optionee. In the event of the death of an Optionee during,
or within a three (3)-month period after the termination of, the Optionee's
Continuous Service, the Option may be exercised to the extent vested by the
Optionee's estate, by a person who acquired the right to exercise the Option by
bequest or inheritance or by a person designated to exercise the
7.
<PAGE>
option upon the Optionee's death pursuant to subsection 6(d), but only within
the period ending on the earlier of (i) the date eighteen (18) months following
the date of death (or such longer or shorter period specified in the Option
Agreement), or (ii) the expiration of the term of such Option as set forth in
the Option Agreement. If, at the time of death, the Optionee was not entitled to
exercise his or her entire Option, the shares covered by the unexercisable
portion of the Option shall revert to and again become available for issuance
under the Plan. If, after death, the Option is not exercised within the time
specified herein, the Option shall terminate, and the shares covered by such
Option shall revert to and again become available for issuance under the Plan.
(i) Early Exercise. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject to
the Option prior to the full vesting of the Option. Any unvested shares so
purchased may be subject to a repurchase right in favor of the Company or to any
other restriction the Board determines to be appropriate.
7. TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.
Each stock bonus or restricted stock purchase agreement shall be in such
form and shall contain such terms and conditions as the Board or Committee shall
deem appropriate. The terms and conditions of stock bonus or restricted stock
purchase agreements may change from time to time, and the terms and conditions
of separate agreements need not be identical, but each stock bonus or restricted
stock purchase agreement shall include (through incorporation of provisions
hereof by reference in the agreement or otherwise) the substance of each of the
following provisions as appropriate:
(a) Purchase Price. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board or Committee shall
determine and designate in such agreement, but in no event shall the purchase
price be less than eighty-five percent (85%) of the stock's Fair Market Value on
the date such award is made. Notwithstanding the foregoing, the Board or
Committee may determine that eligible participants in the Plan may be awarded
stock pursuant to a stock bonus agreement in consideration for past services
actually rendered to the Company for its benefit.
(b) Transferability. No rights under a stock bonus or restricted stock
purchase agreement shall be transferable except by will or the laws of descent
and distribution or, if the agreement so provides, pursuant to a domestic
relations order satisfying the requirements of Rule 16b-3, so long as stock
awarded under such agreement remains subject to any restrictions pursuant to the
agreement.
(c) Consideration. The purchase price of stock acquired pursuant to a
stock purchase agreement shall be paid either: (i) in cash at the time of
purchase; (ii) at the discretion of the Board or Committee, according to a
deferred payment or other arrangement with the person to whom the stock is sold;
or (iii) in any other form of legal consideration that may be acceptable
8.
<PAGE>
to the Board or Committee in its discretion. Notwithstanding the foregoing, the
Board or Committee to which administration of the Plan has been delegated may
award stock pursuant to a stock bonus agreement in consideration for past
services actually rendered to the Company or for its benefit.
(d) Vesting. Shares of stock sold or awarded under the Plan may, but
need not, be subject to a repurchase option in favor of the Company in
accordance with a vesting schedule to be determined by the Board or Committee.
(e) Termination of Continuous Service. In the event a Participant's
Continuous Service terminates, the Company may repurchase or otherwise reacquire
any or all of the shares of stock held by that person which have not vested as
of the date of termination under the terms of the stock bonus or restricted
stock purchase agreement between the Company and such person.
8. COVENANTS OF THE COMPANY.
(a) During the terms of the Stock Awards, the Company shall keep
available at all times the number of shares of stock required to satisfy such
Stock Awards.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares under Stock Awards; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
of 1933, as amended (the "Securities Act") either the Plan, any Stock Award or
any stock issued or issuable pursuant to any such Stock Award. If, after
reasonable efforts, the Company is unable to obtain from any such regulatory
commission or agency the authority which counsel for the Company deems necessary
for the lawful issuance and sale of stock under the Plan, the Company shall be
relieved from any liability for failure to issue and sell stock upon exercise of
such Stock Awards unless and until such authority is obtained.
9. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Stock Awards shall constitute
general funds of the Company.
10. MISCELLANEOUS.
(a) The Board shall have the power to accelerate the time at which a
Stock Award may first be exercised or the time during which a Stock Award or any
part thereof will vest, notwithstanding the provisions in the Stock Award
stating the time at which it may first be exercised or the time during which it
will vest.
9.
<PAGE>
(b) Neither an Employee, Director nor a Consultant nor any person to
whom a Stock Award is transferred in accordance with the Plan shall be deemed to
be the holder of, or to have any of the rights of a holder with respect to, any
shares subject to such Stock Award unless and until such person has satisfied
all requirements for exercise of the Stock Award pursuant to its terms.
(c) Nothing in the Plan or any instrument executed or Stock Award
granted pursuant thereto shall confer upon any Employee, Consultant or other
holder of Stock Awards any right to continue in the employ of the Company or any
Affiliate, or to continue serving as a Consultant and Director, or shall affect
the right of the Company or any Affiliate to terminate the employment of any
Employee with or without notice and with or without cause, the right to
terminate the relationship of any Consultant pursuant to the terms of such
Consultant's agreement with the Company or Affiliate or service as a Director
pursuant to the Company's By-Laws.
(d) To the extent that the aggregate Fair Market Value (determined at
the time of grant) of stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year under
all plans of the Company and its Affiliates exceeds one hundred thousand dollars
($100,000), the Options or portions thereof which exceed such limit (according
to the order in which they were granted) shall be treated as Nonstatutory Stock
Options.
(e) The Company may require any person to whom a Stock Award is granted,
or any person to whom a Stock Award is transferred in accordance with the Plan,
as a condition of exercising or acquiring stock under any Stock Award, (1) to
give written assurances satisfactory to the Company as to such person's
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters, and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award; and (2) to
give written assurances satisfactory to the Company stating that such person is
acquiring the stock subject to the Stock Award for such person's own account and
not with any present intention of selling or otherwise distributing the stock.
The foregoing requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the shares upon the
exercise or acquisition of stock under the Stock Award has been registered under
a then currently effective registration statement under the Securities Act, or
(ii) as to any particular requirement, a determination is made by counsel for
the Company that such requirement need not be met in the circumstances under the
then applicable securities laws. The Company may, upon advice of counsel to the
Company, place legends on stock certificates issued under the Plan as such
counsel deems necessary or appropriate in order to comply with applicable
securities laws, including, but not limited to, legends restricting the transfer
of the stock.
(f) To the extent provided by the terms of a Stock Award Agreement, the
person to whom a Stock Award is granted may satisfy any federal, state or local
tax withholding obligation
10.
<PAGE>
relating to the exercise or acquisition of stock under a Stock Award by any of
the following means or by a combination of such means: (1) tendering a cash
payment; (2) authorizing the Company to withhold shares from the shares of the
Common Stock otherwise issuable to the participant as a result of the exercise
or acquisition of stock under the Stock Award; or (3) delivering to the Company
owned and unencumbered shares of the Common Stock of the Company.
11. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject
to any Stock Award, without the receipt of consideration by the Company (through
merger, consolidation, reorganization, recapitalization, reincorporation, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by the
Company), the Plan will be appropriately adjusted in the class(es) and maximum
number of shares subject to the Plan and the maximum number of shares subject to
award to any person during any calendar year, and the outstanding Stock Awards
will be appropriately adjusted in the class(es) and number of shares and price
per share of stock subject to such outstanding Stock Awards. Such adjustments
shall be made by the Board or Committee, the determination of which shall be
final, binding and conclusive. (The conversion of any convertible securities of
the Company shall not be treated as a "transaction not involving the receipt of
consideration by the Company.")
(b) In the event of a Change in Control, (i) any surviving or acquiring
corporation shall assume Stock Awards outstanding under the Plan or shall
substitute similar Stock Awards for those outstanding under the Plan, or (ii) in
the event any surviving or acquiring corporation refuses to assume such Stock
Awards or to substitute similar Stock Awards for those outstanding under the
Plan, (A) with respect to Stock Awards held by persons then performing services
as Employees, Directors or Consultants, the vesting of such Stock Awards and the
time during which such Stock Awards may be exercised shall be accelerated prior
to such event and the Stock Awards terminated if not exercised after such
acceleration and at or prior to such event, and (B) with respect to any other
Stock Awards outstanding under the Plan, such Stock Awards shall be terminated
if not exercised prior to such event.
In addition, with respect to any person who was providing services as an
Employee, Director or Consultant immediately prior to the consummation of the
Change in Control, any Stock Awards held by such persons shall immediately
become fully vested and exercisable, and any repurchase right by the Company
with respect to shares acquired by such person under a Stock Award shall lapse,
if such person's Continuous Service is terminated other than for Cause within
twelve (12) months following consummation of the Change in Control. For purposes
of the Plan, "Cause" shall mean willful conduct that is materially injurious to
the Company (or any Affiliate) or any successor thereto, whether financial or
otherwise.
11.
<PAGE>
For purposes of this Plan, "Change in Control" means: (1) a dissolution,
liquidation, or sale of all or substantially all of the assets of the Company;
(2) a merger or consolidation in which the Company is not the surviving
corporation; (3) a reverse merger in which the Company is the surviving
corporation but the shares of the Company's common shares outstanding
immediately preceding the merger are converted by virtue of the merger into
other property, whether in the form of securities, cash or otherwise; or (4) the
acquisition by any person, entity or group within the meaning of Section 13(d)
or 14(d) of the Exchange Act, or any comparable successor provisions (excluding
any employee benefit plan, or related trust, sponsored or maintained by the
Company or any Affiliate of the Company) of the beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act, or comparable
successor rule) of securities of the Company representing at least fifty percent
(50%) of the combined voting power entitled to vote in the election of
directors.
12. AMENDMENT OF THE PLAN AND STOCK AWARDS.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 11 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company to the extent stockholder approval is necessary for the Plan to
satisfy the requirements of Section 422 of the Code, Rule 16b-3 or any Nasdaq or
securities exchange listing requirements.
(b) The Board may in its sole discretion submit any other amendment to
the Plan for stockholder approval, including, but not limited to, amendments to
the Plan intended to satisfy the requirements of Section 162(m) of the Code and
the regulations thereunder regarding the exclusion of performance-based
compensation from the limit on corporate deductibility of compensation paid to
certain executive officers.
(c) It is expressly contemplated that the Board may amend the Plan in
any respect the Board deems necessary or advisable to provide eligible
Employees, Directors or Consultants with the maximum benefits provided or to be
provided under the provisions of the Code and the regulations promulgated
thereunder relating to Incentive Stock Options and/or to bring the Plan and/or
Incentive Stock Options granted under it into compliance therewith.
(d) Rights and obligations under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the person to whom the Stock Award was
granted and (ii) such person consents in writing.
(e) The Board at any time, and from time to time, may amend the terms of
any one or more Stock Award; provided, however, that the rights and obligations
under any Stock Award shall not be impaired by any such amendment unless (i) the
Company requests the consent of the person to whom the Stock Award was granted
and (ii) such person consents in writing.
12.
<PAGE>
13. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate ten (10) years from the date the
Plan is adopted by the Board or approved by the stockholders of the Company,
whichever is earlier. No Stock Awards may be granted under the Plan while the
Plan is suspended or after it is terminated.
(b) Rights and obligations under any Stock Award granted while the Plan
is in effect shall not be impaired by suspension or termination of the Plan,
except with the consent of the person to whom the Stock Award was granted.
14. STOCKHOLDER APPROVAL.
No Stock Awards granted under the Plan shall be exercisable in whole or
part unless and until the Plan has been approved by the stockholders of the
Company, which approval shall be within twelve (12) months before or after the
date the Plan is adopted by the Board.
13.
<PAGE>
Exhibit 10.3
GENE LOGIC INC.
1997 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
Pursuant to the Grant Notice and this Stock Option Agreement, the Company
has granted you an option to purchase the number of shares of the Company's
common stock ("Common Stock") indicated in the Grant Notice at the exercise
price indicated in the Grant Notice. Defined terms not explicitly defined in
this Stock Option Agreement but defined in the Plan shall have the same
definitions as in the Plan.
The details of your option are as follows:
1. VESTING. Subject to the limitations contained herein, your option will
vest as provided in the Grant Notice, provided that vesting will cease upon the
termination of your Continuous Service.
2. METHOD OF PAYMENT.
(a) Payment Options. Payment of the exercise price by cash or check
is due in full upon exercise of all or any part of your option, provided that
you may elect, to the extent permitted by applicable law and the Grant Notice,
to make payment of the exercise price under one of the following alternatives:
(i) Pursuant to a program developed under Regulation T as
promulgated by the Federal Reserve Board which, prior to the issuance of Common
Stock, results in either the receipt of cash (or check) by the Company or the
receipt of irrevocable instructions to pay the aggregate exercise price to the
Company from the sales proceeds;
(ii) Provided that at the time of exercise the Company's
Common Stock is publicly traded and quoted regularly in The Wall Street Journal,
by delivery of already-owned shares of Common Stock, held for the period
required to avoid a charge to the Company's reported earnings, and owned free
and clear of any liens, claims, encumbrances or security interests, which Common
Stock shall be valued at its fair market value on the date of exercise; or
(iii) Payment by a combination of the above methods.
3. WHOLE SHARES. Your option may only be exercised for whole shares.
4. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the contrary
contained herein, your option may not be exercised unless the shares issuable
upon exercise of your option are then registered under the Securities Act or, if
such shares are not then so
<PAGE>
registered, the Company has determined that such exercise and issuance would be
exempt from the registration requirements of the Securities Act.
5. TERM. The term of your option commences on the Date of Grant and
expires upon the earliest of:
(i) the Expiration Date indicated in the Grant Notice;
(ii) the tenth (10th) anniversary of the Date of Grant;
(iii) eighteen (18) months after your death, if you die
during, or within three (3) months after the termination of your Continuous
Service;
(iv) twelve (12) months after the termination of your
Continuous Service due to disability;
(v) the termination of your Continuous Service for Cause; or
(vi) three (3) months after the termination of your Continuous
Service for any other reason, provided that if during any part of such three
(3)-month period the option is not exercisable solely because of the condition
set forth in paragraph 4 (Securities Law Compliance), in which event the option
shall not expire until the earlier of the Expiration Date or until it shall have
been exercisable for an aggregate period of three (3) months after the
termination of Continuous Service.
For these purposes, "Cause" shall mean willful conduct that is
materially injurious to the Company (or any Affiliate) or any successor thereto,
whether financial or otherwise.
To obtain the federal income tax advantages associated with an
"incentive stock option," the Code requires that at all times beginning on the
grant date of the option and ending on the day three (3) months before the date
of the option's exercise, you must be an employee of the Company, except in the
event of your death or permanent and total disability. The Company cannot
guarantee that your option will be treated as an "incentive stock option" if you
exercise your option more than three (3) months after the date your employment
with the Company terminates.
6. EXERCISE.
(a) You may exercise the vested portion of your option during its
term (and the unvested portion of your option if the Grant Notice so permits) by
delivering a Notice of Exercise (in the form attached to your Grant Notice or
other form designated by the Company) together with the exercise price to the
Secretary of the Company, or to such other person as the Company may designate,
during regular business hours, together with such additional documents as the
Company may then require.
2.
<PAGE>
(b) By exercising your option you agree that:
(i) as a condition to any exercise of your option, the Company
may require you to enter an arrangement providing for the payment by you to the
Company of any tax withholding obligation of the Company arising by reason of
(1) the exercise of your option; (2) the lapse of any substantial risk of
forfeiture to which the shares are subject at the time of exercise; or (3) the
disposition of shares acquired upon such exercise;
(ii) you will notify the Company in writing within fifteen
(15) days after the date of any disposition of any of the shares of the Common
Stock issued upon exercise of an incentive stock option that occurs within two
(2) years after the Date of Grant or within one (1) year after such shares of
Common Stock are transferred upon exercise of your option; and
(iii) the Company (or a representative of the underwriters)
may, in connection with the first underwritten registration of the offering of
any securities of the Company under the Act, require that you not sell or
otherwise transfer or dispose of any shares of Common Stock or other securities
of the Company during such period (not to exceed one hundred eighty (180) days)
following the effective date of the registration statement of the Company filed
under the Securities Act as may be requested by the Company or the
representative of the underwriters. You further agree that the Company may
impose stop-transfer instructions with respect to securities subject to the
foregoing restrictions until the end of such period.
7. TRANSFERABILITY. Your option is not transferable, except by will or by
the laws of descent and distribution, and is exercisable during your life only
by you. Notwithstanding the foregoing, by delivering written notice to the
Company, in a form satisfactory to the Company, you may designate a third party
who, in the event of your death, shall thereafter be entitled to exercise your
option.
8. OPTION NOT A SERVICE CONTRACT. Your option is not an employment
contract and nothing in your option shall be deemed to create in any way
whatsoever any obligation on your part to continue in the employ of the Company,
or of the Company to continue your employment with the Company. In addition,
nothing in your option shall obligate the Company, its shareholders, Board of
Directors, officers or employees to continue any relationship which you might
have as a Director or Consultant for the Company.
9. NOTICES. Any notices provided for in your option or the Plan shall be
given in writing and shall be deemed effectively given upon receipt or, in the
case of notices delivered by the Company to you, five (5) days after deposit in
the United States mail, postage prepaid, addressed to you at the last address
you provided to the Company.
3.
<PAGE>
10. GOVERNING PLAN DOCUMENT. Your option is subject to all the provisions
of the Plan, the provisions of which are hereby made a part of your option,
including without limitation the provisions of the Plan relating to option
provisions, and is further subject to all interpretations, amendments, rules and
regulations which may from time to time be promulgated and adopted pursuant to
the Plan. In the event of any conflict between the provisions of your option and
those of the Plan, the provisions of the Plan shall control.
4.
<PAGE>
Exhibit 10.4
GENE LOGIC INC.
1997 EQUITY INCENTIVE PLAN
STOCK OPTION GRANT NOTICE
Gene Logic Inc. (the "Company"), pursuant to its 1997 Equity Incentive Plan
(the "Plan"), hereby grants to Optionee an option to purchase the number of
shares of the Company's common stock set forth below. This option is subject
to all of the terms and conditions as set forth herein and in Attachments I,
II and III, which are incorporated herein in their entirety.
Optionee: _________________________________
Date of Grant: _________________________________
Vesting Commencement Date: _________________________________
Shares Subject to Option: _________________________________
Exercise Price Per Share: _________________________________
Expiration Date: _________________________________
____ Incentive Stock Option ____ Nonstatutory Stock Option
Exercise/Vesting Schedule: [25% of the option shares shall vest on the one
(1)-year anniversary of the Vesting Commencement
Date, the remaining shares shall vest in 36 equal
monthly installments thereafter.]
Payment: Any or a combination of the following: (i) by cash or check, (ii)
pursuant to a Regulation T program, as set forth in the Stock Option
Agreement or (iii) delivering shares of previously-owned common stock, as set
forth in the Stock Option Agreement.
Additional Terms/Acknowledgements: The undersigned Optionee acknowledges
receipt of, and understands and agrees to, this Grant Notice, the Stock
Option Agreement and the Plan. Optionee further acknowledges that as of the
Date of Grant, this Grant Notice, the Stock Option Agreement and the Plan set
forth the entire understanding between Optionee and the Company regarding the
acquisition of stock in the Company and supersede all prior oral and written
agreements on that subject with the exception of (i) options previously
granted and delivered to Optionee under the Plan, and (ii) the following
agreements only:
Other Agreements: __________________________________
__________________________________
GENE LOGIC INC. OPTIONEE:
By:_______________________ _____________________________
Signature
Title:____________________
Date:_____________________ Date:________________________
Attachment I: Stock Option Agreement
Attachment II: 1997 Equity Incentive Plan
Attachment III: Notice of Exercise
<PAGE>
Exhibit 10.5
GENE LOGIC INC.
EMPLOYEE STOCK PURCHASE PLAN
Adopted October 1, 1997
Approved by the Stockholders on _____________, 1997
1. PURPOSE.
(a) The purpose of the Employee Stock Purchase Plan (the "Plan") is to
provide a means by which employees of Gene Logic Inc., a Delaware corporation
(the "Company"), and its Affiliates, as defined in subparagraph 1(b), which are
designated as provided in subparagraph 2(b), may be given an opportunity to
purchase stock of the Company.
(b) The word "Affiliate" as used in the Plan means any parent corporation
or subsidiary corporation of the Company, as those terms are defined in Sections
424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended
(the "Code").
(c) The Company, by means of the Plan, seeks to retain the services of its
employees, to secure and retain the services of new employees, and to provide
incentives for such persons to exert maximum efforts for the success of the
Company.
(d) The Company intends that the rights to purchase stock of the Company
granted under the Plan be considered options issued under an "employee stock
purchase plan" as that term is defined in Section 423(b) of the Code.
2. ADMINISTRATION.
(a) The Plan shall be administered by the Board of Directors (the "Board")
of the Company unless and until the Board delegates administration to a
Committee, as provided in subparagraph 2(c). Whether or not the Board has
delegated administration, the Board shall have the final power to determine all
questions of policy and expediency that may arise in the administration of the
Plan.
(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(i) To determine when and how rights to purchase stock of the
Company shall be granted and the provisions of each offering of such rights
(which need not be identical).
(ii) To designate from time to time which Affiliates of the Company
shall be eligible to participate in the Plan.
(iii) To construe and interpret the Plan and rights granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the
1.
<PAGE>
exercise of this power, may correct any defect, omission or inconsistency in the
Plan, in a manner and to the extent it shall deem necessary or expedient to make
the Plan fully effective.
(iv) To amend the Plan as provided in paragraph 13.
(v) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company and its Affiliates and to carry out the intent that the Plan be treated
as an "employee stock purchase plan" within the meaning of Section 423 of the
Code.
(c) The Board may delegate administration of the Plan to a Committee
composed of two (2) or more members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
3. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 12 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to rights granted under
the Plan shall not exceed in the aggregate [two hundred fifty thousand
(250,000)] shares of the Company's common stock (the "Common Stock"). If any
right granted under the Plan shall for any reason terminate without having been
exercised, the Common Stock not purchased under such right shall again become
available for the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. GRANT OF RIGHTS; OFFERING.
(a) The Board or the Committee may from time to time grant or
provide for the grant of rights to purchase Common Stock of the Company under
the Plan to eligible employees (an "Offering") on a date or dates (the "Offering
Date(s)") selected by the Board or the Committee. Each Offering shall be in such
form and shall contain such terms and conditions as the Board or the Committee
shall deem appropriate, which shall comply with the requirements of Section
423(b)(5) of the Code that all employees granted rights to purchase stock under
the Plan shall have the same rights and privileges. The terms and conditions of
an Offering shall be incorporated by reference into the Plan and treated as part
of the Plan. The provisions of separate Offerings need not be identical, but
each Offering shall include (through incorporation of the provisions of this
Plan by reference in the document comprising the Offering or otherwise) the
period during which the Offering shall be effective, which period shall not
exceed twenty-seven (27) months beginning with the Offering Date, and the
substance of the provisions contained in paragraphs 5 through 8, inclusive.
2.
<PAGE>
(b) If an employee has more than one right outstanding under the Plan,
unless he or she otherwise indicates in agreements or notices delivered
hereunder: (1) each agreement or notice delivered by that employee will be
deemed to apply to all of his or her rights under the Plan, and (2) a right with
a lower exercise price (or an earlier-granted right, if two rights have
identical exercise prices), will be exercised to the fullest possible extent
before a right with a higher exercise price (or a later-granted right, if two
rights have identical exercise prices) will be exercised.
5. ELIGIBILITY.
(a) Rights may be granted only to employees of the Company or, as the
Board or the Committee may designate as provided in subparagraph 2(b), to
employees of any Affiliate of the Company. Except as provided in subparagraph
5(b), an employee of the Company or any Affiliate shall not be eligible to be
granted rights under the Plan, unless, on the Offering Date, such employee has
been in the employ of the Company or any Affiliate for such continuous period
preceding such grant as the Board or the Committee may require, but in no event
shall the required period of continuous employment be equal to or greater than
two (2) years. In addition, unless otherwise determined by the Board or the
Committee and set forth in the terms of the applicable Offering, no employee of
the Company or any Affiliate shall be eligible to be granted rights under the
Plan, unless, on the Offering Date, such employee's customary employment with
the Company or such Affiliate is for at least twenty (20) hours per week and at
least five (5) months per calendar year.
(b) The Board or the Committee may provide that each person who, during
the course of an Offering, first becomes an eligible employee of the Company or
designated Affiliate will, on a date or dates specified in the Offering which
coincides with the day on which such person becomes an eligible employee or
occurs thereafter, receive a right under that Offering, which right shall
thereafter be deemed to be a part of that Offering. Such right shall have the
same characteristics as any rights originally granted under that Offering, as
described herein, except that:
(i) the date on which such right is granted shall be the "Offering
Date" of such right for all purposes, including determination of the exercise
price of such right;
(ii) the period of the Offering with respect to such right shall
begin on its Offering Date and end coincident with the end of such Offering; and
(iii) the Board or the Committee may provide that if such person
first becomes an eligible employee within a specified period of time before the
end of the Offering, he or she will not receive any right under that Offering.
(c) No employee shall be eligible for the grant of any rights under the
Plan if, immediately after any such rights are granted, such employee owns stock
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any Affiliate. For purposes of this
subparagraph 5(c), the rules of Section 424(d) of the Code shall apply in
determining the stock ownership of any employee, and stock
3.
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which such employee may purchase under all outstanding rights and options shall
be treated as stock owned by such employee.
(d) An eligible employee may be granted rights under the Plan only if such
rights, together with any other rights granted under "employee stock purchase
plans" of the Company and any Affiliates, as specified by Section 423(b)(8) of
the Code, do not permit such employee's rights to purchase stock of the Company
or any Affiliate to accrue at a rate which exceeds twenty-five thousand dollars
($25,000) of fair market value of such stock (determined at the time such rights
are granted) for each calendar year in which such rights are outstanding at any
time.
(e) Officers of the Company and any designated Affiliate shall be eligible
to participate in Offerings under the Plan, provided, however, that the Board
may provide in an Offering that certain employees who are highly compensated
employees within the meaning of Section 423(b)(4)(D) of the Code shall not be
eligible to participate.
6. RIGHTS; PURCHASE PRICE.
(a) On each Offering Date, each eligible employee, pursuant to an Offering
made under the Plan, shall be granted the right to purchase up to the number of
shares of Common Stock of the Company purchasable with a percentage designated
by the Board or the Committee not exceeding fifteen percent (15%) of such
employee's Earnings (as defined in subparagraph 7(a)) during the period which
begins on the Offering Date (or such later date as the Board or the Committee
determines for a particular Offering) and ends on the date stated in the
Offering, which date shall be no later than the end of the Offering. The Board
or the Committee shall establish one or more dates during an Offering (the
"Purchase Date(s)") on which rights granted under the Plan shall be exercised
and purchases of Common Stock carried out in accordance with such Offering.
(b) In connection with each Offering made under the Plan, the Board or the
Committee may specify a maximum number of shares that may be purchased by any
employee as well as a maximum aggregate number of shares that may be purchased
by all eligible employees pursuant to such Offering. In addition, in connection
with each Offering that contains more than one Purchase Date, the Board or the
Committee may specify a maximum aggregate number of shares which may be
purchased by all eligible employees on any given Purchase Date under the
Offering. If the aggregate purchase of shares upon exercise of rights granted
under the Offering would exceed any such maximum aggregate number, the Board or
the Committee shall make a pro rata allocation of the shares available in as
nearly a uniform manner as shall be practicable and as it shall deem to be
equitable.
(c) The purchase price of stock acquired pursuant to rights granted under
the Plan shall be not less than the lesser of:
(i) an amount equal to eighty-five percent (85%) of the fair market
value of the stock on the Offering Date; or
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(ii) an amount equal to eighty-five percent (85%) of the fair market
value of the stock on the Purchase Date.
7. PARTICIPATION; WITHDRAWAL; TERMINATION.
(a) An eligible employee may become a participant in the Plan pursuant to
an Offering by delivering a participation agreement to the Company within the
time specified in the Offering, in such form as the Company provides. Each such
agreement shall authorize payroll deductions of up to the maximum percentage
specified by the Board or the Committee of such employee's Earnings during the
Offering. "Earnings" is defined as an employee's regular salary or wages
(including amounts thereof elected to be deferred by the employee, that would
otherwise have been paid, under any arrangement established by the Company
intended to comply with Section 401(k), Section 402(e)(3), Section 125, Section
402(h), or Section 403(b) of the Code, and also including any deferrals under a
non-qualified deferred compensation plan or arrangement established by the
Company), any may also include or exclude (as provided for each Offering) the
following items of compensation: bonuses, commissions, overtime pay, incentive
pay, profit sharing, other remuneration paid directly to the employee, the cost
of employee benefits paid for by the Company or an Affiliate, education or
tuition reimbursements, imputed income arising under any group insurance or
benefit program, traveling expenses, business and moving expense reimbursements,
income received in connection with stock options, contributions made by the
Company or an Affiliate under any employee benefit plan, and similar items of
compensation, as determined by the Board or Committee. The payroll deductions
made for each participant shall be credited to an account for such participant
under the Plan and shall be deposited with the general funds of the Company. A
participant may reduce (including to zero) or increase such payroll deductions,
and an eligible employee may begin such payroll deductions, after the beginning
of any Offering only as provided for in the Offering. A participant may make
additional payments into his or her account only if specifically provided for in
the Offering and only if the participant has not had the maximum amount withheld
during the Offering.
(b) At any time during an Offering, a participant may terminate his or her
payroll deductions under the Plan and withdraw from the Offering by delivering
to the Company a notice of withdrawal in such form as the Company provides. Such
withdrawal may be elected at any time prior to the end of the Offering except as
provided by the Board or the Committee in the Offering. Upon such withdrawal
from the Offering by a participant, the Company shall distribute to such
participant all of his or her accumulated payroll deductions (reduced to the
extent, if any, such deductions have been used to acquire stock for the
participant) under the Offering, without interest, and such participant's
interest in that Offering shall be automatically terminated. A participant's
withdrawal from an Offering will have no effect upon such participant's
eligibility to participate in any other Offerings under the Plan but such
participant will be required to deliver a new participation agreement in order
to participate in subsequent Offerings under the Plan.
(c) Rights granted pursuant to any Offering under the Plan shall terminate
immediately upon cessation of a participant's employment with the Company and
any designated Affiliate, for any reason, and the Company shall distribute to
such terminated employee all of
5.
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his or her accumulated payroll deductions (reduced to the extent, if any, such
deductions have been used to acquire stock for the terminated employee), under
the Offering, without interest.
(d) Rights granted under the Plan shall not be transferable by a
participant otherwise than by will or the laws of descent and distribution, or
by a beneficiary designation as provided in paragraph 14 and, otherwise during
his or her lifetime, shall be exercisable only by the person to whom such rights
are granted.
8. EXERCISE.
(a) On each Purchase Date specified in the relevant Offering, each
participant's accumulated payroll deductions and other additional payments
specifically provided for in the Offering (without any increase for interest)
will be applied to the purchase of whole shares of stock of the Company, up to
the maximum number of shares permitted pursuant to the terms of the Plan and the
applicable Offering, at the purchase price specified in the Offering. No
fractional shares shall be issued upon the exercise of rights granted under the
Plan, unless the Offering document specifically provides otherwise. The amount,
if any, of accumulated payroll deductions remaining in each participant's
account after the purchase of shares which is less than the amount required to
purchase one share of stock on the final Purchase Date of an Offering shall be
held in each such participant's account for the purchase of shares under the
next Offering under the Plan, unless such participant withdraws from such next
Offering, as provided in subparagraph 7(b), or is no longer eligible to be
granted rights under the Plan, as provided in paragraph 5, in which case such
amount shall be distributed to the participant after such final Purchase Date,
without interest. The amount, if any, of accumulated payroll deductions
remaining in any participant's account after the purchase of shares which is
equal to the amount required to purchase whole shares of stock on the final
Purchase Date of an Offering shall be distributed in full to the participant
after such Purchase Date, without interest.
(b) No rights granted under the Plan may be exercised to any extent unless
the shares to be issued upon such exercise under the Plan (including rights
granted thereunder) are covered by an effective registration statement pursuant
to the Securities Act of 1933, as amended (the "Securities Act") and the Plan is
in material compliance with all applicable state, foreign and other securities
and other laws applicable to the Plan. If on a Purchase Date in any Offering
hereunder the Plan is not so registered or in such compliance, no rights granted
under the Plan or any Offering shall be exercised on such Purchase Date, and the
Purchase Date shall be delayed until the Plan is subject to such an effective
registration statement and such compliance, except that the Purchase Date shall
not be delayed more than twelve (12) months and the Purchase Date shall in no
event be more than twenty-seven (27) months from the Offering Date. If on the
Purchase Date of any Offering hereunder, as delayed to the maximum extent
permissible, the Plan is not registered and in such compliance, no rights
granted under the Plan or any Offering shall be exercised and all payroll
deductions accumulated during the Offering (reduced to the extent, if any, such
deductions have been used to acquire stock) shall be distributed to the
participants, without interest.
6.
<PAGE>
9. COVENANTS OF THE COMPANY.
(a) During the terms of the rights granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such rights.
(b) The Company shall seek to obtain from each federal, state, foreign or
other regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to issue and sell shares of stock upon exercise of
the rights granted under the Plan. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of stock under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such rights unless and until
such authority is obtained.
10. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to rights granted under the Plan
shall constitute general funds of the Company.
11. RIGHTS AS A STOCKHOLDER.
A participant shall not be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to rights granted
under the Plan unless and until the participant's shares acquired upon exercise
of rights hereunder are recorded in the books of the Company.
12. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject to
any rights granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan and outstanding rights will
be appropriately adjusted in the class(es) and maximum number of shares subject
to the Plan and the class(es) and number of shares and price per share of stock
subject to outstanding rights. Such adjustments shall be made by the Board or
the Committee, the determination of which shall be final, binding and
conclusive. (The conversion of any convertible securities of the Company shall
not be treated as a "transaction not involving the receipt of consideration by
the Company.")
(b) In the event of: (1) a dissolution or liquidation of the Company; (2)
a merger or consolidation in which the Company is not the surviving corporation;
(3) a reverse merger in which the Company is the surviving corporation but the
shares of the Company's Common Stock outstanding immediately preceding the
merger are converted by virtue of the merger into other property, whether in the
form of securities, cash or otherwise; or (4) the acquisition by any person,
entity or group within the meaning of Section 13(d) or 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") or any comparable
successor provisions (excluding any employee benefit plan, or related trust,
sponsored or maintained by the Company
7.
<PAGE>
or any Affiliate of the Company) of the beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act, or comparable successor rule)
of securities of the Company representing at least fifty percent (50%) of the
combined voting power entitled to vote in the election of directors, then, as
determined by the Board in its sole discretion (i) any surviving or acquiring
corporation may assume outstanding rights or substitute similar rights for those
under the Plan, (ii) such rights may continue in full force and effect, or (iii)
participants' accumulated payroll deductions may be used to purchase Common
Stock immediately prior to the transaction described above and the participants'
rights under the ongoing Offering terminated.
13. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 12 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment if such amendment requires stockholder approval in order for the Plan
to obtain employee stock purchase plan treatment under Section 423 of the Code
or to comply with the requirements of Rule 16b-3 promulgated under the Exchange
Act or any Nasdaq or securities exchange requirements.
(b) The Board may amend the Plan in any respect the Board deems necessary
or advisable to provide eligible employees with the maximum benefits provided or
to be provided under the provisions of the Code and the regulations promulgated
thereunder relating to employee stock purchase plans and/or to bring the Plan
and/or rights granted under it into compliance therewith.
(c) Rights and obligations under any rights granted before amendment of
the Plan shall not be altered or impaired by any amendment of the Plan, except
with the consent of the person to whom such rights were granted, or except as
necessary to comply with any laws or governmental regulations, or except as
necessary to ensure that the Plan and/or rights granted under the Plan comply
with the requirements of Section 423 of the Code.
14. DESIGNATION OF BENEFICIARY.
(a) A participant may file a written designation of a beneficiary who is
to receive any shares and cash, if any, from the participant's account under the
Plan in the event of such participant's death subsequent to the end of an
Offering but prior to delivery to the participant of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death during an Offering.
(b) Such designation of beneficiary may be changed by the participant at
any time by written notice. In the event of the death of a participant and in
the absence of a beneficiary validly designated under the Plan who is living at
the time of such participant's death, the Company shall deliver such shares
and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of
8.
<PAGE>
the Company), the Company, in its sole discretion, may deliver such shares
and/or cash to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
15. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board in its discretion, may suspend or terminate the Plan at any
time. No rights may be granted under the Plan while the Plan is suspended or
after it is terminated.
(b) Rights and obligations under any rights granted while the Plan is in
effect shall not be altered or impaired by suspension or termination of the
Plan, except as expressly provided in the Plan or with the consent of the person
to whom such rights were granted, or except as necessary to comply with any laws
or governmental regulation, or except as necessary to ensure that the Plan
and/or rights granted under the Plan comply with the requirements of Section 423
of the Code.
16. EFFECTIVE DATE OF PLAN.
The Plan shall become effective upon the Company's initial public offering
of shares of common stock (the "Effective Date"), but no rights granted under
the Plan shall be exercised unless and until the Plan has been approved by the
stockholders of the Company within twelve (12) months before or after the date
the Plan is adopted by the Board or the Committee, which date may be prior to
the Effective Date.
9.
<PAGE>
GENE LOGIC INC.
EMPLOYEE STOCK PURCHASE PLAN OFFERING
Adopted by the Board of Directors on October 1, 1997
1. Grant; Offering Date.
(a) The Board of Directors (the "Board") of Gene Logic Inc. (the
"Company"), pursuant to the Company's Employee Stock Purchase Plan (the "Plan"),
hereby authorizes the grant of rights to purchase shares of the common stock of
the Company ("Common Stock") to all Eligible Employees (an "Offering"). The
first Offering shall begin on the effective date of the initial public offering
of the Company's Common Stock and end on January 31, 2000 (the "Initial
Offering"). Thereafter, an Offering shall begin on February 1 every two (2)
years, beginning with calendar year 2000, and shall end on the day prior to the
second anniversary of its Offering Date. The first day of an Offering is that
Offering's "Offering Date."
(b) Notwithstanding anything to the contrary, in the event that the fair
market value of a share of Common Stock on any Purchase Date (as defined in
Section 6 hereof) during an Offering is less than the fair market value of a
share of Common Stock on the Offering Date of the Offering, then following the
purchase of Common Stock on such Purchase Date (i) the Offering shall terminate,
(ii) a new Offering shall commence on the day following the Purchase Date and
shall end on the day prior to the second anniversary of such new Offering's
Offering Date, and (iii) all participants in the just-terminated Offering shall
automatically be enrolled in the new Offering.
(c) Prior to the commencement of any Offering, the Board (or the Committee
described in subparagraph 2(c) of the Plan, if any) may change any or all terms
of such Offering and any subsequent Offerings. The granting of rights pursuant
to each Offering hereunder shall occur on each respective Offering Date unless,
prior to such date (a) the Board (or such Committee) determines that such
Offering shall not occur, or (b) no shares remain available for issuance under
the Plan in connection with the Offering.
2. Eligible Employees.
(a) All employees of the Company and each of its Affiliates (as defined in
the Plan) incorporated in the United States shall be granted rights to purchase
Common Stock under each Offering on the Offering Date of such Offering, provided
that each such employee otherwise meets the employment requirements of
subparagraph 5(a) of the Plan (an "Eligible Employee"). Notwithstanding the
foregoing, the following employees shall not be Eligible Employees or be granted
rights under an Offering: (i) part-time or seasonal employees whose customary
employment is less than twenty (20) hours per week or five (5) months per
calendar year or (ii)
1.
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5% stockholders (including ownership through unexercised and/or unvested stock
options) described in subparagraph 5(c) of the Plan.
(b) Each person who first becomes an Eligible Employee during any Offering
and at least six (6) months prior to the final Purchase Date of the Offering
will, on the next August 1 or February 1 during that Offering, receive a right
under such Offering, which right shall thereafter be deemed to be a part of the
Offering. Such right shall have the same characteristics as any rights
originally granted under the Offering except that:
(1) the date on which such right is granted shall be the "Offering
Date" of such right for all purposes, including determination of the exercise
price of such right; and
(2) the Offering for such right shall begin on its Offering Date and
end coincident with the end of the ongoing Offering.
3. Rights.
(a) Subject to the limitations contained herein and in the Plan, on each
Offering Date each Eligible Employee shall be granted the right to purchase the
number of shares of Common Stock purchasable with up to fifteen percent (15%) of
such employee's Earnings paid during the period of such Offering beginning after
such Eligible Employee first commences participation; provided, however, that no
employee may purchase Common Stock on a particular Purchase Date that would
result in more than fifteen percent (15%) of such employee's Earnings in the
period from the Offering Date to such Purchase Date having been applied to
purchase shares under all ongoing Offerings under the Plan and all other plans
of the Company intended to qualify as "employee stock purchase plans" under
Section 423 of the Internal Revenue Code of 1986, as amended (the "Code"). For
this Offering, "Earnings" means the base salary paid to an employee, including
all amounts elected to be deferred by the employee, that would otherwise have
been paid, under any cash or deferred arrangement established by the Company),
but excluding overtime pay, commissions, bonuses, and other remuneration paid
directly to the employee, profit sharing, the cost of employee benefits paid for
by the Company, education or tuition reimbursements, imputed income arising
under any Company group insurance or benefit program, traveling expenses,
business and moving expense reimbursements, income received in connection with
stock options, contributions made by the Company under any employee benefit
plan, and similar items of compensation.
(b) Notwithstanding the foregoing, the maximum number of shares of Common
Stock an Eligible Employee may purchase on any Purchase Date in an Offering
shall be such number of shares as has a fair market value (determined as of the
Offering Date for such Offering) equal to (x) $25,000 multiplied by the number
of calendar years in which the right under such Offering has been outstanding at
any time, minus (y) the fair market value of any other shares of Common Stock
(determined as of the relevant Offering Date with respect to such shares) which,
2.
<PAGE>
for purposes of the limitation of Section 423(b)(8) of the Code, are attributed
to any of such calendar years in which the right is outstanding. The amount in
clause (y) of the previous sentence shall be determined in accordance with
regulations applicable under Section 423(b)(8) of the Code based on (i) the
number of shares previously purchased with respect to such calendar years
pursuant to such Offering or any other Offering under the Plan, or pursuant to
any other Company plans intended to qualify as "employee stock purchase plans"
under Section 423 of the Code, and (ii) the number of shares subject to other
rights outstanding on the Offering Date for such Offering pursuant to the Plan
or any other such Company plan.
(c) The maximum aggregate number of shares available to be purchased by
all Eligible Employees under an Offering shall be the number of shares remaining
available under the Plan on the Offering Date. If the aggregate purchase of
shares of Common Stock upon exercise of rights granted under the Offering would
exceed the maximum aggregate number of shares available, the Board shall make a
pro rata allocation of the shares available in a uniform and equitable manner.
4. Purchase Price.
The purchase price of the Common Stock under the Offering shall be the
lesser of: (i) eighty-five percent (85%) of the fair market value of the Common
Stock on the Offering Date or (ii) or eighty-five percent (85%) of the fair
market value of the Common Stock on the Purchase Date, in each case rounded up
to the nearest whole cent per share. For the Initial Offering, the fair market
value of the Common Stock at the time when the Offering commences shall be the
price per share at which shares of Common Stock are first sold to the public in
the Company's initial public offering as specified in the final prospectus with
respect to that public offering.
5. Participation.
(a) Except as otherwise provided in this paragraph 5 or in the Plan, an
Eligible Employee may elect to participate in an Offering only at the beginning
of the Offering or as of the day following a Purchase Date during such Offering.
An Eligible Employee shall become a participant in an Offering by delivering an
agreement authorizing payroll deductions. Such deductions must be in whole
percentages of Earnings, with a minimum percentage of one percent (1%) and a
maximum percentage of fifteen percent (15%). A participant may not make
additional payments into his or her account. The agreement shall be made on such
enrollment form as the Company provides, and must be delivered to the Company
prior to the date participation is to be effective, unless a later time for
filing the enrollment form is set by the Company for all Eligible Employees with
respect to a given participation date. For the Initial Offering, the time for
filing an enrollment form and commencing participation for individuals who are
Eligible Employees on the Offering Date for the Initial Offering shall be
determined by the Company and communicated to such Eligible Employees.
3.
<PAGE>
(b) A participant may decrease his or her participation level during the
course of a six (6)-month purchase interval one (1) time, and only by delivering
notice to the Company at least ten (10) days in advance of the Purchase Date in
such form as the Company prescribes; provided that a participant may (i) reduce
his or her deductions to zero percent (0%) upon ten (10) days' prior notice by
delivering a notice in such form as the Company provides, (ii) may increase or
decrease his or her participation level at any time to become effective on the
day following the next subsequent Purchase Date or (iii) may withdraw from an
Offering and receive his or her accumulated payroll deductions from the Offering
(reduced to the extent, if any, such deductions have been used to acquire Common
Stock for the participant on any prior Purchase Dates) without interest, at any
time prior to the end of the Offering, excluding only each ten (10)-day period
immediately preceding a Purchase Date, by delivering a withdrawal notice to the
Company in such form as the Company provides. A participant who has withdrawn
from an Offering shall not again participate in such Offering, but may
participant in subsequent Offerings under the Plan in accordance with the terms
thereof.
6. Purchases.
Subject to the limitations contained herein, on each Purchase Date, each
participant's accumulated payroll deductions (without any increase for interest)
shall be applied to the purchase of whole shares of Common Stock, up to the
maximum number of shares permitted under the Plan and the Offering. "Purchase
Date" shall be defined as each January 31 and July 31, except that the first
Purchase Date under this Offering shall be July 31, 1998, and not January 31,
1998.
7. Notices and Agreements.
Any notices or agreements provided for in an Offering or the Plan shall be
given in writing, in a form provided by the Company, and unless specifically
provided for in the Plan or this Offering, shall be deemed effectively given
upon receipt or, in the case of notices and agreements delivered by the Company,
five (5) days after deposit in the United States mail, postage prepaid.
8. Exercise Contingent on Stockholder Approval.
The rights granted under an Offering are subject to the approval of the
Plan by the stockholders as required for the Plan to obtain treatment as a
tax-qualified employee stock purchase plan under Section 423 of the Code and to
comply with the requirements of exemption from potential liability under Section
16(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")
set forth in Rule 16b-3 promulgated under the Exchange Act.
4.
<PAGE>
9. Offering Subject to Plan.
Each Offering is subject to all the provisions of the Plan, and its
provisions are hereby made a part of the Offering, and is further subject to all
interpretations, amendments, rules and regulations which may from time to time
be promulgated and adopted pursuant to the Plan. In the event of any conflict
between the provisions of an Offering and those of the Plan (including
interpretations, amendments, rules and regulations which may from time to time
be promulgated and adopted pursuant to the Plan), the provisions of the Plan
shall control.
5.
<PAGE>
Exhibit 10.6
GENE LOGIC INC.
1997 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
Adopted on October 1, 1997
Approved by Stockholders on ______________, 1997
1. PURPOSE.
(a) The purpose of the 1997 Non-Employee Directors' Stock Option Plan (the
"Plan") is to provide a means by which each director of Gene Logic Inc. (the
"Company") who is not otherwise at the time of grant an employee of or
consultant to the Company or of any Affiliate of the Company (each such person
being hereafter referred to as a "Non-Employee Director") will be given an
opportunity to purchase stock of the Company.
(b) The word "Affiliate" as used in the Plan means any parent corporation
or subsidiary corporation of the Company as those terms are defined in Sections
424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended
from time to time (the "Code").
(c) The Company, by means of the Plan, seeks to retain the services of
persons now serving as Non-Employee Directors of the Company, to secure and
retain the services of persons capable of serving in such capacity, and to
provide incentives for such persons to exert maximum efforts for the success of
the Company.
2. ADMINISTRATION.
(a) The Plan shall be administered by the Board of Directors of the
Company (the "Board") unless and until the Board delegates administration to a
committee, as provided in subparagraph 2(b).
(b) The Board may delegate administration of the Plan to a committee
composed of two (2) or more members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
3. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 10 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to options granted under
the Plan shall not exceed in the aggregate [one hundred twenty five thousand
(125,000)] shares of the Company's common stock. If any option granted under the
Plan shall for any reason expire or otherwise terminate without having been
exercised in full, the stock not purchased under such option shall again become
available for the Plan.
1.
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(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. ELIGIBILITY.
Options shall be granted only to Non-Employee Directors of the Company.
5. NON-DISCRETIONARY GRANTS.
(a) Each person who is first elected or appointed to the Board as a
Non-Employee Director after the Adoption Date shall automatically be granted, on
the date of such initial election or appointment, an option to purchase thirty
thousand (30,000) shares of common stock of the Company on the terms and
conditions set forth herein (hereinafter, an "Initial Grant").
(b) Each Non-Employee Director who is re-elected at or after the [1998]
annual meeting of stockholders, and who has continuously served as a
Non-Employee Director for the six (6)-month period prior to the date of the such
annual meeting of stockholders, shall automatically be granted, following
such annual meeting, an option to purchase seven thousand five hundred (7,500)
shares of common stock of the Company on the terms and conditions set forth
herein (hereinafter, an "Annual Grant").
6. OPTION PROVISIONS.
Each option shall be subject to the following terms and conditions:
(a) The term of each option commences on the date it is granted and,
unless sooner terminated as set forth herein, expires on the date ("Expiration
Date") ten (10) years from the date of grant. If the optionee's service as a
Non-Employee Director or employee of or consultant to the Company or any
Affiliate terminates for any reason or for no reason, the option shall terminate
on the earlier of the Expiration Date or the date twelve (12) months following
the date of termination of all such service; provided, however, that if such
termination of service is due to the optionee's death, the option shall
terminate on the earlier of the Expiration Date or eighteen (18) months
following the date of the optionee's death. In any and all circumstances, an
option may be exercised following termination of the optionee's service as a
Non-Employee Director or employee of or consultant to the Company or any
Affiliate only as to that number of shares as to which it was exercisable as of
the date of termination of all such service under the provisions of subparagraph
6(e).
(b) The exercise price of each option shall be equal to one hundred
percent (100%) of the Fair Market Value of the stock (as such term is defined in
subsection 9(e) of this Plan) subject to such option on the date such option is
granted.
(c) The optionee may elect to make payment of the exercise price under one
of the following alternatives:
2.
<PAGE>
(i) In cash (or check) at the time of exercise;
(ii) Provided that at the time of the exercise the Company's
common stock is publicly traded and quoted regularly in The Wall Street Journal,
payment by delivery of shares of common stock of the Company already owned by
the optionee, held for the period required to avoid a charge to the Company's
reported earnings, and owned free and clear of any liens, claims, encumbrances
or security interest, which common stock shall be valued at its Fair Market
Value on the date immediately preceding the date of exercise; or
(iii) Pursuant to a program developed under Regulation T as
promulgated by the Federal Reserve Board which results in the receipt of cash
(or check) by the Company either prior to the issuance of shares of the
Company's common stock or pursuant to the terms of irrevocable instructions
issued by the optionee prior to the issuance of shares of the Company's common
stock.
(iv) Payment by a combination of the methods of payment
specified in subparagraph 6(c)(i) through 6(c)(iii) above.
(d) An option shall be transferable only to the extent specifically
provided in the option agreement; provided, however, that if the option
agreement does not specifically provide for the transferability of an option,
then the option shall not be transferable except by will or by the laws of
descent and distribution, and shall be exercisable during the lifetime of the
person to whom the option is granted only by such person (or by his guardian or
legal representative) or transferee pursuant to such an order. Notwithstanding
the foregoing, the optionee may, by delivering written notice to the Company in
a form satisfactory to the Company, designate a third party who, in the event of
the death of the optionee, shall thereafter be entitled to exercise the option.
(e) (i) An Initial Grant shall become exercisable in four (4) equal annual
installments measured from the date of grant, commencing on the one (1)-year
anniversary of the date of grant of the option, and (ii) an Annual Grant shall
become exercisable one (1) year from the date of grant, provided that, with
respect to any grant under the Plan, the optionee has, during the entire period
prior to such vesting installment date, continuously served as a Non-Employee
Director or employee of or consultant to the Company or any Affiliate of the
Company, whereupon such option shall become fully exercisable in accordance with
its terms with respect to that portion of the shares represented by that
installment.
(f) The Company may require any optionee, or any person to whom an option
is transferred under subparagraph 6(d), as a condition of exercising any such
option: (i) to give written assurances satisfactory to the Company as to the
optionee's knowledge and experience in financial and business matters; and (ii)
to give written assurances satisfactory to the Company stating that such person
is acquiring the stock subject to the option for such person's own account and
not with any present intention of selling or otherwise distributing the stock.
These requirements, and any assurances given pursuant to such requirements,
shall be inoperative if
3.
<PAGE>
(x) the issuance of the shares upon the exercise of the option has been
registered under a then currently-effective registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), or (y) as to any
particular requirement, a determination is made by counsel for the Company that
such requirement need not be met in the circumstances under the then applicable
securities laws. The Company may require any optionee to provide such other
representations, written assurances or information which the Company shall
determine is necessary, desirable or appropriate to comply with applicable
securities laws as a condition of granting an option to the optionee or
permitting the optionee to exercise the option. The Company may, upon advice of
counsel to the Company, place legends on stock certificates issued under the
Plan as such counsel deems necessary or appropriate in order to comply with
applicable securities laws, including, but not limited to, legends restricting
the transfer of the stock.
(g) Notwithstanding anything to the contrary contained herein, an option
may not be exercised unless the shares issuable upon exercise of such option are
then registered under the Securities Act or, if such shares are not then so
registered, the Company has determined that such exercise and issuance would be
exempt from the registration requirements of the Securities Act.
7. COVENANTS OF THE COMPANY.
(a) During the terms of the options granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such options.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the options granted under the
Plan; provided however, that this undertaking shall not require the Company to
register under the Securities Act either the Plan, any option granted under the
Plan, or any stock issued or issuable pursuant to any such option. If, after
reasonable efforts, the Company is unable to obtain from any such regulatory
commission or agency the authority which counsel for the Company deems necessary
for the lawful issuance and sale of stock under the Plan, the Company shall be
relieved from any liability for failure to issue and sell stock upon exercise of
such options.
8. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to options granted under the Plan
shall constitute general funds of the Company.
9. MISCELLANEOUS.
(a) Neither an optionee nor any person to whom an option is transferred
under subparagraph 6(d) shall be deemed to be the holder of, or to have any of
the rights of a holder
4.
<PAGE>
with respect to, any shares subject to such option unless and until such person
has satisfied all requirements for exercise of the option pursuant to its terms.
(b) Nothing in the Plan or in any instrument executed pursuant thereto
shall confer upon any Non-Employee Director any right to continue in the service
of the Company or any Affiliate in any capacity or shall affect any right of the
Company, its Board or stockholders or any Affiliate, to remove any Non-Employee
Director pursuant to the Company's Bylaws and the provisions of Delaware General
Corporations Law.
(c) No Non-Employee Director, individually or as a member of a group, and
no beneficiary or other person claiming under or through him, shall have any
right, title or interest in or to any option reserved for the purposes of the
Plan except as to such shares of common stock, if any, as shall have been
reserved for him pursuant to an option granted to him.
(d) In connection with each option made pursuant to the Plan, it shall be
a condition precedent to the Company's obligation to issue or transfer shares to
a Non-Employee Director, or to evidence the removal of any restrictions on
transfer, that such Non-Employee Director make arrangements satisfactory to the
Company to insure that the amount of any federal, state or local withholding tax
required to be withheld with respect to such sale or transfer, or such removal
or lapse, is made available to the Company for timely payment of such tax.
(e) As used in this Plan, "Fair Market Value" means, as of any date, the
value of the common stock of the Company determined as follows:
(i) If the common stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap, the Fair Market Value of a share of
common stock shall be the closing sales price for such stock (or the closing
bid, if no sales were reported) as quoted on such system or exchange (or the
exchange with the greatest volume of trading in common stock) on the last market
trading day prior to the day of determination, as reported in The Wall Street
Journal or such other source as the Board deems reliable; or
(ii) In the absence of an established market for the common
stock, the Fair Market Value shall be determined in good faith by the Board.
10. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject to
any option granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan and outstanding options will
be appropriately adjusted in the class(es) and maximum number of shares subject
to the Plan and the class(es) and number of shares and price per share of stock
subject to outstanding options. Such adjustments
5.
<PAGE>
shall be made by the Board, the determination of which shall be final, binding
and conclusive. (The conversion of any convertible securities of the Company
shall not be treated as a "transaction not involving the receipt of
consideration by the Company.")
(b) In the event of: (1) a dissolution, liquidation, or sale of all or
substantially all of the assets of the Company; (2) a merger or consolidation in
which the Company is not the surviving corporation; (3) a reverse merger in
which the Company is the surviving corporation but the shares of the Company's
common stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise; or (4) the acquisition by any person, entity or group within
the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") or any comparable successor provisions (excluding
any employee benefit plan, or related trust, sponsored or maintained by the
Company or any Affiliate of the Company) of the beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act, or comparable
successor rule) of securities of the Company representing at least fifty percent
(50%) of the combined voting power entitled to vote in the election of
directors, then to the extent not prohibited by applicable law, the time during
which options outstanding under the Plan may be exercised shall be accelerated
prior to such event and the options terminated if not exercised after such
acceleration and at or prior to such event.
11. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may amend the Plan
and/or some or all outstanding options granted under the Plan. However, except
as provided in paragraph 10 relating to adjustments upon changes in stock, no
amendment shall be effective unless approved by the stockholders of the Company
to the extent stockholder approval is necessary for the Plan to satisfy the
requirements of Rule 16b-3 promulgated under the Exchange Act or any Nasdaq or
securities exchange listing requirements.
(b) Rights and obligations under any option granted before any amendment
of the Plan shall not be impaired by such amendment unless (i) the Company
requests the consent of the person to whom the option was granted and (ii) such
person consents in writing.
12. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate on [August 31, 2007]. No options may be
granted under the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any option granted while the Plan is in
effect shall not be impaired by suspension or termination of the Plan, except
with the consent of the person to whom the option was granted.
6.
<PAGE>
(c) The Plan shall terminate upon the occurrence of any of the events
described in Section 10(b) above.
13. EFFECTIVE DATE OF PLAN; CONDITIONS OF EXERCISE.
(a) The Plan shall become effective upon adoption by the Board.
(b) No option granted under the Plan shall be exercised or become
exercisable unless and until the Plan is approved by the stockholders of the
Company.
7.
<PAGE>
Exhibit 10.7
GENE LOGIC INC.
1997 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
NONSTATUTORY STOCK OPTION
_______________________, Optionee:
On __________________, 19___, an option was automatically granted to you
(the "Optionee") pursuant to the Gene Logic Inc. (the "Company") 1997
Non-Employee Directors' Stock Option Plan (the "Plan") to purchase shares of the
Company's common stock ("Common Stock"). This option is not intended to qualify
and will not be treated as an "incentive stock option" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
The grant hereunder is in connection with and in furtherance of the
Company's compensatory benefit plan for Non-Employee Directors (as defined in
the Plan).
The details of your option are as follows:
1. The total number of shares of Common Stock subject to this option is
[thirty thousand (30,000)] [seven thousand five hundred (7,500)].
2. The exercise price of this option is _____________________ ($________)
per share, such amount being equal to the Fair Market Value (as defined in the
Plan) of the Common Stock on the date of grant of this option.
3. (a) Subject to the limitations contained herein, if:
(i) this option is exercisable for 30,000 shares, then this
option shall become exercisable (i.e., vest) in four (4) equal annual
installments with the first installment becoming exercisable one (1) year after
the date of grant; or
(ii) this option is exercisable for 7,500 shares, then this
option shall become exercisable (i.e., vest) one (1) year after the date of
grant;
provided, however, that you have, during the period from the date of grant to
such vesting date, continuously served as a Non-Employee Director or employee of
or consultant to the Company or any Affiliate (as defined in the Plan),
whereupon this option shall become fully exercisable with respect to that
portion of the shares represented by that installment.
(b) Notwithstanding anything to the foregoing, this option shall not
be exercisable in whole or in part unless and until the Plan has been approved
by the Company's stockholders.
4. (a) This option may be exercised, to the extent specified above, by
delivering a Notice of Exercise (in the form attached hereto or such other form
designated by the Company) together with the exercise price to the Secretary of
the Company, or to such other person as the Company may designate, during
regular business hours, together with such additional documents as the Company
may then require pursuant to Section 6 of the Plan.
1.
<PAGE>
(b) This option may only be exercised for whole shares.
(c) You may elect to pay the exercise price under one of the
following alternatives:
(i) In cash (or check) at the time of exercise;
(ii) Provided that at the time of the exercise the Common
Stock is publicly traded and quoted regularly in The Wall Street Journal,
payment by delivery of shares of Common Stock already owned by you, held for the
period required to avoid a charge to the Company's reported earnings, and owned
free and clear of any liens, claims, encumbrances or security interest, which
Common Stock shall be valued at its Fair Market Value on the date immediately
preceding the date of exercise; or
(iii) Payment pursuant to a program developed under Regulation
T as promulgated by the Federal Reserve Board which results in the receipt of
cash (or check) by the Company either prior to the issuance of shares of the
Common Stock or pursuant to the terms of irrevocable instructions issued by you
prior to the issuance of shares of the Common Stock.
(iv) Payment by a combination of the methods of payment
specified in subparagraphs (i) through (iii) above.
(d) By exercising this option you agree that the Company may require
you to enter an arrangement providing for the cash payment by you to the Company
of any tax withholding obligation of the Company arising by reason of the
exercise of this option.
5. The term of this option is ten (10) years measured from the date of
grant, subject, however, to earlier termination upon your termination of
service, as set forth in Section 6(a) of the Plan.
6. Any notices provided for in this option or the Plan shall be given in
writing and shall be deemed effectively given upon receipt or, in the case of
notices delivered by the Company to you, five (5) days after deposit in the
United States mail, postage prepaid, addressed to you at the address specified
below or at such other address as you hereafter designate by written notice to
the Company.
7. This option is subject to all the provisions of the Plan, a copy of
which is attached hereto and its provisions are hereby made a part of this
option, including without limitation the provisions of Section 6 of the Plan
relating to option provisions, and is further subject to all interpretations,
amendments, rules and regulations which may from time to time be promulgated and
adopted pursuant
2.
<PAGE>
to the Plan. In the event of any conflict between the provisions of this option
and those of the Plan, the provisions of the Plan shall control.
Dated the ____ day of _______________, 19__.
Very truly yours,
Gene Logic Inc.
By:
--------------------------------
Duly authorized on behalf
of the Board of Directors
ATTACHMENTS: Notice of Exercise
1997 Non-Employee Directors' Stock Option Plan
3.
<PAGE>
The undersigned:
(a) Acknowledges receipt of the foregoing option and the attachments
referenced therein and understands that all rights and liabilities with respect
to this option are set forth in the option and the Plan; and
(b) Acknowledges that as of the date of grant of this option, it sets
forth the entire understanding between the undersigned Optionee and the Company
and its Affiliates regarding the acquisition of Common Stock in the Company and
supersedes all prior oral and written agreements on that subject with the
exception of (i) the options and any other stock awards previously granted and
delivered to the undersigned under stock award plans of the Company, and (ii)
the following agreements only:
NONE:
--------------
(Initial)
OTHER:
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
Optionee
Address:
--------------------------------------------
--------------------------------------------
4.
<PAGE>
GENE LOGIC INC.
1997 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
NOTICE OF EXERCISE
Gene Logic Inc.
- - - ------------------
- - - ------------------ Date of Exercise:
--------------------
Ladies and Gentlemen:
This constitutes notice under my stock option that I elect to purchase the
number of shares for the price set forth below.
Type of option: Nonstatutory
Stock option dated:
-------------------
Number of shares for
which option is exercised:
-------------------
Certificates to be
issued in name of:
-------------------
Total exercise price: $
-------------------
Cash payment delivered
herewith: $
-------------------
Value of ______ shares
of common stock delivered
herewith(1): $
-------------------
By this exercise, I agree (i) to provide such additional documents as you
may require pursuant to the terms of the Company's 1997 Non-Employee Directors'
Stock Option Plan and (ii) to provide for the payment by me to you (in the
manner designated by you) of your withholding obligation, if any, relating to
the exercise of this option.
[USE FOLLOWING LANGUAGE ONLY IF GRANTS MADE PRE-IPO]
- - - ----------
(1) Shares must meet the public trading requirements set forth in the option.
Shares must be valued in accordance with the terms of the option being
exercised, must have been owned for the minimum period required in the option,
and must be owned free and clear of any liens, claims, encumbrances or security
interests. Certificates must be endorsed or accompanied by an executed
assignment separate from certificate.
1.
<PAGE>
[I hereby make the following certifications and representations with
respect to the number of shares of Common Stock (the "Shares"), which are being
acquired by me for my own account upon exercise of the Option as set forth
above:
I acknowledge that the Shares have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and are deemed to
constitute "restricted securities" under Rule 701 and Rule 144 promulgated under
the Securities Act. I warrant and represent to the Company that I have no
present intention of distributing or selling said Shares, except as permitted
under the Act and any applicable state securities laws.
I further acknowledge that I will not be able to resell the Shares for at
least ninety (90) days after the stock of the Company becomes publicly traded
(i.e., subject to the reporting requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended) under Rule 701 and that more
restrictive conditions apply to affiliates of the Company under Rule 144.
I further acknowledge that all certificates representing any of the Shares
subject to the provisions of the Option shall have endorsed thereon appropriate
legends reflecting the foregoing limitations, as well as any legends reflecting
restrictions pursuant to the Company's Articles of Incorporation, Bylaws and/or
applicable securities laws.
I further agree that, if required by the Company (or a representative of
the underwriters) in connection with the first underwritten registration of the
offering of any securities of the Company under the Securities Act, I will not
sell or otherwise transfer or dispose of any shares of Common Stock or other
securities of the Company during such period (not to exceed one hundred eighty
(180) days following the effective date of the registration statement of the
Company filed under the Securities Act as may be requested by the Company or the
representative of the underwriters. I further agree that the Company may impose
stop-transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such period.]
Very truly yours,
---------------------------
2.
<PAGE>
Exhibit 10.8
GENE LOGIC INC.
Stock Restriction Agreement
AGREEMENT dated as of July 31, 1996, by and between Gene Logic Inc., a
Delaware corporation (the "Company") and Mark D. Gessler (the "Stockholder").
W I T N E S S E T H
WHEREAS, the Stockholder has as of the date of this Agreement acquired
75,000 shares of the Company's Common Stock (the "Shares");
WHEREAS, the Stockholder is an executive officer of the Company; and
WHEREAS, the parties hereto desire to provide for the continuity of
ownership and management of the Company to best further the interests of the
Company and its present and future stockholders;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and of other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. Repurchase Option.
(a) If the Stockholder shall for any reason (including, without
limitation, involuntary removal with or without cause) cease to be employed by
the Company, the Company shall have an irrevocable and exclusive right, for 60
days from the date upon which the Stockholder shall so cease to be employed by
the Company (which date shall be determined in the sole reasonable judgment of
the Company and shall be referred to herein as the "Termination Date"), to
purchase all or any portion of the Shares, other than Vested Shares (as such
term is defined below).
(b) "Vested Shares" shall mean those Shares released from the
Company's repurchase option, as set forth in Section 1(a) above, in accordance
with the following schedule, subject to the continued service of the Stockholder
as an employee of the Company: 25% of the Shares on the date hereof and an
additional 1/36 of the remaining Shares on the first day of each month
commencing June 1, 1997 and continuing thereafter until June 1, 2000 (at which
time, all Shares shall have become Vested Shares). If the Stockholder ceases to
be an employee of the Company, no further shares beyond those already vested
upon the Termination Date shall vest pursuant to this Agreement.
If (i) the Company is merged or consolidated with, or all or
substantially all of its assets are acquired by, another entity, or (ii) the
Company issues and sells shares of its Common Stock to the public in a firm
underwriting pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "Securities Act") and the
<PAGE>
Stockholder has continued to serve as an employee of the Company through the
effective date of such merger, consolidation, sale or public offering, then upon
the consummation of such merger, consolidation, sale or public offering all
unvested Shares held by the Stockholder on such date shall immediately become
Vested Shares and the Company's repurchase right under this Section 1 shall
terminate.
(c) The purchase price at which the Company may exercise its option
to purchase the Shares under this Section 1 (the "Option Price") shall be $.15
per share.
2. Right of First Refusal. In the event the Stockholder shall desire to
sell or otherwise dispose of any portion of the Shares, including the Vested
Shares, the Stockholder shall (i) obtain an irrevocable and unconditional bona
fide offer in writing (the "Bona Fide Offer") for the purchase thereof and (ii)
give written notice (the "Option Notice") to the Company setting forth his
desire to sell such Shares, which Option Notice shall be accompanied by a
photocopy of the original executed Bona Fide Offer. The Company shall have a
non-assignable option, exercisable for 30 days from receipt of the Option
Notice, to purchase any or all shares proposed to be sold, at a price and on
terms identical to those set forth in the Bona Fide Offer.
3. Restrictions on Transfer. The Stockholder may not sell, assign,
transfer, pledge, hypothecate, mortgage or dispose of, by gift or otherwise, or
in any way encumber all or any of the Shares, except as provided in this
Agreement. Notwithstanding the foregoing, the Stockholder may transfer all or
any of the Shares to any member of his family or to any trust for the benefit of
any such family member or the Stockholder, provided that any such transferee
shall agree in writing, as a condition to such transfer, to be bound by all of
the provisions of this Agreement. As used herein, the word "family" shall mean
any parent, spouse, lineal descendant, brother or sister.
4. Adjustments. If there shall be any change in the Common Stock of the
Company through merger, consolidation, reorganization, recapitalization, stock
dividend, stock split, combination or exchange of shares, or the like, all of
the terms and provisions of this Agreement shall apply to any new, additional or
different shares of securities issued to the Stockholder as replacements for the
Shares or otherwise as a result of such event, and the price and the number of
shares or other securities that may be purchased by the Company pursuant to this
Agreement shall be appropriately adjusted.
5. Recognition of Transferee. The Company shall not (i) transfer on its
books record ownership of any Shares which shall have been sold or transferred
in violation of any of the provisions set forth in this Agreement or (ii)
recognize the right to vote, or to receive dividends upon, such Shares with
respect to any transferee to whom such Shares shall have been so transferred.
-2-
<PAGE>
6. Rights of Stockholder. This Agreement shall not be deemed to be an
employment contract, and nothing in this Agreement shall affect in any way the
right or power of the Company to terminate the Stockholder's service as a
consultant to the Company.
7. Specific Enforcement. Each of the parties hereto acknowledges that the
parties will be irreparably damaged in the event that this Agreement is
breached. Upon a breach or threatened breach in the terms, covenants or
conditions of this Agreement by either of the parties hereto, the other party
shall be entitled (in addition to all other remedies) to a temporary or
permanent injunction, without showing any actual damage, or a decree for
specific performance, in accordance with the provisions hereof.
8. Notices. Any notice required to be given hereunder shall be in writing
and shall be deemed to be properly given when sent by registered or certified
mail, return receipt requested, addressed, if to the Company, to its President
at the Company's principal office, and if to the Stockholder, to his address as
shown on the stock transfer records of the Company, or in either case to such
other address as to which either party shall give the other notice pursuant to
this Section.
9. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware.
10. Waivers; Amendments. No waiver of any right hereunder by either party
shall operate as a waiver of any other right, or of the same right with respect
to any subsequent occasion for its exercise, or of any right to damages. No
waiver by either party of any breach of this Agreement shall be held to
constitute a waiver of any other breach or a continuation of the same breach.
All remedies provided by this Agreement are in addition to all other remedies
provided by law. This Agreement may not be amended except in writing signed by
the parties hereto.
11. Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of the respective legal representatives, successors and
assigns of the parties hereto.
12. Severability. If any provision of this Agreement shall be declared
void and unenforceable by any judicial or administrative authority, the validity
of any other provisions and of the entire Agreement shall not be affected
thereby.
13. Prior Understandings. This Agreement represents the complete agreement
of the parties with respect to the transactions contemplated hereby and
supersedes all prior agreement and understandings.
14. Termination. The Company's right of first refusal set forth in Section
2 shall terminate upon the consummation of an underwritten public offering of
the Company's
-3-
<PAGE>
Common Stock, pursuant to an effective registration statement under the
Securities Act, in which the aggregate net proceeds to the Company exceed
$10,000,000.
15. Headings. Headings in this Agreement are included for reference only
and shall have no affect upon the construction or interpretation of any part of
this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement under seal,
as of the date first above written.
GENE LOGIC INC.
By: /s/ Michael J. Brennan
-----------------------------
Michael J. Brennan
President
/s/ Mark D. Gessler
--------------------------------
Mark D. Gessler
-4-
<PAGE>
Exhibit 10.9
GENE LOGIC INC.
Stock Restriction Agreement
AGREEMENT dated as of December 20, 1996, by and between Gene Logic Inc., a
Delaware corporation (the "Company") and Mark D. Gessler (the "Stockholder").
W I T N E S S E T H
WHEREAS, the Stockholder has as of the date of this Agreement acquired
25,000 shares of the Company's Common Stock (the "Shares");
WHEREAS, the Stockholder is an executive officer of the Company; and
WHEREAS, the parties hereto desire to provide for the continuity of
ownership and management of the Company to best further the interests of the
Company and its present and future stockholders;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and of other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. Repurchase Option.
(a) If the Stockholder shall for any reason (including, without
limitation, involuntary removal with or without cause) cease to be employed by
the Company, the Company shall have an irrevocable and exclusive right, for 60
days from the date upon which the Stockholder shall so cease to be employed by
the Company (which date shall be determined in the sole reasonable judgment of
the Company and shall be referred to herein as the "Termination Date"), to
purchase all or any portion of the Shares, other than Vested Shares (as such
term is defined below).
(b) "Vested Shares" shall mean those Shares released from the
Company's repurchase option, as set forth in Section 1(a) above, in accordance
with the following schedule, subject to the continued service of the Stockholder
as an employee of the Company:
o 6,250 Shares on the date hereof
o An additional 521 Shares on the first day of each month
beginning on July 1, 1997 and continuing through and including May 1, 2000
o An additional 515 Shares on July 1, 2000 (at which time, all
25,000 Shares shall have become Vested Shares).
<PAGE>
If the Stockholder ceases to be an employee of the Company, no
further shares beyond those already vested upon the Termination Date shall vest
pursuant to this Agreement.
If (i) the Company is merged or consolidated with, or all or
substantially all of its assets are acquired by, another entity, or (ii) the
Company issues and sells shares of its Common Stock to the public in a firm
underwriting pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "Securities Act") and the Stockholder
has continued to serve as an employee of the Company through the effective date
of such merger, consolidation, sale or public offering, then upon the
consummation of such merger, consolidation, sale or public offering all unvested
Shares held by the Stockholder on such date shall immediately become Vested
Shares and the Company's repurchase right under this Section 1 shall terminate.
(c) The purchase price at which the Company may exercise its option
to purchase the Shares under this Section 1 (the "Option Price") shall be $.15
per share.
2. Right of First Refusal. In the event the Stockholder shall desire to
sell or otherwise dispose of any portion of the Shares, including the Vested
Shares, the Stockholder shall (i) obtain an irrevocable and unconditional bona
fide offer in writing (the "Bona Fide Offer") for the purchase thereof and (ii)
give written notice (the "Option Notice") to the Company setting forth his
desire to sell such Shares, which Option Notice shall be accompanied by a
photocopy of the original executed Bona Fide Offer. The Company shall have a
non-assignable option, exercisable for 30 days from receipt of the Option
Notice, to purchase any or all shares proposed to be sold, at a price and on
terms identical to those set forth in the Bona Fide Offer.
3. Restrictions on Transfer. The Stockholder may not sell, assign,
transfer, pledge, hypothecate, mortgage or dispose of, by gift or otherwise, or
in any way encumber all or any of the Shares, except as provided in this
Agreement. Notwithstanding the foregoing, the Stockholder may transfer all or
any of the Shares to any member of his family or to any trust for the benefit of
any such family member or the Stockholder, provided that any such transferee
shall agree in writing, as a condition to such transfer, to be bound by all of
the provisions of this Agreement. As used herein, the word "family" shall mean
any parent, spouse, lineal descendant, brother or sister.
4. Adjustments. If there shall be any change in the Common Stock of the
Company through merger, consolidation, reorganization, recapitalization, stock
dividend, stock split, combination or exchange of shares, or the like, all of
the terms and provisions of this Agreement shall apply to any new, additional or
different shares of securities issued to the Stockholder as replacements for the
Shares or otherwise as a result of such event, and the price and the number of
shares or other securities that may be purchased by the Company pursuant to this
Agreement shall be appropriately adjusted.
-2-
<PAGE>
5. Recognition of Transferee. The Company shall not (i) transfer on its
books record ownership of any Shares which shall have been sold or transferred
in violation of any of the provisions set forth in this Agreement or (ii)
recognize the right to vote, or to receive dividends upon, such Shares with
respect to any transferee to whom such Shares shall have been so transferred.
6. Rights of Stockholder. This Agreement shall not be deemed to be an
employment contract, and nothing in this Agreement shall affect in any way the
right or power of the Company to terminate the Stockholder's service as a
consultant to the Company.
7. Specific Enforcement. Each of the parties hereto acknowledges that the
parties will be irreparably damaged in the event that this Agreement is
breached. Upon a breach or threatened breach in the terms, covenants or
conditions of this Agreement by either of the parties hereto, the other party
shall be entitled (in addition to all other remedies) to a temporary or
permanent injunction, without showing any actual damage, or a decree for
specific performance, in accordance with the provisions hereof.
8. Notices. Any notice required to be given hereunder shall be in writing
and shall be deemed to be properly given when sent by registered or certified
mail, return receipt requested, addressed, if to the Company, to its President
at the Company's principal office, and if to the Stockholder, to his address as
shown on the stock transfer records of the Company, or in either case to such
other address as to which either party shall give the other notice pursuant to
this Section.
9. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware.
10. Waivers; Amendments. No waiver of any right hereunder by either party
shall operate as a waiver of any other right, or of the same right with respect
to any subsequent occasion for its exercise, or of any right to damages. No
waiver by either party of any breach of this Agreement shall be held to
constitute a waiver of any other breach or a continuation of the same breach.
All remedies provided by this Agreement are in addition to all other remedies
provided by law. This Agreement may not be amended except in writing signed by
the parties hereto.
11. Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of the respective legal representatives, successors and
assigns of the parties hereto.
12. Severability. If any provision of this Agreement shall be declared
void and unenforceable by any judicial or administrative authority, the validity
of any other provisions and of the entire Agreement shall not be affected
thereby.
-3-
<PAGE>
13. Prior Understandings. This Agreement represents the complete agreement
of the parties with respect to the transactions contemplated hereby and
supersedes all prior agreement and understandings.
14. Termination. The Company's right of first refusal set forth in Section
2 shall terminate upon the consummation of an underwritten public offering of
the Company's Common Stock, pursuant to an effective registration statement
under the Securities Act, in which the aggregate net proceeds to the Company
exceed $10,000,000.
15. Headings. Headings in this Agreement are included for reference only
and shall have no affect upon the construction or interpretation of any part of
this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement under seal,
as of the date first above written.
GENE LOGIC INC.
By: /s/ Michael J. Brennan
-----------------------------
President
/s/ Mark D. Gessler
--------------------------------
Mark D. Gessler
-4-
<PAGE>
Exhibit 10.10
GENE LOGIC INC.
STOCK RESTRICTION AGREEMENT
AGREEMENT dated as of February 29, 1996, by and between Gene Logic Inc.
(formerly known as Senatics Corporation), a Delaware corporation (the "Company")
and Michael J. Brennan (the "Stockholder").
WITNESSETH
WHEREAS, the Stockholder has as of the date of this Agreement acquired
100,000 shares of the Company's Common Stock (the "Shares");
WHEREAS, the Stockholder is President and Chief Executive Officer of the
Company; and
WHEREAS, the parties hereto desire to provide for the continuity of
ownership and management of the Company to best further the interests of the
Company and its present and future stockholders;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and of other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. REPURCHASE OPTION.
(a) If the Stockholder shall for any reason (including, without
limitation, death, disability or involuntary removal with or without cause)
cease to be a consultant to the Company, the Company shall have an irrevocable
and exclusive right, for 60 days from the date upon which the Stockholder shall
so cease to be a consultant to the Company (which date shall be determined in
the sole reasonable judgment of the Company and shall be referred to herein as
the "Termination Date "), to purchase all or any portion of the Shares, other
than Vested Shares (as such term is defined below).
(b) "Vested Shares" shall mean those Shares released from the
Company's repurchase option, as set forth in Section 1 (a) above, in accordance
with the following schedule, subject to the continued service of the Stockholder
as a consultant to the Company: 25% of the Shares on the date hereof and an
additional 25% of the Shares on March 31 of each year commencing March 31, 1996,
and continuing thereafter until March 31, 1998. If the Stockholder ceases to be
a consultant to the Company, no further shares beyond those already vested upon
the Termination Date shall vest pursuant to this Agreement.
1.
<PAGE>
If (i) the Company is merged or consolidated with, or all or
substantially all of its assets are acquired by, another entity, or (ii) the
Company issues and sells shares of the Common Stock to the public in a firm
underwriting pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "Securities Act") and the stockholder
has continued to serve as an employee of the Company through the effective date
of such merger, consolidation, sale or public offering, then upon the
consummation of such merger, consolidation, sale or public offering all unvested
Shares held by the Stockholder on such date shall immediately become Vested
Shares and the Company's repurchase right under this Section 1 shall terminate.
(c) The purchase price at which the Company may exercise its option
to purchase the Shares under this Section 1 (the "Option Price") shall be $.01
per share.
2. RIGHT OF FIRST REFUSAL. In the event the Stockholder shall desire to
sell or otherwise dispose of any portion of the Shares, including the Vested
Shares, the Stockholder shall (i) obtain an irrevocable and unconditional bona
fide offer in writing (the "Bona Fide Offer") for the purchase thereof and (ii)
give written notice (the "Option Notice") to the Company setting forth his
desire to sell such Shares, which Option Notice shall be accompanied by a
photocopy of the original executed Bona Fide Offer. The Company shall have a
non-assignable option, exercisable for 30 days from receipt of the Option
Notice, to purchase any or all shares proposed to be sold, at a price and on
terms identical to those set forth in the Bona Fide Offer.
3. RESTRICTIONS ON TRANSFER. The Stockholder may not sell, assign,
transfer, pledge, hypothecate, mortgage or dispose of, by gift or otherwise, or
in any way encumber all or any of the Shares, except as provided in this
Agreement. Notwithstanding the foregoing, the Stockholder may transfer all or
any of the Shares to any member of his family or to any trust for the benefit of
any such family member or the Stockholder, provided that any such transferee
shall agree in writing, as a condition to such transfer, to be bound by all of
the provisions of this Agreement. As used herein, the word "family" shall mean
any parent, spouse, lineal descendant, brother or sister.
4. ADJUSTMENTS. If there shall be any change in the Common Stock of the
Company through merger, consolidation, reorganization, recapitalization, stock
dividend, stock split, combination or exchange of shares, or the like, all of
the terms and provisions of this Agreement shall apply to any new, additional or
different shares of securities issued to the Stockholder as replacements for the
Shares or otherwise as a result of such event, and the price and the number of
shares or other securities that may be purchased by the Company pursuant to this
Agreement shall be appropriately adjusted.
2.
<PAGE>
5. RECOGNITION OF TRANSFEREE. The Company shall not (i) transfer on its
books record ownership of any Shares which shall have been sold or transferred
in violation of any of the provisions set forth in this Agreement or (ii)
recognize the right to vote, or to receive dividends upon, such Shares with
respect to any transferee to whom such Shares shall have been so transferred.
6. RIGHTS OF STOCKHOLDER. This Agreement shall not be deemed to be an
employment contract, and nothing in this Agreement shall affect in any way the
right or power of the Company to terminate the Stockholder's service as a
consultant to the Company.
7. SPECIFIC ENFORCEMENT. Each of the parties hereto acknowledges that the
parties will be irreparably damaged in the event that this Agreement is
breached. Upon a breach or threatened breach in the terms, covenants or
conditions of this Agreement by either of the parties hereto, the other party
shall be entitled (in addition to all other remedies) to a temporary or
permanent injunction, without showing any actual damage, or a decree for
specific performance, in accordance with the provisions hereof.
8. NOTICES. Any notice required to be given hereunder shall be in writing
and shall be deemed to be properly given when sent by registered or certified
mail, return receipt requested, addressed, if to the Company, to its President
at the Company's principal office, and if to the Stockholder, to his address as
shown on the stock transfer records of the Company, or in either case to such
other address as to which either party shall give the other notice pursuant to
this Section.
9. GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware.
10. WAIVERS; AMENDMENTS. No waiver of any right hereunder by either party
shall operate as a waiver of any other right, or of the same right with respect
to any subsequent occasion for its exercise, or of any right to damages. No
waiver by either party of any breach of this Agreement shall be held to
constitute a waiver of any other breach or a continuation of the same breach.
All remedies provided by this Agreement are in addition to all other remedies
provided by law. This Agreement may not be amended except in writing signed by
the parties hereto.
11. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall
inure to the benefit of the respective legal representatives, successors and
assigns of the parties hereto.
12. SEVERABILITY. If any provision of this Agreement shall be declared
void and unenforceable by any judicial or administrative authority, the validity
of any other provisions and of the entire Agreement shall not be affected
thereby.
3.
<PAGE>
13. PRIOR UNDERSTANDINGS. This Agreement represents the complete agreement
of the parties with respect to the transactions contemplated hereby and
supersedes all prior agreement and understandings.
14. TERMINATION. The Company `s right of first refusal set forth in
Section 2 shall terminate upon the consummation of an underwritten public
offering of the Company's Common Stock, pursuant to an effective registration
statement under the Securities Act at an initial offering price of not less than
$10 per share, in which the aggregate net proceeds to the Company exceed
$10,000,000.
15. HEADINGS. Headings in this Agreement are included for reference only
and shall have no affect upon the construction or interpretation of any part of
this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement under seal,
as of the date first above written.
GENE LOGIC INC.
By: /s/ Mark D. Gessler
---------------------------------------
Mark D. Gessler, Senior Vice President
/s/ Michael J. Brennan
---------------------------------------
Michael J. Brennan
<PAGE>
Exhibit 10.11
GENE LOGIC INC.
AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
THIS AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT (this "Agreement") is
entered into as of July 15, 1997, by and among (i) GENE LOGIC INC., a Delaware
corporation (the "Company"), (ii) holders of the Company's Series A Preferred
Stock, Series A-1 Preferred Stock and Series B Preferred Stock (such holders are
listed on Exhibit A attached hereto and are referred to herein individually as a
"Previous Investor" and collectively as "Previous Investors") and (iii) the
Purchasers listed on Exhibit A of that certain Preferred Stock Purchase
Agreement of even date herewith (the "Purchase Agreement") and Exhibit B hereto
(the "Purchasers"). Each of the Previous Investors and the Purchasers are
referred to herein as an "Investor," collectively they are referred to as the
"Investors."
This Agreement supersedes, amends and restates in its entirety that
certain Registration Rights Agreement dated as of April 2, 1996 and amended
October 21, 1996, by and among the Company and the Investors defined therein
(the "Previous Registration Rights Agreement").
This Agreement supersedes, amends and restates Articles V and VI of the
certain Preferred Stock Purchase Agreement dated as of April 2, 1996 and amended
October 21, 1996, by and among the Company and the Preferred Stockholders
defined therein (the "Series B Purchase Agreement").
WHEREAS, the Company proposes to issue and sell up to an aggregate
4,444,444 shares of its Series C Preferred Stock pursuant to the Purchase
Agreement (the "Financing");
WHEREAS, as a condition to entering into the Purchase Agreement, the
Purchasers have requested that the Company extend to them registration rights
and certain other rights and covenants as set forth herein;
WHEREAS, in order to induce the Purchasers to enter into the Purchase
Agreement and to induce the Purchasers to invest funds in the Company, the
Company and the Previous Investors have agreed to enter into this Agreement in
order to (i) supersede, amend and restate the Previous Registration Rights
Agreement and (ii) supersede, amend and restate Article V and Article VI of the
Series B Purchase Agreement so that this Agreement is the sole agreement with
respect to the obligations and rights contained herein;
<PAGE>
WHEREAS, Section 13(d) of the Previous Registration Rights Agreement
provides that such agreement may be amended with the written consent of the
Company and the holders of at least a majority of the outstanding shares of
Registrable Securities (as defined in the Previous Registration Rights
Agreement);
WHEREAS, Section 8.3 of the Series B Purchase Agreement provides that
Article V of such agreement may be amended and any of its restrictions or
provisions may be waived by the consent of the Company and the holders of (i) a
majority of shares of Common Stock issued or issuable upon conversion of the
Company's Series B Preferred Stock, (ii) a majority of shares of Common Stock
issued or issuable upon conversion of the Company's Series A Preferred Stock,
and (iii) a majority of shares of Common Stock issued or issuable upon
conversion of the Company's Series A-1 Preferred Stock; and
WHEREAS, Section 8.3 of the Series B Purchase Agreement provides that
Article VI of such agreement may be amended and any of its restrictions or
provisions may be waived by the consent of the Company and of holders of not
less than a majority of shares of Common Stock issued or issuable upon
conversion of the Company's Series A Preferred Stock, Series A-1 Preferred Stock
and Series B Preferred Stock;
NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Agreement, the parties
hereby agree that the Previous Registration Rights Agreement and Articles V and
VI of the Series B Purchase Agreement are amended and restated in their entirety
to read as set forth above and as follows:
1. GENERAL
1.1 Certain Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commission" shall mean the Securities and Exchange Commission and any
successor agency of the Federal government administering the Securities Act.
"Common Stock" shall mean (i) the common stock, $0.01 par value per Stock,
of the Company; (ii) any other capital stock of the Company, however designated,
authorized on or after the date hereof, which shall neither be limited to a
fixed sum or percentage of par value in respect of the rights of the holders
thereof to participate in dividends nor entitled to a preference in the
distribution of assets upon the voluntary or involuntary liquidation,
dissolution or winding up of the Company; and (iii) any other securities into
which or for which any of the securities described in (i) or (ii) may be
2.
<PAGE>
converted or exchanged pursuant to a plan of recapitalization, reorganization,
merger, consolidation, sale of assets or other similar transaction.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and any similar or successor Federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect from time to time.
"Investment" shall mean, with respect to any Person, any loan, advance or
extension of credit (other than in connection with the sale by such Person of
products or services in the ordinary course of business) by such Person to, and
any guarantee or other contingent liability with respect to the capital stock,
indebtedness or other obligations of, and any contributions to the capital of,
any other Person, as well as any ownership, purchase or other acquisitions by
such Person of any interest in any capital stock or other securities of any such
other Person as well as any transfer or sale (other than in connection with the
sale by such Person of products or services in the ordinary course of business)
of property by such Person to any other Person other than upon full payment, in
cash, of not less than the agreed sale price or the fair value of such property,
whichever is higher.
"Lien" shall mean: (i) any interest in property (whether real, personal or
mixed and whether tangible or intangible) which secures an obligation owed to,
or a claim by, a Person other than the owner of such property, whether such
interest is based on the common law, statute or contract, including, without
limitation, any such interest arising from a lease, mortgage, charge, pledge,
security agreement, conditional sale, trust receipt or deposit in trust, or
arising from a consignment of bailment given for security purposes (other than a
trust receipt or deposit given in the ordinary course of business which does not
secure any obligation for borrowed money), (ii) any encumbrance upon such
property which does not secure such an obligation, and (iii) any exception to or
defect in the title to or ownership interest in such property, including,
without limitation, reservations, rights of entry, possibilities of reverter,
encroachments, easements, rights of way, restrictive covenants, licenses and
profits a prendre. For purposes of this Agreement, any Person shall be deemed to
be the owner of the leasehold or other interest in any property which it has
acquired or holds subject to a lease and the owner of any property which it has
acquired or holds subject to a conditional sale agreement or other similar
arrangement pursuant to which title to the property has been retained by or
vested in some other Person for security purposes.
"Permitted Liens" shall mean:
(a) for taxes, assessments or governmental charges or levies on
property of the Company if the same shall not at the time be delinquent or
thereafter can be paid without penalty, or are being contested in good faith and
by appropriate proceedings;
3.
<PAGE>
(b) imposed by law, such as carriers, warehousemen's and mechanics'
Liens and other similar Liens arising in the ordinary course of business;
(c) arising out of pledges or deposits under worker's compensation
laws, unemployment insurance, old age pensions, or other social security or
retirement benefits, or similar legislation;
(d) in the nature of zoning restriction, easements and rights or
restrictions of record on the use of real property which do not materially
detract from its value or impair its use;
(e) arising from any litigation or proceeding which is being
contested in good faith by appropriate proceedings, provided, however, that no
execution or levy has been made;
(f) securing the performance of bids, tenders, contracts (other than
for the repayment of borrowed money), statutory obligations and surety bonds;
(g) arising by operation of law in favor of the owner or sublessor
of leased premises and confined to the property rented; and
(h) any lien created in connection with an equipment financing
transaction.
"Person" shall include an individual, a corporation, an association, a
partnership, a trust or estate, a governmental and any agency or political
subdivision thereof, or any other entity.
"Preferred Stock" shall mean (i) the Series A Preferred Stock, (ii) the
Series A-1 Preferred Stock, (iii) the Series B Preferred Stock and (iv) the
Series C Preferred Stock.
The terms "register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement, or, as the context may require, under the Exchange Act
or applicable state securities laws.
"Registrable Securities" shall mean (i) the Preferred Stock, (ii) shares
of Common Stock or other securities issued or issuable pursuant to the
conversion of the Preferred Stock, (iii) shares of Common Stock or other
securities issued or issuable pursuant to the exercise of the Warrants and (iv)
any shares of Common Stock or other securities issued in respect of securities
issued pursuant to the conversion of the Preferred Stock or the exercise of the
Warrants upon any stock split, stock dividend,
4.
<PAGE>
recapitalization, reorganization, merger, consolidation, sale of assets or
similar event, excluding in any event securities which have been (a) registered
under the Securities Act pursuant to an effective registration statement filed
thereunder and disposed of in accordance with the registration statement
covering them or (b) publicly sold pursuant to Rule 144 under the Securities
Act. Wherever reference is made in this Agreement to a request or consent of
holders of a certain percentage of Registrable shares, the determination of such
percentage shall be calculated on the basis of shares of Common Stock issued or
issuable upon conversion of the Preferred Stock and exercise of the Warrants
even if such conversion or exercise has not been effected.
"Registration Expenses" shall mean the expenses so described in Section
2.7.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
any similar or successor Federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"Selling Expenses" shall mean the expenses so described in Section 2.7.
"Subsidiary" or "Subsidiaries" shall mean any corporation, partnership,
trust or other entity of which the Company and/or any of its other Subsidiaries
directly or indirectly owns at the time a majority of the outstanding shares of
any class of equity security of such corporation, partnership, trust or other
entity.
"Warrants" shall mean the (i) warrants for the purchase (subject to
adjustment as provided therein) of up to an aggregate of 50,000 shares of Common
Stock, issued to the holders of the Series A-1 Preferred Stock, and (ii)
warrants for the purchase (subject to adjustment as provided therein) of up to
an aggregate of 52,272 shares of Series B Preferred Stock, issued in connection
with equipment financing transactions.
2. RESTRICTIONS ON TRANSFER; REGISTRATION
2.1 Restrictive Legend. Each certificate representing Registrable
Securities shall, except as otherwise provided in this Section 2.1 or in Section
2.2, be stamped or otherwise imprinted with a legend substantially in the
following form (in addition to any legend required under applicable state
securities laws):
"The securities represented by this certificate have not been
registered under the Securities Act of 1933 or any other securities
laws. These securities have been acquired for investment and not
with a view to distribution or resale. Such securities may not be
offered for sale, sold, delivered after sale, transferred, pledged
or hypothecated in the absence of an effective registration
statement covering such securities under the Securities Act of 1933
and any other applicable securities laws, unless the
5.
<PAGE>
holder shall have obtained an opinion of counsel reasonably
satisfactory to the corporation that such registration is not
required."
Upon request of a holder of such a certificate, the Company shall remove the
foregoing legend from the certificate or issue to such holder a new certificate
therefor free of any transfer legend, if there is an effective registration
statement covering the securities represented by such certificate or, with such
request, the Company shall have received either the opinion referred to in
Section 2.2(a) or the "no-action" letter referred to in Section 2.2(b).
2.2 Notice of Proposed Transfer. Prior to any proposed sale, pledge,
hypothecation or other transfer of any Registrable Securities (other than under
the circumstances described in Section 2.3, 2.4 or 2.5 and other than pursuant
to that certain Stock Repurchase Agreement, dated April 2, 1996, by and between
the Company and the State of Maryland, Department of Business and Economic
Development), the holder thereof shall give written notice to the Company of its
intention to effect such sale, pledge, hypothecation or other transfer. Each
such notice shall describe the manner of the proposed sale, pledge,
hypothecation or other transfer and, if requested by the Company (it being
understood that if such transfer is intended to be in accordance with the
provisions of Rule 144, the Company shall not require an opinion of counsel),
shall be accompanied by either (a) an opinion of counsel reasonably satisfactory
to the Company to the effect that the proposed sale, pledge, hypothecation or
other transfer may be effected without registration under the Securities Act or
(b) a "no action" letter from the Commission to the effect that the distribution
of such securities without registration will not result in a recommendation by
the staff of the Commission that action be taken with respect thereto, whereupon
the holder of such stock shall be entitled to transfer such stock in accordance
with the terms of its notice; provided, however, that no such opinion of counsel
shall be required for a distribution to one or more partners of the transferor
(in the case of a transferor that is a partnership) or to a stockholder (in the
case of a transferor that is a corporation) in each case in respect of the
beneficial interest of such partner or stockholder. Each certificate for
Registrable Securities transferred as above provided shall bear the appropriate
restrictive legend set forth in Section 2.1, except that such certificate shall
not bear such legend if (i) such transfer is in accordance with the provisions
of Rule 144 (or any other rule permitting public sale without registration under
the Securities Act) or (ii) the opinion of counsel or "no-action" letter
referred to above is to the further effect that the transferee and any
subsequent transferee (other than an affiliate of the Company) would be entitled
to transfer such securities in a public sale without registration under the
Securities Act or that such legend is not required to establish compliance with
any provisions of the Securities Act. Notwithstanding any other provision
hereof, the restrictions provided for in this Section 2.2 shall not apply to
securities which are not required to bear the legend prescribed by Section 2.1
in accordance with the provisions of that Section. If the Company does not
accept an
6.
<PAGE>
opinion of counsel required hereby signed by the original holder's general
counsel (it being agreed that an opinion of Brobeck, Phleger & Harrison shall be
considered satisfactory), the Company will pay the reasonable fees and
disbursements of other counsel in connection with all opinions rendered by them
pursuant to this Section 2.2.
2.3 Required Registration.
(a) At any time after the earlier of (i) March 31, 1998, or (ii)
three months after any registration statement covering the initial public
offering of securities of the Company under the Securities Act shall have become
effective (an "Initial Public Offering"), the holders of Registrable Securities
constituting at least 25% of the total shares of Registrable Securities then
outstanding may request the Company to register for sale under the Securities
Act all or any portion of the shares of Registrable Securities held by such
requesting holder or holders for sale in the manner specified in such notice.
Notwithstanding any other provision of this Section 2.3, the Company shall not
be obligated to register any Preferred Stock or Warrants for sale pursuant to
any such registration.
(b) Following receipt of any notice under this Section 2.3, the
Company shall immediately notify all holders of Registrable Securities from whom
notice has not been received and such holders shall then be entitled within
thirty (30) days after receipt of such notice from the Company to request the
Company to include in the requested registration all or any portion of their
shares of Registrable Securities. The Company shall use its best efforts to
register under the Securities Act, for public sale in accordance with the method
of disposition specified in the notice from requesting holders described in
paragraph (a) above, the number of shares of Registrable Securities specified in
such notice (and in all notices received by the Company from other holders
within thirty (30) days after the receipt of such notice by such holders). The
Company shall be obligated to register the Registrable Securities pursuant to
this Section 2.3 on two (2) occasions only, provided, however, that such
obligation shall be deemed satisfied only when a registration statement covering
all shares of Registrable Securities specified in notices received as aforesaid
(except to the extent reduced (but not by more than 10%) by the managing
underwriter, if any, pursuant to subsection 2.3(d)), for sale in accordance with
the method of disposition specified by the requesting holders, shall have become
effective and, if such method of disposition is a firm commitment underwritten
public offering, all such shares shall have been sold pursuant thereto.
Notwithstanding anything to the contrary contained herein, no request may be
made under this Section 2.3 after the effective date of a registration statement
filed by the Company covering a firm commitment underwritten public offering and
prior to the later to occur of the completion of the period of distribution for
such offering or 120 days after the effective date of such registration
statement.
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(c) If the holders requesting such registration intend to distribute
the Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
this Section 2.3 and the Company shall include such information in the written
notice referred to in paragraph (b) above. The right of any holder to
registration pursuant to this Section 2.3 shall be conditioned upon such
holder's agreeing to participate in such underwriting and to permit inclusion of
such holder's Registrable Securities in the underwriting. If such method of
disposition is an underwritten public offering, the holders of at least a
majority in interest of the shares of Registrable Securities to be sold in such
offering may designate the managing underwriter of such offering, subject to the
approval of the Company, which approval shall not be unreasonably withheld or
delayed. A holder may elect to include in such underwriting all or a part of the
Registrable Securities it holds.
(d) A registration statement filed pursuant to this Section 2.3 may,
subject to the following provisions, include (i) shares of Common Stock for sale
by the Company for its own account, (ii) shares of Common Stock held by officers
or directors of the Company and (iii) shares of Common Stock held by Persons who
by virtue of agreements with the Company in compliance with the provisions of
Section 5.6 hereof are entitled to include such shares in such registration (the
"Other Stockholders"), in each case for sale in accordance with the method of
disposition specified by the requesting holders. If such registration shall be
underwritten, the Company, such officers and directors and Other Stockholders
proposing to distribute their shares through such underwriting shall enter into
an underwriting agreement in customary form with the representative of the
underwriter or underwriters selected for such underwriting on terms no less
favorable to such officers, directors or Other Stockholders than the terms
afforded the holders of Registrable Securities. If and to the extent that the
managing underwriter determines that marketing factors require a limitation on
the number of shares to be included in such registration, then the shares of
Common Stock held by officers or directors (other than Registrable Securities)
of the Company or by Other Stockholders (other than Registrable Securities) and
shares of Common Stock to be sold by the Company for its own account shall be
excluded from such registration to the extent so required by such managing
underwriter, and unless the holders of such shares and the Company have
otherwise agreed in writing, such exclusion shall be applied first to the shares
held by the directors and officers and the Other Stockholders to the extent
required by the managing underwriter, then to the shares of Common Stock of the
Company to be included for its own account to the extent required by the
managing underwriter. If the managing underwriter determines that marketing
factors require a limitation of the number of Registrable Securities to be
registered under this Section 2.3, then Registrable Securities shall be excluded
in such manner that the securities to be sold shall be allocated among the
selling holders pro rata based on their ownership of Registrable Securities. In
any event all securities to be sold other than Registrable Securities will be
excluded prior
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to any exclusion of Registrable Securities. No Registrable Securities or any
other security excluded from the underwriting by reason of the underwriter's
marketing limitation shall be included in such registration. If any holder of
Registrable Securities, officer, director or Other Stockholder who has requested
inclusion in such registration as provided above, disapproves of the terms of
the underwriting, such holder of securities may elect to withdraw therefrom by
written notice to the Company and the managing underwriter. The securities so
withdrawn shall also be withdrawn from registration. Except for registration
statements on Form S-4, S-8 or any comparable form or successor thereto, the
Company will not file with the Commission any other registration statement with
respect to its Common Stock, whether for its own account or that of other
stockholders, from the date of receipt of a notice from requesting holders
pursuant to this Section 2.3 until the completion of the period of distribution
of the registration contemplated thereby or 120 days after the effective date of
such registration, whichever is later.
2.4 Incidental Registration. If the Company at any time (other than
pursuant to Section 2.3 or Section 2.5) proposes to register any of its
securities under the Securities Act for sale to the public, whether for its own
account or for the account of other security holders or both (except with
respect to registration statements on Forms S-4, S-8 or any successor to such
forms or another form not available for registering the Registrable Securities
for sale to the public), each such time it will promptly give written notice to
all holders of the Registrable Securities of its intention so to do. Upon the
written request of any such holder, received by the Company within thirty (30)
days after the giving of any such notice by the Company, to register any or all
of its Registrable Securities, the Company will use its best efforts to cause
the Registrable Securities as to which registration shall have been so requested
to be included in the securities to be covered by the registration statement
proposed to be filed by the Company, all to the extent requisite to permit the
sale or other disposition by the holder (in accordance with its written request)
of such Registrable Securities so registered. Notwithstanding any other
provision of this Section 2.4, the Company shall not be obligated to register
any Preferred Stock or Warrants for sale pursuant to any such registration. If
the registration of which the Company gives notice is for a registered public
offering involving an underwriting, the Company shall so advise the holders of
Registrable Securities as a part of the written notice given pursuant to this
Section 2.4. In such event the right of any holder of Registrable Securities to
registration pursuant to this Section 2.4 shall be conditioned upon such
holder's participation in such underwriting to the extent provided herein. All
holders of Registrable Securities proposing to distribute their securities
through such underwriting shall (together with the Company and the Other
Stockholders distributing their securities through such underwriting) enter into
an underwriting agreement in customary form with the underwriter or underwriters
selected for underwriting by the Company. Notwithstanding any other provision of
this Section 2.4, if the underwriter determines that marketing factors require a
limitation on the number of shares to be
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underwritten, and (a) if such registration is the first registered offering of
the Company's securities to the public, the underwriter may (subject to the
allocation priority set forth below) exclude from such registration and
underwriting some or all of the Registrable Securities which would otherwise be
underwritten pursuant hereto, and (b) if such registration is other than the
first registered offering of the sale of the Company's securities to the public,
the underwriter may (subject to the allocation priority set forth below) limit
the number of Registrable Securities to be included in the registration and
underwriting to not less than thirty percent (30%) of the securities included
therein (based on aggregate market values). The Company shall so advise all
holders of securities requesting registration of any limitations on the number
of shares to be underwritten, and the number of shares of securities that are
entitled to be included in the registration and underwriting shall (except to
the extent that such allocation would reduce the number of Registrable
Securities to less than 30% of the shares included in such registration) be
allocated first to Other Stockholders exercising a demand or required
registration right and, if a limitation on the number of shares is required, the
number of shares that may be included in the registration and underwriting shall
be allocated among all holders of securities requesting registration (including
the holders of Registrable Securities) in proportion, as nearly as practicable,
to the respective amounts of securities owned by them. Notwithstanding the
foregoing provisions, the Company may withdraw any registration statement
referred to in this Section 2.4 without thereby incurring any liability to the
holders of Registrable Securities. If any holder of Registrable Securities
disapproves of the terms of any such underwriting, it may elect to withdraw
therefrom by written notice to the Company and the underwriter. Any Registrable
Securities or other securities excluded or withdrawn from such underwriting
shall be withdrawn from such registration.
2.5 Registration on Form S-3.
(a) Subject to a limit of one (1) registration hereunder in any six
(6) month period, if at any time (i) any holder or holders of the Registrable
Securities request that the Company file a registration statement on Form S-3 or
any comparable or successor form thereto for a public offering of all or any
portion of the shares of Registrable Securities held by such requesting holder
or holders, the reasonably anticipated aggregate price to the public of which
would equal or exceed $500,000, and (ii) the Company is a registrant entitled to
use Form S-3 or any comparable or successor form thereto to register such
shares, then the Company shall use its best efforts to register under the
Securities Act on Form S-3 or any comparable or successor form thereto, for
public sale in accordance with the method of disposition specified in such
notice, the number of shares of Registrable Securities specified in such notice.
Whenever the Company is required by this Section 2.5 to use its best efforts to
effect the registration of Registrable Securities, each of the procedures and
requirements of Section 2.3, including but not limited to the requirement that
the Company notify all holders of Registrable
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Securities from whom notice has not been received and provide them with the
opportunity to participate in the offering (provided, however that holders shall
have no more than fifteen (15) days to reply to the Company's notice in order to
participate in the offering), shall apply to such registration, provided,
however, that except as provided above, there shall be no limitation on the
number of registrations on Form S-3 which may be requested and obtained under
this Section 2.5. Notwithstanding any other provision of this Section 2.5, the
Company shall not be obligated to register any Preferred Stock or Warrants for
sale pursuant to any such registration.
(b) The Company shall use its best efforts to qualify for
registration on Form S-3 or any comparable or successor form or forms; and to
that end the Company shall register (whether or not required by law to do so)
the Common Stock under the Exchange Act in accordance with the provisions of
that Act following the effective date of the first registration of any
securities of the Company on Form S-1 or any comparable or successor form.
2.6 Registration Procedures. If and whenever the Company is required by
the provisions of Section 2.3, 2.4 or 2.5 to use its best efforts to effect the
registration of any Registrable Securities under the Securities Act, the Company
will, as expeditiously as possible:
(a) prepare and file with the Commission a registration statement
(which, in the case of an underwritten public offering pursuant to Section 2.3,
shall be on Form S-1 or other form of general applicability satisfactory to the
managing underwriter selected as therein provided) with respect to such
securities including executing an undertaking to file post-effective amendments
and use its best efforts to cause such registration statement to become and
remain effective for the period of the distribution contemplated thereby;
(b) prepare and file with the Commission such 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
the period specified herein and comply with the provisions of the Securities Act
with respect to the disposition of all Registrable Securities covered by such
registration statement in accordance with the sellers' intended method of
disposition set forth in such registration statement for such period;
(c) furnish to each seller of Registrable Securities and to each
underwriter such number of copies of the registration statement and each such
amendment and supplement thereto (in each case including all exhibits) and the
prospectus included therein (including each preliminary prospectus) as such
Persons
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reasonably may request in order to facilitate the public sale or other
disposition of the Registrable Securities covered by such registration
statement;
(d) use its best efforts to register or qualify the Registrable
Securities covered by such registration statement under the securities or "blue
sky" laws of such jurisdictions as the sellers of Registrable Securities or, in
the case of an underwritten public offering, the managing underwriter reasonably
shall request, provided, however, that the Company shall not for any such
purpose be required to qualify generally to transact business as a foreign
corporation in any jurisdiction where it is not so qualified or to consent to
general service of process in any such jurisdiction, unless the Company is
already subject to service in such jurisdiction;
(e) use its best efforts to list the Registrable Securities covered
by such registration statement with any securities exchange on which the Common
Stock of the Company is then listed;
(f) comply with all applicable rules and regulations under the
Securities Act and Exchange Act;
(g) immediately notify each seller of Registrable Securities and
each underwriter under such registration statement, at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event of which the Company has knowledge as a
result of which the prospectus contained in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing, and promptly
prepare and furnish to such seller a reasonable number of copies of a prospectus
supplemented or amended 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 not misleading in
light of the circumstances then existing;
(h) if the offering is underwritten and at the request of any seller
of Registrable Securities, use its best efforts to furnish on the date that
Registrable Securities are delivered to the underwriters for sale pursuant to
such registration: (i) an opinion dated such date of counsel representing the
Company for the purposes of such registration, addressed to the underwriters to
such effects as reasonably may be requested by counsel for the underwriters, and
executed counterparts of such opinion addressed to the sellers of Registrable
Securities to the same effects as requested by counsel for the underwriters, and
(ii) a letter dated such date from the independent public accountants retained
by the Company, addressed to the underwriters stating that they are independent
public accountants within the meaning of the Securities Act and that, in the
opinion of
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such accountants, the financial statements of the Company included in the
registration statement or the prospectus, or any amendment or supplement
thereof, comply as to form in all material respects with the applicable
accounting requirements of the Securities Act, and such letter shall
additionally cover such other financial matters (including information as to the
period ending no more than five (5) business days prior to the date of such
letter) with respect to such registration as such underwriters reasonably may
request;
(i) make available for inspection by each seller of Registrable
Securities, any underwriter participating in any distribution pursuant to such
registration statement, and any attorney, accountant or other agent retained by
such seller or underwriter, reasonable access to all financial and other
records, pertinent corporate documents and properties of the Company, as such
parties may reasonably request, and cause the Company's officers, directors and
employees to supply all information reasonably requested by any such seller,
underwriter, attorney, accountant or agent in connection with such registration
statement;
(j) cooperate with the selling holders of Registrable Securities and
the managing underwriter, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold, such
certificates to be in such denominations and registered in such names as such
holders or the managing underwriter may request at least two business days prior
to any sale of Registrable Securities; and
(k) permit any holder of Registrable Securities which holder, in the
sole and exclusive judgment, exercised in good faith, of such holder, might be
deemed to be a controlling person of the Company, to participate in good faith
in the preparation of such registration or comparable statement and to require
the insertion therein of material, furnished to the Company in writing, which in
the reasonable judgment of such holder and its counsel should be included.
For purposes of this Agreement, the period of distribution of
Registrable Securities in a firm commitment underwritten public offering shall
be deemed to extend until each underwriter has completed the distribution of all
securities purchased by it, and the period of distribution of Registrable
Securities in any other registration shall be deemed to extend until the earlier
of the sale of all Registrable Securities covered thereby or 180 days after the
effective date thereof, provided, however, in the case of any registration of
Registrable Securities on Form S-3 or a comparable or successor form which are
intended to be offered on a continuous or delayed basis, such 180 day-period
shall be extended, if necessary, to keep the registration statement effective
until all such Registrable Securities are sold, provided that Rule 415, or any
successor rule under the Securities Act, permits an offering on a continuous or
delayed basis, and provided further that applicable rules under the Securities
Act governing the obligation to file a post-
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effective amendment, permit, in lieu of filing a post-effective amendment which
(y) includes any prospectus required by Section 10(a)(3) of the Securities Act
or (z) reflects facts or events representing a material or fundamental change in
the information set forth in the registration statement, the incorporation by
reference of information required to be included in (y) and (z) above contained
in periodic reports filed pursuant to Section 13 or 15(d) of the Exchange Act in
the registration statement.
In connection with each registration hereunder, the sellers of
Registrable Securities will furnish to the Company in writing such information
requested by the Company with respect to themselves and the proposed
distribution by them as shall be necessary in order to assure compliance with
Federal and applicable state securities laws; and such sellers shall provide the
Company with appropriate representations with respect to the accuracy of such
information.
2.7 Expenses.
(a) All expenses incurred by the Company in complying with Sections
2.3, 2.4 and 2.5, including, without limitation, all registration and filing
fees, printing expenses, fees and disbursements of counsel and independent
public accountants for the Company, fees and expenses (including counsel fees)
incurred in connection with complying with state securities or "blue sky" laws,
fees of the National Association of Securities Dealers, Inc., transfer taxes,
fees of transfer agents and registrars, costs of any insurance which might be
obtained by the Company with respect to the offering by the Company, and fees
and disbursements of one counsel selected by a majority in interest of the
sellers of Registrable Securities, but excluding any Selling Expenses, are
called "Registration Expenses". All underwriting discounts and selling
commissions applicable to the sale of Registrable Securities are called "Selling
Expenses".
(b) The Company will pay all Registration Expenses in connection
with each registration statement under Section 2.3, 2.4 or 2.5; provided, that,
in the event of a registration pursuant to Section 2.3 hereof which is withdrawn
at the request of the Investors other than as a result of the Company's failure
to perform its obligations hereunder and other than as a result of a cutback by
the underwriter of such registration in the amount of Registrable Securities
which may be included in such registration by more than 10%, the Investors shall
pay the Registration Expenses with respect to such registration, unless the
holders of a majority of the Registrable Securities agree to forfeit their right
to one demand registration pursuant to Section 2.3; provided further, however,
that if at the time of such withdrawal, the holders of the Registrable
Securities have learned of a material adverse change in the condition, business,
or prospects of the Company from that known to the holders of the Registrable
Securities at the time of their request and have withdrawn the request with
reasonable promptness following disclosure by the Company of such material
adverse change, then the holders of the Registrable
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Securities shall not be required to pay any of such expenses and shall retain
their rights pursuant to Section 2.3. All Selling Expenses in connection with
each registration statement under Section 2.3, 2,4 or 2.5 shall be borne by the
participating sellers in proportion to the number of shares registered by each,
or by such participating sellers other than the Company (except to the extent
the Company shall be a seller) as they may agree.
2.8 Indemnification and Contribution.
(a) In the event of a registration of any of the Registrable
Securities under the Securities Act pursuant to Section 2.3, 2.4 or 2.5, the
Company will indemnify and hold harmless each holder of Registrable Securities,
its officers, directors and partners, each underwriter of such Registrable
Securities thereunder and each other Person, if any, who controls such holder or
underwriter within the meaning of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, to which such holder, officer,
director, partner, underwriter or controlling Person may become subject under
the Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or' actions in respect thereof) arise out of or are based upon (i)
any untrue statement or alleged untrue statement of any material fact contained
in any prospectus, offering circular or other document incident to such
registration (including any related notification, registration statement under
which such Registrable Securities were registered under the Securities Act
pursuant to Section 2.3, 2.4 or 2.5, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereof), (ii) any
blue sky application or other document executed by the Company specifically for
that purpose or based upon written information furnished by the Company filed in
any state or other jurisdiction in order to qualify any or all of the
Registrable Securities under the securities laws thereof (any such application,
document or information herein called a "Blue Sky Application"), (iii) any
omission or alleged omission to state in any such registration statement,
prospectus, amendment or supplement or in any Blue Sky Applications executed or
filed by the Company, a material fact required to be stated therein or necessary
to make the statements therein not misleading, (iv) any violation by the Company
or its agents of the Securities Act or any rule or regulation promulgated under
the Securities Act applicable to the Company or its agents and relating to
action or inaction required of the Company in connection with such registration,
or (v) any failure to register or qualify the Registrable Securities in any
state where the Company or its agents has affirmatively undertaken or agreed in
writing that the Company (the undertaking of any underwriter chosen by the
Company being attributed to the Company) will undertake such registration or
qualification (provided that in such instance the Company shall not be so liable
if it has used its best efforts to so register or qualify the Registrable
Securities) and will reimburse each such seller, and such officer, director and
partner, each such underwriter and each such controlling Person for any legal or
other expenses reasonably incurred by them in connection with
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investigating or defending any such loss, claim, damage, liability or action,
promptly after being so incurred, provided, however, that the Company will not
be liable in any such case if and to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission so made in conformity
with written information furnished by any such holder, any such underwriter or
any such controlling Person in writing specifically for use in such registration
statement or prospectus.
(b) In the event of a registration of any of the Registrable
Securities under the Securities Act pursuant to Section 2.3, 2.4 or 2.5, each
seller of such Registrable Securities thereunder, severally and not jointly,
will indemnify and hold harmless the Company, each Person, if any, who controls
the Company within the meaning of the Securities Act, each officer of the
Company who signs the registration statement, each director of the Company, each
other seller of Registrable Securities, each underwriter and each Person who
controls any underwriter within the meaning of the Securities Act, against all
losses, claims, damages or liabilities, joint or several, to which the Company
or such officer, director, other seller, underwriter or controlling Person may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in any prospectus offering circular or other document incident to
such registration (including any related notification, registration statement
under which such Registrable Securities were registered under the Securities Act
pursuant to Section 2.3, 2.4 or 2.5, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereof), or any
Blue Sky Application or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse the
Company and each such officer, director, other seller, underwriter and
controlling Person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action, promptly after being so incurred, provided, however, that
such seller will be liable hereunder in any such case if and only to the extent
that any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with information pertaining to such
seller, as such, furnished in writing to the Company by such seller specifically
for use in such registration statement or prospectus; and provided, further,
however, that the liability of each seller hereunder shall be limited to the
proportion of any such loss, claim, damage, liability or expense which is equal
to the proportion that the public offering price of the securities sold by such
seller under such registration statement bears to the total public offering
price of all securities sold thereunder, but not in any event to exceed the
proceeds received by such seller from the sale of Registrable Securities covered
by such
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registration statement. Notwithstanding the foregoing, it is expressly
acknowledged and agreed that in accordance with the terms of the Opinion of the
Maryland Attorney General (No. 86-064) dated December 1, 1986, absent insurance
or already available appropriations to fund indemnification obligations of the
State of Maryland, Department of Business and Economic Development ("DBED") that
may arise under this Section, any and all such obligations are conditioned upon
the availability of appropriations for use by DBED at the time such
indemnification obligations arise. Not in limitation of the foregoing, it is
understood and agreed that the indemnification obligations of any seller
hereunder pursuant to any underwriting agreement entered into in connection
herewith shall be limited to the obligations contained in this paragraph (b).
(c) Promptly after receipt by an indemnified party hereunder of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve it from any liability which it may have
to such indemnified party other than under this Section 2.8 and shall only
relieve it from any liability which it may have to such indemnified party under
this Section 2.8 if and to the extent the indemnifying party is prejudiced by
such omission. In case any such action shall be brought against any indemnified
party and it shall notify the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 2.8 for any legal expenses subsequently incurred by
such indemnified party in connection with the defense thereof other than
reasonable costs of investigation and of liaison with counsel so selected,
provided, however, that, if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be reasonable defenses available to it
which are different from or additional to those available to the indemnifying
party or that the interests of the indemnified party reasonably may be deemed to
conflict with the interests of the indemnifying party, the indemnified party
shall have the right to select a separate counsel and to assume such legal
defenses and otherwise to participate in the defense of such action, with the
expenses and fees of such separate counsel and other expenses related to such
participation to be reimbursed by the indemnifying party as incurred. No
indemnifying party, in the defense of any such claim or action, shall, except
with the consent of each indemnified party, consent to entry of any judgment or
enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect to such claim or action. Each indemnified
party shall furnish such information regarding
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itself or the claim in question as an indemnifying party may reasonably request
in writing and as shall be reasonably required in connection with defense of
such claim and litigation resulting therefrom.
(d) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) any holder of
Registrable Securities exercising rights under this Agreement, or any
controlling Person of any such holder, makes a claim for indemnification
pursuant to this Section 2.8 but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section 2.8 provides for indemnification in such case, or (ii) contribution
under the Securities Act may be required on the part of any such selling holder
or any such controlling Person in circumstances for which indemnification is
provided under this Section 2.8; then, and in each such case, the Company and
such holder will contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others) in
such proportion so that such holder is responsible for the portion represented
by the percentage that the public offering price of its Registrable Securities
offered by the registration statement bears to the public offering price of all
securities offered by such registration statement, and the Company is
responsible for the remaining portion; provided, however, that, in any such
case, (A) no such holder of Registrable Securities will be required to
contribute any amount in excess of the proceeds received from the sale of all
such Registrable Securities offered by it pursuant to such registration
statement; and (B) no Person or entity guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) will be entitled to
contribution from any Person or entity who was not guilty of such fraudulent
misrepresentation.
(e) The indemnities and obligations provided in this Section 2.8
shall survive the transfer of any Registrable Securities by such holder.
2.9 Changes in Common Stock or Preferred Stock. If, and as often as, there
is any change in the Common Stock and/or Preferred Stock by way of a stock
split, stock dividend, combination or reclassification, or through a merger,
consolidation, reorganization or recapitalization, or by any other means,
appropriate adjustment shall be made in the provisions hereof so that the rights
and privileges granted hereby shall continue with respect to the Common Stock
and/or Preferred Stock as so changed.
2.10 Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Registrable Securities to the public without registration, except as
provided in paragraph (c) below, at all times after ninety (90) days after any
registration statement
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covering a public offering of securities of the Company under the Securities Act
shall have become effective, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act (or any successor
rule);
(b) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(c) furnish to each holder of Registrable Securities forthwith upon
request a written statement by the Company as to its compliance with the
reporting requirements of such Rule 144 (or any successor rule) and, at any time
after it has become subject to such reporting requirements, of the Securities
Act and the Exchange Act, a copy of the most recent annual or quarterly report
of the Company, and such other reports and documents so filed by the Company as
such holder may reasonably request in availing itself of any rule or regulation
of the Commission allowing such holder to sell any Registrable Securities
without registration.
2.11 "Market Stand-Off" Agreement. Each of the Investors agrees, severally
and not jointly, if requested by the Company and an underwriter of Common Stock
(or other securities) of the Company, not to sell or otherwise transfer or
dispose of any Common Stock (or other securities) of the Company held by such
Investor during a period not to exceed one hundred and eighty (180) days
following the effective date of a registration statement of the Company filed
under the Securities Act, provided that:
(a) such agreement only applies to the first such registration
statement of the Company including securities to be sold on its behalf to the
public in an underwritten offering; and
(b) all holders of Registrable Securities, Other Stockholders,
officers and directors of the Company and all Persons including shares in such
offering enter into similar agreements.
The Company may impose stop-transfer instructions with respect to
the shares (or securities) subject to the foregoing restriction until the end of
said period.
2.12 Assignment of Registration Rights. The rights to cause the Company to
register Registrable Securities pursuant to this Section 2 may be assigned (but
only with all related obligations) by a holder of Registrable Securities to a
transferee or assignee of such securities who, after such assignment or
transfer, holds at least 100,000 shares of Registrable Securities (subject to
appropriate adjustment for stock splits, stock dividends, combinations and other
recapitalizations), provided the Company is, within a reasonable
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time after such transfer, furnished with written notice of the name and address
of such transferee or assignee and the securities with respect to which such
registration rights are being assigned; and provided, further, that such
assignment shall be effective only if (i) immediately following such transfer
the further disposition of such securities by the transferee or assignee is
restricted under the Act and (ii) the transferee or assignee shall acknowledge
in writing that the transferred or assigned Registrable Securities shall remain
subject to this Agreement. For the purposes of determining the number of shares
of Registrable Securities held by a transferee or assignee, the holdings of
transferees and assignees of a partnership who are partners or retired partners
of such partnership (including spouses and ancestors, lineal descendants and
siblings of such partners or spouses who acquire Registrable Securities by gift,
will or intestate succession) shall be aggregated together and with the
partnership; provided that all assignees and transferees who would not qualify
individually for assignment of registration rights shall have a single
attorney-in-fact for the purpose of exercising any rights, receiving notices or
taking any action under this Section 2.
3. AFFIRMATIVE COVENANTS OF THE COMPANY.
The Company covenants and agrees that so long as any Purchaser owns any
Registrable Securities, it will perform and observe the following covenants and
provisions, and will cause each Subsidiary, if and when such Subsidiary exists,
to perform and observe the following covenants and provisions as applicable to
such Subsidiary. The following provisions supersede, amend and restate in their
entirety the covenants of the Company set forth in Article V of the Series B
Purchase Agreement. The Previous Investors hereby consent to the amendment and
restatement of such covenants and agree that the following provisions shall
supersede, amend and restate in their entirety the provisions of Article V of
the Series B Purchase Agreement.
3.1 Financial Statements; Other Reports. The Company and each Subsidiary
will maintain proper books of account and records in accordance with generally
accepted accounting principles applied on a consistent basis, and will deliver
to each Purchaser and all Investors owning at least one hundred thousand
(100,000) shares of the Company's capital stock on a fully diluted basis
(treating all Preferred Stock on an as converted basis, but excluding any
unexercised options, warrants or purchase rights) (each, a "Rights Holder"):
(a) as soon as available and in any event within thirty (30) days
after the end of each month of each fiscal year of the Company, a consolidated
balance sheet of the Company and its Subsidiaries as of the end of such month,
statements of income, stockholders' equity and the related statements of cash
flows of the Company for the period commencing at the end of the previous fiscal
year and ending with the end of such month, setting forth in each case in
comparative form the corresponding figures for the
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corresponding period of the preceding fiscal year and the budget for such
current year, all in reasonable detail and prepared in accordance with generally
accepted accounting principles consistently applied, and duly certified (subject
to year-end audit adjustments) by the Chief Financial Officer of the Company;
(b) as soon as available and in any event within forty-five (45)
days after the end of each of the first three quarters of each fiscal year of
the Company, a consolidated balance sheet of the Company and its Subsidiaries as
of the end of such quarter and the related statements of income and
stockholders' equity and of cash flows of the Company for the period commencing
at the end of the previous fiscal year and ending with the end of such quarter,
setting forth in each case in comparative form the corresponding figures for the
corresponding period of the preceding fiscal year and the budget for such
current year, all in reasonable detail and prepared in accordance with generally
accepted accounting principles consistently applied, and duly certified (subject
to year-end audit adjustments) by the Chief Financial Officer of the Company;
(c) as soon as available and in any event within thirty (30) days
after the end of each quarter of each fiscal year of the Company, a certificate
executed by the President, Vice President or Chief Financial Officer of the
Company stating that the Company is, and has been during such quarterly
accounting period, in compliance with the terms and conditions set forth in this
Agreement;
(d) as soon as available and in any event within one hundred twenty
(120) days after the end of each fiscal year of the Company, a copy of the
annual audit report for such year for the Company, including therein a
consolidated balance sheet of the Company and its Subsidiaries as of the end of
such fiscal year and statements of income and stockholders' equity and of cash
flows of the Company for such fiscal year, setting forth in each case in
comparative form the corresponding figures for the preceding fiscal year, all
duly certified by independent public accountants of recognized standing
acceptable to the Rights Holders;
(e) promptly upon receipt thereof, any written report submitted to
the Company by independent public accountants in connection with an annual or
interim audit of the books of the Company and its Subsidiaries made by such
accountants;
(f) promptly after sending, making available, or filing the same,
such reports and financial statements as the Company shall send or make
available to the stockholders of the Company; and
(g) promptly after the occurrence thereof after it becomes aware of
each occurrence, notice of any event which has had a material adverse effect on
the business,
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assets, properties, management, operations or financial condition of the Company
or its Subsidiaries.
Neither the foregoing provisions of this Section 3.1 nor any other
provision of this Agreement shall be in limitation of any rights which an
Investor may have with respect to the books and records of the Company and its
Subsidiaries, or to inspect their properties or discuss their affairs, finances
and accounts, under the laws of the jurisdictions in which they are
incorporated.
3.2 Inspection and Other Information. Each Rights Holder and such agents,
advisors and counsel as such Rights Holder may designate may, at its expense,
visit and inspect any of the properties of the Company and each Subsidiary,
examine the books of account of the Company and each Subsidiary, take extracts
therefrom and discuss the affairs, finances and accounts of the Company and each
Subsidiary with its officers and employees and public accountants (and by this
provision the Company and each Subsidiary, hereby authorizes said accountants to
discuss with such Rights Holder and such Persons its finances and accounts), at
reasonable times with reasonable prior notice during normal business hours and
provided that any person conducting such inspection sign the Company's standard
form of confidentiality agreement. All such visits and inspections shall be
conducted in a manner which will not unreasonably interfere with the normal
business operations of the Company and each Subsidiary. The Company and each
Subsidiary will furnish to each such Rights Holder such other information as it
from time to time may reasonably request.
3.3 Independent Accountants. The Company will retain independent public
accountants of recognized national standing approved by the Company's Board of
Directors (including a majority of the Preferred Stock Directors) who shall
certify the Company's consolidated financial statements at the end of each
fiscal year. In the event the services of the independent public accountants, so
selected, or any firm of independent public accountants hereafter employed by
the Company are terminated, the Company will promptly thereafter notify the
Rights Holders and will request the firm of independent public accountants whose
services are terminated to deliver to the Rights Holders a letter of such firm
setting forth the reasons for the termination of their services. In the event of
such termination, the Company will promptly thereafter engage another such firm
of independent public accountants. In its notice to the Rights Holders, the
Company shall state whether the change of accountants was recommended or
approved by the Board of Directors or any committee thereof.
3.4 Maintenance of Insurance. The Company and each Subsidiary will
maintain insurance with financially sound and reputable insurance companies or
associations in such amounts and covering such risks as is usually carried by
companies engaged in similar businesses and owning similar properties in the
same general areas in
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which the Company operates, including, without limitation, directors' and
officers' liability insurance.
3.5 Maintenance of Key-Person Life Insurance. The Company will maintain,
with a financially sound and reputable insurance company or association, life
insurance policies on the life of each of the President and Chief Executive
Officer and each Senior Vice President in the face amounts of at least
$2,000,000, with the proceeds thereof to be payable to the order of the Company.
The Company will not cause or permit any assignment of the proceeds of any such
policy or change in beneficiary, and will not borrow against any such policy.
3.6 Preservation of Corporate Existence. The Company and each Subsidiary
will preserve and maintain its corporate existence, rights, franchises and
privileges in the jurisdiction of its incorporation, and qualify and remain
qualified, as a foreign corporation in each jurisdiction in which such
qualification is necessary or desirable in view of its business and operations
or the ownership of its properties. The Company and each Subsidiary shall
preserve and maintain all licenses and other rights to use patents, processes,
licenses, trademarks, trade names, inventions, intellectual property rights or
copyrights owned or possessed by it and necessary to the conduct of its
business.
3.7 Compliance with Laws. The Company will comply, and cause each of its
Subsidiaries to comply, with all applicable laws, rules, regulations and orders
of any governmental authority, noncompliance with which could have a material
adverse effect on its business or condition, financial or otherwise, including
without limitation, in a manner such that the representation and warranty set
forth in 2.5(c) of the Purchase Agreement shall remain true and accurate.
3.8 Compensation. The Company and each Subsidiary shall pay to its
management compensation which is not in excess of compensation customarily paid
to management in companies of similar size, of similar maturity, and in similar
business and all management compensation and all policies relating thereto,
shall be approved in advance by the Compensation Committee of the Board of
Directors (including a majority of the Preferred Stock Directors).
3.9 New Developments. The Company and each Subsidiary will cause all
technological developments, patentable or unpatentable inventions, discoveries
or improvements by their officers, employees or consultants to be documented in
accordance with appropriate professional standards, cause all officers,
employees and consultants to execute appropriate patent and copyright assignment
agreements to the Company and such Subsidiary, as the case may be, and, where
possible and appropriate, cause all officers, employees and consultants to file
and execute United States and foreign patent or
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copyright applications relating to and protecting such developments on behalf of
the Company or such Subsidiary.
3.10 Agreements of Officers and Employees. The Company and each Subsidiary
will cause each officer, employee and consultant now or hereafter employed to
execute and deliver a Proprietary Information and Inventions Agreement in the
form attached to the Purchase Agreement, or as otherwise approved by the Board
of Directors of the Company.
3.11 Bylaws; Meetings and Indemnification. The Company shall cause its
Bylaws to provide that, unless otherwise required by the laws of the
jurisdiction of its incorporation (i) any one director or (ii) any holder or
holders of at least ten percent (10%) of the outstanding shares of the Company,
treating all Preferred Stock on an as converted basis, shall have the right to
call a special meeting of the Board of Directors or stockholders, respectively.
The Company shall at all times maintain provisions in its Bylaws or charter
indemnifying all directors against liability and providing for the advancement
of expenses to the maximum extent permitted under the laws of the jurisdiction
of its incorporation.
3.12 Meetings of Directors and Committees; Expenses of Directors. The
Company shall hold meetings of the Company's Board of Directors not less
frequently than six times during any calendar year. The Company shall promptly
reimburse in full each director of the Company for all of his or her reasonable
out-of-pocket expenses incurred in attending each meeting of the Board of
Directors of the Company or any committee thereof or in connection with any
special project.
3.13 Rule 144A Information. The Company covenants and agrees that, at all
times during which the Company is neither subject to the reporting requirements
of Section 13 or 15(d) of the Exchange Act, nor exempt from reporting pursuant
to Rule 12g3-2(b) under the Exchange Act, it will provide in written form (as
promptly as practicable and in any event within fifteen (15) business days),
upon the written request of any Rights Holder or a prospective buyer of shares
of Preferred Stock or shares issuable upon conversion thereof from any Rights
Holder, all information required by Rule 144A(d)(4)(i) of the General
Regulations promulgated by the Commission under the Securities Act ("Rule 144A
Information"). The Company further covenants, upon written request, to cooperate
with and assist any Rights Holder or any member of the National Association of
Securities Dealers, Inc. system for Private Offerings Resales and Trading
through Automated Linkage ("PORTAL") in applying to designate and thereafter
maintain the eligibility of the shares of Preferred Stock or shares issuable
upon conversion thereof for trading through PORTAL. The Company's obligations
under this Section 3.13 shall at all times be contingent upon the relevant
Rights Holders obtaining from a prospective purchaser an agreement to take all
reasonable precautions to safeguard
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the Rule 144A Information from disclosure to anyone other than a Person who will
assist such purchaser in evaluating the purchase of such securities.
3.14 Stock Plan. The Company has reserved an aggregate of Two Million
(2,000,000) shares of Common Stock or such additional number of shares of Common
Stock as authorized by the Board of Directors (including the Preferred Stock
Directors) for issuance to employees, directors, officers and consultants of the
Company pursuant to the Stock Plan. All options to be granted (or stock issued
directly) under the Stock Plan or otherwise shall vest and become exercisable in
equal annual installments over a four year period and be subject to a right of
refusal of the Company, unless otherwise approved by the Compensation Committee
of the Board of Directors.
3.15 Prompt Payment of Taxes, Etc. The Company and each Subsidiary will
promptly pay and discharge, or cause to be paid and discharged, when due and
payable, all lawful taxes, assessments and governmental charges or levies
imposed upon the income, profits, property or business of the Company or any
Subsidiary; provided, however, that any such tax, assessment, charge or levy
need not be paid if the validity thereof shall currently be contested in good
faith by appropriate proceedings and if the Company or such Subsidiary shall
have set aside on its books adequate reserves with respect thereto, and
provided, further, that the Company and each Subsidiary will pay all such taxes,
assessments, charges or levies forthwith upon the commencement of proceedings to
foreclose any lien which may have attached as security therefor. The Company and
each Subsidiary will promptly pay or cause to be paid when due, or in
conformance with customary trade terms, all other indebtedness incident to
operations of the Company and each Subsidiary.
3.16 Maintenance of Properties and Leases. The Company will keep its
properties and those of its Subsidiaries in good repair, working order and
condition, reasonable wear and tear excepted, and from time to time make all
needful and proper repairs, renewals, replacements, additions and improvements
thereto; and the Company and its Subsidiaries will at all times comply with each
provision of all leases to which any of them is a party or under which any of
them occupies property if the breach of such provision might have a material
adverse effect on the condition, financial or otherwise, or operations of the
Company or such Subsidiary.
3.17 Availability of Common Stock. The Company will, from time to time, in
accordance with the laws of the state of its incorporation, increase the
authorized amount of Common Stock if at any time the number of shares of Common
Stock remaining unissued and available for issuance shall be insufficient to
permit conversion of all the then outstanding shares of Preferred Stock.
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3.18 Notice of Record Dates. In the event of any taking by the Company of
a record of the holders of any class of securities (other than the Preferred
Stock) for the purpose of determining the holders thereof who are entitled to
receive any dividend or other Distribution (defined below), the Company shall
mail to each Rights Holder at least ten (10) days prior to such record date,
specified herein, a notice specifying the date on which any such record is to be
taken for the purpose of such dividend or Distribution.
3.19 Right of First Refusal. The Company and each employee or officer of
the Company who hereafter acquires shares of the Company's capital stock from
the Company, or any option or right to acquire shares of the Company's capital
stock from the Company, shall enter into (if they have not already done so) an
agreement in such form as approved by the Board of Directors which agreement
shall provide the Company with a right of first refusal to purchase all or a
portion of such shares in the event such employee or officer of the Company
desires to sell such shares.
3.20 Investments. The Company and its Subsidiaries shall not make or
permit to remain outstanding any Investments unless such Investments are
approved by the Board of Directors.
3.21 Termination of Affirmative Covenants. The covenants set forth in this
Section 3 shall be of no further force or effect upon the consummation of an
Initial Public Offering.
4. NEGATIVE COVENANTS.
Without limiting any other covenants or provisions hereof, the Company
covenants and agrees that it will comply with and observe the following negative
covenants and provisions, and will cause each Subsidiary to comply with and
observe such of the following covenants and provisions as are applicable to such
Subsidiary, if and when such Subsidiary exists, and will not without the written
consent or written waiver of the holders of at least 66 2/3 % of the outstanding
shares of Preferred Stock, do any of the actions set forth in the following
covenants and provisions. The following provisions supersede, amend and restate
in their entirety the covenants of the Company set forth in Article VI of the
Series B Purchase Agreement. The Previous Investors hereby consent to the
amendment and restatement of such covenants and agree that the following
provisions shall supersede, amend and restate in their entirety the provisions
of Article VI of the Series B Purchase Agreement.
4.1 Liens. Neither the Company nor any Subsidiary will create, incur,
assume or suffer to exist any lien of any nature, upon or with respect to any of
its properties, now owned or hereinafter acquired, or assign or otherwise convey
any right to receive income, except Permitted Liens.
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4.2 Change in Business; Merger and Sale of Assets. The Company will not
permit any change in the nature of the business of the Company or any Subsidiary
or merge or consolidate with any other Person or sell, assign, lease or
otherwise dispose of substantially all of its assets, in one transaction or in a
series of transactions.
4.3 Distributions; Section 305. Neither the Company nor any Subsidiary
will purchase, redeem, retire, or otherwise acquire for value any shares of its
capital stock (or rights, options or warrants to purchase such shares) now or
hereafter outstanding, return any capital to its stockholders (such transactions
being hereinafter referred to as "Distributions"), and neither the Company nor
any Subsidiary shall declare or pay any dividends or make any distribution of
assets to its stockholders as such, except for (i) dividends on the Preferred
Stock paid out of earnings; (ii) repurchases from employees, directors, officers
or consultants at the original purchase price of the shares pursuant to stock
repurchase agreements and similar vesting agreements approved by the Board of
Directors; (iii) to the Company; and (iv) repurchases pursuant to that certain
Stock Repurchase Agreement, dated as of April 2, 1996, by and between the
Company and the State of Maryland/Department of Business and Economic
Development. The Company shall not enter into any transaction which would result
in a dividend on Preferred Stock under Section 305 of the Code (or any successor
provision) other than dividends accruing pursuant to the Certificate of
Incorporation, as amended and restated from time to time.
4.4 Dealings with Affiliates. Except for existing agreements identified in
Schedule 2.21 to the Purchase Agreement, neither the Company nor any Subsidiary
will enter into any transaction or agreement other than indemnification and
employment transactions in the ordinary course of the Company's business with
any employee, officer or director or any member of their families, or any
corporation or other entity in which any one or more of such persons holds,
directly or indirectly, five percent (5 %) or more of any class of capital
stock, or with any other affiliate of the Company, except agreements and
transactions on terms no less favorable to the Company or any Subsidiary than it
would obtain in a transaction between unrelated parties, and then only if such
agreements or transactions are approved by the disinterested members of the
Board of Directors.
4.5 Transfers of Technology. Neither the Company nor any Subsidiary will
transfer any ownership or interest in, or material rights relating to, any of
its intellectual property rights to any Person, except pursuant to licensing
agreements and other transfers made in the ordinary course of business and
approved by the Board of Directors.
4.6 Restrictive Agreements Prohibited. Neither the Company nor any of its
Subsidiaries shall become a party to any agreement which by its terms restricts
the Company's performance of this Agreement, the Purchase Agreement, the Amended
and
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Restated Stockholders Agreement or the Certificate of Incorporation, as amended
and restated from time to time, provided, however, that nothing in this Section
4.5 shall prohibit any amendment of or waiver of any provision of this
Agreement, the Purchase Agreement, the Amended and Restated Stockholders
Agreement or the Certificate of Incorporation if such amendment or waiver is in
accordance with the applicable provisions of this Agreement, such other
agreements, the Certificate of Incorporation, as amended and restated from time
to time, or the Delaware General Corporation Law.
4.7 Mergers, Sale of Assets, Etc. of Subsidiaries. The Company shall not
permit any Subsidiary to consolidate or merge into or with or sell or transfer
all or substantially all its assets, except that any Subsidiary may (i)
consolidate or merge into or with or sell or transfer assets to any other
Subsidiary, or (ii) merge into or sell or transfer assets to the Company.
4.8 Maintenance of Ownership of Subsidiaries. The Company shall not sell
or otherwise transfer any shares of capital stock of any Subsidiary, except to
the Company or another Subsidiary, or permit any Subsidiary to issue, sell or
otherwise transfer any shares of its capital stock or the capital stock of any
Subsidiary, except to the Company or another Subsidiary.
4.9 Securities of Other Persons. Except as set forth on Schedule 2.2 to
the Purchase Agreement neither the Company nor any Subsidiary shall purchase any
stock or other securities of any Person, unless such Person is wholly-owned.
4.10 U.S. Real Property Holding Corporation. The Company will not be a
"United States real property holding corporation", as defined in Section
897(c)(2) of the Code and Section 1.897-2(b) of the Regulations promulgated by
the Internal Revenue Service and upon written request, will provide to any
holder of Preferred Stock a statement to the effect informing such holder
whether such interest constitutes a U.S. real property interest.
4.11 Termination of Negative Covenants. The covenants set forth in this
Section 4 shall be of no further force or effect upon the consummation of an
Initial Public Offering.
5. MISCELLANEOUS.
5.1 Successors and Assigns. All covenants and agreements contained in this
Agreement by or on behalf of any of the parties hereto shall bind and inure to
the benefit of the respective heirs, successors (including, without limitation,
by sale or transfer of all or substantially all assets, merger or consolidation)
and assigns of the parties hereto (including without limitation transferees of
any Registrable Securities), whether so expressed or not.
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5.2 Notices. All notices, requests, consents and other communications
hereunder shall be in writing, shall be addressed to the receiving party's
address set forth below or to such other address as a party may designate by
notice hereunder, and shall be either (i) delivered by hand, (ii) made by telex,
telecopy or facsimile transmission, (iii) sent by overnight courier, or (iv)
sent by registered or certified mail, return receipt requested, postage prepaid:
(a) if to the Company or any other party hereto, at the address of
such party set forth in the Purchase Agreement by and among the parties hereto
dated as of the date hereof;
(b) if to any subsequent holder of Registrable Securities, to it at
such address as may have been furnished to the Company in writing by such
holder; or
(c) in any case, to such other address or addresses as shall have
been furnished in writing to the Company (in the case of a holder of Registrable
Securities) or to the holders of Registrable Securities (in the case of the
Company) in accordance with the provisions of this paragraph.
All notices, requests, consents and other communications hereunder shall be
deemed to have been given (i) if by hand, at the time of the delivery thereof to
the receiving party at the address of such party set forth above, (ii) if made
by telex, telecopy or facsimile transmission, at the time that receipt thereof
has been acknowledged by electronic confirmation or otherwise, (iii) if sent by
overnight courier, on the next business day (or if sent overseas, on the second
business day) following the day such notice is delivered to the courier service,
or (iv) if sent by registered or certified mail, on the 5th business day (or if
sent overseas, on the 10th business day) following the day such mailing is made,
provided, however, that the reports required by Section 2.10 (c) may be mailed
by first-class regular mail, postage prepaid, if mailed to an address in the
United States.
5.3 Governing Law. This Agreement and the rights and obligations of the
parties hereunder shall be construed in accordance with and governed by the law
of the State of Delaware, without giving effect to the conflict of law
principles thereof.
5.4 Modifications and Amendments. This Agreement may not be amended or
modified, and no provision hereof may be waived, without the written consent of
the Company and the holders of at least sixty-six and two-thirds percent
(66 2/3%) of the outstanding shares of Registrable Securities. Any waiver or
consent hereunder shall be effective only in the specific instance and for the
purpose for which it was given, and shall not constitute a continuing waiver or
consent. Notwithstanding the foregoing, Exhibit B may be amended by the Company
without the consent of any holders in order
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to reflect an additional Purchaser in accordance with Section 1.2 of the
Purchase Agreement.
5.5 Counterparts. This Agreement may be executed in one or more
counterparts, and by different parties hereto on separate counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
5.6 Limitation on Subsequent Registration Rights. The Company shall not
grant to any third party any registration rights more favorable than, or in any
way conflicting with, any of those contained herein, so long as any of the
registration rights under this Agreement remains in effect, provided, in any
event, (i) any grant of demand or required registration rights shall provide
that the Investors have incidental or "piggyback" registration rights with
respect thereto in accordance with the provisions of Section 2.4 hereof, and
(ii) such rights shall not become effective prior to the rights of the holders
of Registrable Securities hereunder.
5.7 Severability. In the event that any court of competent jurisdiction
shall determine that any provision, or any portion thereof, contained in this
Agreement shall be unenforceable in any respect, then such provision shall be
deemed limited to the extent that such court deems it enforceable, and as so
limited shall remain in full force and effect. In the event that such court
shall deem any such provision, or portion thereof, wholly unenforceable, the
remaining provisions of this Agreement shall nevertheless remain in full force
and effect.
5.8 Injunctive Relief. The Company recognizes that the rights of the
Investors under this Agreement are unique and, accordingly, the Investors shall,
in addition to such other remedies as may be available to them at law or in
equity, have the right to enforce their rights hereunder by actions for
injunctive relief and specific performance to the extent permitted by law. This
Agreement is not intended to limit or abridge any rights of the Investors which
may exist apart from this Agreement.
5.9 Legal Review; Interpretation. The parties hereto acknowledge and agree
that: (i) each party and its counsel, if so represented, reviewed and negotiated
the terms and provisions of this Agreement and have contributed to its revision;
and (ii) the rule of construction to the effect that any ambiguities are
resolved against the drafting party shall not be employed in the interpretation
of this Agreement.
5.10 Heading and Captions. The headings and captions of the various
subdivisions of this Agreement are for convenience of reference only and shall
in no way modify or affect the meaning or construction of any of the terms or
provisions hereof.
30.
<PAGE>
5.11 Delays or Omissions. No failure or delay by a party hereto in
exercising any right, power or remedy under this Agreement, and no course of
dealing between the parties hereto, shall operate as a waiver of any such right,
power or remedy of the party. No single or partial exercise of any right, power
or remedy under this Agreement by a party hereto, nor any abandonment or
discontinuance of steps to enforce any such right, power or remedy, shall
preclude such party from any other or further exercise thereof or the exercise
of any other right, power or remedy hereunder. The election of any remedy by a
party hereto shall not constitute a waiver of the right of such party to pursue
other available remedies. No notice to or demand on a party not expressly
required under this Agreement shall entitle the party receiving such notice or
demand to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the party giving such
notice or demand to any other or further action in any circumstances without
such notice or demand.
5.12 Jurisdiction And Service Of Process. Any legal action or proceeding
with respect to this Agreement may be brought in the courts of the State of
Maryland or of the United States of America for the District of Maryland. By
execution and delivery of this Agreement, each of the parties hereto accepts for
itself and in respect of its property, generally and unconditionally, the
jurisdiction of the aforesaid courts. Each of the parties hereto irrevocably
consents to the service of process of any of the aforementioned courts in any
such action or proceeding by the mailing of copies thereof by certified mail,
postage prepaid, to the party at its address set forth in Section 5.2 hereof.
5.13 Gender. Wherever this Agreement refers to the neuter gender such
reference shall include the masculine and feminine genders as the context may
require.
5.14 New York Life Insurance Company Compliance Obligations. Nothing in
this Agreement shall diminish the continuing obligations of New York Life
Insurance Company to comply with applicable requirements of law that it maintain
responsibility for the disposition of, and control over its admitted assets,
investments and property, including (without limiting the generality of the
foregoing) the provisions of Section 1411(b) of the New York Insurance Law, as
amended, and as hereinafter from time to time in effect.
31.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused this Agreement to be executed by their duly authorized representatives as
of the date first written above.
Very truly yours,
GENE LOGIC INC.
By: /s/ Michael J. Brennan
---------------------------------------
Michael J. Brennan, President and Chief
Executive Officer
Counterpart Signature Pages Beginning on the Next Page
32.
<PAGE>
COUNTERPART SIGNATURE PAGE
The undersigned hereby agrees to become a party to that certain Amended and
Restated Investor Rights Agreement dated as of July 15, 1997 (the "Agreement")
among Gene Logic Inc. (the "Company") and others. From and after the
undersigned's execution and delivery and the Company's acceptance of this
Counterpart Signature Page, the undersigned shall be a party to the Agreement
and shall be deemed to be an "Investor" for all purposes of the Agreement.
---------------------------------------
Printed Name of Investor
---------------------------------------
Signature of Investor
By:
------------------------------------
Title:
---------------------------------
Address:
-------------------------------
-------------------------------
-------------------------------
-------------------------------
Date:
----------------------------------
Agreed and accepted:
GENE LOGIC INC.
By:
-----------------------------
Title:
--------------------------
Date:
---------------------------
33.
<PAGE>
EXHIBIT A
PREVIOUS INVESTORS
Larry Abrams
24 Central Park South
New York, NY 10019
Altamira Pooled U.S. Equity Fund
250 Bloor Street West, Ste. 300
Toronto M4W 1E6
Canada
Attn: Ian Ainsworth
Altamira Science & Technology Fund
250 Bloor Street West, Ste. 300
Toronto M4W 1E6
Canada
Attn: Ian Ainsworth
Altamira Special Growth Fund
250 Bloor Street West, Ste. 300
Toronto M4W 1E6
Canada
Attn: Sue Coleman
The Connecticut Future Fund L.P.
c/o Cullinane & Donnelly
265 Church St., Ste. 1004
New Haven, CT 06510-7014
Attn: John Cullinane
Cross Atlantic Partners K/S
c/o Gorrissen & Federspiel
12 H.C. Andersens Blvd.
Copenhagen, Denmark
Cross Atlantic Partners II K/S
c/o Gorrissen & Federspiel
12 H.C. Andersens Blvd.
Copenhagen, Denmark
<PAGE>
E.J. Financial Investments L.P.
225 East Deerpath, Ste. 250
Lake Forest, Illinois 60045
Attn: Dr. Mahendra Shah
Evolution Partners, II
2 North LaSalle, Ste. 400
Chicago, Illinois 60606
Attn: Fred Holobow
GIMV Investment Corporation
Karel Ooomsstraat 37
B-2018 Antwerpen
Belgium
Attn: Patrick Van Beneden
James Ginsburg
900 Bluff Street
Glencoe, IL 60022
Steven Helms
1111 West Drummond Place
Chicago, IL 60614
New York Life Insurance Company
51 Madison Avenue
New York, NY 10010
Attn: Richard F. Drake
OxCal Venture Fund L.P.
617 El Medio Ave.
Pacific Palisades, CA 90272
c/o Stevan Birnbaum
Oxford Bioscience Partners (Bermuda) Limited Partnership
315 Post Road West
Westport, CT 06880
Attn: Dr. Alan G. Walton
<PAGE>
Oxford Bioscience Partners, L.P.
315 Post Road West
Westport, CT 06880
Attn: Dr. Alan G. Walton
Oxford Bioscience Partners (Adjunct) L.P.
315 Post Road West
Westport, CT 06880
Attn: Dr. Alan G. Walton
Sanctus Spiritus Antilles N.V.
c/o Intertrust (Antilles) N.V.
Lanhuis Joonchi
Kaya Richard J. Beaujon 3/n
P.O. Box 837
Curacao, Netherlands Antilles
Attn: Gregory E. Elias
State of Maryland
Dept. of Business & Economic Development, Investment Financing Group
217 E. Redwood Street, 22nd Floor
Baltimore, MD 21202
<PAGE>
EXHIBIT B
PURCHASERS
Name
Altamira, Management Ltd.
Biotechvest L.P.
Cresta Limited
Cross Atlantic Partners K/S
Cross Atlantic Partners II K/S
Cross Atlantic Partners III K/S
E.J. Financial Enterprises, Inc.
Four Partners
Fruit of the Loom, Inc.
GeneChem Technologies Venture Fund L.P.
GIMV Investment Corporation
James Ginsburg
Glenbrook Capital L.P.
Goldman Sachs Group L.P.
H & Q Gene Logic Investors L.P.
Steve Helms
Niederhoffer Global Systems, S.A.
Niederhoffer Friends Partnership L.P.
Niederhoffer Intermarket Fund L.P.
New York Life Insurance Company
OxCal Venture Fund L.P.
Oxford Bioscience Partners L.P.
Oxford Bioscience Partners (Adjunct) L.P.
Oxford Bioscience Partners (Bermuda)
Limited Partnership
<PAGE>
Pensionskassen for Vaerkstedsfunktionaerer i
Jernit
Sanctus Spiritus (Antilles) N.V.
WPG - Farber, Weber Fund, L.P.
WPG - Farber, Weber Overseas, L.P.
<PAGE>
Exhibit 10.12
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and
entered into as of October 31, 1995 by and between GENE LOGIC INC., a
Delaware corporation (the "Company") and MICHAEL J. BRENNAN, a Maryland
resident ("Brennan").
RECITALS:
A. The Company desires to secure the services of Brennan and
Brennan desires to perform such services for the Company on the terms and
conditions as set forth in this Agreement.
NOW, THEREFORE, in consideration of these premises and the
mutual promises and conditions contained in this Agreement, the parties
hereto hereby agree as follows:
1. Employment and Duties. Subject to the terms and conditions of
this Agreement, the Company shall employ Brennan as President and Chief
Executive Officer of the Company and shall elect Brennan as a director of the
Company and Brennan hereby accepts such employment and such positions.
Brennan shall devote his full time, ability, attention, knowledge and skill
to performing all duties as President and Chief Executive Officer of the
Company as set forth in the Bylaws of the Company and as lawfully assigned or
delegated to him by the directors of the Company.
2. Base Salary. In consideration for Brennan's services to the
Company during the term of his employment under this Agreement, Brennan shall
receive an annual base salary of $200,000 during 1996 and $210,000 during
1997, and thereafter in such amounts as may be mutually agreed by the Company
and Brennan, but not less than $210,000 per calendar year. Base salary shall
be paid in equal bi-weekly installments from which the Company shall withhold
and deduct all applicable federal and state income, social security,
disability and other taxes as required by applicable laws.
3. Incentive Stock. In addition to the salary specified above, the
Company shall provide Brennan with stock incentives as follows:
3.1 Founders' Stock. Upon the date of signing of this
Agreement, the Company shall sell to Brennan and Brennan shall purchase
100,000 shares of the Company's common stock at a purchase price of $0.01 per
share. Unrestricted ownership of such shares shall vest according to the
following schedule: twenty-five percent (25%) upon the date of signing of
this Agreement and thereafter at a rate of 1/36th each month for 36 months
beginning upon the first anniversary of such date. The Company shall deliver
to Brennan the certificates representing vested shares within 30 days of the
date upon which vesting occurs; certificates representing unvested shares
shall be held in escrow by the Secretary of the Company. Any unvested stock
shall automatically become fully vested upon the date upon which a
registration statement for the sale of securities of the Company to the
public becomes effective, or upon any merger of the Company or sale of the
Company or all or substantially all of its assets.
3.2 Incentive Stock Options. Upon the date of
signing of this Agreement, the Company shall grant to Brennan incentive stock
options under the Company's Incentive Stock Option Plan to purchase 40,000
shares of the Company's common stock at a purchase
<PAGE>
price of $0.01 per share. The incentive stock options shall become
exercisable according to the following schedule: twenty-five percent (25%)
upon the date of signing of this Agreement and thereafter at a rate of 1/36th
each month for 36 months beginning upon the first anniversary of such date.
The Company will grant further incentive stock options to Brennan in each
year during which this Agreement remains in force, in numbers consistent with
Brennan's position as President and CEO of the Company. Any unexercisable
options held by Brennan pursuant to this Subsection 3.2 shall automatically
become exercisable upon the date upon which a registration statement for the
sale of securities of the Company to the public becomes effective, or upon
any merger of the Company or sale of the Company or all or substantially all
of its assets.
3.3 Effect of Termination by Brennan. In the event
Brennan terminates this Agreement prior to its first anniversary, except in
consequence of a breach of this Agreement by the Company, all vested stock
shall become unvested and the Company shall have the right to repurchase any
shares of the Company's stock acquired by Brennan under either Subsection 3.1
or 3.2 above, such repurchase to occur at a purchase price equal to Brennan's
original purchase price for such shares.
3.4 Right to Participate in Offerings of Securities.
The Company shall further permit Brennan to invest on a pro rata basis in any
future offerings of the Company's securities, for which purposes "pro rata
basis" shall mean the right to acquire that number of the to-be-issued
securities represented by the ratio, calculated immediately prior to the
offering, of stock held by Brennan (whether vested or not) to the Company's
outstanding stock both on a fully-diluted, as-if-converted basis multiplied
by the total number of shares or other securities proposed to be issued in
the offering, or such lesser number as Brennan may elect. This right shall
not apply to securities issued (a) upon conversion of any convertible
preferred shares, (b) as a common stock dividend or upon any subdivision of
shares of common stock, (c) pursuant to a firm commitment underwritten public
offering, or (d) pursuant to the exercise of options to purchase common stock
granted to employees, directors, officers, consultants or advisers of the
Company or members of the Company's Scientific Advisory Board.
4. Additional Compensation and Benefits.
4.1 Signing Bonus. Upon the execution of this
Agreement, the Company shall pay to Brennan a cash signing bonus in the
amount of $50,000. In addition, the Company shall issue to Brennan, without
receiving monetary consideration therefore, 50,000 shares of preferred stock
at the time of closing of the next private round of venture financing
(presently proposed to be the Series B round, closing on or before May 31,
1996). Such shares shall be fully-paid and non-assessable and shall have all
the rights and preferences of the securities issued to the other investors in
such financing and Brennan shall be accorded all such rights as are accorded
to other investors under the terms of any Convertible Preferred Stock
Purchase Agreement which may be executed by and between the Company and
subscribers to the offering.
4.2 Annual Performance Bonus. During each calendar
year during the term of this Agreement commencing with 1996, Brennan shall
receive, in addition to the base salary specified in Section 2 above, a
performance bonus based upon achievement of goals with respect to financing
of the Company, establishment of a corporate base for the Company and
progress in building the Company, such goals for 1996 to be mutually agreed
by Brennan and the Company and set forth promptly following execution of this
Agreement in a side letter which shall thereafter become Exhibit A to this
Agreement and, with respect to each year during the term of this Agreement
after 1996, to be mutually agreed upon by Brennan and the Company not
2
<PAGE>
later than sixty (60) days prior to the commencement of such year. The amount of
such bonuses shall be $30,000 for 1996, $50,000 for 1997, and thereafter in such
amounts as may be mutually agreed by the Company and Brennan, but not less than
$50,000 per calendar year.
4.3 Relocation Expenses. In the event that Brennan
relocates his family, the Company shall pay all reasonable moving expenses
and other costs related to such relocation, including without limitation the
closing costs on the sale of Brennan's existing house and the purchase of a
new home of similar value, including without limitation up to three (3)
points on the new mortgage for such purchase.
4.4 Medical Benefits, Vacation and Sick Leave.
Commencing on January 1, 1996, Brennan shall be entitled to participate in
such medical, health and life insurance plans as the Company may from time to
time implement, and to receive paid vacation and sick leave on the same basis
as the Company's other senior executives.
4.5 Pension Plan. Brennan shall be entitled to
participate as a beneficiary under such pension plan(s) as the Company may
from time to time adopt, on the same basis as the Company's other senior
executives.
5. Confidentiality and Proprietary Inventions Agreement. Upon
the commencement of the term of this Agreement, Brennan shall enter into the
Company's standard form of agreement relating to the treatment of the
Company's confidential information and ownership of proprietary inventions.
6. Term of Employment. Subject to the provisions of Section 7, the
term of the employment engaged by this Agreement shall be a period of five
(5) years commencing on December 1, 1995 and ending on December 31, 2000,
whereupon the term shall automatically renew for successive one (1) year
periods unless one of the parties to the Agreement shall have given notice of
its intention to terminate the Agreement not later than ninety (90) days
prior to the end of such initial term or any such renewal term.
7. Termination of Employment.
7.1 For Cause. The Company may terminate this Agreement,
effective immediately upon written notice to Brennan, if at any time, in the
reasonable opinion of the Company's Board of Directors, (a) Brennan commits
any material act of dishonesty, fraud or embezzlement with respect to the
Company or any subsidiary or affiliate thereof, (b) is convicted of a crime
of moral turpitude, or (c) breaches any material obligation under this
Agreement. The Company's total liability to Brennan in the event of
termination of Brennan's employment under this Subsection 7.1 shall be
limited to the payment of Brennan's salary and benefits through the effective
date of termination.
7.2 Without Cause. The Company may terminate this
Agreement without cause upon sixty (60) days' written notice to Brennan. Upon
any termination of this Agreement without cause by the Company, the Company
shall pay to Brennan as severance pay an amount equal to Brennan's total
combined base salary and performance bonus for that calendar year during
which the termination becomes effective, in addition to such other
compensation to which Brennan may be entitled prior to the date of
termination.
3
<PAGE>
7.3 By Brennan. Brennan reserves the right to terminate his
employment hereunder for any reason upon ninety (90) days' written notice to
the Company. The Company's total liability to Brennan in the event of
termination of Brennan's employment under this Subsection 7.3 shall be
limited to the payment of Brennan's salary and benefits through the effective
date of termination and the provisions of Subsection 7.2 shall not apply.
8. Confirmation of Equity Structure. The Company represents and
warrants that the equity table attached to this Agreement as Exhibit B
accurately describes the current capital structure of the Company on a
fully-diluted basis and that there are no shares, options, warrants,
commitments, conversion rights or agreements for the purchase of any shares
of the Company's capital stock or other securities of the Company not shown
on Exhibit B.
9. Miscellaneous.
9.1 Modification. Any modification of this Agreement
shall be effective only if reduced to writing and signed by the parties to be
bound thereby.
9.2 Entire Agreement. This Agreement constitutes the
entire agreement between the Company and Brennan pertaining to the subject
matter hereof and supersedes all prior or contemporaneous written or verbal
agreements and understandings between the parties in connection with the
subject matter hereof.
9.3 Severability. If any provision of this Agreement is
held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remaining provisions shall, nevertheless, continue in full
force and effect without being impaired or invalidated in any way.
9.4 Waiver. The parties hereto shall not be deemed to
have waived any of their respective rights under this Agreement unless the
waiver is in writing and signed by the waiving party. No delay in exercising
any right shall be a waiver of such right nor shall a waiver of any right on
one occasion operate as a waiver of such right on a future occasion.
9.5 Costs of Enforcement. If any action or proceeding
shall be commenced to enforce this Agreement or any right arising in
connection with this Agreement, each party shall initially bear its own costs
and legal fees associated with such action or proceeding. The prevailing
party in any such action or proceeding shall be entitled to recover from the
other party the reasonable attorneys' fees, costs and expenses incurred by
such prevailing party in connection with such action or proceeding.
4
<PAGE>
9.6 Notices. All notices provided for herein shall be
in writing and delivered personally or sent by United States mail, registered
or certified, postage paid, addressed as follows:
To the Company: Gene Logic, Inc.
Five Science Park
New Haven, CT 06511
To Brennan; Michael J. Brennan
9908 Conestoga Way
Potomac, MD 20854
or to such other addresses as either of such parties may from time to time
designate in writing. Any notice given under this Agreement shall be deemed
to have been given on the date of actual receipt, or, if not received during
normal business hours, on the next business day.
IN WITNESS WHEREOF, the parties have executed this
Agreement by their duly authorized officers or agents as of the date first
written above.
"Company" "Employee"
GENE LOGIC INC. /s/ Michael J. Brennan
a Delaware corporation ----------------------
Dr. Michael J. Brennan
By: /s/ Alan G. Walton
--------------------------
Name: Dr. Alan G. Walton
-------------------------
Title: Chairman, Board of Directors
----------------------------
5
<PAGE>
Exhibit 10.13
AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT (this "Amendment") is made and
entered into as of July 9, 1997, by and between GENE LOGIC INC., a Delaware
Corporation (the "Company"), and MICHAEL J. BRENNAN ("Executive").
WHEREAS, the Company and Executive previously entered into an Employment
Agreement dated December 1, 1995 (the "Employment Agreement") which, among other
things, provides for the automatic vesting of all outstanding options to
purchase the Company's Common Stock held by the Executive upon a change of
control of the Company (the "Vesting Provision") and that Executive may
participate in future equity securities offerings by the Company (the
"Participation Right") ; and
WHEREAS, the Company and Executive desire to amend the Employment
Agreement to amend and restate the Vesting Provision and to terminate the
Participation Right upon an initial public offering of the Company's Common
Stock.
NOW, THEREFORE, the parties hereto, in consideration of the mutual
promises and agreements set forth below, hereby agree to amend the Employment
Agreement as follows:
1. Restatement of Vesting Provision. Section 3.2 of the Employment
Agreement shall be amended and restated to read in its entirety as follows:
"3.2 Incentive Stock Options. Upon the date of signing of this
Agreement, the Company shall grant Brennan incentive stock options under
the Company's Incentive Stock Option Plan to purchase 40,000 shares of the
Company's common stock at a purchase price of $0.01 per share. The
incentive stock options shall become exercisable according to the
following schedule: twenty-five percent (25%) upon the date of signing of
this Agreement and thereafter at a rate of 1/36th each month for 36 months
upon the first anniversary of such date. The Company will grant further
incentive stock options to Brennan in each year during which this
Agreement remains in force, in numbers consistent with Brennan's position
as President and CEO of the Company. In the event of: (i) a merger or
consolidation of the Company with another corporation, not including any
merger or consolidation if immediately thereafter the stockholders of the
Company immediately before such transaction own shares representing more
than 50% of the outstanding voting securities of the surviving
corporation, (ii) a sale of shares by the stockholders of the Company if
immediately thereafter the stockholders of the Company immediately before
such sale own shares representing less than 50% of the outstanding voting
securities of the surviving corporation, or (iii) a sale of all or
substantially all of the Company's assets, all
1.
<PAGE>
options to purchase Common Stock of the Company held by Brennan that have
not previously vested under the terms of the applicable Option Agreements
shall vest immediately upon the closing of such transaction. In the event
of an underwritten initial public offering of the Company's Common Stock,
to the extent at least 80% of the aggregate of the shares subject to
outstanding options to purchase Common Stock of the Company held by
Brennan (other than any such options granted immediately prior to and in
contemplation of such initial public offering) have not previously vested
under the terms of the applicable Option Agreements, then the vesting of
such options shall be accelerated such that 80% of the shares subject to
each such option shall be vested as of the closing of such initial public
offering and the remaining 20% of the shares subject to each such option
shall vest 180 days from the closing of such initial public offering. If,
in the event of an underwritten initial public offering of the Company's
Common Stock, 80% or more of the aggregate of the shares subject to
outstanding options to purchase Common Stock of the Company held by
Brennan (other than any such options granted immediately prior to and in
contemplation of such initial public offering) have previously vested,
then any remaining unvested shares subject to such options shall vest 180
days from the closing of such initial public offering.
2. Termination Of Participation Right Upon Initial Public Offering. The
following shall be added at the end of Section 3.4 of the Employment Agreement
to amend such section:
"Notwithstanding anything to the contrary herein, Brennan's right to
invest in any future offerings of the Company hereunder shall terminate
automatically upon the closing of the Company's initial public offering of
its securities to the public."
3. Effective Date. This Amendment shall be effective as of the date of the
Employment Agreement. Except as amended herein, or as otherwise agreed to in
writing by the Company and Executive, all terms of the Employment Agreement
shall remain in full force and effect.
2.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment to Employment
Agreement as of the date first above written.
THE COMPANY: EXECUTIVE:
GENE LOGIC INC.
a Delaware Corporation
By: /s/ Mark D. Gessler /s/ Michael J. Brennan
------------------------- -------------------------------
Name: Mark D. Gessler Michael J. Brennan
-------------------------
Title: Vice President,
Corporate Development and
CFO
3.
<PAGE>
Exhibit 10.14
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and
entered into as of May 16, 1996 by and between GENE LOGIC INC., a Delaware
corporation (the "Company") and MARK D. GESSLER, a Texas resident ("Gessler").
RECITALS:
The Company desires to secure the services of Gessler and Gessler
desires to perform such services for the Company on the terms and conditions
as set forth in this Agreement.
NOW, THEREFORE, in consideration of these premises and the
mutual promises and conditions contained in this Agreement, the parties
hereto hereby agree as follows:
1. Employment and Duties. Subject to the terms and conditions of
this Agreement, the Company shall employ Gessler as Senior Vice President,
Corporate Development and Chief Financial Officer of the Company and Gessler
hereby accepts such employment and such positions. Gessler shall devote his
full time, ability, attention, knowledge and skill to performing all duties
as Senior Vice President, Corporate Development and Chief Financial Officer
of the Company as lawfully assigned or delegated to him by the Chief
Executive Officer of the Company.
2. Base Salary. In consideration for Gessler's services to the
Company during the term of his employment under this Agreement, Gessler shall
receive an annual base salary of $170,000 during 1996, and thereafter in such
amounts as may be mutually agreed by the Company and Gessler, but not less
than $170,000. Base salary shall be paid in equal, bi-weekly installments
from which the Company shall withhold and deduct all applicable federal and
state income, social security, disability and other taxes as required by
applicable laws.
3. Incentive Stock. In addition to the salary specified above, the
Company shall provide Gessler with stock incentives as follows:
3.1 Founders' Stock. On or before June 30, 1996, the
Company shall sell to Gessler and Gessler shall purchase 75,000 shares of the
Company's common stock at a purchase price of $0.15 per share. Unrestricted
ownership of such shares shall vest through a declining buy-back right of the
Company according to the following schedule: twenty-five percent (25%) upon
the date of signing of this Agreement and thereafter at a rate of 1/36th each
month for 36 months beginning upon the first anniversary of such date. Any
unvested stock shall automatically become fully vested upon the date upon
which a registration statement for the sale of securities of the Company to
the public becomes effective, or upon any merger of the Company or sale of
the Company or all or substantially all of its assets.
3.2 Incentive Stock Options. The Company will grant
incentive stock options to Gessler in each year during which this Agreement
remains in force, in numbers consistent with Gessler's position as Senior
Vice President, Corporate Development and Chief Financial Officer of the
Company. Such incentive stock options shall become exercisable according to
the schedule established by the Board of Directors for the Company's
Incentive Stock Option Plan. Any unexercisable options held by Gessler
pursuant to this Subsection 3.2 shall automatically become exercisable upon
the date upon which a registration statement for the
Page 1
<PAGE>
sale of securities of the Company to the public becomes effective, or upon
any merger of the Company or sale of the Company or all or substantially all
of its assets.
3.3 Effect of Termination by Gessler. In the event
Gessler terminates this Agreement prior to its first anniversary, all vested
stock shall become unvested and the Company shall have the right to
repurchase any shares of the Company's stock acquired by Gessler under either
Subsection 3.1 or 3.2 above, such repurchase to occur at a purchase price
equal to Gessler's original purchase price for such shares.
4. Additional Compensation and Benefits.
4.1 Signing Bonus. Upon the execution of this
Agreement, the Company shall pay to Gessler a cash signing bonus in the
amount of $20,000.
4.2 Annual Performance Bonus. During each calendar
year while this Agreement remains in force, commencing with 1996, Gessler
shall receive, in addition to the base salary specified in Section 2 above, a
performance bonus based upon achievement of goals mutually agreed by Gessler
and the Chief Executive Officer of the Company. The amount of such bonus for
1996 shall be $20,000 in cash and, in addition, the Company shall, prior to
the end of 1996, grant to Gessler incentive stock options under the Company's
Incentive Stock Option Plan to purchase an additional 25,000 shares of the
Company's common stock at a purchase price per share equal to then fair
market value, such options to become exercisable according to the same
schedule as described under Subsection 3.1 above. Thereafter any annual cash
bonus shall be in such amount as may be mutually agreed by the Company and
Gessler, but not less than $20,000.
4.3 Relocation Expenses and Allowances. The Company
shall reimburse Gessler on a tax grossed-up basis for all reasonable moving
expenses, temporary accommodation and house-hunting expenses and other costs
related to his relocation to the vicinity of the Company's headquarters,
including seller's closing costs on the sale of Gessler's existing house and
purchaser's closing costs on the purchase of a new home of similar value,
including up to three (3) points on the new mortgage for such purchase. In
connection with his relocation, the Company shall extend to Gessler a demand
loan in the capital amount of $50,000 (fifty thousand dollars); interest on
such loan, as imputed by the Internal Revenue Service, shall be capitalized
on a semi-annual basis. The capital amount and accumulated interest shall be
secured by Gessler's stock and stock options in the Company. The Company
agrees that the loan balance (the capital amount plus any accumulated
interest thereon) will be forgiven on the date (i) upon which a registration
statement for the sale of securities of the Company to the public becomes
effective, or (ii) upon any merger of the Company or sale of the Company or
all or substantially all of its assets, provided that Gessler remains an
employee of the Company as of that date. Gessler agrees to execute, as of the
same date as this Agreement, such loan indenture and security interest
agreements as necessary to give effect to this understanding.
4.4 Medical Benefits, Vacation and Sick Leave.
Gessler shall be entitled to participate in such medical, health and life
insurance plans as the Company may from time to time implement, and to
receive twenty (20) days of paid vacation per year and sick leave on the same
basis as the Company's other senior executives.
Page 2
<PAGE>
4.5 Pension Plan. Gessler shall be entitled to
participate as a beneficiary under such pension plan(s) as the Company may
from time to time adopt, on the same basis as the Company's other senior
executives.
5. Confidentiality and Proprietary Inventions Agreement. Upon
the commencement of the term of this Agreement, Gessler shall enter into the
Company's standard form of agreement relating to the treatment of the
Company's confidential information and ownership of proprietary inventions.
6. Term of Employment. Subject to the provisions of Section 7, the
term of the employment engaged by this Agreement shall be a period of four
(4) years commencing on June 11, 1996 and ending on June 10, 2000, whereupon
the term shall automatically renew for successive one (1) year periods unless
one of the parties to the Agreement shall have given notice of its intention
to terminate the Agreement not later than ninety (90) days prior to the end
of such initial term or any such renewal term.
7. Termination of Employment.
7.1 For Cause. The Company may terminate this Agreement,
effective immediately upon written notice to Gessler, if at any time, in the
reasonable opinion of the Company's Board of Directors, (a) Gessler commits
any material act of dishonesty, fraud or embezzlement with respect to the
Company or any subsidiary or affiliate thereof, (b) is convicted of a crime
of moral turpitude, or (c) breaches any material obligation under this
Agreement. The Company's total liability to Gessler in the event of
termination of Gessler's employment under this Subsection 7.1 shall be
limited to the payment of Gessler's salary and benefits through the effective
date of termination.
7.2 Without Cause. The Company may terminate this
Agreement without cause upon thirty (30) days' written notice to Gessler.
Upon any termination of this Agreement without cause by the Company, the
Company shall pay to Gessler as severance pay an amount equal to one half
(1/2) of Gessler's salary for that calendar year during which the termination
becomes effective, in addition to such other compensation to which Gessler
may be entitled prior to the date of termination.
7.3 By Gessler. Gessler reserves the right to terminate his
employment hereunder for any reason upon thirty (30) days' written notice to
the Company. The Company's total liability to Gessler in the event of
termination of Gessler's employment under this Subsection 7.3 shall be
limited to the payment of Gessler's salary and benefits through the effective
date of termination and the provisions of Subsection 7.2 shall not apply.
8. Miscellaneous.
8.1 Modification. Any modification of this Agreement
shall be effective only if reduced to writing and signed by the parties to be
bound thereby.
8.2 Entire Agreement. This Agreement constitutes the
entire agreement between the Company and Gessler pertaining to the subject
matter hereof and supersedes all prior or contemporaneous written or verbal
agreements and understandings between the parties in connection with the
subject matter hereof.
Page 3
<PAGE>
8.3 Severability. If any provision of this Agreement is
held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remaining provisions shall, nevertheless, continue in full
force and effect without being impaired or invalidated in any way.
8.4 Waiver. The parties hereto shall not be deemed to
have waived any of their respective rights under this Agreement unless the
waiver is in writing and signed by the waiving party. No delay in exercising
any right shall be a waiver of such right nor shall a waiver of any right on
one occasion operate as a waiver of such right on a future occasion.
8.5 Costs of Enforcement. If any action or proceeding
shall be commenced to enforce this Agreement or any right arising in
connection with this Agreement, each party shall initially bear its own costs
and legal fees associated with such action or proceeding. The prevailing
party in any such action or proceeding shall be entitled to recover from the
other party the reasonable attorneys' fees, costs and expenses incurred by
such prevailing party in connection with such action or proceeding.
8.6 Notices. All notices provided for herein shall be
in writing and delivered personally or sent by United States mail, registered
or certified, postage paid or by Federal Express, addressed as follows:
To the Company: Gene Logic, Inc.
10150 Old Columbia Road
Columbia, MD 21046
To Gessler: Mark D. Gessler
111 Speckled Egg Place
The Woodlands, TX 77381
or to such other addresses as either of such parties may from time to time
designate in writing. Any notice given under this Agreement shall be deemed
to have been given on the date of actual receipt, or, if not received during
normal business hours, on the next business day.
IN WITNESS WHEREOF, the parties have executed this
Agreement by their duly authorized officers or agents as of the date first
written above.
"Company" "Employee"
GENE LOGIC INC.
a Delaware corporation /s/ Mark D. Gessler
_______________________
Mark D. Gessler
By: /s/ Michael J. Brennan
________________________________
Name: Dr. Michael J. Brennan
_____________________________
Title: President and Chief Executive Officer
______________________________________
Page 4
<PAGE>
Exhibit 10.15
AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT (this "Amendment") is made and
entered into as of July 9, 1997, by and between GENE LOGIC INC., a Delaware
Corporation (the "Company"), and MARK D. GESSLER ("Executive").
WHEREAS, the Company and Executive previously entered into an Employment
Agreement dated May 16, 1996 (the "Employment Agreement") which, among other
things, provides for the automatic vesting of all outstanding options to
purchase the Company's Common Stock held by the Executive upon a change of
control of the Company (the "Vesting Provision"); and
WHEREAS, the Company and Executive desire to amend the Employment
Agreement to amend and restate the Vesting Provision.
NOW, THEREFORE, the parties hereto, in consideration of the mutual
promises and agreements set forth below, hereby agree to amend the Employment
Agreement as follows:
1. Restatement of Vesting Provision. Section 3.2 of the Employment
Agreement shall be amended and restated to read in its entirety as follows:
"3.2 Incentive Stock Options. The Company will grant incentive stock
options to Gessler in each year during which this Agreement remains in
force, in numbers consistent with Gessler's position as Senior Vice
President, Corporate Development and Chief Financial Officer of the
Company. Such incentive stock options shall become exercisable according
to the schedule established by the Board of Directors for the Company's
Incentive Stock Option Plan. In the event of: (i) a merger or
consolidation of the Company with another corporation, not including any
merger or consolidation if immediately thereafter the stockholders of the
Company immediately before such transaction own shares representing more
than 50% of the outstanding voting securities of the surviving
corporation, (ii) a sale of shares by the stockholders of the Company if
immediately thereafter the stockholders of the Company immediately before
such sale own shares representing less than 50% of the outstanding voting
securities of the surviving corporation, or (iii) a sale of all or
substantially all of the Company's assets, all options to purchase Common
Stock of the Company held by Gessler that have not previously vested under
the terms of the applicable Option Agreements shall vest immediately upon
the closing of such transaction. In the event of an underwritten initial
public offering of the Company's Common Stock, to the extent at least 80%
of the aggregate of the shares subject to outstanding options to purchase
Common Stock of the Company held by Gessler (other than any such options
granted
1.
<PAGE>
immediately prior to and in contemplation of such initial public offering)
have not previously vested under the terms of the applicable Option
Agreements, then the vesting of such options shall be accelerated such
that 80% of the shares subject to each such option shall be vested as of
the closing of such initial public offering and the remaining 20% of the
shares subject to each such option shall vest 180 days from the closing of
such initial public offering. If, in the event of an underwritten initial
public offering of the Company's Common Stock, 80% or more of the
aggregate of the shares subject to outstanding options to purchase Common
Stock of the Company held by Gessler (other than any such options granted
immediately prior to and in contemplation of such initial public offering)
have previously vested, then any remaining unvested shares subject to such
options shall vest 180 days from the closing of such initial public
offering.
2. Effective Date. This Amendment shall be effective as of the date
of the Employment Agreement. Except as amended herein, or as otherwise
agreed to in writing by the Company and Executive, all terms of the
Employment Agreement shall remain in full force and effect.
2.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment to Employment
Agreement as of the date first above written.
THE COMPANY: EXECUTIVE:
GENE LOGIC INC.
a Delaware Corporation
By: /s/ Michael J. Brennan /s/ Mark D. Gessler
-------------------------- --------------------------
Name: Dr. Michael J. Brennan Mark D. Gessler
Title: President and Chief Executive Officer
-------------------------------------
3.
<PAGE>
Exhibit 10.16
THE SECURITY REPRESENTED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 AND MAY NOT BE SOLD, ASSIGNED OR TRANSFERRED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT FOR SUCH SECURITY UNDER THE SECURITIES ACT OF 1933
UNLESS THE COMPANY HAS RECEIVED THE WRITTEN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY TO THE EFFECT THAT SUCH SALE, ASSIGNMENT OR TRANSFER DOES NOT
INVOLVE A TRANSACTION REQUIRING REGISTRATION OF SUCH SECURITY UNDER THE
SECURITIES ACT OF 1933
Warrant No. 95-1 Right to Purchase
39,141 Shares (subject to
adjustment) of Series A-1
Issue Date: August 1, 1995 Convertible Preferred Stock of
Void After August 31, 2005 Senatics Corporation
Senatics Corporation
SERIES A-1 CONVERTIBLE PREFERRED STOCK PURCHASE WARRANT
THIS CERTIFIES that, in consideration of value received, Oxford
Bioscience Partners L.P. (the "Holder"), is entitled, upon the terms and
subject to the conditions hereinafter set forth, to subscribe for and
purchase from Senatics Corporation, a Delaware corporation (the "Company"),
Thirty-Nine Thousand One Hundred Forty-One (39,141) fully paid and
nonassessable shares of the Company's Series A-1 Convertible Preferred Stock,
$0.01 par value (the "Preferred Stock"). The number and exercise price of
the securities that may be purchased upon the exercise of this Series A-1
Convertible Preferred Stock Purchase Warrant (the "Warrant") are subject to
adjustment as provided herein.
1. Exercise Period and Price - The purchase rights represented by this
Warrant are exercisable by the Holder, in whole or in part, at any time from
time to time during the Exercise Period at the Exercise Price. The Exercise
Price shall initially be $1.60 per share of Preferred Stock, subject to
adjustment as hereinafter provided.
The Exercise Period shall commence at 9:00 a.m. Westport, Connecticut
time on August 1, 1995 and shall end at 5:00 p.m. Westport, Connecticut
time on August 31, 2005.
2. Exercise of Warrant - During the Exercise Period and provided this
Warrant has not been terminated, this Warrant shall be exercised, in whole or
in part and from time to time, by the surrender of this Warrant and the
Notice of Exercise annexed hereto duly executed at the principal office of
the Company, in Westport, Connecticut (or
1
<PAGE>
such other office or agency of the Company as it may designate) and upon
payment of the Exercise Price of the shares thereby purchased (payment to be
by check or bank draft payable to the order of the Company). If the amount of
the payment received by the Company is less than the Exercise Price, the
Holder will be notified of the deficiency and shall make payment in that
amount within three days. In the event the payment exceeds the Exercise
Price, the Company will refund the excess to the holder within three days of
receipt. Upon exercise, the Holder shall be entitled to receive, within a
reasonable time after payment in full, one or more certificates, issued in
the Holder's name or in such name or names as the Holder may direct, subject
to the limitations on transfer contained herein, for the number of shares of
Preferred Stock so purchased. The shares so purchased shall be deemed to be
issued as of the close of business on the date on which this Warrant shall
have been exercised.
The Company covenants that all shares of Preferred Stock that are issued
upon the exercise of rights represented by this Warrant will be fully paid,
nonassessable, and free from all taxes, liens and charges in respect of the
issue thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue) and that such number of shares of the
Company's Common Stock, par value $0.01, as shall be necessary to permit the
conversion of all such shares of Preferred Stock have been, and will remain,
reserved and set aside for issuance upon conversion in accordance with the
terms of the Preferred Stock.
3. No Fractional Shares or Scrip - No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. In lieu thereof, a cash payment shall be made equal to such
fraction multiplied by the Exercise Price per share as then in effect.
4. Charges, Taxes and Expenses - Issuance of certificates for shares of
Preferred Stock upon the exercise of this Warrant shall be made without
charge to the Holder for any issue or transfer tax or other incidental
expense in respect of the issuance of such certificate, all of which taxes
and expenses shall be paid by the Company.
5. No Rights as Shareholder - This Warrant does not entitle the Holder
to any voting rights or other rights as a shareholder of the Company prior to
exercise and payment of the Exercise Price in accordance with Section 2
hereof.
6. Sale or Transfer of the Warrant; Legend - This Warrant shall not be
sold or transferred unless either (i) it first shall have registered under
the 1933 Act and any applicable state securities laws, or (ii) the Company
first shall have been furnished with an opinion of legal counsel reasonably
satisfactory to the Company to the effect that such sale or transfer is
exempt from the registration requirements of the 1933 Act and such state
laws. Each certificate representing any Warrant that has not been registered
and that
2
<PAGE>
has not been sold pursuant to an exemption that permits removal of the legend
shall bear a legend substantially in the form of the legend affixed to this
Warrant.
Upon the request of a holder of a certificate representing any Warrant,
the Company shall remove the aforementioned legend from the certificate or
issue to such holder a new certificate therefor free of any transfer legend,
if, with such request, the Company shall have received either (i) an opinion
of counsel reasonably satisfactory to the Company to the effect that such
legend may be removed from such certificate or (ii) if the present Paragraph
(k) of Rule 144 or a substantially similar successor rule remains in force
and effect, representations from the holder that such holder is not then, and
has not been during the preceding three months, an affiliate of the Company
and that such holder has beneficially owned the security (within the meaning
of Rule 144) for three years or more.
Such Warrant may be subject to additional restrictions on transfer
imposed under applicable state and federal securities law.
7. Adjustments
7.1 Adjustments for Stock Splits, Reverse Stock Splits and Stock
Dividends - In the event that the outstanding shares of Preferred Stock or
Preferred Stock shall be subdivided (split), combined (reverse split), by
reclassification or otherwise, or in the event of any dividend payable on the
Preferred Stock in shares of Preferred Stock, the number of shares of
Preferred Stock available for purchase in effect immediately prior to such
subdivision, combination, or dividend shall be proportionately adjusted.
7.2 Adjustment for Capital Reorganizations - If at any time there
shall be a capital reorganization of the Company or a merger or consolidation
of the Company with or into another corporation, or the sale of the Company's
properties and assets as, or substantially as, an entirety to any other
person, then, as part of such reorganization, merger, consolidation, or sale,
lawful provision shall be made so that the Holder of this Warrant shall
thereafter be entitled to receive on exercise of this Warrant during the
period specified in this Warrant and on payment of the Exercise Price then in
effect, the number of shares of stock or other securities or property of the
Company, or of the successor corporation resulting from such merger or
consolidation, to which a holder of the Preferred Stock deliverable on
exercise of this Warrant would have been entitled on such capital
reorganization, merger, consolidation, or sale if this Warrant would have
been entitled on such capital reorganization, merger, consolidation, or sale
if this Warrant had been exercised immediately before that capital
reorganization, merger, consolidation, or sale. In any such case,
appropriate adjustment, as determined in good faith by the Board of Directors
of the Company, shall be made in the application of the provisions of this
Warrant with respect to the rights and interests of the Holder of this
Warrant after the
3
<PAGE>
reorganization, merger, consolidation, or sale to the end that the provisions
of this Warrant (including adjustment of the number of shares purchasable on
exercise of this Warrant) shall be applicable after that event, as near as
reasonably may be, in relation to any shares or other securities or property
deliverable after that event on exercise of this Warrant.
7.3 Certificate as to Adjustments - Upon the occurrence of each
adjustment or readjustment pursuant to this Section 7, the Company at its
expense shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and furnish to each Holder a certificate setting forth
such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based. The Company shall, upon the
written request, at any time, of any Holder, furnish or cause to be furnished
to such Holder, a like certificate setting forth: (i) such adjustments and
readjustments; (ii) the Exercise Price at the time in effect; and (iii) the
number of shares of Preferred Stock and the amount, if any, of other property
that at the time would be received upon the exercise of the Warrant.
7.4 Notices of Record Date - In the event of any taking by the
Company of a record of the holders of any class of securities for the purpose
of determining the holders thereof who are entitled to receive any dividend
(other than a cash dividend that is the same as cash dividends paid in
previous quarters) or other distribution, the Company shall mail to each
Holder at least ten days prior to the date specified for the taking of a
record, a notice specifying the date on which any such record is to be taken
for the purpose of such dividend or distribution.
8. Reservation of Stock, etc., Issuable on Exercise of Warrant - The
Company will at all times reserve and keep available, solely for issuance and
delivery upon the exercise of this Warrant, all shares of Preferred Stock (or
other securities) from time to time issuable upon the exercise of this
Warrant and all shares of Preferred Stock issuable upon conversion of such
shares of Preferred Stock.
9. Loss, Theft, Destruction or Mutilation of Warrant - Upon receipt by
the Company of evidence reasonably satisfactory to it of the loss, theft,
destruction, or mutilation of this Warrant, and in case of loss, theft, or
destruction, of indemnity or security reasonably satisfactory to it, and upon
reimbursement to the Company of all reasonable expenses incidental thereto,
and upon surrender and cancellation of this Warrant, if mutilated, the
Company will make and deliver a new Warrant of like tenor and dated as of
such cancellation in lieu of this Warrant.
10. Remedies - The Company stipulates that the remedies at law of the
holder of this Warrant in the event of any default or threatened default by
the Company in the performance of or compliance with any of the terms of this
Warrant are not adequate and
4
<PAGE>
may be enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
11. Notices, etc. - All notices and other communications from the
Company to the holder of this Warrant shall be mailed, by first class mail,
to such address as may have been furnished to the Company in writing by such
holder, or, until an address is so furnished, to and at the address of the
last holder of this Warrant who has so furnished an address to the Company.
All communications from the holder of this Warrant to the Company shall be
mailed by first class mail to the Company's principal office, or such other
address as may have been furnished to the holder in writing by the Company.
12. Miscellaneous - This Warrant shall be construed and enforced in
accordance with and governed by the laws of the State of Delaware. The
headings in this Warrant are for purposes of reference only, and shall not
limit or otherwise affect any of the terms hereof.
In Witness Whereof, the Company has caused this Warrant to be executed in
its corporate name by its duly authorized President and to be dated as of the
issue date set forth on the first page of this Warrant.
In the presence of: Senatics Corporation
Martin A. Vogelbaum By: /s/ Alan G. Walton
- - - ------------------------------ ----------------------------------
President
5
<PAGE>
NOTICE OF EXERCISE OF STOCK PURCHASE WARRANT
TO: Senatics Corporation
1. Pursuant to the terms of the attached Warrant, the undersigned
hereby elects to purchase _______ shares of Series A-1 Convertible Preferred
Stock of Senatics Corporation, and tenders herewith payment of the Exercise
Price of such shares in full.
2. Please issue a certificate or certificates representing said shares
of Preferred Stock, in the name of the undersigned or in such other name(s)
as is/are specified immediately below or, if necessary, on an attachment
hereto:
Name Address
- - - -------------------------------- --------------------------------------
3. In the event of partial exercise, please reissue an appropriate
Warrant exercisable into the remaining shares.
DATE: HOLDER:
--------------------------- -------------------------------
6
<PAGE>
Exhibit 10.17
THE SECURITY REPRESENTED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 AND MAY NOT BE SOLD, ASSIGNED OR TRANSFERRED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT FOR SUCH SECURITY UNDER THE SECURITIES ACT OF 1933
UNLESS THE COMPANY HAS RECEIVED THE WRITTEN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY TO THE EFFECT THAT SUCH SALE, ASSIGNMENT OR TRANSFER DOES NOT
INVOLVE A TRANSACTION REQUIRING REGISTRATION OF SUCH SECURITY UNDER THE
SECURITIES ACT OF 1933
Warrant No. 95-2 Right to Purchase
10,859 Shares (subject to adjustment) of
Issue Date: August 1, 1995 Series A-1 Convertible Preferred Stock
Void After August 31, 2005 of Senatics Corporation
Senatics Corporation
SERIES A-1 CONVERTIBLE PREFERRED STOCK PURCHASE WARRANT
THIS CERTIFIES that, in consideration of value received, Oxford
Bioscience Partners (Bermuda) Limited Partnership (the "Holder"), is
entitled, upon the terms and subject to the conditions hereinafter set forth,
to subscribe for and purchase from Senatics Corporation, a Delaware
corporation (the "Company"), Ten Thousand Eight Hundred Fifty-Nine (10,859)
fully paid and nonassessable shares of the Company's Series A-1 Convertible
Preferred Stock, $0.01 par value (the "Preferred Stock"). The number and
exercise price of the securities that may be purchased upon the exercise of
this Series A-1 Convertible Preferred Stock Purchase Warrant (the "Warrant")
are subject to adjustment as provided herein.
1. Exercise Period and Price - The purchase rights represented by this
Warrant are exercisable by the Holder, in whole or in part, at any time from
time to time during the Exercise Period at the Exercise Price. The Exercise
Price shall initially be $1.60 per share of Preferred Stock, subject to
adjustment as hereinafter provided.
The Exercise Period shall commence at 9:00 a.m. Westport, Connecticut
time on August 1, 1995 and shall end at 5:00 p.m. Westport, Connecticut
time on August 31, 2005.
2. Exercise of Warrant - During the Exercise Period and provided this
Warrant has not been terminated, this Warrant shall be exercised, in whole or
in part and from time to time, by the surrender of this Warrant and the
Notice of Exercise annexed hereto duly executed at the principal office of
the Company, in Westport, Connecticut (or
1
<PAGE>
such other office or agency of the Company as it may designate) and upon
payment of the Exercise Price of the shares thereby purchased (payment to be
by check or bank draft payable to the order of the Company). If the amount
of the payment received by the Company is less than the Exercise Price, the
Holder will be notified of the deficiency and shall make payment in that
amount within three days. In the event the payment exceeds the Exercise
Price, the Company will refund the excess to the holder within three days of
receipt. Upon exercise, the Holder shall be entitled to receive, within a
reasonable time after payment in full, one or more certificates, issued in
the Holder's name or in such name or names as the Holder may direct, subject
to the limitations on transfer contained herein, for the number of shares of
Preferred Stock so purchased. The shares so purchased shall be deemed to be
issued as of the close of business on the date on which this Warrant shall
have been exercised.
The Company covenants that all shares of Preferred Stock that are issued
upon the exercise of rights represented by this Warrant will be fully paid,
nonassessable, and free from all taxes, liens and charges in respect of the
issue thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue) and that such number of shares of the
Company's Common Stock, par value $0.01, as shall be necessary to permit the
conversion of all such shares of Preferred Stock have been, and will remain,
reserved and set aside for issuance upon conversion in accordance with the
terms of the Preferred Stock.
3. No Fractional Shares or Scrip - No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. In lieu thereof, a cash payment shall be made equal to such
fraction multiplied by the Exercise Price per share as then in effect.
4. Charges, Taxes and Expenses - Issuance of certificates for shares of
Preferred Stock upon the exercise of this Warrant shall be made without
charge to the Holder for any issue or transfer tax or other incidental
expense in respect of the issuance of such certificate, all of which taxes
and expenses shall be paid by the Company.
5. No Rights as Shareholder - This Warrant does not entitle the Holder
to any voting rights or other rights as a shareholder of the Company prior to
exercise and payment of the Exercise Price in accordance with Section 2
hereof.
6. Sale or Transfer of the Warrant; Legend - This Warrant shall not be
sold or transferred unless either (i) it first shall have registered under
the 1933 Act and any applicable state securities laws, or (ii) the Company
first shall have been furnished with an opinion of legal counsel reasonably
satisfactory to the Company to the effect that such sale or transfer is
exempt from the registration requirements of the 1933 Act and such state
laws. Each certificate representing any Warrant that
2
<PAGE>
has not been registered and that has not been sold pursuant to an exemption
that permits removal of the legend shall bear a legend substantially in the
form of the legend affixed to this Warrant.
Upon the request of a holder of a certificate representing any Warrant,
the Company shall remove the aforementioned legend from the certificate or
issue to such holder a new certificate therefor free of any transfer legend,
if, with such request, the Company shall have received either (i) an opinion
of counsel reasonably satisfactory to the Company to the effect that such
legend may be removed from such certificate or (ii) if the present Paragraph
(k) of Rule 144 or a substantially similar successor rule remains in force
and effect, representations from the holder that such holder is not then, and
has not been during the preceding three months, an affiliate of the Company
and that such holder has beneficially owned the security (within the meaning
of Rule 144) for three years or more.
Such Warrant may be subject to additional restrictions on transfer
imposed under applicable state and federal securities law.
7. Adjustments
7.1 Adjustments for Stock Splits, Reverse Stock Splits and Stock
Dividends - In the event that the outstanding shares of Preferred Stock or
Preferred Stock shall be subdivided (split), combined (reverse split), by
reclassification or otherwise, or in the event of any dividend payable on the
Preferred Stock in shares of Preferred Stock, the number of shares of
Preferred Stock available for purchase in effect immediately prior to such
subdivision, combination, or dividend shall be proportionately adjusted.
7.2 Adjustment for Capital Reorganizations - If at any time there
shall be a capital reorganization of the Company or a merger or consolidation
of the Company with or into another corporation, or the sale of the Company's
properties and assets as, or substantially as, an entirety to any other
person, then, as part of such reorganization, merger, consolidation, or sale,
lawful provision shall be made so that the Holder of this Warrant shall
thereafter be entitled to receive on exercise of this Warrant during the
period specified in this Warrant and on payment of the Exercise Price then in
effect, the number of shares of stock or other securities or property of the
Company, or of the successor corporation resulting from such merger or
consolidation, to which a holder of the Preferred Stock deliverable on
exercise of this Warrant would have been entitled on such capital
reorganization, merger, consolidation, or sale if this Warrant would have
been entitled on such capital reorganization, merger, consolidation, or sale
if this Warrant had been exercised immediately before that capital
reorganization, merger, consolidation, or sale. In any such case,
appropriate adjustment, as determined in good faith by the Board of Directors
of the Company, shall be made in the application of the provisions of this
Warrant with respect to the rights and interests of the Holder of this
Warrant after the
3
<PAGE>
reorganization, merger, consolidation, or sale to the end that the provisions
of this Warrant (including adjustment of the number of shares purchasable on
exercise of this Warrant) shall be applicable after that event, as near as
reasonably may be, in relation to any shares or other securities or property
deliverable after that event on exercise of this Warrant.
7.3 Certificate as to Adjustments - Upon the occurrence of each
adjustment or readjustment pursuant to this Section 7, the Company at its
expense shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and furnish to each Holder a certificate setting forth
such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based. The Company shall, upon the written
request, at any time, of any Holder, furnish or cause to be furnished to such
Holder, a like certificate setting forth: (i) such adjustments and
readjustments; (ii) the Exercise Price at the time in effect; and (iii) the
number of shares of Preferred Stock and the amount, if any, of other property
that at the time would be received upon the exercise of the Warrant.
7.4 Notices of Record Date - In the event of any taking by the
Company of a record of the holders of any class of securities for the purpose
of determining the holders thereof who are entitled to receive any dividend
(other than a cash dividend that is the same as cash dividends paid in
previous quarters) or other distribution, the Company shall mail to each
Holder at least ten days prior to the date specified for the taking of a
record, a notice specifying the date on which any such record is to be taken
for the purpose of such dividend or distribution.
8. Reservation of Stock, etc., Issuable on Exercise of Warrant - The
Company will at all times reserve and keep available, solely for issuance and
delivery upon the exercise of this Warrant, all shares of Preferred Stock (or
other securities) from time to time issuable upon the exercise of this
Warrant and all shares of Preferred Stock issuable upon conversion of such
shares of Preferred Stock.
9. Loss, Theft, Destruction or Mutilation of Warrant - Upon receipt by
the Company of evidence reasonably satisfactory to it of the loss, theft,
destruction, or mutilation of this Warrant, and in case of loss, theft, or
destruction, of indemnity or security reasonably satisfactory to it, and upon
reimbursement to the Company of all reasonable expenses incidental thereto,
and upon surrender and cancellation of this Warrant, if mutilated, the
Company will make and deliver a new Warrant of like tenor and dated as of
such cancellation in lieu of this Warrant.
10. Remedies - The Company stipulates that the remedies at law of the
holder of this Warrant in the event of any default or threatened default by
the Company in the performance of or compliance with any of the terms of this
Warrant are not adequate and
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may be enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
11. Notices, etc. - All notices and other communications from the
Company to the holder of this Warrant shall be mailed, by first class mail,
to such address as may have been furnished to the Company in writing by such
holder, or, until an address is so furnished, to and at the address of the
last holder of this Warrant who has so furnished an address to the Company.
All communications from the holder of this Warrant to the Company shall be
mailed by first class mail to the Company's principal office, or such other
address as may have been furnished to the holder in writing by the Company.
12. Miscellaneous - This Warrant shall be construed and enforced in
accordance with and governed by the laws of the State of Delaware. The
headings in this Warrant are for purposes of reference only, and shall not
limit or otherwise affect any of the terms hereof.
In Witness Whereof, the Company has caused this Warrant to be executed in
its corporate name by its duly authorized President and to be dated as of the
issue date set forth on the first page of this Warrant.
In the presence of: Senatics Corporation
Martin A. Vogelbaum By: /s/ Alan G. Walton
- - - ----------------------------- ---------------------------
President
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NOTICE OF EXERCISE OF STOCK PURCHASE WARRANT
TO: Senatics Corporation
1. Pursuant to the terms of the attached Warrant, the undersigned
hereby elects to purchase _______ shares of Series A-1 Convertible Preferred
Stock of Senatics Corporation, and tenders herewith payment of the Exercise
Price of such shares in full.
2. Please issue a certificate or certificates representing said shares
of Preferred Stock, in the name of the undersigned or in such other name(s)
as is/are specified immediately below or, if necessary, on an attachment
hereto:
Name Address
- - - ---------------------------------------- -----------------------------------
3. In the event of partial exercise, please reissue an appropriate
Warrant exercisable into the remaining shares.
DATE: HOLDER:
------------------------------------ ---------------------------
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Exhibit 10.18
THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION
STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN
EXEMPTION TO SUCH ACT.
Void after the Fifth Anniversary of the Date Hereof
WARRANT FOR THE
PURCHASE OF SHARES OF COMMON STOCK
of
GENE LOGIC INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES THAT, for value received, ARE-708 QUINCE ORCHARD, LLC, a
Delaware limited liability company, having its principal offices at 251 South
Lake Avenue, Suite 700, Pasadena, California 91101, together with its
successors and assigns (the "Investor") is entitled to purchase, up to Twenty
Thousand (20,000) duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock (the "Common Stock") of Gene Logic Inc.,
a Delaware corporation having its principal offices at 10150 Old Columbia
Road, Columbia, Maryland 21046 (the "Company"), at the per share purchase
price described in Section 1.3 below, subject to the provisions and upon the
terms and conditions hereinafter set forth.
1. Exercise of Warrant. The terms and conditions upon which this Warrant
may be exercised, and the Common Stock covered hereby (the "Warrant Stock")
may be purchased, are as follows:
1.1 Term. Subject to the terms hereof, the purchase right
represented by this Warrant may be exercised in whole or in part at any time
and from time to time from and after the date hereof and on or before the
date which is the earlier of (i) the fifth anniversary of the date of this
Warrant; (ii) the closing of the initial underwritten public offering by the
Company of its Common Stock effected pursuant to a Registration Statement
filed under the Securities Act of 1933, as amended (the "Act"); (iii) the
effective time of a merger or reorganization following which the stockholders
of the Company immediately prior to such transaction own after such
transaction less
<PAGE>
than fifty percent (50%) of the equity securities of the surviving
corporation (or its parent, if any), or (iv) the closing of a sale of all or
substantially all of the Company's assets; provided that, if the last day on
which this Warrant may be exercised is a Sunday or a legal holiday or a day
on which banking institutions doing business in the City of Baltimore are
authorized by law to close, this Warrant may be exercised prior to 5:00 p.m.
(Baltimore time) on the next succeeding full business day with the same force
and effect as if exercised on such last day specified herein.
1.2 Number of Shares. The number of shares of Common Stock for
which this Warrant is initially exercisable is Twenty Thousand (20,000)
shares, which number is subject to adjustment pursuant to Section 2 of this
Warrant.
1.3 Purchase Price. The initial per share purchase price for the
shares of Common Stock to be issued upon exercise of this Warrant shall be
$5.40, subject to adjustment as provided herein (the "Warrant Price").
1.4 Method of Exercise. The exercise of the purchase rights
evidenced by this Warrant shall be effected by (a) the surrender of the
Warrant, together with a duly executed copy of the form of a subscription
attached hereto, to the Company at its principal offices and (b) the delivery
of the purchase price (i) by check or bank draft payable to the Company's
order or by wire transfer to the Company's account for the number of shares
for which the purchase rights hereunder are being exercised or any other form
of consideration approved by the Company's Board of Directors or (ii)
pursuant to the procedure set forth in Section 1.5. Each exercise of this
Warrant shall be deemed to have been effected immediately prior to the close
of business on the day on which this Warrant shall have been surrendered to
the Company as provided herein or at such latter date as may be specified in
the executed form of subscription, and at such time the person or persons in
whose name or names any certificate or certificates for shares of Common
Stock shall be issuable upon such exercise as provided herein shall be deemed
to have become the holder or holders of record thereof.
1.5 Cashless Exercise. In addition to and without limiting the
rights of the holder hereof under the terms hereof, at the holder's option
this Warrant may be exercised in whole or in part at any time or from time to
time prior to its expiration for a number of shares of Common Stock having an
aggregate fair market value on the date of such exercise equal to the
difference between (a) the fair market value of the number of shares of
Common Stock subject to this Warrant designated for exercise by the holder
hereof on the date of the exercise and (b) the aggregate Warrant Price for
such shares in effect at such time. For the purposes of this Warrant, the
"fair market value" of shares of Common Stock shall be calculated on the
basis of (a) if the Common Stock is then traded on a securities exchange, the
average of the closing prices of the Common Stock on such exchange over the
20 trading day period ending three (3)
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trading days prior to the date of exercise, (b) if the Common Stock is then
regularly traded over-the-counter, the average of the sale prices or
secondarily the closing bid of the Common Stock over the 20 trading day
period ending three (3) trading days prior to the date of exercise, or (c) if
there is no active public market for the Common Stock, the fair market value
thereof shall be determined in good faith by the Company's Board of
Directors. In the event the holder of this Warrant exercises this Warrant
contingent upon the closing of a public offering, the "fair market value" of
a share of Common Stock on the date of exercise shall be equal to the initial
price to the public specified in the final prospectus with respect to such
public offering. The following diagram illustrates how many shares would
then be issued upon exercise pursuant to this Section 1.5:
Let FMV = Fair market value per share of Common Stock
at date of exercise.
PSP = Per share Warrant Price at date of exercise.
N = Number of shares of Common Stock desired to
be exercised.
X = Number of shares of Common Stock issued upon
exercise.
X = (FMV)(N)-(PSP)(N)
-----------------
FMV
No payment of any cash or other consideration to the Company shall be
required from the holder of this Warrant in connection with any exercise of
this Warrant pursuant to this Section 1.5. Such exercise shall be effective
upon the date of receipt by the Company of the original Warrant surrendered
for cancellation and a written request from the holder hereof that the
exercise pursuant to this section be made, or at such later date as may be
specified in such request.
1.6 Issuance of Shares. As soon as reasonably practicable after
each exercise of this Warrant, in whole or in part, the Company at its
expense (including the payment by it of any applicable issue taxes) will
cause to be issued in the name of and delivered to the holder hereof or as
such holder (upon payment by such holder of any applicable transfer taxes)
may direct, (a) a certificate or certificates for the number of duly
authorized, validly issued, fully paid and nonassessable shares of Common
Stock to which such holder shall be entitled upon such exercise, and (b) in
case such exercise is in part only, a new Warrant or Warrants of like tenor,
calling in the aggregate on the face or faces thereof for the number of
shares of Common Stock equal (without giving effect to any adjustment
thereof) to the number of such shares called for on the face of this Warrant
minus the number of such shares designated by the holder upon such exercise
as provided herein.
2. Certain Adjustments.
2.1 Mergers Consolidations or Sale of Assets. If at any time
after the date hereof there shall be a capital reorganization (other than a
combination or subdivision of Common Stock otherwise provided for herein), or
spin-off, or a merger or consolidation of the Company with or into another
corporation, or the sale of all or substantially all of the Company's
properties and assets to any other person, then, as a part of such
reorganization, spin-off, merger, consolidation or sale, lawful provision
shall be made so that the Investor shall thereafter be entitled to receive
upon
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<PAGE>
exercise of this Warrant, during the period specified in this Warrant and
upon payment of the purchase price, the number of shares of stock or other
securities, cash or property of the Company or the successor corporation
resulting from such reorganization, spin-off, merger, consolidation or sale,
to which a holder of the Common Stock deliverable upon exercise of this
Warrant would have been entitled under the provisions of the agreement in
such reorganization, spin-off, merger, consolidation or sale if this Warrant
had been exercised immediately before such reorganization, spin-off, merger,
consolidation or sale. In any such case, appropriate adjustment (as
determined reasonably and in good faith by the Company's Board of Directors)
shall be made in the application of the provisions of this Warrant with
respect to the rights and interests of the Investor after the reorganization,
spin-off, merger, consolidation or sale to the end that the provisions of
this Warrant (including adjustment of the purchase price then in effect and
the number of shares of Common Stock issuable upon exercise hereof) shall be
applicable after that event, as near as reasonably may be, in relation to any
shares or other property deliverable after that event upon exercise of this
Warrant.
2.2 Splits and Subdivisions Dividends. In the event the Company
should at any time or from time to time effect or fix a record date for the
effectuation of a split or subdivision of the outstanding shares of Common
Stock or the determination of the holders of Common Stock entitled to receive
a dividend or other distribution payable in additional shares of Common Stock
or other securities or warrants, options or other rights convertible into, or
entitling the holder thereof to receive directly or indirectly, additional
shares of Common Stock (hereinafter referred to as the "Common Stock
Equivalents") without payment of any consideration by such holder for the
additional shares of Common Stock or Common Stock Equivalents (including the
additional shares of Common Stock issuable upon conversion or exercise
thereof), then, as of such record date (or the date of such distribution,
split or subdivision if no record date is fixed), the per share purchase
price shall be appropriately decreased and the number of shares of Common
Stock issuable upon exercise hereof shall be appropriately increased in
proportion to such increase of outstanding shares.
2.3 Combination of Shares. If the number of shares of Common
Stock outstanding at any time after the date hereof is decreased by a
combination of the outstanding shares of Common Stock, the per share purchase
price shall be appropriately increased and the number of shares of Common
Stock issuable upon exercise hereof shall be appropriately decreased in
proportion to such decrease in outstanding shares.
2.4 Notice of Other Distributions. In the event the Company
intends to declare a distribution payable in securities of the Company (other
than Common Stock Equivalents) or other persons, evidences of indebtedness
issued by the Company or other persons, assets (including cash dividends) or
options or rights not referred to in subsection 2.2, then, in each such case
for purposes of this subsection 2.4, the Company shall deliver to the
Investor at least twenty (20) days prior to the date of any such distribution
written notice of the Company's intention to make such distribution and
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<PAGE>
shall provide the Investor with any information related thereto as the
Investor shall reasonably request.
2.5 Issuance of Additional Common Stock
(a) If, after the date hereof, the Company shall issue or
sell (i) Additional Shares of Common Stock without consideration or for a
consideration per share less than the fair market value of a share of Common
Stock in effect immediately prior to such issue or sale, or (ii) options or
convertible securities with a minimum exercise or exchange price less than
the fair market value of a share of Common Stock then, and in each such case,
the Warrant Price shall be reduced, concurrently with such issue or sale, to
a price (calculated to the nearest .001 of a cent) determined by multiplying
such Warrant Price by a fraction (i) the numerator of which shall be (A) the
number of shares of Common Stock outstanding immediately prior to such issue
or sale plus (B) the number of shares of Common Stock that the aggregate
consideration received by the Company upon such issuance or sale (or, in the
case of options or convertible securities, receivable by the Company upon
exercise or exchange) would purchase at such fair market value, and (ii) the
denominator of which shall be the number of shares of Common Stock
outstanding immediately after such issue or sale (in the case of options or
convertible securities assuming exercise or exchange thereof).
(b) For purposes of this Section 2.5 only, "Common Stock"
shall mean the Common Stock of the Company and all Common Stock Equivalents.
For the purposes of this Section 2.5, the consideration for the issue or sale
of Additional Shares of Common Stock shall, irrespective of the accounting
treatment of such consideration, (i) insofar as it consists of cash, be
computed at the net amount of cash received by the Company, and (ii) insofar
as it consists of property (including securities) other than cash, be
computed at the fair value thereof at the time of such issue or sale, as
determined in good faith by the Board of Directors of the Company. In the
event of a dispute in good faith by the Investor as to the fair market value
of the consideration consisting of property, at the option of the Investor,
the Company shall engage a consulting firm or investment banking firm
mutually agreed to by the Investor and the Company to prepare an independent
appraisal of the fair market value of such property to be distributed. The
expenses of such appraisal shall be borne by the Company. Insofar as the
consideration for the issue or sale of Additional Shares of Common Stock
consists of both cash and property, it shall be computed as provided in
clauses (i) and (ii) of this Section 2.5(b).
(c) (i) Notwithstanding anything contained herein to the
contrary, the consideration for any Common Stock Equivalents shall be the
total amount of consideration received by the Company for the issuance of
such Common Stock Equivalents plus the minimum amount of consideration
payable to the Company upon exercise, conversion or exchange of Common Stock
Equivalents (the "Net Consideration") determined as of the date of issuance
of such Common
5
<PAGE>
Stock Equivalents. Any obligation, agreement or understanding to issue
Common Stock Equivalents at any time in the future shall be deemed to be an
issuance at the time such obligation or agreement is made or arises. No
adjustment of the Warrant Price shall be made under this Section 2.5 upon the
issuance of any shares of Common Stock which are issued pursuant to the
exercise, conversion or exchange of any Common Stock Equivalents if any
adjustment shall previously have been made upon the issuance of any such
Common Stock Equivalents.
(ii) Should the Net Consideration for any such Common
Stock Equivalents be increased or decreased from time to time, then, upon the
effectiveness of such change, the Warrant Price will be that which would have
been obtained (A) had the adjustments made upon the issuance of such Common
Stock Equivalents been made upon the basis of the actual Net Consideration
(as so increased or decreased) of such Common Stock Equivalents, and (B) had
adjustments to such Warrant Price since the date of issuance of such Common
Stock Equivalents been made to such Warrant Price as adjusted pursuant to (A)
above. Any adjustment of the Warrant Price with respect to this paragraph
which relates to Common Stock Equivalents shall be disregarded if, as, and
when all of such Common Stock Equivalents expire or are canceled without
being exercised, so that the Warrant Price effective immediately upon
cancellation or expiration shall be equal to the Warrant Price in effect at
the time of the issuance of the expired or canceled Common Stock Equivalents,
with such additional adjustments as would have been made to such Warrant
Price had the expired or canceled Common Stock Equivalents not been issued.
(d) "Additional Shares of Common Stock" shall mean all shares
of Common Stock issued by the Company, whether or not subsequently reacquired
or retired by the Company other than:
(i) the issuance or sale of 2,000,000 shares of Common
Stock or such additional number of shares of Common Stock as authorized by
the Board of Directors, or the grant of options exercisable therefor, to
directors, officers, employees and consultants of the Company or any
subsidiary pursuant to any qualified or non-qualified stock option plan or
agreement, stock purchase plan or agreement, stock restriction agreement,
employee stock ownership plan (ESOP), consulting agreement, or such other
options, issuances, arrangements, agreements or plans approved by a majority
of the members of the Board of Directors.
(ii) shares of Common Stock issued or issuable upon the
exercise of outstanding warrants for an aggregate of 50,000 shares of Series
A-1 Preferred Stock of the Company issued to the holders of such Series A-1
Preferred Stock in connection with the acquisition of such shares;
(iii) shares of Common Stock issued or issuable upon
the exercise of warrants issued in connection with the establishment or
maintenance by the Company of
6
<PAGE>
credit facilities or equipment financing transactions, approved in each case
by the Board of Directors;
(iv) shares of Common Stock issued or deemed issued in
connection with that certain Equity Adjustment Agreement dated March 29,
1996, by and between the Company and Michael J. Brennan, M.D., Ph.D.;
(v) shares of Common Stock issued or issuable in
connection with the acquisition of operating assets (including patents,
licenses and other intellectual property rights) or other businesses or the
establishment of joint ventures or strategic business relationships approved
in each case by the Board of Directors; and
(vi) 66,666 shares of Common Stock issued or issuable to
BIOS Laboratories, Inc., provided, that, if less than 66,666 shares are
issued to BIOS Laboratories, Inc., the remaining shares may be issued under
(i) above.
All such numbers shall be subject to equitable adjustment in the event of any
stock dividend, stock split, combination, reorganization, recapitalization,
reclassification or other similar event involving a change in the capital
structure of the Company.
(e) The number of shares of Common Stock that the holder of
this Warrant shall be entitled to receive upon each exercise hereof after any
adjustment pursuant to this Section 2.5 shall be determined by multiplying
(i) the number of shares of Common Stock that were issuable immediately prior
to such adjustment, by (ii) the fraction of which (A) the numerator is the
Warrant Price immediately prior to such adjustment and (B) the denominator is
the Warrant Price immediately following such adjustment.
2.6 Certificate as to Adjustments. In the case of each adjustment
or readjustment of the Warrant Price pursuant to this Section 2, the Company
at its expense will promptly compute such adjustment or readjustment in
accordance with the terms hereof and cause a certificate, signed by the
Company's Chief Financial Officer, setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based to be delivered to the holder of this Warrant. The
Company will furnish or cause to be furnished to such holder a certificate
setting forth (a) such adjustments and readjustments, (b) the Warrant Price
at the time in effect and how it was calculated and (c) the number of shares
of Common Stock issuable upon exercise hereof and the amount, if any, of
other property at the time receivable upon the exercise of the Warrant.
2.7 Other Dilutive Events. If any event shall occur as to which
the provisions of Section 2 are not strictly applicable but the failure to
make any adjustment would not fairly protect the purchase rights represented
by this Warrant in accordance with the essential intent and principles
7
<PAGE>
of such sections, then, in each such case, the Board of Directors of the
Company shall make such adjustment, if any, on a basis consistent with the
essential intent and principles established in Section 2, necessary to
preserve, without dilution, the purchase rights represented by this Warrant.
The Company will promptly notify the Investor of any such adjustments and
shall make the suggested adjustments.
2.8 No Dilution or Impairment. The Company will not, by amendment
of its certificate of incorporation or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issue or sale of securities
or any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of
all such action as may be necessary or appropriate in order to protect the
rights of the holder of this Warrant against dilution or other impairment.
Without limiting the generality of the foregoing, the Company (a) will
not permit the par value of any shares of stock receivable upon the exercise
of this Warrant to exceed the amount payable therefor upon such exercise, (b)
will take all such action as may be necessary or appropriate in order that
the Company may validly and legally issue fully paid and nonassessable shares
of stock on the exercise of the Warrants from time to time outstanding; and
(c) will not take any action which results in any adjustments of the Warrant
Price if the total number of shares of Common Stock issuable after the action
upon the exercise of all of the Warrants would exceed the total number of
shares of Common Stock then authorized by the Company's certificate of
incorporation and available for the purpose of issue upon such exercise.
2.9 Notices of Record Date etc. In the event of: (a) any taking by
the Company of a record of the holders of any class of securities of the
Company for the purpose of determining the holders thereof who are entitled
to receive any dividend (other than a cash dividend payable out of earned
surplus at the same rate as that of the last such cash dividend theretofore
paid) or other distribution, or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities or
property, or to receive any other right; (b) any capital reorganization of
the Company, any reclassification or recapitalization of the capital stock of
the Company or any transfer of all or substantially all of the assets of the
Company to any other person or any consolidation or merger involving the
Company; or (c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company, the Company will mail to the holder of this
Warrant at least twenty (20) days prior to the earliest date specified below,
a notice specifying: (i) the date on which any such record is to be taken for
the purpose of such dividend, distribution or right, and the amount and
character of such dividend, distribution or right; and (ii) the date on which
any such reorganization, reclassification, transfer, consolidation, merger,
dissolution, liquidation or winding-up is expected to become effective and
the record date for determining stockholders entitled to vote thereon and the
time, if any such time is to be fixed, as of which the holders of record of
Common Stock shall be
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<PAGE>
entitled to exchange their shares of Common Stock for the securities or other
property deliverable upon such reorganization, reclassification,
recapitalization, consolidation, merger, transfer, dissolution, liquidation
or winding-up.
3. Fractional Shares. No fractional shares shall be issued in
connection with any exercise of this Warrant. In lieu of the issuance of such
fractional share, the Company shall make a cash payment equal to the then
fair market value of such fractional share as determined in accordance with
Section 1.5 hereof.
4. Representations and Warranties of the Company.
4.1 Authorization. The Company has full power and authority to
enter into this Warrant. This Warrant has been duly authorized, executed and
delivered by the Company and constitutes its valid and legally binding
obligation, enforceable in accordance with its terms.
4.2 Reservation of Common Stock. The Company shall at all times
reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of effecting the exercise of this
Warrant, such number of its shares of Common Stock, free from preemptive
rights, as shall from time to time be sufficient to effect the exercise of
this Warrant, and if at any time the number of authorized but unissued shares
of Common Stock shall not be sufficient to effect the exercise of the entire
Warrant, in addition to such other remedies as shall be available to the
holder of this Warrant, the Company will take such action as may be necessary
to increase its authorized but unissued shares of Common Stock to such number
of shares as shall be sufficient for such purposes. If any shares of its
Common Stock to be reserved for the purpose of issuance upon exercise of the
Warrants require registration with or approval of any governmental authority
under any applicable law before such shares of Common Stock may be validly
issued or delivered, then it shall secure such registration or approval, as
the case may be, and maintain such registration or approval in effect so long
as so required. Nothing herein shall be deemed to require the Company to
register the sale of the Common Stock issued in connection with any exercise
of this Warrant.
4.3 Adjustment in Number of Shares Issuable and Purchase Price.
There has not been nor will there be any adjustment to the number of shares
issuable or the purchase price payable upon the exercise of any securities of
the Company convertible into or exchangeable for shares of Common Stock
resulting from the issuance or exercise of this Warrant.
4.4 Valid Issuance. This Warrant, when issued and delivered in
accordance with the terms hereof will be duly authorized and validly issued,
and the Common Stock issuable upon the exercise hereof, when issued pursuant
to the terms hereof and upon payment of the exercise price, shall, upon such
issuance, be duly authorized, validly issued, fully paid and nonassessable.
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4.5 Series C Convertible Preferred Stock. The per share purchase
price for the shares of Common Stock to be issued upon conversion of the
Company's outstanding Series C Convertible Preferred Stock is $4.50 as of the
date hereof.
5. Privilege of Stock Ownership. Prior to the exercise of this
Warrant, the Investor shall not be entitled, by virtue of holding this
Warrant, to any rights of a stockholder of the Company, including (without
limitation) the right to vote, receive dividends or other distributions,
exercise preemptive rights or be notified of stockholder meetings, and such
holder shall not be entitled to any notice or other communication concerning
the business or affairs of the Company. Nothing in this Section 5, however,
shall limit the right of the Investor to be provided the notices described in
Section 2 hereof or to participate in distributions described in Section 2
hereof if the Investor ultimately exercises this Warrant.
6. Limitation of Liability. Except as otherwise provided herein, in
the absence of affirmative action by the holder hereof to purchase the Common
Stock in accordance herewith, no mere enumeration herein of the rights or
privileges of the holder hereof shall give rise to an obligation on such
holder to purchase any securities or any liability of such holder for the
purchase price or as a stockholder of the Company, whether such obligation or
liability is asserted by the Company or by creditors of the Company.
7. Representations and Warranties of the Investor. The Investor
represents and warrants to the Company as follows:
7.1 Purchase Entirely for Own Account. This Warrant is being
acquired and, if this Warrant is exercised, the Common Stock issuable upon
exercise hereof will be acquired, for investment for such Investor's own
account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof in violation of the federal or state
securities laws.
7.2 Investment Experience. The Investor represents that it can
bear the economic risk of its investment and has such knowledge and
experience in financial or business matters that it is capable of evaluating
the merits and risks of the investment in the Warrant and the Common Stock
issuable upon exercise hereof. The Investor also represents it has not been
organized solely for the purpose of acquiring the Warrant or the Common Stock
issuable upon exercise hereof.
7.3 Restricted Securities. The Investor understands that the
Warrant being issued hereunder and the Common Stock issuable upon exercise
hereof are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and have not been registered
under the Act nor qualified under applicable state securities laws and that
under such laws and applicable regulations such securities may not be resold
without registration under the Act, except in certain limited
10
<PAGE>
circumstances. In this connection, the Investor represents that it is
familiar with Rule 144 promulgated under the Act ("Rule 144"), as presently
in effect, and understands the resale limitations imposed thereby and by the
Act.
7.4 Accredited Investor. The Investor is an "accredited investor"
within the meaning of Rule 501 of Regulation D promulgated under the Act.
7.5 Legends. It is understood that the certificates evidencing
the Common Stock issuable upon exercise hereof may bear one or all of the
following legends:
(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY
NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED
IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE
SECURITIES UNDER SUCH ACT OR AN EXEMPTION TO SUCH ACT"
(b) Any legend required by the laws of the States of Delaware
or Maryland and any other state in which the securities will be issued.
8. Additional Agreements
8.1 Market Stand-Off Agreement Except to the extent necessary to
maintain Alexandria Real Estate Equities Inc.'s, the non-managing member of
the Investor ("ARE"), status as a Real Estate Investment Trust ("REIT") under
the Internal Revenue Code of 1986, as amended, the Investor hereby agrees
that, during the period of duration specified by the Company or an
underwriter of Common Stock or other securities of the Company, following the
effective date of a registration statement of the Company filed under the
Act, it shall not, to the extent requested by the Company and such
underwriter, directly or indirectly sell, offer to sell, contract to sell
(including, without limitation, any short sale), grant any option to purchase
or otherwise transfer or dispose of (other than to a donee who agree to be
similarly bound) any portion of this Warrant or any Common Stock issuable
upon exercise hereof held by it at any time during such period except Common
Stock included in such registration; provided, however, that: (a) all
executive officers and directors of the Company and all other persons with
registration rights enter into similar agreements; and (b) such period shall
not exceed three hundred sixty five (365) days beginning the day after the
effective date of such registration statement.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Common Stock issuable upon
exercise hereof until the end of such period.
11
<PAGE>
8.2 Confidentiality. In handling any confidential information Investor
shall exercise the same degree of care that it exercises with respect to its
own proprietary information of the same type to maintain the confidentiality
of any nonpublic information thereby received or received pursuant to the
Warrant except that disclosure of such information may be made (i) to the
subsidiaries or affiliates of Investor in connection with their present or
prospective business relations with the Company, (ii) to prospective
transferees or purchasers of any interest in this Warrant, provided that they
have entered into a comparable confidentiality agreement in favor of the
Company, (iii) as may be required in connection with the examination, audit
or similar investigation of Investor. Confidential information hereunder
shall not include information that either: (a) is in the public domain or in
the knowledge or possession of Investor when disclosed to Investor, or (b) is
disclosed to Investor by a third party, provided, that Investor does not
have actual knowledge that such third party is prohibited from disclosing
such information.
8.3 Refusal Rights. On or before the date on which the Company becomes
subject to the reporting requirements of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), if the Investor desires to sell all or any
part of the Common Stock acquired under this Warrant (including any
securities received in respect thereof pursuant to recapitalization and the
like), and an offeror (the "Offeror") has made an offer therefore, which
offer the Investor desires to accept, the Investor shall: (i) obtain in
writing a bona fide offer (the "Bona Fide Offer") for the purchase thereof
from the Offeror; and (ii) give written notice (the "Warrant Notice") to the
Company setting forth the Investor's desire to sell such shares, which
Warrant Notice shall be accompanied by a photocopy of the original executed
Bona Fide Offer and shall set forth at least the name and address of the
Offeror and the price and terms of the Bona Fide Offer. Upon receipt of the
Warrant Notice, the Company shall have an option to purchase any or all of
such shares of Common Stock specified in the Warrant Notice, such option to
be exercisable by giving, within fifteen (15) days after the receipt of the
Warrant Notice, a written counter-notice to the Investor. If the Company
elects to purchase any or all such shares of Common Stock, it shall be
obligated to purchase, and the Investor shall be obligated to sell to the
Company, such shares at the price and terms indicated in the Bona Fide Offer
within forty-five (45) days from the date of receipt by the Company of the
Warrant Notice.
The Investor may sell, pursuant to the terms of the Bona Fide
Offer, any or all of such shares not purchased or agreed to be purchased by
the Company at any time during the sixty (60) days immediately following the
expiration of the fifteen (15)-day period during which the Company may give
the aforesaid counter-notice. If any or all such shares of Common Stock are
not sold pursuant to a Bona Fide Offer within the time period permitted
above, the unsold shares of Common Stock shall remain subject to the terms of
this subsection 8.3.
9. Transfers and Exchanges.
12
<PAGE>
9.1 The Investor agrees not to sell, hypothecate, pledge or
otherwise dispose of any interest in the Warrant or the Common Stock issuable
upon exercise hereof in the United States, its territories, possessions or
any area subject to its jurisdiction, or to any person who is a national
thereof or resident therein (including any estate of such person), or any
corporation, partnership or other entity created or organized therein, other
than in accordance with the Act.
9.2 Upon presentation to the Company's transfer agent of the form
of Assignment attached hereto, a new Warrant shall be issued to the new
holder hereof. New warrants issued in connection with transfers or exchanges
shall not require the signature of the new holder hereof and shall be
identical in form and provision to this Warrant except as to the number of
shares.
9.3 Each certificate evidencing the shares of Common Stock issued
upon exercise of this Warrant, or upon any transfer of such shares (other
than a transfer registered under the Act or any subsequent transfer of shares
so registered) shall, at the option of the Company, contain a legend, in form
and substance reasonably satisfactory to the Company and its counsel,
restricting the transfer of such shares to sales or other dispositions exempt
from the requirements of the Act.
9.4 Ownership of Warrants. The Company may treat the person in
whose name any Warrant is registered on the register kept at the office of
the Company maintained pursuant to Section 9.5(a) as the owner and holder
thereof for all purposes, notwithstanding any notice to the contrary, except
that, if and when any Warrant is properly assigned in blank, the Company may
(but shall not be obligated to) treat the bearer thereof as the owner of such
Warrant for all purposes, notwithstanding any notice to the contrary. A
Warrant, if properly assigned, may be exercised by a new holder without a new
Warrant first having been issued.
9.5 Transfer and Exchange of Warrants.
(a) The Company's counsel, Cooley Godward LLP, will serve as
transfer agent for the Company for purposes of this Warrant, where notices,
presentations and demands in respect of this Warrant may be made upon it,
until such time as the Company shall notify the holders of the Warrants of
any change in such transfer agent; and
(b) Upon the surrender of any Warrant, properly endorsed, for
registration of transfer or for exchange, the Company at its expense will
execute and deliver to or upon the order of the holder thereof a new Warrant
or Warrants of like tenor, in the name of such holder or as such holder (upon
payment by such holder of any applicable transfer taxes) may direct, calling
in the aggregate on the face or faces thereof for the number of shares of
Common Stock called for on the face or faces of the Warrant or Warrants so
surrendered.
13
<PAGE>
10. Successors and Assigns. The terms and provisions of this Warrant
shall be binding upon the Company and the Investor and their respective
successors and assigns, subject at all times to the restrictions set forth
herein.
11. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by
the Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to the Company,
and upon reimbursement to the Company of all reasonable expenses incidental
thereto, and upon surrender and cancellation of this Warrant, if mutilated,
the Company will make and deliver a new warrant of like tenor and dated as of
such cancellation, in lieu of this Warrant.
12. Saturdays, Sundays, Holidays, etc. If the last or appointed day
for the taking of any action or the expiration of any right required or
granted herein shall be a Saturday or Sunday or shall be a legal holiday,
then such action may be taken or such right may be exercised on the next
succeeding day not a legal holiday.
13. Amendments and Waivers. Any term of this Warrant may be amended
and the observance of any term of this Warrant may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the
Investor. Any such amendment or waiver shall be binding on the parties.
14. Governing Law. The terms and conditions of this Warrant shall be
governed by and construed in accordance with Delaware law, without regard to
conflict of law provisions.
15. Notices. Except as otherwise provided in this Warrant, any
requirement for a notice, demand or request under this Warrant will be
satisfied by a writing (a) hand delivered with receipt; (b) mailed by United
States registered or certified mail or Express Mail, return receipt
requested, postage prepaid; or (c) sent by Federal Express or any other
nationally recognized overnight courier service, and addressed as follows:
if to the Holder, at its address as shown on the books of the Company; and if
to the Company, at the address indicated therefor in the first paragraph of
this Warrant, Attn: Chief Financial Officer, with a copy to L. Kay Chandler,
Esq., Cooley Godward LLP, 4365 Executive Drive, Suite 1100, San Diego,
California 92121. All notices that are sent in accordance with this Section
15 will be deemed received by the Holder or the Company on the earliest of
the following applicable time periods: (i) the date the return receipt is
executed; or (ii) the date delivered as documented by the overnight courier
service or the hand delivery receipt. Either the Holder or the Company may
designate a change of address by written notice to the other party.
16. Securities Matters
14
<PAGE>
From and after the date on which the Company becomes subject to the
reporting requirements of the Exchange Act and in order to make available the
benefits of certain rules and regulations of the Securities and Exchange
Commission (the "SEC") which may at any time permit the sale of the shares of
Common Stock issuable upon exercise of the Warrant to the public without
registration, the Company agrees to use its reasonable best efforts to: (a)
make and keep public information available, as those terms are understood and
defined in Rule 144; (b) file with the SEC in a timely manner all reports and
other documents required of the Company under the Exchange Act; and (c)
furnish to the Investor, within a reasonable amount of time upon written
request, a written statement by the Company as to its compliance with the
public information requirements of Rule 144 of the Act and of the Exchange
Act, a copy of the most recent annual or quarterly report of the Company, and
such other reports and documents of the Company and other information in the
possession of or reasonably obtainable by the Company as the Investor may
reasonably require to allow the Investor to sell any such securities without
registration.
15
<PAGE>
[Warrant for the Purchase of Shares of Common Stock of Gene Logic Inc.]
GENE LOGIC INC.
By: /s/ Mark D. Gessler
-------------------------------
Name: Mark D. Gessler
Title: Senior Vice President and CFO
Dated: August 29, 1997
ACCEPTED AND AGREED:
ARE-708 QUINCE ORCHARD, LLC
By: ARE-QRS Corp.
Its Sole Managing Member
By: /s/ Joel S. Marcus
------------------------------------
Name: Joel S. Marcus
Title: Chief Executive Officer
Dated: August 29, 1997
16
<PAGE>
SUBSCRIPTION
GENE LOGIC INC.
708 Quince Orchard Road,
Gaithersburg, Maryland
Ladies and Gentlemen:
The undersigned, _____________________, hereby elects to
purchase, pursuant to the provisions of the Warrant dated, _________
__, 1997 held by the undersigned, ________ shares of the Common Stock
of Gene Logic Inc., a Delaware corporation, and tenders herewith
payment of the purchase price of such shares in full.
In exercising its rights to purchase such Common Stock, the
undersigned hereby confirms the investment representations made in
Section 7 and the agreements made in Section 8 of such Warrant.
Dated: ___________ 19__ .
--------------------------------
By
-----------------------------
Address:
--------------------------------
--------------------------------
17
<PAGE>
[FORM OF ASSIGNMENT]
The undersigned hereby assigns this Warrant to
- - - ------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee)
Please insert Social Security or other
identifying number of assignee
- - - ---------------------------------------
and irrevocably appoints ___________________ as agent to transfer this
Warrant on the books of the Company. The agent may substitute another to act
for him or it.
Dated: Signed:
--------------------------- ---------------------------
- - - ------------------------------------------------------------------------------
(Sign exactly as name appears on the front of this Warrant)
Dated: Signed:
--------------------------- ---------------------------
Name:
----------------------------
Title:
----------------------------
18
<PAGE>
EXHIBIT 10.19
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND
ANY APPLICABLE STATE SECURITIES LAWS.
WARRANT TO PURCHASE A MAXIMUM OF
25,758 SHARES OF PREFERRED STOCK OF
GENE LOGIC INC.
This certifies that VENTURE LENDING & LEASING, INC., a Maryland
corporation, or assigns (the "Holder"), for value received, is entitled to
purchase from GENE LOGIC INC., a Delaware corporation (the "Company"), 25,758
fully paid and nonassessable shares of the Company's Preferred Stock
("Preferred Stock") for cash at a price of $2.20 per share (the "Stock
Purchase Price") at any time or from time to time up to and including 5:00
p.m. (Eastern Time) on December 31, 2002 (the "Expiration Date"), upon
surrender to the Company at its principal office at 10150 Old Columbia Road,
Columbia, Maryland 21046 (or at such other location as the Company may advise
Holder in writing) of this Warrant properly endorsed with the Form of
Subscription attached hereto duly filled in and signed and upon payment in
cash or by check of the aggregate Stock Purchase Price for the number of
shares for which this Warrant is being exercised determined in accordance
with the provisions hereof. The Stock Purchase Price and the number of
shares purchasable hereunder are subject to adjustment as provided in Section
4 of this Warrant.
This Warrant is subject to the following terms and conditions:
1. Exercise; Issuance of Certificates; Payment for Shares.
(a) Unless an election is made pursuant to clause (b) of this
Section 1, this Warrant shall be exercisable at the option of the Holder, at
any time or from time to time, on or before the Expiration Date for all or
any portion of the shares of Preferred Stock (but not for a fraction of a
share) which may be purchased hereunder for the Stock Purchase Price
multiplied by the number of shares to be purchased. In the event, however,
that pursuant to the Company's Certificate of Incorporation, as amended, an
event causing automatic conversion of the Company's Preferred Stock shall
<PAGE>
have occurred prior to the exercise of this Warrant, in whole or in part,
then this Warrant shall be exercisable for the number of shares of Common
Stock of the Company into which the Preferred Stock not purchased upon any
prior exercise of the Warrant would have been so converted (and, where the
context requires, reference to "Preferred Stock" shall be deemed to include
such Common Stock). The Company agrees that the shares of Preferred Stock
purchased under this Warrant shall be and are deemed to be issued to the
holder hereof as the record owner of such shares as of the close of business
on the date on which this Warrant shall have been surrendered and payment
made for such shares. Subject to the provisions of Section 2, certificates
for the shares of Preferred Stock so purchased, together with any other
securities or property to which the Holder hereof is entitled upon such
exercise, shall be delivered to the Holder hereof by the Company at the
Company's expense within a reasonable time after the rights represented by
this Warrant have been so exercised. Except as provided in clause (b) of
this Section 1, in case of a purchase of less than all the shares which may
be purchased under this Warrant, the Company shall cancel this Warrant and
execute and deliver a new Warrant or Warrants of like tenor for the balance
of the shares purchasable under the Warrant surrendered upon such purchase to
the Holder hereof within a reasonable time. Each stock certificate so
delivered shall be in such denominations of Preferred Stock as may be
requested by the Holder hereof and shall be registered in the name of such
Holder or such other name as shall be designated by such Holder, subject to
the limitations contained in Section 2.
(b) The Holder, in lieu of exercising this Warrant by the payment
of the Stock Purchase Price pursuant to clause (a) of this Section 1, may
elect, at any time on or before the Expiration Date, to receive that number
of shares of Preferred Stock equal to the quotient of: (i) the difference
between (A) the Per Share Price (as hereinafter defined) of the Preferred
Stock, less (B) the Stock Purchase Price then in effect, multiplied by the
number of shares of Preferred Stock the Holder would otherwise have been
entitled to purchase hereunder pursuant to clause (a) of this Section 1 (or
such lesser number of shares as the Holder may designate in the case of a
partial exercise of this Warrant); over (ii) the Per Share Price.
(c) For purposes of clause (b) of this Section 1, "Per Share Price"
means the price per share which the Company would obtain from a willing buyer
for shares sold by the Company from authorized but unissued shares as such
price shall be agreed upon by the Holder and the Company or, if agreement
cannot be reached within ten (10) business days of the Holder's election
hereunder, as such price shall be determined in good faith by the Board of
Directors of the Company.
(d) This Warrant will be wholly void and of no effect after the
date (the "Expiration Date") which is the earlier of (i) 5:00 p.m. (Eastern
time) December 31, 2002, (ii) the effective time of a merger or
reorganization following which stockholders of the Company immediately prior
to such transaction own less than fifty percent (50%) of the equity
<PAGE>
securities of the surviving corporation (or its parent, if any), so long as
the surviving entity is publicly traded and all securities in the surviving
entity held by the Company's shareholders are free of trading restrictions
within 90 days of the effective time of such transaction, or (iii) the
closing of a sale of all or substantially all of the Company's assets, and if
the last day on which this Warrant may be exercised is a Sunday or a legal
holiday or a day on which banking institutions doing business in the City of
Baltimore are authorized by law to close, this Warrant may be exercised prior
to 5:00 p.m. (Eastern time) on the next succeeding full business day with the
same force and effect as if exercised on such last day specified herein.
2. Limitation on Transfer.
(a) The Warrant and the Preferred Stock shall not be transferable
except upon the conditions specified in this Section 2, which conditions are
intended to insure compliance with the provisions of the Securities Act.
Each holder of this Warrant or the Preferred Stock issuable hereunder will
cause any proposed transferee of the Warrant or Preferred Stock to agree to
take and hold such securities subject to the provisions and upon the
conditions specified in this Section 2.
(b) Each certificate representing (i) this Warrant, (ii) the
Preferred Stock, (iii) shares of the Company's Common Stock issued upon
conversion of the Preferred Stock and (iv) any other securities issued in
respect of the Preferred Stock or Common Stock issued upon conversion of the
Preferred Stock upon any stock split, stock dividend, recapitalization,
merger, consolidation or similar event, shall (unless otherwise permitted by
the provisions of this Section 2 or unless such securities have been
registered under the Securities Act or sold under Rule 144) be stamped or
otherwise imprinted with a legend substantially in the following form (in
addition to any legend required under applicable state securities laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD
OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
(c) The Holder of this Warrant and each person to whom this Warrant
is subsequently transferred represents and warrants to the Company (by
acceptance of such transfer) that it will not transfer the Warrant (or
securities issuable upon exercise hereof unless a registration statement
under the Securities Act was in effect with respect to such securities at the
<PAGE>
time of issuance thereof) except pursuant to (i) an effective registration
statement under the Securities Act, (ii) Rule 144 under the Securities Act
(or any other rule under the Securities Act relating to the disposition of
securities), or (iii) an opinion of counsel, reasonably satisfactory to
counsel for the Company, that an exemption from such registration is
available.
3. Shares to be Fully Paid; Reservation of Shares. The Company
covenants and agrees that all shares of Preferred Stock which may be issued
upon the exercise of the rights represented by this Warrant will, upon
issuance, be duly authorized, validly issued, fully paid and nonassessable
and free of all taxes, liens and charges with respect to the issue thereof.
The Company further covenants and agrees that during the period within which
the rights represented by this Warrant may be exercised, the Company will at
all times have authorized and reserved, for the purpose of issue or transfer
upon exercise of the subscription rights evidenced by this Warrant, a
sufficient number of shares of authorized but unissued Preferred Stock, or
other securities and property, when and as required to provide for the
exercise of the rights represented by this Warrant. The Company will take
all such action as may be necessary to assure that such shares of Preferred
Stock may be issued as provided herein without violation of any applicable
law or regulation, or of any requirements of any domestic securities exchange
upon which the Preferred Stock may be listed. The Company will not take any
action which would result in any adjustment of the Stock Purchase Price (as
defined in Section 4 hereof) (i) if the total number of shares of Preferred
Stock issuable after such action upon exercise of all outstanding warrants,
together with all shares of Preferred Stock then outstanding and all shares
of Preferred Stock then issuable upon exercise of all options and upon the
conversion of all convertible securities then outstanding, would exceed the
total number of shares of Preferred Stock then authorized by the Company's
Certificate of Incorporation, or (ii) if the total number of shares of Common
Stock issuable after such action upon the conversion of all such shares of
Preferred Stock together with all shares of Common Stock then outstanding and
then issuable upon exercise of all options and upon the conversion of all
convertible securities then outstanding would exceed the total number of
shares of Common Stock then authorized by the Company's Certificate of
Incorporation.
4. Adjustment of Stock Purchase Price Number of Shares. The Stock
Purchase Price and the number of shares purchasable upon the exercise of this
Warrant shall be subject to adjustment from time to time upon the occurrence
of certain events described in this Section 4. For purposes of this Section
4, the term "Preferred Stock" shall not be deemed to include the Common Stock
issuable upon conversion of the Preferred Stock. Upon each adjustment of the
Stock Purchase Price, the Holder of this Warrant shall thereafter be entitled
to purchase, at the Stock Purchase Price resulting from such adjustment, the
number of shares obtained by multiplying the Stock Purchase Price in effect
immediately prior to such adjustment by the number of shares purchasable
<PAGE>
pursuant hereto immediately prior to such adjustment, and dividing the
product thereof by the Stock Purchase Price resulting from such adjustment.
4.1 Subdivision or Combination of Stock. In case the Company shall
at any time subdivide its outstanding shares of Preferred Stock into a
greater number of shares, the Stock Purchase Price in effect immediately
prior to such subdivision shall be proportionately reduced, and conversely,
in case the outstanding shares of Preferred Stock of the Company shall be
combined into a smaller number of shares, the Stock Purchase Price in effect
immediately prior to such combination shall be proportionately increased.
4.2 Dividends in Preferred Stock, Other Stock, Property,
Reclassification. If at any time or from time to time the holders of
Preferred Stock (or any shares of stock or other securities at the time
receivable upon the exercise of this Warrant) shall have received or become
entitled to receive, without payment therefor,
(a) Preferred Stock, or any shares of stock or other
securities whether or not such securities are at any time directly or
indirectly convertible into or exchangeable for Preferred Stock, or any
rights or options to subscribe for, purchase or otherwise acquire any of the
foregoing by way of dividend or other distribution, or
(b) Preferred Stock or other or additional stock or other
securities or property (including cash) by way of spinoff, split-up,
reclassification, combination of shares or similar corporate rearrangement
(other than shares of Preferred Stock issued as a stock split or combination,
adjustments in respect of which shall be covered by the terms of Section 4.1
above, or a stock dividend, adjustments in respect of which shall be covered
by the terms of Section 4.2(a) above), then and in each such case, the Holder
hereof shall, upon the exercise of this Warrant, be entitled to receive, in
addition to the number of shares of Preferred Stock receivable thereupon, and
without payment of any additional consideration therefore, the amount of
stock and other securities and property (including cash in the cases referred
to in clause (b)) which such Holder would hold on the date of such exercise
had he been the holder of record of such Preferred Stock as of the date on
which holders of Preferred Stock received or became entitled to receive such
shares and/or all other additional stock and other securities and property.
4.3 Reorganization, Reclassification, Consolidation, Merger or
Sale. If any capital reorganization of the capital stock of the Company, or
any consolidation or merger of the Company with another corporation, or the
sale of all or substantially all of its assets to another corporation shall
be effected in such a way that holders of Preferred Stock shall be entitled
to receive stock, securities or assets with respect to or in exchange for
Preferred Stock, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate
provisions shall be made whereby the holder hereof shall thereafter have the
right to purchase and receive(in lieu of the shares of the Preferred Stock of
<PAGE>
the Company immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby) such shares of stock, securities
or assets as may be issued or payable with respect to or in exchange for a
number of outstanding shares of such Preferred Stock equal to the number of
shares of such stock immediately theretofore purchasable and receivable upon
the exercise of the rights represented hereby. In any such case, appropriate
provision shall be made with respect to the rights and interests of the
holder of this Warrant to the end that the provisions hereof (including,
without limitation, provisions for adjustments of the Stock Purchase Price
and of the number of shares purchasable and receivable upon the exercise of
this Warrant) shall thereafter be applicable, as nearly as may be possible,
in relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise hereof. The Company will not effect any such
consolidation, merger or sale unless, prior to the consummation thereof, the
successor corporation (if other than the Company) resulting from such
consolidation or the corporation purchasing such assets shall assume by
written instrument, executed and mailed or delivered to the registered Holder
hereof at the last address of such Holder appearing on the books of the
Company, the obligation to deliver to such Holder such shares of stock,
securities or assets as, in accordance with the foregoing provisions, such
Holder may be entitled to purchase.
4.4 Sale or Issuance Below Purchase Price. If the Company shall at
any time or from time to time issue or sell any of its Common Stock,
Preferred Stock, options to acquire (or rights to acquire such options), or
any other securities convertible into or exercisable for Common Stock, for a
consideration per share less than the Stock Purchase Price in effect
immediately prior to the time of such issue or sale, the Stock Purchase Price
then in effect and then applicable for any subsequent period or periods shall
be adjusted in accordance with section A.5(d) of the Borrowers Certificate of
Incorporation as applicable to holders of preferred stock.
4.5 Notice of Adjustment. Upon any adjustment of the Stock
Purchase Price, and/or any increase or decrease in the number of shares
purchasable upon the exercise of this Warrant the Company shall give written
notice thereof, by first class mail, postage prepaid, addressed to the
registered holder of this Warrant at the address of such holder as shown on
the books of the Company. The notice shall be signed by the Company's chief
financial officer and shall state the Stock Purchase Price resulting from
such adjustment and the increase or decrease, if any, in the number of shares
purchasable at such price upon the exercise of this Warrant, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based.
4.6 Other Notices. If at any time:
(a) the Company shall declare any cash dividend upon its
Preferred Stock;
<PAGE>
(b) the Company shall declare any dividend upon its Preferred
Stock payable in stock or make any special dividend or other distribution to
the holders of its Preferred Stock;
(c) the Company shall offer for subscription pro rata to the
holders of its Preferred Stock any additional shares of stock of any class or
other rights;
(d) there shall be any capital reorganization or
reclassification of the capital stock of the Company, or consolidation or
merger of the Company with, or sale of all or substantially all of its assets
to, another corporation;
(e) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company; or
(f) the Company shall take or propose to take any other
action, notice of which is actually provided to holders of the Preferred
Stock;
then, in any one or more of said cases, the Company shall give, by first
class mail, postage prepaid, addressed to the holder of this Warrant at the
address of such holder as shown on the books of the Company, (i) at least 20
day's prior written notice of the date on which the books of the Company
shall close or a record shall be taken for such dividend, distribution or
subscription rights or for determining rights to vote in respect of any such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up, or other action and (ii) in the case of any such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, or other action, at least 20 day's written notice
of the date when the same shall take place. Any notice given in accordance
with the foregoing clause (i) shall also specify, in the case of any such
dividend, distribution or subscription rights, the date on which the holders
of Preferred Stock shall be entitled thereto. Any notice given in accordance
with the foregoing clause (ii) shall also specify the date on which the
holders of Preferred Stock shall be entitled to exchange their Preferred
Stock for securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, or other action as the case may be.
4.7 Certain Events. If any change in the outstanding Preferred
Stock of the Company or any other event occurs as to which the other
provisions of this Section 4 are not strictly applicable or if strictly
applicable would not fairly protect the purchase rights of the Holder of the
Warrant in accordance with the essential intent and principles of such
provisions, then the Board of Directors of the Company shall make an
adjustment in the number and class of shares available under the Warrant, the
Stock Purchase Price and/or the application of such provisions, in accordance
with such essential intent and principles, so as to protect such purchase
rights as aforesaid. The adjustment shall be such as will give the Holder of
<PAGE>
the Warrant upon exercise for the same aggregate Stock Purchase Price the
total number, class and kind of shares as it would have owned had the Warrant
been exercised prior to the event and had it continued to hold such shares
until after the event requiring adjustment.
5. Issue Tax. The issuance of certificates for shares of Preferred
Stock upon the exercise of the Warrant shall be made without charge to the
Holder of the Warrant for any issue tax in respect thereof; provided,
however, that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of
any certificate in a name other than that of the then Holder of the Warrant
being exercised.
6. Closing of Books. The Company will at no time close its transfer
books against the transfer of any Warrant or of any shares of Preferred
Stock issued or issuable upon the exercise of any warrant in any manner which
interferes with the timely exercise of this Warrant.
7. No Voting or Dividend Rights; Limitation of Liability. Nothing
contained in this Warrant shall be construed as conferring upon the Holder
hereof the right to vote or to consent as a shareholder in respect of
meetings of shareholders for the election of directors of the Company or any
other matters or any rights whatsoever as a shareholder of the Company. No
dividends or interest shall be payable or accrued in respect of this Warrant
or the interest represented hereby or the shares purchasable hereunder until,
and only to the extent that, this Warrant shall have been exercised. No
provisions hereof, in the absence of affirmative action by the Holder to
purchase shares of Preferred Stock, and no mere enumeration herein of the
rights or privileges of the Holder hereof, shall give rise to any liability
of such Holder for the Stock Purchase Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by its
creditors.
8. No impairment. The Company will not, by amendment of its
Certificate of Incorporation or through any reclassification, capital
reorganization, consolidation, merger, sale or conveyance of assets,
dissolution, liquidation, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the
terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the Holder
hereunder.
9. Registration Rights. The Holder hereof shall be entitled, with
respect to the shares of Common Stock issued upon conversion of such
Preferred Stock, to all of the registration rights set forth in the
Registration Rights Agreement dated as of April 2, 1996 to the same extent
and on the same terms and conditions as possessed by the holders of
<PAGE>
registration rights. The Company shall take such action as may be reasonably
necessary to assure that the granting of such registration rights to the
Holder does not violate the provisions of such agreement or any of the
Company's charter documents or rights of prior Grantees of registration
rights.
10. Market Stand-Off. If requested by the Company or the representative
of the underwriters of Common Stock (or other securities) of the Company,
Holder shall not sell or otherwise transfer or dispose of any Common Stock
(or other securities) of the Company held by such Holder (other than those
included in the registration, if any) for a period specified by the
representative of the underwriters not to exceed one hundred eighty (180)
days following the effective date of a registration statement of the Company
filed under the Securities Act pertaining to the Company's initial public
offering. The Company may impose stop-transfer instructions with respect to
the shares of Common Stock (or other securities) subject to the foregoing
restriction until the end of said one hundred eighty (180) day period.
11. Rights and Obligations Survive Exercise of Warrant. The rights and
obligations of the Company, of the Holder of this Warrant and of the holder
of shares of Preferred Stock issued upon exercise of this Warrant, contained
in Sections 6, 8 and 9 shall survive the exercise of this Warrant.
12. Modification and Waiver. This Warrant and any provision hereof may
be changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
13. Notices. Except as otherwise provided in this Warrant agreement,
any requirements for a notice, demand or request under this Warrant will be
satisfied by a writing (a) hand delivered with receipt; (b) mailed by United
States registered or certified mail or Express Mail, return receipt
requested, postage prepaid; or (c) sent by Federal Express or any other
nationally recognized overnight courier service, and addressed as follows:
if to the Holder, at its address as shown on the books of the Company; and
if to the Company, at the address indicated therefor in the first paragraph
of this Warrant, Attn: Chief Financial Officer, with a copy to L. Kay
Chandler, Esq., Cooley Godward LLP, 4365 Executive Drive, Suite 1100, San
Diego, California 92121. All notices that are sent in accordance with this
Section 13 will be deemed received by the Holder or the Company on the
earliest of the following applicable time periods: (i) the date the return
receipt is executed; or (ii) the date delivered as documented by the
overnight courier service or the hand delivery receipt. Either the Holder or
the Company may designate a change of address by written notice to the other
party.
14. Binding Effect on Successors. This Warrant shall be binding upon
any corporation succeeding the Company by merger, consolidation or
<PAGE>
acquisition of all or substantially all of the Company's assets. All of the
obligations of the Company relating to the Preferred Stock issuable upon the
exercise of this Warrant shall survive the exercise and termination of this
Warrant. All of the covenants and agreements of the Company shall inure to
the benefit of the successors and assign of the Holder hereof. The Company
will, at the time of the exercise of this Warrant, in whole or in part, upon
request of the Holder hereof but at the Company's expense, acknowledge in
writing its continuing obligation to the Holder hereof in respect of any
rights (including, without limitation, any right to registration of the
shares of Common Stock) to which the Holder hereof shall continue to be
entitled after such exercise in accordance with this Warrant; provided, that
the failure of the Holder hereof to make any such request shall not affect
the continuing obligation of the Company to the Holder hereof in respect of
such rights.
15. Descriptive Headings and Governing Law. The descriptive headings of
the several sections and paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant. This Warrant
shall be construed and enforced in accordance with, and the rights of the
parties shall be governed by, the laws of the State of Delaware.
16. Lost Warrants or Stock Certificates. The Company represents and
warrants to the Holder hereof that upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
any Warrant or stock certificate and, in the case of any such loss, theft or
destruction, upon receipt of an indemnity reasonably satisfactory to the
Company, or in the case of any such mutilation upon surrender and
cancellation of such Warrant or stock certificate, the Company at its expense
will make and deliver a new Warrant or stock certificate, of like tenor, in
lieu of the lost, stolen, destroyed or mutilated Warrant or stock certificate.
17. Fractional Shares. No fractional shares shall be issued upon
exercise of this Warrant. The Company shall, in lieu of issuing any
fractional share, pay the holder entitled to such fraction a sum in cash
equal to such fraction multiplied by the then effective Stock Purchase Price.
18. Representations of Holder. With respect to this Warrant, Holder
represents and warrants to the Company as follows:
18.1 Experience. It is experienced in evaluating and investing in
companies engaged in businesses similar to that of the Company; it
understands that investment in the Warrant and, if the Warrant is exercised,
the Preferred Stock (and Common Stock issuable upon conversion thereof)
involves substantial risks; it has made detailed inquiries concerning the
Company, its business and services, its officers and its personnel; the
officers of the Company have made available to Holder any and all written
information it has requested; the officers of the Company have answered to
<PAGE>
Holder's satisfaction all inquiries made by it; in making this investment it
has relied upon information made available to it by the Company; and it has
such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of investment in the Company and
it is able to bear the economic risk of that investment.
18.2 Investment. It is acquiring the Warrant and, if the Warrant is
exercised, the Preferred Stock (and Common Stock issuable upon conversion
thereof) for investment for its own account and not with a view to, or for
resale in connection with, any distribution thereof. It understands that the
Warrant, the shares of Preferred Stock issuable upon exercise thereof and the
shares of Common Stock issuable upon conversion of the Preferred Stock, have
not been registered under the Securities Act nor qualified under applicable
state securities laws.
18.3 Rule 144. It acknowledges that the Warrant, the Preferred
Stock and the Common Stock must be held indefinitely unless they are
subsequently registered under the Securities Act or an exemption from such
registration is available. It has been advised or is aware of the provisions
of Rule 144 promulgated under the Securities Act.
18.4 Access to Data. It has had an opportunity to discuss the
Company's business, management and financial affairs with the Company's
management and has had the opportunity to inspect the Company's facilities.
19. Additional Representations and Covenants of the Company. The
Company hereby represents, warrants and agrees as follows:
19.1 Corporate Power. The Company has all requisite corporate power
and corporate authority to issue this Warrant and to carry out and perform
its obligations hereunder.
19.2 Authorization. All corporate action on the part of the
Company, its directors and shareholders necessary for the authorization,
execution, delivery and performance by the Company of this Warrant has been
taken. This Warrant is a valid and binding obligation of the Company,
enforceable in accordance with its terms.
19.3 Offering. Subject in part to the truth and accuracy of
Holder's representations set forth in Section 18 hereof, the offer, issuance
and sale of the Warrant is, and the issuance of Preferred Stock upon exercise
of the Warrant and the issuance of Common Stock upon conversion of the
Preferred Stock will be exempt from the registration requirements of the
Securities Act, and are exempt from the qualification requirements of any
applicable state securities laws; and neither the Company nor anyone acting
on its behalf will take any action hereafter that would cause the loss of
such exemptions.
<PAGE>
19.4 Stock Issuance. Upon exercise of the Warrant, the Company will
use its best efforts to cause stock certificates representing the shares of
Preferred Stock purchased pursuant to the exercise to be issued in the
individual names of Holder, its nominees or assignees, as appropriate at the
time of such exercise. Upon conversion of the shares of Preferred Stock to
shares of Common Stock, the Company will issue the Common Stock in the
individual names of Holder, its nominees or assignees, as appropriate.
19.5 Certificate and By-Laws. The Company has provided Holder with
true and complete copies of the Company's Certificate of Incorporation,
By-Laws, and each Certificate of Determination or other charter document
setting, forth any rights, preferences and privileges of Company's capital
stock, each as amended and in effect on the date of issuance of this Warrant.
19.6 Conversion of Preferred Stock. As of the date hereof, each
share of the Preferred Stock is convertible into one share of the Common
Stock.
19.7 Financial and Other Reports. From time to time up to the
earlier of the Expiration Date or the complete exercise of this Warrant, the
Company shall furnish to Holder (i) within 120 days after the close of each
fiscal year of the Company an audited balance sheet and statement of changes
in financial position at and as of the end of such fiscal year, together with
an audited statement of income for such fiscal year; (ii) within 45 days
after the close of each of the first three fiscal quarters of the Company
each year, an unaudited balance sheet and statement of cash flows at and as
of the end of such quarter, together with an unaudited statement of income
for such quarter; and (iii) promptly after sending, making available, or
filing, copies of all reports, proxy statements, and financial statements
that the Company sends or makes available to its shareholders and all
registration statements and reports that the Company files with the SEC or
any other governmental or regulatory authority.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its officers, thereunto duly authorized this 24th day of March,
1997.
Gene Logic Inc.
By: /s/ Mark D. Gessler
--------------------------------
Name: Mark D. Gessler
Its: Senior Vice President, Corporate Development and CFO
<PAGE>
FORM OF SUBSCRIPTION
(To be signed only upon exercise of Warrant)
To:_____________________________
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, __________________________________ (_____) (1) shares of
Preferred Stock of __________________________________ and herewith makes
payment of _____________________________________ Dollars ($________)
therefor, and requests that the certificates for such shares be issued in the
name of, and delivered to, __________________________________________, whose
address is ____________________________________.
The undersigned represents that it is acquiring such Preferred Stock (and
the Common Stock issuable upon conversion thereof) for its own account for
investment and not with a view to or for sale in connection with any
distribution thereof (subject, however, to any requirement of law that the
disposition thereof shall at all times be within its control.
DATED:___________________________________
_________________________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant)
(Address)
_________________________________________
_________________________________________
(1) Insert here the number of shares called for on the face of the Warrant
(or, in the case of a partial exercise, the portion thereof as to which
the Warrant is being exercised), in either case without making any
adjustment for additional Preferred Stock or any other stock or other
securities or property or cash which, pursuant to the adjustment
provisions of the Warrant, may be deliverable upon exercise.
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned, the holder of the within Warrant,
hereby sells, assigns and transfers all of the rights of the undersigned
under the within Warrant, with respect to the number of shares of Preferred
Stock covered thereby set forth herein below, unto:
Name of Assignee Address No. of Shares
Dated:___________________________
_________________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant)
<PAGE>
Exhibit 10.20
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND
ANY APPLICABLE STATE SECURITIES LAWS.
WARRANT TO PURCHASE 48,889 SHARES
OF SERIES C PREFERRED STOCK OF
GENE LOGIC INC.
(Void after September 30, 2000)
This certifies that Hambrecht & Quist LLC or its assigns (the "Holder"),
for value received, is entitled to purchase from Gene Logic inc., a Delaware
corporation (the "Company"), having a place of business at 10150 Old Columbia
Road, Columbia Maryland 21046, a maximum of 48,889 fully paid and
nonassessable shares of the Company's Series C Convertible Preferred Stock
("Preferred Stock") for cash at a price of $4.50 per share (the "Stock
Purchase Price") at any time or from time to time up to and including 5:00
p.m. (Eastern time) on the date (the "Expiration Date") which is the earlier
of (i) September 30, 2000, (ii) the closing of the initial public offering of
the Common Stock of the Company (the "Initial Public Offering") pursuant to a
registration statement under the Securities Act of 1933, as amended (the
"1933 Act"), (iii) the effective time of a merger or reorganization following
which the stockholders of the Company immediately prior to such transaction
own after such transaction less than fifty percent (50%) of the equity
securities of the surviving corporation (or its parent, if any), or (iv) the
closing of a sale of all or substantially all of the Company's assets;
provided that, if the last day on which this Warrant may be exercised is a
Sunday or a legal holiday or a day on which banking institutions doing
business in the City of Baltimore are authorized by law to close, this
Warrant may be exercised prior to 5:00 p.m. (Eastern time) on the next
succeeding full business day with the same force and effect as if exercised
on such last day specified herein. This Warrant may be exercised by surrender
to the Company at its principal office (or at such other location as the
Company may advise the Holder in writing) of this Warrant properly endorsed
with the Form of Subscription attached hereto duly filled in and signed and,
if applicable, upon payment in cash or by check of the aggregate Stock
Purchase Price for the number of shares for which this Warrant is being
exercised determined in accordance with the provisions hereof. The Company
shall deliver notice of the transactions described in (ii) and (iii) above to
the Holder at least 20 days prior to the closing thereof. The Stock Purchase
Price and the number of shares purchasable hereunder are subject to
adjustment as provided in Section 3 of this Warrant.
This Warrant is subject to the following terms and conditions:
1. EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
1.1 General. This Warrant is exercisable at the option of the holder
of record hereof, at any time or from time to time, up to the Expiration Date
for all or any part of the shares of Preferred Stock (but not for a fraction
of a share) which may be purchased hereunder. The Company agrees that the
shares of Preferred Stock purchased under this Warrant shall be and are
1.
<PAGE>
deemed to be issued to the Holder hereof as the record owner of such shares
as of the close of business on the date on which this Warrant shall have been
surrendered, properly endorsed, the completed, executed Form of Subscription
delivered and payment made for such shares. Certificates for the shares of
Preferred Stock so purchased, together with any other securities or property
to which the Holder hereof is entitled upon such exercise, shall be delivered
to the Holder hereof by the Company at the Company's expense within a
reasonable time after the rights represented by this Warrant have been so
exercised. In case of a purchase of less than all the shares which may be
purchased under this Warrant, the Company shall cancel this Warrant and
execute and deliver a new Warrant or Warrants of like tenor for the balance
of the shares purchasable under the Warrant surrendered upon such purchase to
the Holder hereof within a reasonable time. Each stock certificate so
delivered shall be in such denominations of Preferred Stock as may be
requested by the Holder hereof and shall be registered in the name of such
Holder.
1.2 Net Issue Exercise. Notwithstanding any provisions herein to the
contrary, if the fair market value of one share of the Company's Preferred Stock
is greater than the Stock Purchase Price (at the date of calculation as set
forth below), in lieu of exercising this Warrant for cash, the Holder may elect
to receive shares equal to the value (as determined below) of this Warrant (or
the portion thereof being canceled) by surrender of this Warrant at the
principal office of the Company together with the properly endorsed Form of
Subscription and notice of such election in which event the Company shall issue
to the Holder a number of shares of Preferred Stock computed using the following
formula:
X = Y (A-B)
-------
A
Where X = the number of shares of Preferred Stock to be issued to the Holder
Y = the number of shares of Preferred Stock purchasable under the
Warrant or, if only a portion of the Warrant is being exercised,
the portion of the Warrant being canceled (at the date of such
calculation)
A = the fair market value of one share of the Company's Preferred
Stock (at the date of such calculation)
B = Stock Purchase Price (as adjusted to the date of such calculation)
For purposes of the above calculation, fair market value of one share of
Preferred Stock shall be determined by the Company's Board of Directors in
good faith; provided, however, that in the event the Holder exercises this
Warrant effective upon the closing of the Initial Public Offering, the fair
market value per share shall be the product of (i) the initial price to the
public specified in the final prospectus with respect to such Initial Public
Offering, and (ii) the number of shares of Common Stock into which each share
of Preferred Stock is convertible at the time of such exercise.
2.
<PAGE>
2. SHARES TO BE FULLY PAID; RESERVATION OF SHARES. The Company covenants
and agrees that all shares of Preferred Stock which may be issued upon the
exercise of the rights represented by this Warrant will, upon issuance, be
duly authorized, validly issued, fully paid and nonassessable and free from
all preemptive rights of any shareholder and free of all taxes, liens and
charges with respect to the issue thereof. The Company further covenants and
agrees that, during the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized and
reserved, for the purpose of issue or transfer upon exercise of the
subscription rights evidenced by this Warrant, a sufficient number of shares
of authorized but unissued Preferred Stock, or other securities and property,
when and as required to provide for the exercise of the rights represented by
this Warrant. The Company will take all such action as may be necessary to
assure that such shares of Preferred Stock may be issued as provided herein
without violation of any applicable law or regulation, or of any requirements
of any domestic securities exchange upon which the Preferred Stock may be
listed; provided, however, that the Company shall not be required to effect a
registration under Federal or State securities laws with respect to such
exercise. The Company will not take any action which would result in any
adjustment of the Stock Purchase Price (as set forth in Section 3 hereof) (i)
if the total number of shares of Preferred Stock issuable after such action
upon exercise of all outstanding warrants, together with all shares of
Preferred Stock then outstanding and all shares of Preferred Stock then
issuable upon exercise of all options and upon the conversion of all
convertible securities then outstanding, would exceed the total number of
shares of Preferred Stock then authorized by the Company's Restated
Certificate of Incorporation, or (ii) if the total number of shares of Common
Stock issuable after such action upon the conversion of all such shares of
Preferred Stock, together with all shares of Common Stock then issuable upon
exercise of all options and upon the conversion of all such shares of
Preferred Stock, together with all shares of Common Stock then outstanding
and all shares of Common Stock then issuable upon exercise of all options and
upon the conversion of all convertible securities then outstanding would
exceed the total number of shares of Common Stock then authorized by the
Company's Restated Certificate of Incorporation.
3. ADJUSTMENT OF STOCK PURCHASE PRICE AND NUMBER OF SHARES. The Stock
Purchase Price and the number of shares purchasable upon the exercise of this
Warrant shall be subject to adjustment from time to time upon the occurrence
of certain events described in this Section 3. Upon each adjustment of the
Stock Purchase Price, the Holder of this Warrant shall thereafter be entitled
to purchase, at the Stock Purchase Price resulting from such adjustment, the
number of shares obtained by multiplying the Stock Purchase Price in effect
immediately prior to such adjustment by the number of shares purchasable
pursuant hereto immediately prior to such adjustment, and dividing the
product thereof by the Stock Purchase Price resulting from such adjustment.
3.1 Subdivision or Combination of Stock. In case the Company shall
at any time subdivide its outstanding shares of Preferred Stock into a
greater number of shares, the Stock Purchase Price in effect immediately
prior to such subdivision shall be proportionately reduced, and conversely,
in case the outstanding shares of Preferred Stock of the Company shall be
combined into a smaller number of shares, the Stock Purchase Price in effect
immediately prior to such combination shall be proportionately increased.
3.
<PAGE>
3.2 Dividends in Preferred Stock, Other Stock, Property,
Reclassification. If at any time or from time to time the Holders of
Preferred Stock (or any shares of stock or other securities at the time
receivable upon the exercise of this Warrant) shall have received or become
entitled to receive, without payment therefor,
(a) Preferred Stock or any shares of stock or other securities
which are at any time directly or indirectly convertible into or exchangeable
for Preferred Stock, or any rights or options to subscribe for, purchase or
otherwise acquire any of the foregoing by way of dividend or other
distribution, or
(b) Preferred Stock or additional stock or other securities by way
of spinoff, split-up, reclassification, combination of shares or similar
corporate rearrangement, (other than shares of Preferred Stock issued as a
stock split or adjustments in respect of which shall be covered by the terms
of Section 3.1 above), then and in each such case, the Holder hereof shall,
upon the exercise of this Warrant, be entitled to receive, in addition to the
number of shares of Preferred Stock receivable thereupon, and without payment
of any additional consideration therefor, the amount of stock and other
securities which such Holder would hold on the date of such exercise had he
been the holder of record of such Preferred Stock as of the date on which
holders of Preferred Stock received or became entitled to receive such shares
or all other additional stock and other securities.
3.3 Reorganization, Reclassification, Consolidation, Merger or Sale.
If any recapitalization, reclassification or reorganization of the capital
stock of the Company, or any consolidation or merger of the Company with
another corporation, or the sale of all or substantially all of its assets or
other transaction shall be effected in such a way that holders of Preferred
Stock shall be entitled to receive stock, securities, or other assets or
property (a "Transaction"), then, as a condition of such Transaction, lawful
and adequate provisions shall be made by the Company whereby the Holder
hereof shall thereafter have the right to purchase and receive (in lieu of
the shares of the Preferred Stock of the Company immediately theretofore
purchasable and receivable upon the exercise of the rights represented
hereby) such shares of stock, securities or other assets or property as may
be issued or payable with respect to or in exchange for a number of
outstanding shares of such Preferred Stock equal to the number of shares of
such stock immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby; provided, however, that in the
event the value of the stock, securities or other assets or property
(determined in good faith by the Board of Directors of the Company) issuable
or payable with respect to one share of the Preferred Stock of the Company
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby is in excess of the Stock Purchase Price hereof
effective at the time of a merger and securities received in such
reorganization, if any, are publicly traded, then this Warrant shall expire
unless exercised prior to such Transaction. In the event of any Transaction,
appropriate provision shall be made by the Company with respect to the rights
and interests of the Holder of this Warrant to the end that the provisions
hereof (including, without limitation, provisions for adjustments of the
Stock Purchase Price and of the number of shares purchasable and receivable
upon the exercise of this Warrant) shall thereafter be applicable, in
relation to any shares of stock, securities or assets thereafter deliverable
upon the exercise hereof. The Company will not effect any such consolidation,
merger or sale unless, prior to the
4.
<PAGE>
consummation thereof, the successor corporation (if other than the Company)
resulting from such consolidation or the corporation purchasing such assets
shall assume by written instrument reasonably satisfactory in form and
substance to the Holders, executed and mailed or delivered to the registered
Holder hereof at the last address of such Holder appearing on the books of
the Company, the obligation to deliver to such Holder such shares of stock,
securities or assets as, in accordance with the foregoing provisions, such
Holder may be entitled to purchase.
3.4 Certain Events. If any change in the outstanding Preferred Stock
of the Company or any other event occurs as to which the other provisions of
this Section 3 are not strictly applicable or if strictly applicable would
not fairly protect the purchase rights of the Holder of the Warrant in
accordance with such provisions, then the Board of Directors of the Company
shall make an adjustment in the number and class of shares available under
the Warrant, the Stock Purchase Price or the application of such provisions,
so as to protect such purchase rights as aforesaid. The adjustment shall be
such as will give the Holder of the Warrant upon exercise for the same
aggregate Stock Purchase Price the total number, class and kind of shares as
he would have owned had the Warrant been exercised prior to the event and had
he continued to hold such shares until after the event requiring adjustment.
3.5 Notices of Change.
(a) As soon as practicable following any adjustment in the number
or class of shares subject to this Warrant and of the Stock Purchase Price,
the Company shall give written notice thereof to the Holder, setting forth in
reasonable detail and certifying the calculation of such adjustment.
(b) The Company shall give written notice to the Holder at least
20 business days prior to the date on which the Company closes its books or
takes a record for determining rights to receive any dividends or
distributions.
(c) The Company shall also give written notice to the Holder at
least 20 business days prior to the date on which a Transaction shall take
place.
4. ISSUE TAX. The issuance of certificates for shares of Preferred Stock
upon the exercise of the Warrant shall be made without charge to the Holder
of the Warrant for any issue tax (other than any applicable income taxes) in
respect thereof; provided, however, that the Company shall not be required to
pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than that of the
then Holder of the Warrant being exercised.
5. CLOSING OF BOOKS. The Company will at no time close its transfer books
against the transfer of any warrant or of any shares of Preferred Stock
issued or issuable upon the exercise of any warrant in any manner which
interferes with the timely exercise of this Warrant.
6. NO VOTING OR DIVIDEND RIGHTS; LIMITATION OF LIABILITY. Nothing
contained in this Warrant shall be construed as conferring upon the Holder
hereof the right to vote or to consent or to receive notice as a stockholder
of the Company or any other matters or any rights
5.
<PAGE>
whatsoever as a stockholder of the Company. No dividends or interest shall be
payable or accrued in respect of this Warrant or the interest represented
hereby or the shares purchasable hereunder until, and only to the extent
that, this Warrant shall have been exercised. No provisions hereof, in the
absence of affirmative action by the holder to purchase shares of Preferred
Stock, and no mere enumeration herein of the rights or privileges of the
holder hereof, shall give rise to any liability of such Holder for the Stock
Purchase Price or as a stockholder of the Company, whether such liability is
asserted by the Company or by its creditors.
7. REPRESENTATIONS AND WARRANTIES OF THE HOLDER
7.1 Purchase for Own Account. Holder represents that it is acquiring
this Warrant and the Series C Preferred Stock issuable upon exercise of this
Warrant (and the Common Stock issuable upon conversion thereof)
(collectively, the "Securities") solely for its own account and beneficial
interest for investment and not for sale or with a view to distribution of
the Securities or any part thereof, has no present intention of selling (in
connection with a distribution or otherwise), granting any participation in,
or otherwise distributing the same, and does not presently have reason to
anticipate a change in such intention.
7.2 Information and Sophistication. Holder acknowledges that it has
received all the information it has requested from the Company and considers
necessary or appropriate for deciding whether to acquire this Warrant. Holder
represents that it has had an opportunity to ask questions and receive
answers from the Company regarding the terms and conditions of the offering
of this Warrant and to obtain any additional information necessary to verify
the accuracy of the information given the Holder. Holder further represents
that it has such knowledge and experience in financial and business matters
that it is capable of evaluating the merits and risk of this investment.
7.3 Ability to Bear Economic Risk. Holder acknowledges that
investment in this Warrant involves a high degree of risk, and represents
that it is able, without materially impairing its financial condition, to
hold the Securities for an indefinite period of time and to suffer a complete
loss of its investment.
7.4 Further Limitations on Disposition. Without in any way limiting
the representations set forth above, Holder further agrees not to make any
disposition of all or any portion of the Securities unless and until:
(a) There is then in effect a Registration Statement under the
1933 Act covering such proposed disposition and such disposition is made in
accordance with such Registration Statement; or
(b) (i) Holder shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, and (ii) if
reasonably requested by the Company, Holder shall have furnished the Company
with an opinion of counsel, reasonably satisfactory to the Company, that such
disposition will not require registration under the 1933 Act.
6.
<PAGE>
(c) Notwithstanding the provisions of paragraphs (a) and (b)
above, no such registration statement or opinion of counsel shall be
necessary for a transfer by Holder to a shareholder or partner (or retired
partner) of such Holder, or transfers by gift, will or intestate succession
to any spouse or lineal descendants or ancestors, if all transferees agree in
writing to be subject to the terms hereof to the same extent as if they were
a Holder hereunder.
7.5 Experience. Holder is an "accredited investor" as such term is
defined in Rule 501 under the 1933 Act.
7.6 Legends. It is understood that the certificates evidencing the
Preferred Stock issuable upon exercise hereof (and the Common Stock issuable
upon conversion thereof) may bear one or all of the following legends:
(a) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 OR ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM
UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS."
(b) Any legend required by the Company's By-laws or by the laws of
the States of Delaware or Maryland and any other state in which the
securities will be issued.
8. WARRANTS TRANSFERABLE. Subject to compliance with applicable federal
and state securities laws, this Warrant and all rights hereunder are
transferable, in whole or in part, without charge to the holder hereof
(except for transfer taxes), upon surrender of this Warrant properly
endorsed. Each taker and holder of this Warrant, by taking or holding the
same, consents and agrees that this Warrant, when endorsed in blank, shall be
deemed negotiable, and that the holder hereof, when this Warrant shall have
been so endorsed, may be treated by the Company, at the Company's option, and
all other persons dealing with this Warrant as the absolute owner hereof for
any purpose and as the person entitled to exercise the rights represented by
this Warrant, or to the transfer hereof on the books of the Company any
notice to the contrary notwithstanding; but until such transfer on such
books, the Company may treat the registered owner hereof as the owner for all
purposes.
9. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT. The rights and
obligations of the Company, of the holder of this Warrant and of the holder
of shares of Preferred Stock issued upon exercise of this Warrant referred to
in Section 8 shall survive the exercise of this Warrant.
10. MODIFICATION AND WAIVER. This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
11. NOTICES. Except as otherwise provided in this Warrant, any
requirement for a notice, demand or request under this Warrant will be
satisfied by a writing (a) hand delivered
7.
<PAGE>
with receipt; (b) mailed by United States registered or certified mail or
Express Mail, return receipt requested, postage prepaid; or (c) sent by
Federal Express or any other nationally recognized overnight courier service,
and addressed as follows: if to the Holder, at its address as shown on the
books of the Company; and if to the Company, at the address indicated
therefor in the first paragraph of this Warrant, Attn: Chief Financial
Officer, with a copy to L. Kay Chandler, Esq., Cooley Godward LLP, 4365
Executive Drive, Suite 1100, San Diego, California 92121. All notices that
are sent in accordance with this Section 11 will be deemed received by the
Holder or the Company on the earliest of the following applicable time
periods: (i) the date the return receipt is executed; or (ii) the date
delivered as documented by the overnight courier service or the hand delivery
receipt. Either the Holder or the Company may designate a change of address
by written notice to the other party.
12. BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding upon any
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets. All of the obligations of the
Company relating to the Preferred Stock issuable upon the exercise of this
Warrant (and the Common Stock issuable upon conversion thereof) shall survive
the exercise and termination of this Warrant. All of the covenants and
agreements of the Company shall inure to the benefit of the successors and
assigns of the holder hereof.
13. DESCRIPTIVE HEADINGS AND GOVERNING lAW. The description headings of
the several sections and paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant. This Warrant
shall be construed and enforced in accordance with, and the rights of the
parties shall be governed by, the laws of the State of Delaware.
14. LOST WARRANTS. The Company represents and warrants to the Holder
hereof that upon receipt of evidence reasonably satisfactory to the Company
of the loss, theft, destruction, or mutilation of this Warrant and, in the
case of any such loss, theft or destruction, upon receipt of an indemnity
reasonably satisfactory to the Company, or in the case of any such mutilation
upon surrender and cancellation of such Warrant, the Company, at its expense,
will make and deliver a new Warrant, of like tenor, in lieu of the lost,
stolen, destroyed or mutilated Warrant.
15. FRACTIONAL SHARES. No fractional shares shall be issued upon exercise
of this Warrant. The Company shall, in lieu of issuing any fractional share,
pay the holder entitled to such fraction a sum in cash equal to such fraction
multiplied by the then effective Stock Purchase Price.
16. MARKET STANDOFF. If requested by the Company or the representative of
the underwriters of Common Stock (or other securities) of the Company, Holder
shall not sell or otherwise transfer or dispose of any Common Stock (or other
securities) of the Company held by such Holder (other than those included in
the registration, if any) for a period specified by the representative of the
underwriters not to exceed one hundred eighty (180) days following the
effective date of a registration statement of the Company filed under the
1933 Act pertaining to the Company's initial public offering. The Company may
impose stop-transfer instructions with respect to the shares of Common Stock
(or other securities) subject to the foregoing restriction until the end of
said one hundred eighty (180) day period.
8.
<PAGE>
17. CONFIDENTIALITY. In handling any confidential information of the
Company, Holder shall exercise the same degree of care that it exercises with
respect to its own proprietary information of the same type to maintain the
confidentiality of any nonpublic information thereby received or received
pursuant to this Warrant except that disclosure of such information may be
made (a) to the subsidiaries or affiliates of Holder in connection with their
present or prospective business relations with the Company, (b) to
prospective transferees or purchasers of any interest in this Warrant,
provided that they have entered into a comparable confidentiality agreement
in favor of the Company, or (c) as may be required in connection with the
examination, audit or similar investigation of Holder. Confidential
information shall not include information that either (i) is in the public
domain or in the knowledge or possession of Holder when disclosed to Holder,
or (ii) is disclosed to Holder by a third party, provided that Holder does
not have actual knowledge that such third party is prohibited from disclosing
such information.
9.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its officers, thereunto duly authorized this 30th day of
September, 1997.
GENE LOGIC INC.,
a Delaware corporation
By: /S/ Mark D. Gessler
---------------------------------
Title: Senior Vice President,
Corporate Development and CFO
<PAGE>
EXHIBIT A
SUBSCRIPTION FORM
Date:_________________
GENE LOGIC INC.
10150 Old Columbia Road
Columbia, MD 21046
Attn: President
Ladies and Gentlemen:
// The undersigned hereby elects to exercise the warrant issued to it by
Gene Logic inc. (the "Company") and dated , 1997 (the
"Warrant") and to purchase thereunder shares of the Series C Preferred
Stock of the Company (the "Shares") at a purchase price of Four Dollars
and Fifty Cents ($4.50) per Share or an aggregate purchase price of
Dollars ($ ) (the "Purchase Price").
// The undersigned hereby elects to convert percent ( %) of the value
of the Warrant pursuant to the provisions of Section 1.2 of the Warrant.
Pursuant to the terms of the Warrant the undersigned has delivered the
Purchase Price herewith in full in cash or by certified check or wire transfer.
The undersigned also confirms the representations set forth in Sections 7 and 16
of the Warrant.
VERY TRULY YOURS,
_____________________________
By:__________________________
Title:_______________________
<PAGE>
Exhibit 10.22
LEASE
BY AND BETWEEN
ARE-708 QUINCE ORCHARD, LLC
and
GENE LOGIC INC.
<PAGE>
TABLE OF CONTENTS
1. Lease of Premises................................................. 1
2. Basic Lease Provisions............................................ 1
3. Term.............................................................. 4
4. Possession and Commencement Date.................................. 4
5. Rent.............................................................. 5
6. Rent Adjustments.................................................. 5
7. Operating Expenses................................................ 6
8. Intentionally omitted............................................. 10
9. Security Deposit.................................................. 10
10. Use............................................................... 12
11. Brokers........................................................... 15
12. Holding Over...................................................... 15
13. Taxes on Tenant's Property........................................ 16
14. Condition of Demised Premises..................................... 16
15. Common Areas and Parking Facilities............................... 17
16. Utilities and Services............................................ 17
17. Alterations....................................................... 19
18. Repairs and Maintenance........................................... 21
19. Liens............................................................. 22
20. Indemnification and Exculpation................................... 23
21. Insurance - Waiver of Subrogation................................. 24
22. Damage or Destruction............................................. 25
i
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23. Eminent Domain.................................................... 27
24. Tenant's Default and Landlord's Remedies.......................... 28
25. Assignment or Subletting.......................................... 31
26. Intentionally omitted............................................. 34
27. Bankruptcy........................................................ 35
28. Definition of Landlord............................................ 35
29. Estoppel Certificate.............................................. 35
30. Intentionally omitted............................................. 36
31. Limitation of Landlord's Liability................................ 36
32. Project Control by Landlord....................................... 37
33. Quiet Enjoyment................................................... 38
34. Intentionally omitted............................................. 38
35. Subordination and Attornment...................................... 38
36. Surrender......................................................... 39
37. Waiver and Modification........................................... 39
38. Intentionally omitted............................................. 39
39. Intentionally omitted............................................. 39
40. Hazardous Materials............................................... 39
41. Intentionally omitted............................................. 42
42. Options to Extend Term............................................ 42
43. Miscellaneous..................................................... 43
ii
<PAGE>
LEASE
THIS LEASE is made as of the August 22, 1997, by and between ARE-708 QUINCE
ORCHARD, LLC, a Delaware limited liability company (hereinafter called
"Landlord") and GENE LOGIC INC., a Delaware corporation (hereinafter called
"Tenant").
1. Lease of Premises.
1.1 Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord, those certain premises (hereinafter called the "Demised Premises")
within the building located at the address set forth below (hereinafter called
the "Building"). Landlord and Tenant acknowledge that the Demised Premises
shall, for purposes of Tenant's exercise of its rights hereunder, be deemed to
include the entire Building and, except as otherwise expressly provided herein,
Tenant shall be entitled to use the entire Building (including the Common Area
(as hereinafter defined)) as though the portions of the Building not technically
included within the Demised Premises had been so included. The real property
upon which the Building is located, and all landscaping, parking facilities, and
other improvements and appurtenances related thereto, are hereinafter
collectively referred to as the "Project", the site plan and legal description
for which are attached hereto as Exhibit "A". All portions of the Project which
are for the non-exclusive use of tenants of the Building, including, without
limitation, driveways, sidewalks, parking areas, landscaped areas, service
corridors, stairways, elevators, public restrooms and Building lobbies, are
hereinafter referred to as "Common Area". Promptly following the date hereof
Landlord shall cause its architect to field measure the rentable square footage
of the Building, such measurement to be certified in accordance with, at
Landlord's option, either (a) the Building Owners and Managers Association
method of measurement (ANSI 265.1 1996) or (b) WDCAR. In the event that the
field measurement discloses that the rentable square footage of the Building is
more than two percent (2%) larger or smaller than 49,225, appropriate rental and
other adjustments shall be made by way of an amendment to this Lease. Landlord
shall furnish to Tenant a copy of Landlord's architect's field measurement
report.
2. Basic Lease Provisions.
2.1 For convenience of the parties, certain basic provisions of this
Lease are set forth herein. The provisions set forth herein are subject to the
remaining terms and conditions of this Lease and are to be interpreted in light
of such remaining terms and conditions.
2.1.1 Address of the Building:
708 Quince Orchard Road
Gaithersburg, MD 20878
1
<PAGE>
2.1.2 Designation of Tenant's Demised Premises
Entire first floor
Entire second floor
2.1.3 (a) Rentable Area of Demised Premises:
24,230 sq. ft. on first floor
24,995 sq. ft on second floor
(b) Rentable Area of Building/Project:
49,225 sq. ft.
2.1.4 Initial Basic Annual Rent:
(a) 35,000 sq. ft. x $25.10 per sq. ft. = $878,500.00
(b) 14,225 sq. ft. x $13.50 per sq. ft. = $192,037.50
2.1.5 Initial Monthly Rental Installments of Basic Annual
Rent: $89,211.46
2.1.6 Tenant's Pro Rata Share:
100% of the Building
2.1.7 (a) Term Commencement Date:
December 1, 1997
(b) Term Expiration Date:
November 30, 2007
2.1.8 Security Deposit and Rent Deposit: (a) $267,634.38 and
(b) $89,211.46, subject to application in accordance with Section 9.5 hereof.
2.1.9 Permitted Use: General office use,
bio-medical/bio-chemical laboratory use, storage and other incidental uses
consistent with the foregoing named uses.
2.1.10 Address for Rent Payment:
Alexandria Real Estate Equities, Inc.
Suite 700
251 South Lake Avenue
Pasadena, CA 91101
Address for Notices to Landlord:
Alexandria Real Estate Equities, Inc.
Suite 700
251 South Lake Avenue
Pasadena, California 91101
Attention: Corporate Secretary
2
<PAGE>
with copies to:
Alexandria Real Estate Equities, Inc.
11440 West Bernardo Court
Suite 170
San Diego, California 92127
Attention: Gary Kreitzer
and
Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue
Los Angeles, CA 90071
Attention: Rand S. April
Address for Notices to Tenant:
If prior to the Term Commencement Date:
Gene Logic Inc.
10150 Old Columbia Road
Columbia, Maryland 21046
Attention: Chief Financial Officer
If subsequent to the Term Commencement Date:
Gene Logic Inc.
708 Quince Orchard Road
Gaithersburg, Maryland 20878
Attention: Chief Financial Officer
With, in each case, a copy to:
Gary K. Bahena, Esq.
601 Thirteenth Street, N.W.
Suite 320 North
Washington, D.C. 20005
2.1.11 Guarantor of Lease: N/A
-------
2.1.12 Space Plan Approval Date: N/A
-------
2.1.13 The following Exhibits are attached hereto and
incorporated herein: A, A-1, B, C, D, E, and F.
3
<PAGE>
3. Term.
3.1 This Lease shall take effect upon the date of execution and
delivery hereof by all parties hereto and, except as specifically otherwise
provide within this Lease, each of the provisions hereof shall be binding upon
and inure to the benefit of Landlord and Tenant from the date of execution and
delivery hereof by all parties hereto.
3.2 The term of this Lease (the "Term") shall commence on the Term
Commencement Date and shall expire on the Term Expiration Date subject to
earlier termination of this Lease as provided herein.
4. Possession and Commencement Date.
4.1 Landlord shall tender to Tenant possession of the Demised
Premises no later than the fourth business day following the date of receipt by
Landlord from Tenant of four (4) copies of this Lease executed by Tenant (the
"Delivery Date"). In the event that Landlord fails to tender possession of the
Demised Premises by such date, Tenant shall receive two days of free Basic
Annual Rent for each day not delivered. In the event that the Demised Premises
have not been delivered to Tenant by August 30, 1997, then Tenant shall have the
right to terminate this Lease by written notice received by Landlord within ten
(10) business days thereafter.
4.2 Notwithstanding anything to the contrary set forth elsewhere in
this Lease, Tenant shall not have any obligation to pay to Landlord Basic Annual
Rent in respect of the Demised Premises until the earlier of (i) Tenant's
occupancy and commencement of regular business operations within 35,000 sq. ft.
of the Demised Premises or (ii) December 1, 1997 (such December 1 date, however,
being extended by one day for each day following the Delivery Date that Landlord
has failed to deliver occupancy of the Demised Premises to Tenant and such date
to be further extended by one day for each day of Landlord delay pursuant to
Section 4.4 hereof) (the "Term Commencement Date").
4.3 Upon reasonable notice by Tenant to Landlord and provided that
Tenant (and its agents and representatives) are accompanied by a representative
of Landlord, from and after the date hereof Tenant shall be permitted to enter
upon the Demised Premises for the purposes of measurement and inspection. The
terms of this Section 4.3 shall no longer be applicable following delivery of
possession pursuant to Section 4.1 hereof.
4.4 Notwithstanding anything to the contrary set forth elsewhere in
this Lease, the Term Commencement Date shall be extended by one day for each day
that substantial completion of Tenant's Work (as such term is defined in Exhibit
B) is delayed solely by the failure of Landlord to respond in a timely fashion
to Tenant's requests for review and approval. Landlord shall have three (3)
business days following receipt of Tenant's request for review and approval to
review and approve or disapprove such request. Landlord and Tenant shall
execute and deliver written acknowledgement of the actual Term Commencement Date
in the form of Exhibit E.
4
<PAGE>
4.5 There shall be no charge to Tenant for Landlord's personnel or
engineer in connection with Tenant moving in and moving out of the Building.
4.6 The provisions governing the preparation of plans and the
performance of Tenant's Work are set forth in Exhibit B attached hereto and made
a part hereof.
5. Rent.
5.1 Tenant agrees, commencing on the Term Commencement Date, to pay
Landlord as Basic Annual Rent for the Demised Premises the sum set forth in
Section 2.1.4 subject to the rental adjustments provided in Article 6 hereof.
Basic Annual Rent shall be paid in the equal monthly installments set forth in
Section 2.1.5, subject to the rental adjustments provided in Article 6 hereof,
each in advance on the first day of each and every calendar month during the
Term.
5.2 In addition to Basic Annual Rent, Tenant agrees to pay to
Landlord as additional rent ("Additional Rent") at times hereinafter specified
in this Lease (i) Tenant's pro rata share, as set forth in Section 2.1.6
("Tenant's Pro Rata Share") of Operating Expenses as provided in Article 7 and
(ii) any other amounts that Tenant assumes or agrees to pay under the provisions
of this Lease that are owed to Landlord, including, without limitation, any and
all other sums that may become due by reason of any default of Tenant or failure
on Tenant's part to comply with the agreements, terms, covenants and conditions
of this Lease to be performed by Tenant, after notice and lapse of applicable
cure period.
5.3 Basic Annual Rent and Additional Rent shall together be
denominated "Rent". Rent shall be paid to Landlord, without abatement,
deduction or offset, in lawful money of the United States of America, at the
office of Landlord as set forth in Section 2.1.10 or to such other person or at
such other place as Landlord may from time designate in writing. In the event
the Term commences or ends on a day other than the first day of a calendar
month, then the Rent for such fraction of a month shall be prorated for such
period on the basis of a thirty (30) day month and shall be paid at the then
current rate for such fractional month.
6. Rent Adjustments.
6.1 With respect to $878,500.00 of Basic Annual Rent, commencing with
that monthly rental installment which is due on or after the first anniversary
of the Term Commencement Date, such portion of Basic Annual Rent shall be
increased by an amount equal to three percent (3%) of the Basic Annual Rent then
in effect. Commencing with that monthly rental installment which is due on or
after the second anniversary of the Term Commencement Date, and on the same day
of every calendar year thereafter for so long as this Lease continues in effect,
the entire Basic Annual Rent shall be increased by an amount equal to three
percent (3%) of the Basic Annual Rent then in effect.
5
<PAGE>
7. Operating Expenses.
7.1 As used herein, the term "Operating Expenses" shall include:
(a) Government impositions including, without limitation,
property tax costs consisting of real and personal property taxes and
assessments constituting a lien upon the Project, including amounts due under
any improvement bond upon the Building and/or Project including the parcel or
parcels of real property upon which the Building and areas serving such Building
are located or assessments levied in lieu thereof imposed by any governmental
authority or agency, any tax on or measured by gross rentals received from the
rental of space in the Building (i.e., made without regard to or allowance for
any expense or other deductions, allowances or the like), or tax based on the
square footage of the Demised Premises, Building, or Project as well as any
parking charges, utilities surcharges, or any other costs levied, assessed or
imposed by, or at the direction of, or resulting from statutes or regulations,
or interpretations thereof, promulgated by any federal, state, regional,
municipal or local government authority in connection with the use or occupancy
of the Building or the parking facilities serving the Building, any tax on this
transaction or any document to which Tenant is a party creating or transferring
an interest in the Demised Premises, any fee for a business license to operate
an office building, and any expenses, including the reasonable cost of attorneys
or experts, reasonably incurred by Landlord in seeking reduction by the taxing
authority of the applicable taxes, less tax refunds obtained as a result of an
application for review thereof. Operating Expenses shall not include any net
income, franchise, capital stock, estate or inheritance taxes, or taxes which
are the personal obligation of Landlord or of another tenant of the Project, or
taxes on or in respect of personal property (or the value or cost thereof) not
permanently located at and used in connection with the Building or Project, or
any "rent" or similar tax unless applicable solely to landlords of real property
or to real property rental receipts, or any "gross receipts", "receipts" or
other similar tax unless measured, assessed and paid without regard to any
deductions or offsets against receipts, including without deduction for
operating expenses, or any income, transfer, business, unincorporated business
or gains tax or any real estate tax or other sum, charge, levy or tax
attributable to any land or improvements other than the Building and the land
described in Exhibit "A". If any assessments are payable in installments, then
for the purpose hereof (regardless of whether Landlord elects to pay same in
installments) Operating Expenses for any calendar year occurring during the Term
shall include only those installments, together with interest, that would have
become due if Landlord opted to pay same in the maximum number of installments
permitted. All real estate taxes and similar charges includable in Operating
Expenses pursuant to this Section 7.1(a) shall be computed as if the Building
and Project were the only asset of Landlord. Upon request by Tenant, Landlord
shall furnish Tenant with copies of all proposed assessments, assessments, real
estate tax bills and the like. Landlord shall also notify Tenant promptly
following the filing or commencement of, and again following any decision in or
conclusion or settlement of, any tax or assessment appeal, contest, reduction or
challenge. On or before the 40th day before the last day to file an application
to contest any such tax or assessment, Tenant may request Landlord to notify
Tenant whether Landlord intends to file such application and within ten (10)
days after such request Landlord shall notify Tenant whether or not Landlord
will do so. If within such ten (10) day period Landlord either does not so
notify Tenant or notifies Tenant that Landlord does not intend to file such an
application,
6
<PAGE>
Tenant, at its sole cost and expense, shall have the right (and Landlord
hereby constitutes Tenant as Landlord's attorney-in-fact to the extent
required by law to enable Tenant) to challenge and/or appeal any tax,
assessment or other item includable in Operating Expenses pursuant to this
Section 7.1(a), and Landlord shall cooperate with Tenant as requested by
Tenant in any such challenge and/or appeal. Tenant hereby agrees to save
Landlord harmless from and against all costs, expenses, loss or damage
resulting from any such contest or appeal.
(b) All other reasonable costs of any kind paid or incurred by
Landlord in connection with the operation and maintenance of the Building and
the Project including, by way of examples and not as a limitation upon the
generality of the foregoing, costs of repairs and replacements to improvements
within the Project as appropriate to maintain the Project as required hereunder,
including cost of funding such reasonable reserves as Landlord, consistent with
good business practice, may establish (but in no event in excess of Twenty
Thousand Dollars ($20,000) per annum) to provide for future repairs and
replacements, costs of utilities furnished to the Common Areas, sewer fees,
cable T.V., when applicable, trash collection, cleaning, including windows,
heating, ventilation, air-conditioning, maintenance of landscape and grounds,
maintenance of drives and parking areas, security services and devices, building
supplies, maintenance and replacement to equipment utilized for operation and
maintenance of the Project, license, permit and inspection fees, sales, use and
excise taxes on goods and services purchased by Landlord in connection with the
operation, maintenance or repair of the Project and Building systems and
equipment, telephone, postage, stationary supplies and other expenses incurred
in connection with the operation, maintenance, or repair of the Project,
accounting, legal and other professional fees and expenses incurred in
connection with the Project, capital expenditures, costs of complying with any
applicable laws, hazardous waste remediation, rules or regulations, insurance
premiums including premiums for public liability, property casualty, earthquake
and environmental coverages, portions of insured losses paid by Landlord as part
of deductible portion of loss (not to exceed $50,000.00 for any single loss) by
reason of insurance policy terms, service contracts, costs of services of
independent contractors retained to do work of the nature before referenced, and
costs of compensation (including employment taxes and fringe benefits) of all
persons who perform regular and recurring on-site duties connected with the
day-to-day operation and maintenance of the Project, its equipment, the adjacent
walks, landscaped areas, drives, and parking areas, including without
limitation, janitors, floor waxers, window-washers, watchmen, gardeners,
sweepers, and handymen and costs of management services, which costs of
management services shall not exceed four percent (4%) of the non-tenant
improvements Rent (i.e., in calculating management fees in respect of this
Lease, such percentage shall be calculated and applied only to (x) the Basic
Annual Rent as though such Basic Annual Rent were $13.50 per square foot per
annum, as adjusted pursuant to Section 6.1, plus (y) the other Operating
Expenses actually paid by Landlord). In the event that any capital expenditure
by Landlord is in excess of Seventy-Five Thousand Dollars ($75,000) there shall
be included each calendar year as an Operating Expense in respect of such
expenditure only the amortized cost of such item for that year (using the
shorter of seven (7) years or the useful life determined in accordance with the
U.S. Internal Revenue Code regulations in effect at the time the expenditure was
made). Notwithstanding anything to the contrary set forth elsewhere in this
Lease, (i) in no event shall Landlord establish reserves in excess of
$100,000.00 and (ii) in the event that a reserve is in existence and a capital
expenditure is required Landlord shall first use
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funds in reserve to pay for such capital expenditure, in which event Landlord
shall thereafter replenish the reserve (subject to the $100,000.00
limitation).
(c) The foregoing notwithstanding, term "Operating Expenses"
shall not include (1) depreciation; (2) interest on and amortization of debts;
(3) leasehold improvements, alterations, decorations and painting done for
particular tenants or occupants of the Building; (4) leasing and brokerage
commissions; (5) refinancing costs; (6) the cost or repairs or replacements
incurred by reason of fire or other casualty to the extent covered by insurance
proceeds; (7) the cost of items, work, services or overtime heating, ventilation
or air conditioning for which Landlord is or may be entitled to be compensated
by payments by tenants or occupants, including Tenant, which are not fixed
annual rent; (8) amounts received by Landlord through proceeds of insurance, to
the extent the proceeds are compensation for expenses which would be includable
in Operating Expenses; (9) advertising and promotional expenditures; (10) ground
rents; (11) legal fees (provided, however, that Landlord may be entitled to
collect legal fees pursuant to Section 24.2.5 hereof); (12) auditing or
accounting fees other than those reasonably incurred in the preparation of
statements and calculations pursuant to this Section 7.1; (13) wages, benefits
or other compensation or payments to or in respect of employees or other persons
not providing on-site services to the Project or to executives or other persons
above (or performing functions typically assigned to or performed by persons
above) the grade of building manager; (14) wages, benefits or other compensation
or payments to or in respect of any person owning or controlling, directly or
indirectly, any right, title, interest or estate, legal, beneficial, equitable
or otherwise, in or to all or any part of Landlord, the Building and/or the
Project and/or in or to any management agent or company for either or both of
the same; (15) management fees or other mark-ups of any kind or description
other than for the management fee expressly provided for in Section 7.1(b)
above; (16) costs of Landlord's general overhead and general administrative
expenses (individual, partnership or corporate, as the case may be); (17)
charitable contributions; (18) any wages, benefits or other compensation or
payments paid clerks, attendants or other persons in commercial concessions
(such as snack bar or restaurant), if any, operated by Landlord or in the
Building; (19) costs attributable to the gross negligence of Landlord, its
agents, contractors or employees; (20) costs and expenses paid to non-arms
length contractors in excess of fair market value; (21) when operated as a
commercial concession or by a commercial parking operator, parking lot, garage
maintenance or other costs in connection with any parking lot or garage; (22)
costs (including, but not limited to, rent) incurred in connection with or
otherwise attributable to office or other space used for or in connection with
the Building (including any management office space, but excluding any ordinary,
customary and reasonable amounts of space or area used solely for Building
mechanical, electrical, telephone, storage and/or engineering rooms); and (23)
costs or expenses associated with leasing other space in the Building and/or in
connection with any sale, financing and/or refinancing of the Building, the
Project or any interest of Landlord. In addition, Operating Expenses shall not
include any costs incurred by Landlord to test, survey, clean-up, contain,
abate, remove or otherwise remediate Hazardous Materials (as hereinafter
defined) in the Project unless such costs were incurred as a result of the acts
or omissions of Tenant.
7.2 Tenant shall pay to Landlord on the first day of each calendar
month of the Term, as Additional Rent, Landlord's reasonable estimate of
Tenant's Pro Rata Share (as set forth
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in Section 2.1.6) of Operating Expenses with respect to the Project for such
month. On or before December 15th of each year, Landlord shall submit to
Tenant Landlord's good faith estimate of the Operating Expenses for the
succeeding calendar year. Landlord shall be permitted to submit revised
estimates at any time and from time to time. In the event that Landlord
revises its estimate of Operating Expenses, payments by Tenant in respect of
Operating Expenses pursuant to the revised estimate shall commence on the
first payment date that is at least thirty (30) days following Tenant's
receipt of such estimate.
(a) Within ninety (90) days after the conclusion of each
calendar year (or such longer period as may be reasonably required), Landlord
shall furnish to Tenant a statement showing in reasonable detail the actual
Operating Expenses and Tenant's Pro Rata Share of Operating Expenses for the
previous calendar year. Any additional sum due from Tenant to Landlord shall be
immediately due and payable. If the aggregate amount paid by Tenant pursuant to
Section 7.2 exceeds Tenant's Pro Rata Share of Operating Expenses for the
previous calendar year, the difference shall be credited by Landlord against the
Rent next due and owing from Tenant; provided that, if the Lease term has
expired, Landlord shall accompany said statement with payment for the amount of
such difference.
(b) Any amount due under Section 7.2 for any period which is
less than a full month shall be prorated (based on a 30-day month) for such
fractional month.
(c) Landlord's annual statement, except as otherwise provided in
Section 7.3 below, shall constitute a final statement as to such year. Anything
to the contrary contained herein notwithstanding, in the event that such
statement is not received by Tenant on or prior to August 31 of any calendar
year for the immediately preceding calendar year then Landlord may not
thereafter request payment of any deficiency on account of such prior year.
Landlord shall keep true and accurate books and records with respect to all
Operating Expenses in accordance with generally accepted accounting principals
consistently applied.
7.3 Landlord's annual statement shall be final and binding upon
Tenant unless Tenant, within ninety (90) days after Tenant's receipt thereof,
shall contest any item therein by giving written notice to Landlord, specifying
each item contested and the reason therefor. If, during such 90 day period,
Tenant reasonably and in good faith questions or contests the correctness of
Landlord's statement of Tenant's Pro Rata Share of Operating Expenses, (provided
that Tenant shall have paid to Landlord any additional sum due pursuant to
Section 7.2(a)) Landlord will provide Tenant and/or Tenant's designated
representative with access to Landlord's books and records and such information
as Landlord reasonably determines to be responsive to Tenant's questions.
Tenant's designated representative shall be an independent public accounting
firm working pursuant to a fee arrangement other than a contingent fee basis.
In the event that after Tenant's review of such information, Landlord and Tenant
cannot agree upon the amount of Tenant's Pro Rata Share of Operating Expenses,
then Tenant shall have the right to have an independent public accounting firm
hired by Tenant (at Tenant's sole cost and expense) and approved by Landlord
(which approval shall not be unreasonably withheld or delayed) audit and/or
review such Landlord's books and records for the year in question (the
"Independent Review"). The results of any such Independent Review shall be
binding on
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Landlord and Tenant. If the Independent Review shows that Tenant's
Pro Rata Share of Operating Expenses actually paid for the calendar year in
question exceeded Tenant's obligations for such calendar year, Landlord shall at
Tenant's option either (1) credit the excess to the next succeeding installments
of estimated Additional Rent or (2) pay the excess to Tenant within thirty (30)
days after delivery of such statement (provided, however, that in the event that
the Independent Review indicates that the amount of Operating Expenses paid by
Tenant with respect to a calendar year exceeded by more than five percent (5%)
the amount actually due from Tenant (exclusive of any difference between the
amount included in Operating Expenses in respect of insurance premiums and the
amount that should have been included in Operating Expenses in respect of
insurance premiums), then Landlord shall reimburse Tenant for the cost of such
Independent Review). If the Independent Review shows that Tenant's payments of
Tenant's Pro Rata Share of Operating Expenses for such calendar year were less
than Tenant's obligation for the calendar year, Tenant shall pay the deficiency
to the Landlord within thirty (30) days after delivery of such statement.
7.4 Tenant shall not be responsible for Operating Expenses
attributable to the time period prior to the Term Commencement Date. The
responsibility of Tenant for Tenant's Pro Rata Share of Operating Expenses shall
continue to the later of (i) the date of termination of the Lease, or (ii) the
date Tenant has fully vacated the Demised Premises. Tenant shall not be deemed
to have fully vacated the Demised Premises until Tenant shall have removed all
items required to be removed and shall have completed all procedures necessary
to fully release and terminate any permits or licenses restricting the use of
the Demised Premises in any manner.
7.5 Operating Expenses for the calendar year in which Tenant's
obligation to share therein commences and in the calendar year in which such
obligation ceases, shall be prorated on the basis of the number of days in such
calendar year as are included within the Term over 360. Expenses such as taxes,
assessments and insurance premiums which are incurred for an extended time
period shall be prorated based upon time periods to which applicable so that the
amounts attributed to the Demised Premises relate in a reasonable manner to the
time period wherein Tenant has an obligation to share in Operating Expenses.
8. Intentionally omitted.
9. Security Deposit.
9.1 On the date of delivery of the Demised Premises by Landlord to
Tenant, Tenant shall deposit with Landlord the sum set forth in Section 2.1.8(a)
(the "Security Deposit") which sum shall be held by Landlord as security for the
faithful performance by Tenant of all of the terms, covenants, and conditions of
this Lease to be kept and performed by Tenant during the Term. If an Event of
Default shall occur, Landlord may (but shall not be required to) use, apply or
retain all or any part of the Security Deposit to the extent necessary to remedy
such Event of Default and/or to compensate Landlord for any other loss or damage
which Landlord may suffer by reason of such Event of Default. If any portion of
the Security Deposit is so used or applied, Tenant shall, within ten (10) days
following demand therefor, deposit cash with Landlord in an amount sufficient to
restore the Security Deposit to its original amount and Tenant's failure to do
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so shall be a material breach of this Lease. The term "Security Deposit"
incudes any interest to which Tenant is entitled pursuant hereto on any cash
portion of such Security Deposit. Landlord shall deposit the cash portion of
the Security Deposit in a segregated interest-bearing account of its choice and
Tenant shall be entitled to the interest earned thereon. The Security Deposit
may, at Tenant's election, and at any time, be or be changed to be in the form
of a letter of credit (the "Letter of Credit"). Any Letter of Credit tendered
as and for the Security Deposit shall be (i) unconditional (except for standard
conditions relating to presentation); (ii) irrevocable; (iii) issued by a
financial institution reasonably approved by Landlord in Landlord's reasonable
discretion; (iv) in a form reasonably approved by Landlord, assignable (in
accordance with the issuer's standard requirements) and permitting partial and
multiple drawings; (v) for either multiple terms of one (1) year each in
duration, renewed (unless automatically renewing) at least sixty (60) days prior
to the expiration thereof, the entire term extending until the date which is
ninety (90) days after the expiration of the Term, as such Term may be extended
pursuant to the provisions of this Lease, or at Tenant's option for a single
term extending until the date which is ninety (90) days after the expiration of
the Term, as such Term may be extended pursuant to the provisions of this Lease;
and (vi) be in form and substance acceptable to the Landlord, in its reasonable
discretion. Unless automatically renewing, Tenant shall provide Landlord with a
replacement Letter of Credit at least sixty (60) days prior to the expiration of
the immediately preceding Letter of Credit. If a partial drawing occurs under
the Letter of Credit, Tenant shall, upon demand but not more than five (5) days
after such partial drawing, cause the financial institution to reissue the
Letter of Credit in the amount then currently required under the terms of this
Lease. Notwithstanding the foregoing, Landlord shall be entitled to draw down
on the Letter of Credit, without any notice, at any time on or after the earlier
of (i) the occurrence and continuance of an Event of Default by Tenant under
this Lease; or (ii) the thirtieth (30th) day preceding the expiration date of
the Letter of Credit in the event Tenant is required to and fails to timely
replace the Letter of Credit. Landlord shall provide Tenant with written notice
of any draws made on the Letter of Credit.
9.2 In the event of bankruptcy or other debtor-creditor proceedings
against Tenant, the Security Deposit shall be deemed to be applied first to the
payment of Rent and other charges due Landlord for all periods prior to the
filing of such proceedings.
9.3 Landlord shall deliver the funds deposited hereunder by Tenant to
any purchaser of Landlord's interest in the Demised Premises and thereupon
Landlord shall be discharged from any further liability with respect to such
deposit. This provision shall also apply to any subsequent transfers.
9.4 To the extent the Security Deposit has not been applied pursuant
to this Article 9, the Security Deposit, or any balance thereof, shall be
returned to Tenant (or, at Landlord's option, to the last assignee of Tenant's
interest hereunder) within thirty (30) days after the expiration or earlier
termination of this Lease.
9.5 Tenant shall, at the time it delivers the Security Deposit to
Landlord, deposit with Landlord the sum set forth in Section 2.1.8(b) (the "Rent
Deposit") which sum shall be held by Landlord and applied against the first full
monthly payment of Basic Annual Rent.
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10. Use.
10.1 Tenant shall use the Demised Premises for the purpose set forth
in Section 2.1.9 and shall not use the Demised Premises, or permit or suffer the
Demised Premises to be used, for any other purpose without the prior written
consent of Landlord which may be withheld in Landlord's sole discretion,
(provided, however, that Landlord's approval of a change in use shall not be
unreasonably withheld, conditioned or delayed in the case of a change proposed
in connection with an assignment or subletting of the Lease and/or the Demised
Premises under circumstances where, pursuant to the terms of Section 25 below,
Landlord's consent to such assignment or subletting may not be unreasonably
withheld, conditioned or delayed). In no event shall Landlord be deemed to have
acted unreasonably in the event that Landlord does not approve a change in use
which would reduce the number of square feet of the Demised Premises used for
laboratories.
10.2 Tenant shall not use or occupy the Demised Premises in violation
of any federal, state and local laws and regulations, zoning ordinances, or of
the certificate of occupancy issued for the Building, and shall, upon five (5)
days' written notice from Landlord, discontinue any use of the Demised Premises
which is declared or claimed by any governmental authority having jurisdiction
to be a violation of law, regulation or zoning ordinance or of said certificate
of occupancy. Tenant shall comply with any direction of any governmental
authority having jurisdiction which shall, by reason of the nature of Tenant's
use or occupancy of the Demised Premises, impose any duty upon Tenant or
Landlord with respect to the Demised Premises or with respect to the use or
occupation thereof. Provided non-compliance therewith shall not constitute a
crime or an offense punishable by imprisonment of Landlord and provided
non-compliance will not endanger the Demised Premises, Tenant may, at its sole
cost and expense, contest the application or validity of any such law and such
non-compliance shall not be deemed a breach of this Lease during such contest
provided such contest shall be diligently prosecuted.
10.3 Tenant shall not do or permit to be done anything which will
invalidate or increase the cost of any fire, environmental, extended coverage or
any other insurance policy covering the Building and Project and shall comply
with all rules, orders, regulations, and requirements of the insurers of the
Building and Project and Tenant shall within thirty (30) days following written
demand reimburse Landlord for any additional premium charged for such policy by
reason of Tenant's failure to comply with the provisions of this Section.
10.4 Intentionally omitted.
10.5 No additional locks or bolts of any kind shall be placed upon
any of the doors or windows by Tenant nor shall any changes be made in existing
locks or the mechanism thereof without the prior written consent of Landlord
(or, alternatively, without furnishing to Landlord one or more master keys
therefor). Tenant must, upon termination of this Lease return to Landlord all
keys to offices and restrooms, either furnished to, or otherwise procured by
Tenant. The foregoing notwithstanding, Tenant shall have the right to designate
certain areas as "secure" areas and, subject to the provisions of Section 32.3
hereof, to limit access thereto (including, but
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not limited to, by installing locks or other apparatus to which Landlord is
not provided keys or other means of entry).
10.6 No awnings or other projection shall be attached to any outside
wall of the building. Neither the interior nor exterior of any windows shall
be coated or otherwise sunscreened without the express written consent of
Landlord.
10.7 No sign, advertisement, or notice shall be exhibited, painted or
affixed by Tenant on the exterior of the Building without the prior written
consent of Landlord. Notwithstanding anything to the contrary contained
elsewhere in this Lease, Tenant shall have the right, at its sole cost and
expense, to install and maintain an illuminated exterior sign (if permitted by
law and matters currently of record affecting the Project) on the Building upon
and subject to the following terms and conditions:
(i) Tenant shall have submitted to Landlord for
its approval plans and specifications for such installation, including
without limitation, the size, weight, location, design and manner of
affixation to the Building;
(ii) Tenant shall have obtained all required
governmental approvals and permits and delivered copies of the same to
Landlord prior to the commencement of any such installation.
(iii) Tenant's installation shall be performed in
accordance with all applicable laws, applicable provisions of this
Lease and Landlord's reasonable requirements; and
(iv) If requested by Landlord, prior to the
expiration or earlier termination of this Lease, Tenant shall remove
such sign and restore the affected area of the Building to its
condition prior to such installation.
Tenant's right to install signage on the exterior of the Building shall be
exclusive to Tenant so long as Tenant leases the entire Demised Premises and no
other tenant occupies more rentable square footage in the Building.
10.8 Tenant shall cause any office equipment or machinery to be
installed in the Demised Premises so as to reasonably prevent sounds or
vibrations therefrom from extending outside of the Building or, if other tenants
are occupying any part of the Building, from extending into Common Areas as
defined in Section 1.1 or other tenant offices in the Building. Tenant shall
not place a load on any floor of the Demised Premises exceeding a floor load of
one hundred (100) pounds per square foot (one hundred twenty five (125) pounds
per square foot with respect to the loading docks) without advance notice to and
reasonable approval by Landlord.
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10.9 Tenant shall not do or permit anything to be done in or about
the Demised Premises which shall in any way obstruct or interfere with the
rights of other tenants or occupants of the Building, or injure or annoy
them, or use or allow the Demised Premises to be used for immoral or unlawful
purposes, nor shall Tenant knowingly cause, maintain or permit any nuisance
or waste in, on, or about the Demised Premises, Building or Project.
10.10 Notwithstanding any other provision herein to the contrary,
Tenant shall be responsible for all liabilities, costs and expense arising
out of or in connection with the compliance of the Demised Premises with the
Americans With Disabilities Act, 42 U.S.C. Section 12101, et seq. (together
with regulations promulgated pursuant thereto, "ADA") and Tenant shall
indemnify, defend and hold harmless from and against any loss, cost,
liability or expense (including reasonable attorneys' fees and disbursements)
arising out of any failure of the Demised Premises to comply with the ADA.
10.11 Notwithstanding anything to the contrary contained elsewhere
in this Lease, Tenant shall have the non-exclusive right, at its sole cost
and expense but without charge by Landlord, to install and maintain
air-conditioning and communications equipment on the roof of the Building (if
permitted by law and matters currently of record affecting the Project) upon
and subject to the following terms and conditions:
(i) Tenant shall have submitted to Landlord for
its reasonable approval plans and specifications for such
installation, including, without limitation, the size, weight,
location, design and manner of penetration of the roof of the
Building;
(ii) All equipment installed on the roof of the
Building shall be tastefully screened;
(iii) Tenant shall have obtained all required
governmental approvals and permits and delivered copies of the same to
Landlord prior to the commencement of any such installation;
(iv) Tenant's installation shall be performed in
accordance with all applicable laws, applicable provisions of this
Lease and Landlord's reasonable requirements; and
(v) If requested by Landlord, prior to the
expiration or earlier termination of this Lease, Tenant shall remove
such installations and restore the affected areas of the roof to a
leak-free state.
10.12 Landlord, at its sole cost and expense, shall provide a
monitored card or key access system to the Building. Landlord, at Landlord's
sole cost and expense as an Operating Expense, shall maintain and repair the
Common Area security system and supply to Tenant's employees security cards
and/or keys for such system in sufficient quantity for use by Tenant's
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employees. Tenant, at its sole cost and expense, shall have the right to
utilize the same security system within the Demised Premises.
11. Brokers.
11.1 Landlord and Tenant represent and warrant that they have had
no dealings with any real estate broker or agent in connection with the
negotiation of this Lease other than Smithy Braedon - ONCOR International and
The Fred Ezra Company and that they know of no other real estate broker or
agent who is or might be entitled to a commission in connection with this
Lease.
11.2 Tenant represents and warrants that no broker or agent has
made any representation or warranty relied upon by Tenant in Tenant's
decision to enter into this Lease other than as contained in this Lease.
11.3 Tenant acknowledges and agrees that the employment of brokers
by Landlord is for the purpose of solicitation of offers of lease from
prospective tenants and no authority is granted to any broker to furnish any
representation (written or oral) or warranty from Landlord unless expressly
contained within this Lease. Landlord in executing this Lease does so in
reliance upon Tenant's representations and warranties contained within
Sections 11.1 and 11.2 herein.
12. Holding Over.
12.1 If, with Landlord's express written consent, Tenant holds
possession of all or any part of the Demised Premises after the Term, Tenant
shall become a tenant from month-to-month upon the date of such expiration or
earlier termination, and in such case Tenant shall continue to pay in accordance
with Article 5 the Basic Annual Rent as adjusted from the Term Commencement Date
in accordance with Article 6, and Tenant's Pro Rata Share of Operating Expenses,
and such month-to-month tenancy shall be subject to every other term, covenant
and agreement contained herein.
12.2 Notwithstanding the foregoing, if Tenant remains in possession
of the Demised Premises after the expiration or earlier termination of the Term
without the express written consent of Landlord, Tenant shall become a tenant at
sufferance upon the terms of this Lease except that the monthly Basic Annual
Rent shall be equal to one hundred fifty percent (150%) of the Basic Annual
Rent in effect during the last thirty (30) days of the Term.
12.3 Acceptance by Landlord of Rent after such expiration or earlier
termination shall not result in a renewal or reinstatement of this Lease.
12.4 The foregoing provisions of this Article 12 are in addition to
and do not affect Landlord's right to re-entry or any other rights of Landlord
hereunder or as otherwise provided by law.
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12.5 If pursuant to the operation of Section 40.5 or the last
sentence of Section 7.4 Tenant shall not be deemed to have fully vacated the
Demised Premises, Tenant shall continue to pay in accordance with Article 5 the
Basic Annual Rent as adjusted in accordance with Article 6 and Tenant's Pro Rata
Share of Operating Expenses until such time as Tenant shall have complied with
its obligations pursuant to Section 40.5 or the last sentence of 7.4, as
applicable.
13. Taxes on Tenant's Property.
13.1 Tenant shall pay, prior to delinquency, any and all taxes levied
against any personal property or trade fixtures placed by Tenant in or about the
Demised Premises.
13.2 If any such taxes on Tenant's personal property or trade
fixtures are levied against Landlord or Landlord's property or, if the assessed
valuation of the Building is increased by the inclusion therein of a value
attributable to Tenant's personal property or trade fixtures, and if Landlord
after written notice to Tenant pays the taxes based upon such increase in the
assessed valued, then Tenant shall within thirty (30) days following Tenant's
receipt of written demand by Landlord repay to Landlord the taxes so levied
against Landlord (Landlord, however, agreeing to give Tenant written notice upon
first learning of any such tax or other charge and Tenant reserving the right to
contest same whether in the name of Landlord or Tenant).
14. Condition of Demised Premises.
14.1 Tenant acknowledges that neither Landlord nor any agent of
Landlord has made any representation or warranty with respect to the condition
of the Demised Premises or the Building or Project, or with respect to the
suitability for the conduct of Tenant's business. Tenant agrees to take
possession of the Demised Premises in its current "as-is" condition subject only
to Landlord performing the following work promptly following the Delivery Date:
(a) Trimming shrubbery and raking leaves and debris;
(b) Re-grading and restriping handicap parking spaces to conform
to legal requirements;
(c) Repairing and re-grading two (2) exterior entry ramps to the
Building to conform to legal requirements;
(d) Patching parking lot curbs, gutters, potholes and cracks;
and
(e) Caulking the exterior facade of the Building as required.
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15. Common Areas and Parking Facilities.
15.1 Tenant shall have the non-exclusive right, in common with other
Building tenants, if any, to use the Common Areas, subject to the rules and
regulations adopted by Landlord and attached hereto as Exhibit "C" together with
such other reasonable and nondiscriminatory modifications thereof and additions
thereto as are hereafter promulgated by Landlord in its reasonable discretion
(the "Rules and Regulations"). Tenant shall observe and comply with the Rules
and Regulations. In the event of any conflict or inconsistency between any Rule
or Regulation and any other term or provision of this Lease, such other term or
provision of this Lease shall control.
15.2 As an appurtenance to the Demised Premises, Tenant shall have
the exclusive right to use the entire surface parking lot so long as Tenant is
leasing the entire Building. From and after such date that Tenant ceases to
lease the entire Building, parking spaces shall be allocated to tenants of the
Building on a pro-rata basis.
15.3 Landlord reserves the right to modify Common Areas including the
right to add or remove exterior and interior landscaping and to subdivide real
property provided that the same shall not unreasonably interfere with Tenant's
use and enjoyment of the Demised Premises, of the Building and/or of the Project
(including, but not limited to, the Common Areas).
16. Utilities and Services.
16.1 Tenant shall pay for all water (including the cost to service,
repair and replace reverse osmosis, deionized and other treated water), gas,
heat, light, power, telephone and other utilities supplied to the Demised
Premises, together with any fees, surcharges and taxes thereon. If any such
utility is not separately metered to Tenant, Tenant shall pay a reasonable
proportion to be determined by Landlord of all charges jointly metered with
other premises as part of Tenant's Pro Rata Share of Operating Expenses.
16.2 Landlord shall not be liable for nor shall any eviction of
Tenant result from the failure to furnish any such utility or service whether or
not such failure is caused by accident, breakage, repairs, strikes, lockouts or
other labor disturbances or labor disputes of any character, governmental
regulation, moratorium or other governmental action, inability despite the
exercise of reasonable diligence or by any other cause, including the negligence
of Landlord. In the event of such failure, Tenant shall not be entitled to any
abatement or reduction of Rent, nor be relieved from the operation of any
covenant or agreement of this Lease. In the event that Landlord fails to make a
repair that Landlord is obligated to make pursuant to the terms of this Lease
and as a result Tenant is substantially interfered with or interrupted in
conducting its business in the Demised Premises, Tenant, at its sole cost and
expense (unless such repair was an obligation of Landlord pursuant to Section
18.1 that was not includable as an Operating Expense or unless such repair was a
capital expenditure in excess of $75,000.00 that would have been amortized as an
Operating Expense pursuant to Section 7.1(b), in either of which events Landlord
shall reimburse Tenant in an amount equal to the reasonable costs paid by Tenant
to make such repair promptly following a request by Tenant for reimbursement
accompanied by
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copies of all invoices paid by Tenant), shall have the right to make such
repair. In the event that Tenant makes any such repair Tenant shall give
Landlord prompt notice of Tenant's repair and Tenant shall deliver to
Landlord copies of all invoices paid by Tenant to effect any such repair.
16.3 Tenant shall pay for, prior to delinquency, any utilities and
services which may be furnished to the Demised Premises during the Term.
16.4 Tenant shall not, without the prior written consent of Landlord,
use any device in the Demised Premises, including, but without limitation, data
processing machines, which will in any way increase the amount of ventilation,
air exchange, gas, steam, electricity or water beyond the existing capacity of
the Building (as such capacity may be increased based upon improvements by
Landlord or Tenant).
16.5 Intentionally omitted.
16.6 Utilities and services provided by Landlord to the Demised
Premises shall be paid by Tenant directly to the supplier of such utility or
service.
16.7 Intentionally omitted.
16.8 Subject in all cases to the terms of Section 16.2 hereof,
Landlord reserves the right to stop service of the elevator, plumbing,
ventilation, air conditioning and electric systems, when necessary, by reason of
accident or emergency or for repairs, alterations or improvements, in the
judgment of Landlord desirable or necessary to be made, until said repairs,
alterations or improvements shall have been completed, and Landlord shall
further have no responsibility or liability for failure to supply elevator
facilities, plumbing, ventilation, air conditioning or electric service, when
prevented from doing so by strike or accident, or by laws, rules, order,
ordinances, directions, regulations or requirements of any federal, state,
country or municipal authority or failure to deliver gas, oil or other suitable
fuel supply or inability by exercise of reasonable diligence to obtain gas, oil
or other suitable fuel. It is expressly understood and agreed that any
covenants on Landlord's part to furnish any service pursuant to any of the
terms, covenants, conditions, provisions or agreements of this Lease, or to
perform any act or thing for the benefit of Tenant, shall not be deemed breached
if Landlord is unable to furnish or perform the same by virtue of a strike or
labor trouble or any other cause whatsoever. The foregoing notwithstanding,
Landlord shall use its best efforts to minimize any interference with Tenant's
use and enjoyment of the Demised Premises in connection with any action by
Landlord under this Section 16.8 and, in particular, shall coordinate and
schedule all such activities (except in case of emergency) with Tenant.
16.9 Landlord shall have no responsibility to provide an emergency
power generator.
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17. Alterations.
17.1 Except as otherwise specifically provided herein, Tenant
shall make no alterations, additions or improvements in or to the Demised
Premises without Landlord's prior written consent, which approval shall not
be unreasonably withheld, conditioned or delayed (provided, however, that in
the event any proposed alteration, addition or improvement (i) affects any
structural portions of the Building including exterior walls, roof,
foundation and core of the Building, (ii) affects the exterior of the
Building or (iii) materially and adversely affects any Building systems,
including elevator, plumbing, air conditioning, heating, electrical,
security, life safety and power, then, except as otherwise specifically
provided in this Lease, Landlord may withhold its consent with respect
thereto in its sole and absolute discretion), and then only by architects,
contractors, suppliers or mechanics reasonably approved by Landlord. In
seeking Landlord's approval, Tenant shall provide Landlord, at least five (5)
business days in advance of any proposed construction, with plans,
specifications, bid proposals, work contracts and such other information
concerning the nature and cost of the alterations as may be reasonably
requested by Landlord (to the extent the same exist). The foregoing
notwithstanding, Tenant shall have the right without Landlord's prior written
consent or approval to make interior, non-structural alterations, additions
and/or improvements not materially and adversely affecting the Building
systems or the Common Areas and not, as to any particular project, exceeding
$30,000.00 in hard costs in the event that the subject project is undertaken
prior to the fifth anniversary of the Term Commencement Date and exceeding
$50,000.00 in hard costs in the event that the subject project is undertaken
thereafter; provided, however, that Tenant shall nevertheless furnish
Landlord with prior written notice thereof in accordance with Section 17.5
below and with a copy of any preliminary plans and specifications, working
drawings and final "as-built" drawings obtained therefor. In all events
Tenant shall deliver to Landlord a copy of all documents, plans and drawings
submitted to governmental authorities in connection with any alteration,
addition or improvement.
17.2 Tenant agrees that there shall be no construction of
partitions or other obstructions which might interfere with free access to
mechanical installation or service facilities of the Building or interfere
with the moving of Landlord's equipment to or from the enclosures containing
said installations or facilities. The foregoing shall not prohibit Tenant
from constructing corridors or other internal security partitions closing off
such areas from general public access, provided, however, that in such event
Tenant shall ensure that Landlord is given a copy of all keys and the like
needed for Landlord to have access to all Building mechanical systems and
service facilities and provided, further, however, that in no event shall any
such construction interfere with the moving of Landlord's equipment to and
from the subject enclosures.
17.3 Tenant agrees to use its best efforts to ensure that any work
by Tenant shall be accomplished in such a manner as to permit any fire
sprinkler system and fire water supply lines to remain fully operable at all
times.
17.4 If at the time such work is to be performed Tenant is not the
only tenant in the Building, all such work shall be done at such times and in
such manner as Landlord may
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from time to time reasonably designate. Tenant covenants and agrees that all
work done by Tenant shall be performed in full compliance with all laws,
rules, orders, ordinances, directions, regulations, and requirements of all
governmental agencies, offices, departments, bureaus and boards having
jurisdiction, and in full compliance with the rules, orders, directions,
regulations, and requirements of any applicable fire rating bureau. Tenant
shall provide Landlord with copies of "as-built" plans, if obtained, showing
any change in the Demised Premises. In all events Tenant shall deliver to
Landlord a copy of all documents, plans and drawings submitted to
governmental authorities in connection with any alteration, addition or
improvement.
17.5 Before commencing any work, Tenant shall give Landlord prior
written notice of the proposed commencement of such work and shall, if
required by Landlord (in the event that the total projected hard costs of
such work exceed $100,000.00), secure at Tenant's own cost and expense a
completion and lien indemnity bond (in industry standard form) for said work.
Such notice shall be received by Landlord at least five (5) business days
prior to the commencement of such work.
17.6 All alterations, attached equipment, decorations, fixtures,
trade fixtures, additions and improvements, subject to Section 17.8, attached
to or built into the Demised Premises, made by either of the parties,
including (without limiting the generality of the foregoing) all floor and
wallcovering, built-in cabinet work and paneling, sinks and related plumbing
fixtures, exterior venting fume hoods and walk-in freezers and refrigerators,
ductwork, conduits, electrical panels and circuits, shall, unless prior to
such construction or installation, Landlord elects otherwise, become the
property of Landlord upon the expiration or earlier termination of the term
of this Lease, and shall remain upon and be surrendered with the Demised
Premises as a part thereof.
17.7 Tenant shall repair any damage to the Demised Premises caused
by Tenant's removal of any property from the Demised Premises. During any
such restoration period, Tenant shall pay Rent to Landlord as provided herein
as if said space were otherwise occupied by Tenant.
17.8 Notwithstanding anything to the contrary set forth elsewhere in
this Lease, (a) Tenant shall have the right to remove emergency power generation
systems, autoclaves, fume hoods that are not exterior venting, modular cold
rooms, robotic equipment, glass washer and dryer, modular office type furniture,
phone systems, film processors and other Tenant equipment; provided, however,
that Tenant shall repair any damage caused by the removal thereof and (b) Tenant
shall not have the right to remove piping, ductwork, exhaust vents, wiring,
cabling, electrical panels, transfer switches, transformers, circuits, conduits,
gas and vacuum distribution systems, specialized water systems (reverse osmosis
and deionized), exterior exhausting fume hoods, casework, bench tops, built-in
cabinets, wall and floor coverings, pumps, Building boilers, air-handlers, steam
coils, heat exchangers, chillers, waste disposal systems, steam generators,
light fixtures, life and safety systems (i.e., security and fire alarms, eye
wash stations and fire sprinklers), drop ceiling structure and tiles, sinks and
hot water heaters. In any event Tenant shall not be permitted to remove (i) any
part of the Building's systems, (ii) anything purchased or paid for by Landlord
directly or through the payment by Landlord to Tenant of any
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construction or improvement allowance, or (iii) anything that could result in
significant damage to the Building. If Tenant shall fail to remove all of
its effects from the Demised Premises prior to termination of this Lease,
then Landlord may, at its option, remove the same in any manner that Landlord
shall choose, and store said effects without liability to Tenant for loss
thereof or damage thereto, and Tenant agrees to pay Landlord upon demand any
expenses incurred to such removal and storage or Landlord may, at its option,
without notice, sell said property or any of the same, at private sale and
without legal process, for such price as Landlord may obtain and apply the
proceeds of such sale against any amounts due under this Lease from Tenant to
Landlord and against any expenses incident to the removal, storage and sale
of said personal property.
17.9 Notwithstanding any other provision of this Article 17 to the
contrary, in no event may Tenant remove any improvement from the Demised
Premises as to which Landlord contributed payment, including, without
limitation, the Tenant Improvements made pursuant to the Work Letter without
Landlord's prior written consent, which may be withheld in Landlord's sole
discretion.
17.10 Tenant shall pay to Landlord an amount equal to five
percent (5%) of the cost to Tenant of all changes installed by Tenant or its
contractors or agents to cover Landlord's overhead and expenses for plan
review, coordination, scheduling and supervision thereof. Notwithstanding
the immediately preceding sentence, in no event shall Tenant be obligated to
pay to Landlord an amount in excess of $15,000.00 to cover Landlord's
overhead and expenses in connection with Tenant's initial alterations of the
14,225 square foot portion of the first floor of the Building that Tenant is
not altering immediately. For purposes of payment of such sum, Tenant shall
submit to Landlord copies of all bills, invoices, and statements covering the
costs of such charges, which will be accompanied by payment to Landlord of
the percentage fee set forth above. Tenant shall reimburse Landlord for any
extra expense incurred by Landlord by reason of faulty work done by Tenant or
its contractors or by reason of inadequate cleanup.
18. Repairs and Maintenance.
18.1 Landlord shall repair and maintain the structural and
exterior portions and Common Areas of the Building (including water tightness
thereof) and Project, including, without limitations, roofing and covering
materials, foundations, exterior walls, the plumbing, fire sprinkler system
(if any), heating, ventilating, air conditioning, elevator, and electrical
systems thereof (and the full cost thereof shall be included as a part of
Operating Expenses as provided in Article 7), unless such maintenance or
repairs are required in whole or in part because of any act, neglect, fault
of or omissions of any duty by Tenant, its agents, servants, employees or
invitees, in which case Tenant shall pay to Landlord the cost of such
maintenance and repairs. Notwithstanding anything to the contrary set forth
elsewhere in this Lease, Landlord, at its sole cost and expense and not as an
Operating Expense, shall be responsible for maintaining the structural
integrity of the roof, the exterior walls and the floorslabs of the Building.
In the event that Tenant desires to independently arrange for certain
services otherwise furnished by Landlord (e.g., parking lot cleaning,
landscaping, snow removal, cleaning, maintenance and other operations),
Tenant shall give notice to Landlord of such desire and, subject to
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Landlord's approval, which approval shall not be unreasonably withheld,
Tenant may make such arrangements in which event Tenant shall pay the entire
cost therefor directly to the provider thereof and no costs associated with
any such service shall be included in Operating Expenses. In the event
Landlord approves of any such arrangement, Landlord reserves the right to
monitor the work or services provided by any such provider. Upon request by
Landlord in the event that Landlord is dissatified with a provider or with
the work or services provided, Tenant shall terminate any such arrangements
provided that Tenant shall have no less than forty five (45) days following
receipt of Landlord's request to effect such termination. In addition, upon
request by Landlord Tenant shall promptly furnish to Landlord copies of all
documents, contracts, work orders and other instruments executed in
connection with any such arrangement.
18.2 Except for services of Landlord, if any, required by this
Lease, Tenant shall at Tenant's sole cost and expense keep the Demised
Premises and every part thereof in good condition and repair, damage thereto
from ordinary wear and tear excepted. Tenant shall, upon the expiration or
sooner termination of the Term, surrender the Demised Premises to Landlord in
as good condition as when received, ordinary wear and tear and damage by
casualty excepted. Except as otherwise specifically provided herein,
Landlord shall have no obligation to alter, remodel, improve, repair,
decorate or paint the Demised Premises or any part thereof.
18.3 Except as provided in Section 16.2, Landlord shall not be
liable for any failure to make any repairs or to perform any maintenance
which is an obligation of Landlord unless such failure shall persist for an
unreasonable time after written notice of the need of such repairs or
maintenance is given to Landlord by Tenant. Tenant waives the rights under
any law, statute or ordinance now or hereafter in effect to make repairs at
Landlord's expense, Tenant's rights being only as set forth in this Lease.
18.4 Repairs under this Article 18 which are obligations of
Landlord are subject to allocation among Tenant and other tenants as
Operating Expenses.
18.5 This Article 18 relates to repairs and maintenance arising in
ordinary course of operation of the Building, the Project and any related
facilities. In the event of fire, earthquake, flood, vandalism, war, or
similar cause of damage or destruction, this Article 18 shall not be
applicable and the provisions of Article 22 entitled "Damage or Destruction"
shall apply and control.
19. Liens.
19.1 Subject to the immediately succeeding sentence, Tenant shall
keep the Demised Premises, the Building and the real property upon which the
Building is situated free from any liens arising out of work performed,
materials furnished or obligations incurred by Tenant. Tenant further
covenants and agrees that any mechanic's lien filed against the Demised
Premises or against the Building for work claimed to have been done for, or
materials claimed to have been furnished to Tenant, will (unless filed as a
result of Landlord's failure to fund the cost therefor when such cost is
required by this Lease to be borne by Landlord) be discharged by
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Tenant, by bond or otherwise, within ten (10) days after the filing thereof,
at the sole cost and expense of Tenant.
19.2 Should Tenant fail to discharge any lien of the nature
described in Section 19.1 when required thereby, Landlord may at Landlord's
election pay such claim or post a bond or otherwise provide security to
eliminate the lien as a claim against title and the cost thereof shall be due
from Tenant as Additional Rent, within thirty (30) days following Tenant's
receipt of written demand therefor by Landlord.
19.3 In the event Tenant shall lease or finance the acquisition of
office equipment, furnishings, or other personal property of a removable
nature utilized by Tenant in the operation of Tenant's business, Tenant
warrants that any Uniform Commercial Code Financing Statement executed by
Tenant will upon its face or by exhibit thereto indicate that such Financing
Statement is applicable only to removable personal property of Tenant and to
property removable by Tenant pursuant to Section 17.8 hereof. In no event
shall the address of the Building be furnished on the statement without
qualifying language as to applicability of the lien only to such removable
personal property. Should any holder of a Financing Statement executed by
Tenant record or place of record a Financing Statement which appears to
constitute a lien against any interest of Landlord, Tenant shall within ten
(10) days after filing such Financing Statement cause (i) a copy of the
Security Agreement or other documents to which Financing Statement pertains
to be furnished to Landlord to facilitate Landlord's being in a position to
show such lien is not applicable to Landlord's interest and (ii) its lender
to amend documents of record so as to clarify that such lien is not
applicable to any interest of Landlord in the Building or Project.
20. Indemnification and Exculpation.
20.1 Tenant agrees to indemnify, defend and save Landlord
harmless from and against any and all demands, claims, liabilities, losses,
costs, expenses, actions, causes of action, damages or judgments, and all
reasonable expenses incurred in investigating or resisting the same
(including, without limitation, reasonable attorneys' fees, charges and
disbursements), for injury or death to person or injury to property occurring
within or about the Demised Premises, arising directly or indirectly out of
Tenant's, its employees', agents' or guests' use or occupancy of the Demised
Premises or a breach or default by Tenant in the performance of any of its
obligations hereunder, unless caused solely by the willful act or gross
negligence of the Landlord.
20.2 Notwithstanding any provision of Sections 20.1 to the
contrary, Landlord shall not be liable to Tenant and Tenant assumes all risk
of damage to personal property or scientific research, including loss of
records kept within the Demised Premises if the cause of such damage is of a
nature which, if Tenant had elected to maintain fire and theft insurance with
extended coverage and business records endorsement available on a
commercially reasonable basis, would be a loss subject to settlement by the
insurance carrier, unless and except if such loss is due to willful disregard
of Landlord of written notice by Tenant of need for a repair which Landlord
is responsible to make for an unreasonable period of time. Tenant further
waives any
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claim for injury to Tenant's business or loss of income relating to any such
damage or destruction of personal property including any loss of records.
20.3 Landlord shall not be liable for any damages arising from any
act, omission or neglect of any other tenant in the Building or Project or of
any other third party other than any agent, employee or contractor of
Landlord.
20.4 Security devices and services, if any, while intended to
deter crime may not in given instances prevent theft or other criminal acts
and it is agreed that Landlord shall not be liable for injuries or losses
caused by criminal acts of third parties and the risk that any security
device or service may malfunction or otherwise be circumvented by a criminal
is assumed by Tenant. Tenant shall at Tenant's cost obtain insurance coverage
to the extent Tenant desires protection against such criminal acts.
21. Insurance - Waiver of Subrogation.
21.1 Landlord, as part of Operating Expenses, shall carry
insurance upon the Building, in an amount equal to full replacement cost
(exclusive of the costs of excavation, foundations, and footings, and without
reference to depreciation taken by Landlord upon its books or tax returns) or
such lesser coverage as Landlord may elect provided such coverage is not less
than ninety-five percent (95%) of such full replacement cost, providing
protection against any peril generally included within the classification
"Fire and Extended Coverage" together with insurance against sprinkler damage
(if applicable), vandalism and malicious mischief. Landlord, subject to
availability thereof and, as part of Operating Expenses, shall further insure
as Landlord deems appropriate coverage against flood, environmental hazard
and earthquake, loss or failure of building equipment, rental loss during the
period of repair or rebuild, workmen's compensation insurance and fidelity
bonds for employees employed to perform services. Landlord's deductible may
be as Landlord shall determine, provided, however, that in no event shall
such deductible exceed $50,000.00. Landlord's insurance obligation includes
any alterations, additions or improvements made by Tenant to the Demised
Premises and which, pursuant to the terms of this Lease, become the property
of Landlord.
21.2 Landlord, as part of Operating Expenses, shall further carry
public liability insurance with combined single limit of not less than Two
Million Dollars ($2,000,000.00) for death or bodily injury, or property
damage with respect to the Project.
21.3 Tenant at its own cost shall procure and continue in effect
from the Term Commencement Date or the date of occupancy, whichever first
occurs, and continuing throughout the term of this Lease (and occupancy by
Tenant, if any, after termination of this Lease) comprehensive public
liability insurance with limits of not less than Two Million Dollars
($2,000,000.00) per occurrence for death or bodily injury and not less than
One Million Dollars ($1,000,000.00) for property damage with respect to the
Demised Property.
21.4 The aforesaid insurance required of Tenant shall name
Landlord as an additional insured. Said insurance shall be with companies
having a rating of not less than
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policyholder rating of A and financial category rating of at least Class XII
in "Best's Insurance Guide." Tenant shall obtain for Landlord from the
insurance companies or cause the insurance companies to furnish certificates
of coverage to Landlord. No such policy shall be cancelable or subject to
reduction of coverage or other modification or cancellation except after
thirty (30) days' prior written notice to Landlord from the insurer. All
such policies shall be written as primary policies, not contributing with and
not in excess of the coverage which Landlord may carry. Tenant's policy may
be a "blanket policy" which specifically provides that the amount of
insurance shall not be prejudiced by other losses covered by the policy.
Tenant shall, at least twenty (20) days prior to the expiration of such
policies, furnish Landlord with renewals or binders. Tenant agrees that if
Tenant does not take out and maintain such insurance, Landlord may (but shall
not be required to) procure said insurance on Tenant's behalf and at its cost
to be paid as Additional Rent.
21.5 Tenant at Tenant's cost shall carry such insurance as Tenant
desires for Tenant's protection with respect to personal property of Tenant
or business interruption.
21.6 In each instance where insurance is to name Landlord as
additional insured, Tenant shall upon written request of Landlord also
designate and furnish certificates so evidencing Landlord as additional
insured to any of the following persons of whose identity Landlord has given
Tenant written notice: (i) any lender of Landlord holding a security
interest in the Building or real property upon which the Building is
situated, and/or (ii) the landlord under any lease wherein Landlord is tenant
of the real property whereupon the Building is located if the interest of
Landlord is or shall become that of a tenant under a ground lease rather than
that of a fee owner, and/or (iii) any management company retained by Landlord
to manage the Project.
21.7 Landlord and Tenant each hereby waive any and all rights of
recovery against the other or against the officers, directors, employees,
agents, and representatives of the other, on account of loss or damage
occasioned to such waiving party or its property or the property of others
under its control to the extent that such loss or damage is insured against
under any fire and extended coverage insurance policy which either may have
in force at the time of such loss or damage or which such party was required
to maintain hereunder.
21.8 Landlord may require insurance policy limits to be raised to
conform with requirements of Landlord's lender and/or to bring coverage
limits to levels then being required of new tenants within the Project.
22. Damage or Destruction.
22.1 In the event of a partial destruction of the Building
(wherein the Demised Premises are located) by fire or other perils covered by
property and casualty insurance and if the damage thereto is such that the
Building may be repaired, reconstructed or restored within a period of one
hundred eighty (180) days from the date of the happening of such casualty and
Landlord will receive insurance proceeds sufficient to cover the cost of such
repairs (except for any permitted deductible amount provided by Landlord's
policy, which permitted deductible amount if paid by Landlord shall be an
Operating Expense), Landlord shall commence and
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proceed diligently with the work of repair, reconstruction and restoration
and this Lease shall continue in full force and effect.
22.2 In the event of any damage to or destruction of the Building
wherein the Demised Premises are located, other than as provided in Section
22.1, Landlord may elect to repair, reconstruct and restore the Building, in
which case this Lease shall continue in full force and effect. If Landlord
elects not to repair then this Lease shall terminate as of date of
destruction.
22.3 Landlord shall give written notice to Tenant of its election
not to repair, reconstruct or restore the Building or Project within the
sixty (60) day period following the date of damage or destruction.
22.4 Upon any termination of this Lease under any of the
provisions of this Article, the parties shall be released thereby without
further obligation to the other from the date possession of the Demised
Premises is surrendered to the Landlord except for items which have
theretofore occurred.
22.5 In the event of repair, reconstruction and restoration as
herein provided, the rental provided to be paid under this Lease shall be
abated proportionately based on the extent to which Tenant's use of the
Demised Premises is impaired during the period of such repair, reconstruction
or restoration (and taking into account the different rental rates for
different portions of the Demised Premises) unless Landlord provides Tenant
with other space during the period of repair, which in Tenant's reasonable
opinion is suitable for the temporary conduct of Tenant's business.
22.6 Notwithstanding anything to the contrary contained in this
Article, should Landlord be delayed or prevented from completing the repair
or restoration of the damage to the Demised Premises after the occurrence of
such damage or destruction by reason of acts of God or war, governmental
restrictions, inability to procure the necessary labor or materials, strikes,
or other causes beyond the control of Landlord, the time for Landlord to
commence or complete repairs shall be extended, provided, at the election of
Landlord, Landlord shall be relieved of its obligation to make such repairs
or restoration and Tenant shall be released from its obligation under this
Lease as of the end of two hundred forty (240) days from date of destruction,
if repairs required to provide Tenant use of the Demised Premises are not
then substantially complete.
22.7 If Landlord is obligated to or elects to repair or restore as
herein provided, Landlord shall be obligated to make repairs or restoration
to the entire Demised Premises, Building and Project, including all
alterations, additions and improvements made thereto by Tenant which,
pursuant to the terms of this Lease, become the property of Landlord and with
respect to which Landlord had received prior written notice and plans
therefor (including, but not limited to, the improvements made by Tenant
pursuant to Exhibit "B").
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22.8 Notwithstanding anything to the contrary contained in this
Article, Landlord shall not have any obligation whatsoever to repair,
reconstruct or restore the Demised Premises when the damage resulting from
any casualty covered under this Article occurs during the last twelve (12)
months of the term of this Lease or any extension hereof, or to the extent
that insurance proceeds are not available therefor.
22.9 Notwithstanding anything to the contrary set forth elsewhere
in this Lease, in the event that Landlord shall not have substantially
completed the restoration required to be performed by Landlord within two
hundred ten (210) days following the date of the casualty, Tenant shall have
the right, at its election, to terminate this Lease by giving written notice
to Landlord prior to the date that is two hundred forty (240) days following
the date of the casualty. In the event that Tenant so elects, this Lease
shall terminate on the date that is two hundred seventy (270) days following
the date of the casualty unless the restoration has been substantially
completed (including the issuance of a use and occupancy permit) on or prior
to such two hundred seventieth (270th) day.
23. Eminent Domain.
23.1 In the event the whole of the Demised Premises, or such part
thereof as shall substantially interfere with the Tenant's use and occupancy
thereof, shall be taken for any public or quasi-public purpose by any lawful
power or authority by exercise of the right of appropriation, condemnation or
eminent domain, or sold to prevent such taking, Tenant or Landlord may
terminate this Lease effective as of the date possession is required to be
surrendered to said authority.
23.2 In the event of a partial taking of the Building, the Project
or of drives, walkways, and parking areas serving the Building for any public
or quasi-public purpose by any lawful power or authority by exercise of right
of appropriation, condemnation, or eminent domain, or sold to prevent such
taking, then without regard as to whether any portion of the Demised Premises
occupied by Tenant was so taken, Landlord may elect to terminate this Lease
as of such taking if such taking is, in the reasonable opinion of Landlord,
of a material nature such as to make it uneconomical to continue use of the
unappropriated portion for purposes of office rentals or laboratory space.
23.3 Tenant shall be entitled to any award which is specifically
awarded as compensation for the taking of Tenant's personal property, which
was installed at Tenant's expense and for costs of Tenant moving to a new
location. Except as before set forth, any award for such taking shall belong
to Landlord.
23.4 If upon any taking of the nature described in this Article 23
this Lease continues in effect, Landlord shall promptly proceed to restore
the Demised Premises, Building, and Project to substantially their same
condition prior to such partial taking to the extent such restoration is
feasible, as determined by Landlord in its sole discretion. The Rent shall
be abated proportionately based upon the extent to which Tenant's use of the
Demised Premises has decreased on the basis of the percentage of the rental
value of the Demised Premises after such
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taking and the rental value of the Demised Premises prior to such taking
(taking into account the different rental rates for different portions of the
Demised Premises).
24. Tenant's Default and Landlord's Remedies.
24.1 An event of default ("Event of Default") shall exist under
this Lease if:
(a) Tenant fails to pay any rent or any other charges due and
payable by Tenant under this Lease when due and such failure continues for
more than five (5) days following Tenant's receipt of written notice thereof
from Landlord (provided, however, that no such notice shall be required in
the event that Landlord has given two (2) such notices to Tenant within the
preceding 365 days);
(b) Tenant's estate created by this Lease is taken by
execution or other legal process;
(c) Tenant is adjudicated bankrupt or insolvent according to
law; or any assignment is made of the property of Tenant for the benefit of
creditors; or a receiver, guardian, conservator, trustee in voluntary
bankruptcy or other similar officer is appointed to take charge of all or any
substantial part of Tenant's property by a court of competent jurisdiction;
or a petition is filed for the reorganization of Tenant or any guarantor of
Tenant's obligations hereunder under any provisions of the Bankruptcy Act now
or hereunder enacted, and such proceeding is not dismissed within 60 days
after it is begun; or Tenant files a petition for reorganization, or for
arrangements under any provisions of the Bankruptcy Act now or hereafter
enacted and providing a plan for a debtor to settle, satisfy or extend the
time for the payment of debts; or
(d) Tenant fails to perform or observe any of its other
obligations under this Lease within thirty (30) days after written notice
from Landlord to Tenant specifying the failure, provided, however, if such
obligation(s) cannot reasonably be performed or observed within said thirty
(30) day period, Tenant shall not be in default so long as Tenant has
commenced curative action and is continuously and diligently prosecuting such
curative action to completion and same is capable of completion within ninety
(90) days.
24.2 Landlord's Remedies
If an Event of Default shall exist hereunder, in addition to any
and all other rights or remedies of Landlord in this Lease or at law or in
equity, Landlord may do any or all of the following, without further notice
or demand to Tenant or any other person:
24.2.1 Termination - Landlord may declare the Lease Term
ended (even after it has relet the Demised Premises without terminating this
Lease) and may re-enter and retake possession of the Demised Premises and
remove all persons and property from the Demised Premises. If Landlord
terminates this Lease under this Section 24.2.1., Tenant shall pay to
Landlord, in addition to any other amounts Tenant is obligated to pay to
Landlord under this Lease:
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(a) Any unpaid Rent, including interest at the Default Rate,
that is due when this Lease is terminated; plus
(b) Any other amount necessary to compensate Landlord for its
damages connected with Tenant's failure to perform its obligations under this
Lease, such as costs to re-enter and retake possession of the Demised
Premises and remove all persons and property from the Demised Premises, to
alter, repair, and decorate the Demised Premises, and reasonable attorneys'
fees, advertising, and other reletting costs; plus
(c) The net present value (discounted at the then Wall Street
Journal "prime" or similar rate) of the difference between (x) the Basic
Annual Rent which would thereafter had remained to be paid under this Lease
had such termination not occurred and (y) the fair rental value of the
Demised Premises for the period following such termination and through the
date upon which the Term was otherwise, in the absence of such termination,
most recently scheduled to expire.
Nothing in this Lease shall limit Landlord's right to recover
as damages in any bankruptcy, insolvency, receivership, reorganization or
arrangement proceeding the maximum allowed by the law then governing such
proceedings, even if that amount is greater than the amount Landlord may
recover under this Lease.
24.2.2 Rent Suit without Re-entry/Termination - Landlord may
sue to collect Rent (as it accrues under this Lease) and damages (including
reasonable attorneys' fees and the cost to renovate the Demised Premises)
without retaking possession of the Demised Premises or terminating this Lease.
24.2.3 Re-entry without Termination - Landlord may re-enter
and retake possession of the Demised Premises from Tenant by summary
proceedings or otherwise and remove Tenant and any other occupants from the
Demised Premises in such a manner as Landlord deems advisable with legal
process. Landlord also may remove from the Demised Premises all or any of
the personal property in the Demised Premises and may place it in storage at
a public warehouse at the expense and risk of the owner or owners thereof.
"Re-enter" or "re-entry" as used in this Lease are not restricted to their
technical meaning but are used in their broadest sense. Neither Landlord's
commencement and prosecution of any action in unlawful detainer, ejectment or
otherwise, nor Landlord's execution of any judgment or decree obtained in any
action to recover possession of the Demised Premises, nor any action to
recover possession of the Demised Premises, nor any other re-entry and
removal shall, terminate this Lease (even if the re-entry is done under
summary proceedings or otherwise) or discharge Tenant from any obligation
under this Lease. In any of such events, Tenant shall continue to be liable
to pay Rent and to perform all of its other obligations under this Lease, and
Tenant shall pay to Landlord all monthly deficits in Rent, after any such
re-entry, in monthly installments as the amounts of such deficits from time
to time are ascertained. If Landlord retakes possession, Landlord may relet
parts or all of the Demised Premises for terms greater or less than or equal
to the unexpired part of the Lease Term on such terms and conditions and for
such Rent as the Landlord deems proper.
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Landlord shall apply the Rent from such reletting (if and when received):
first, to pay any indebtedness other than Rent due under this Lease from
Tenant to Landlord; second, to pay any cost to relet (including costs to
alter, repair or decorate the Demised Premises as Landlord deems advisable);
third, to pay Rent due and unpaid under this Lease; and the residue, if any,
to be held by Landlord and applied to pay future Rent as it becomes due. If
the Rent received from reletting, after being applied as required in this
Section 24.2.3, is not enough to pay the Rent under this Lease, then Tenant
shall have no right to any excess. Tenant also shall pay to Landlord, as
soon as ascertained, any costs to relet, alter, and repair not covered by the
Rent received from reletting, including brokerage commissions and reasonable
attorneys' fees. Nothing in this Lease shall obligate Landlord to relet all
or any part of the Demised Premises.
24.2.4 Landlord's Right to Cure Tenant's Default
If an Event of Default shall exist hereunder, Landlord may perform
any action required of Tenant under the Lease, and Tenant shall pay Landlord,
within thirty (30) days following Tenant's receipt of written demand by
Landlord all of Landlord's expenses (including, without limitation,
reasonable attorneys' fees) to perform the action.
24.2.5 Landlord's and Tenant's Costs
In the event that either party shall default hereunder and such
default shall result in the commencement of legal or other proceedings in
respect thereof, then the prevailing party in any such proceeding shall be
entitled to such reasonable attorneys' fees and expenses as the Court in such
proceeding may award it pursuant hereto.
24.2.6 Counterclaim
If Landlord files suit for non-payment of Rent or other amounts due
under this Lease, Tenant will not interpose any non-compulsory counterclaim
except in a separate action brought by Tenant. The covenants to pay Rent and
other amounts hereunder are independent covenants, and Tenant shall have no
right to hold back, offset or fail to pay any such amounts for default by
Landlord or any other reason whatsoever.
24.2.7 Waiver of Rights of Redemption
To the extent permitted by law, Tenant waives any and all rights of
redemption granted by or under any present or future laws if Tenant is
evicted or dispossessed for any cause, or if Landlord obtains possession of
the Demised Premises due to Tenant's default hereunder or otherwise.
24.2.8 Waiver of Trial by Jury
Landlord and Tenant waive all rights to a trial by jury in any
action, counterclaim, or proceeding based upon, or related to, the subject
matter of this Lease. This waiver applies to all claims against all parties
to such actions and proceedings, including parties who are not
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parties to this Lease. This waiver is knowingly, intentionally, and
voluntarily made by each party and each party acknowledges that neither the
other party nor any person acting on behalf of the other party , has made any
representations to induce this waiver of trial by jury or in any way to
modify or nullify its effect. Each party further acknowledges that it has
been represented (or has had the opportunity to be represented) in the
signing of this Lease and in the making of this waiver by independent legal
counsel, selected of its own freewill and that it has had the opportunity to
discuss this waiver with counsel. Each party further acknowledges that it
has read and understands the meaning and ramifications of this waiver
provision.
24.3 Landlord shall have the right to terminate this Lease,
without penalty or charge to Landlord or Tenant, in the event that the
Demised Premises remains vacant for more than one hundred twenty (120) days
(other than if such vacancy is in connection with an alteration, renovation,
addition, repair or improvement thereto).
25. Assignment or Subletting.
25.1 Except as hereinafter provided, Tenant shall not, either
voluntarily or by operation of law, directly or indirectly, sell,
hypothecate, assign, pledge, encumber or otherwise transfer this Lease, or
sublet the Demised Premises or any part hereof, or permit or suffer the
Demises Demised Premises or any part thereof to be used or occupied as work
space, storage space, mailing privileges, concession or otherwise by anyone
other than Tenant or Tenant's employees, without the prior written consent of
Landlord in each instance, which consent shall not be unreasonably withheld,
conditioned or delayed. Landlord shall be deemed to have acted reasonably in
withholding its consent if, inter alia, the proposed use of the Demised
Premises by the proposed assignee or subtenant is substantially more
hazardous and burdensome than the use by Tenant or if the net worth of the
proposed assignee or subtenant (in the case of a proposed sublease covering
more than fifty percent (50%) of the Demised Premises) is less than Three
Million Dollars ($3,000,000).
25.2 If Tenant is a corporation, the shares of which are not
traded upon a stock exchange or in the over-the-counter market, a transfer or
series of transfers whereby fifty (50%) or more of the issued and outstanding
shares of such corporation are or the voting control is transferred (but
excepting transfers upon deaths of individual shareholders) from a person or
persons or entity or entities (or affiliates thereof) which were owners or
warrant holders thereof (or affiliates of such owners or warrant holders) at
the time of execution of this Lease to persons or entities who were not
owners of shares or holders of warrants of the corporation (or affiliates of
such owners or warrant holders) at the time of execution of this Lease (or to
any persons or entities who are not then affiliates of any such original
owners, holders or other affiliates) shall be deemed an assignment of this
Lease requiring the consent of Landlord as provided in Section 25.1 above.
The foregoing shall not apply to transfers among stockholders existing at the
time of such transfer, nor to transfers from any such holders to affiliates,
family members, spouses or employees thereof, nor to any transfer pursuant to
which all or a substantial amount of the transferred shares are intended to
be transferred or thereafter traded on a public exchange (including in the
so-called over-the-counter market).
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25.3 If Tenant desires to assign this Lease to any entity into
which Tenant is merged, with which Tenant is consolidated, or which acquires
all or substantially all of the assets of Tenant, provided that the assignee
first executes, acknowledge and delivers to Landlord an agreement whereby the
assignee agrees to be bound by all of the covenants and agreements in this
Lease and that the assignee shall have a net worth (determined in accordance
with generally accepted accounting principles consistently applied)
immediately after such assignment which is at least equal to Three Million
Dollars ($3,000,000) (as so determined), then Landlord, upon receipt of proof
of foregoing, will consent to the assignment. The provisions of Sections
25.4, 25.5, 25.6 and 25.10 shall not be applicable to assignments of this
Lease pursuant to this Section 25.3.
25.4 In the event Tenant desires to assign, sublease, hypothecate
or otherwise transfer this Lease or sublet the Demised Premises, then at
least ten (10) days, but not more than ninety (90) days, prior to the date
when Tenant desires the assignment or sublease to be effective (the
"Assignment Date"), Tenant shall give Landlord a notice (the "Assignment
Notice") containing information (including references) concerning the
character of the proposed assignee or sublessee, the Assignment Date, any
ownership or commercial relationship between Tenant and the proposed assignee
or sublessee, and the consideration and all other material terms and
conditions of the proposed assignment or sublease, all in such detail as
Landlord shall reasonably require. Tenant shall also reimburse Landlord for
any, reasonable attorneys fees and other costs or overhead expenses incurred
by Landlord (not to exceed $2,000.00 for any one request) in reviewing
Tenant's request for such assignment.
25.5 Landlord in making its determination as to whether consent
should be given to a proposed assignment or sublease, may give consideration
to the financial strength of the proposed subtenant (in the case of a
proposed sublease covering more than fifty percent (50%) of the Demised
Premises) or assignee (notwithstanding Tenant remaining liable for Tenant's
performance), any change in use which such subtenant or assignee proposes to
make in use of Demised Premises and any desire of Landlord to exercise any
rights under Section 25.10 to terminate this Lease. In no event shall
Landlord be deemed to be unreasonable for declining to consent to a transfer
to a subtenant or assignee of poor reputation, lacking financial
qualifications (in the case of a proposed sublease, only if the proposed
sublease covers more than fifty percent (50%) of the Demised Premises), or
seeking change in use which would reduce the number of square feet of the
Demised Premises used for laboratories.
25.6 As conditions precedent to Landlord considering a request by
Tenant to Tenant's transfer of rights or sharing of the Demised Premises,
Landlord may require any or all of the following:
(a) Tenant shall remain fully liable under this Lease during
the unexpired Term;
(b) Tenant shall provide Landlord with evidence concerning
the relevant business experience, financial responsibility and status of the
third party concerned;
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(c) Tenant shall reimburse Landlord for Landlord's reasonable
costs and expenses, including, without limitation, reasonable attorneys'
fees, charges and disbursements (not to exceed $2,000.00 for any one request)
incurred in connection with the review, processing, documentation and
approval or disapproval of such request;
(d) If Tenant's transfer of rights or sharing of the Demised
Premises results in the receipt by, on behalf or on account of Tenant of any
consideration of any kind whatsoever (including, but not by way of
limitation, a premium rental for a sublease or lump sum payment for an
assignment) in excess of the rental and other charges due Landlord under this
Lease, Tenant shall pay fifty percent (50%) of said excess to Landlord (after
deduction from such excess all costs and expenses incurred by Tenant in
connection with any assignment or sublease, including, without limitation,
alterations, concessions, commissions, advertising and legal fees). If said
consideration consists of cash paid to Tenant, said payment to Landlord shall
be made upon receipt by Tenant of said cash payment;
(e) Written agreement from any third party concerned that in
the event Landlord gives such third party notice that an Event of Default has
occurred under this Lease, such third party shall thereafter make all
payments otherwise due Tenant directly to Landlord for so long as such Event
of Default remains uncured, which payments will be received by Landlord
without any liability on Landlord except to credit such payment against those
due under the Lease, and any such third party shall agree to attorn to
Landlord or its successors and assigns should this Lease be terminated for
any reason; provided, however that in no event shall Landlord or its
successors or assigns be obligated to accept such attornment;
(f) Any such transfer and consent shall be effected on forms
reasonably satisfactory to Landlord and Tenant as to form and substance;
(g) No Event of Default shall exist hereunder in any respect;
(h) Landlord shall not be bound by any provision of any
agreement pertaining to Tenant's transfer of rights or sharing of the Demised
Premises;
(i) Tenant shall deliver to Landlord one executed copy of any
and all written instruments evidencing or relating to Tenant's transfer of
rights or sharing of the Demised Premises; and
(j) A list of Hazardous Material (as defined in Section 40.6
below), certified by the proposed sublessee to be true and correct, which the
proposed sublessee intends to use or store in the Demised Premises.
Additionally, Tenant shall deliver to Landlord, on or before the date any
proposed sublessee takes occupancy of the Demised Premises, all of the items
relating to Hazardous Material of such proposed sublessee as described in
Section 40.1.1 below.
25.7 Any sale, assignment, hypothecation or transfer of this Lease
or subletting of the Demised Premises that is not in compliance with the
provisions of this Article 25 shall
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constitute an Event of Default if any such non-complying sale, assignment,
hypothecation or transfer is not rescinded within ten (10) days after
Tenant's receipt of notice from Landlord.
25.8 The consent by Landlord to an assignment or subletting shall
not relieve Tenant or any assignees of this Lease or sublessee of the Demised
Premises from obtaining the consent of Landlord to any further assignment or
subletting nor shall it release Tenant or any assignee or sublessee of Tenant
from full and primary liability under the Lease.
25.9 Notwithstanding any subletting or assignment, Tenant shall
remain fully and primarily liable for the payment of all Rent and other sums
due, or to become due hereunder, and for the full performance of all other
terms, conditions, and covenants to be kept and performed by Tenant. The
acceptance of Rent or any other sum due hereunder, or the acceptance of
performance of any other term, covenant, or condition thereof, from any other
person or entity shall not be deemed to be a waiver of any of the provisions
of this Lease or a consent to any subletting, assignment or other transfer of
the Demised Premises.
25.10 If Tenant delivers to Landlord an Assignment Notice
indicating a desire to assign this Lease to a transferee pursuant to a
transaction requiring Landlord's consent hereunder, then Landlord shall have
the option, exercisable by giving notice to Tenant at any time within ten
(10) days after Landlord's receipt of the Assignment Notice, to terminate
this Lease as of the date specified in the Assignment Notice as the
Assignment Date. If Landlord exercises such option, then Tenant shall have
the right to withdraw such Assignment Notice by delivery to Landlord written
notice of such election within five (5) days after Landlord's delivery of
notice electing to exercise such option to terminate. In the event Tenant
withdraws the Assignment Notice as hereinabove provided, this Lease shall
continue in full force and effect as if such Assignment Notice had never been
given. In the event Tenant does not so withdraw the Assignment Notice as
hereinabove provided, this Lease, and the term and estate herein granted,
shall terminate as of the Assignment Date. No failure of Landlord to
exercise any such option to terminate this Lease shall be deemed to be
Landlord's consent to the proposed assignment, sublease or other transfer.
25.11 None of the terms of this Section 25 shall apply to any
sublease between Tenant and any affiliate or subsidiary of Tenant nor to any
arrangements (whether designated subleases, licenses or otherwise), other
than assignments, between Tenant and any person with whom Tenant or any
affiliate or subsidiary of Tenant has any scientific collaboration, joint
venture, licensing arrangement or other similar relationship.
25.12 Any consent, approval or other action required of Landlord
under this Article 25 and not provided by the time period specified herein
shall be deemed granted and/or waived as the case may be in accordance with
the terms of the Assignment Notice.
26. Intentionally omitted.
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27. Bankruptcy.
27.1 In the event a debtor, trustee, or debtor in possession under
the Bankruptcy Code, or other person with similar rights, duties and powers
under any other law, proposes to cure any default under this Lease or to
assume or assign this Lease, and is obliged to provide adequate assurance to
Landlord that (i) a default will be cured, (ii) Landlord will be compensated
for its damages arising from any breach of this Lease, or (iii) future
performance under this Lease will occur, then adequate assurance shall
include any or all of the following, as designated by Landlord:
(a) Those acts specified in the Bankruptcy Code or other law
as included within the meaning of adequate assurance, even if this Lease does
not concern a shopping center or other facility described in such laws;
(b) A prompt cash payment to compensate Landlord for any
monetary defaults or actual damages arising directly from a breach of this
Lease;
(c) A cash deposit in an amount at least equal to the
Security Deposit as referenced in 2.1.8 originally required at time of
execution of this Lease.
(d) The assumption or assignment of all of Tenant's interest
and obligations under this Lease.
28. Definition of Landlord.
28.1 The term "Landlord" as used in this Lease, so far as
covenants or obligations on the part of Landlord are concerned, shall be
limited to mean and include only Landlord or the successor-in-interest of
Landlord under this Lease at the time in question. In the event of any
transfer, assignment or the conveyance of Landlord's title or leasehold, the
Landlord herein named (and in case of any subsequent transfers or
conveyances, the then grantor) shall be automatically freed and relieved,
from and after the date of such transfer, assignment or conveyance, of all
liability for the performance of any covenants or obligations contained in
this Lease thereafter to be performed by Landlord and, without further
agreement, the transferee of such title or leasehold shall be deemed to have
assumed and agreed to observe and perform any and all obligations of Landlord
hereunder, during its ownership or ground lease of the Demised Premises.
Landlord may transfer its interest in the Demised Premises or this Lease
without the consent of Tenant and such transfer or subsequent transfer shall
not be deemed a violation on the part of Landlord or the then grantor of any
of the terms or conditions of this Lease. The foregoing notwithstanding,
Landlord shall not be released from or in respect of any liability or
obligation accruing prior to such transfer nor shall the terms of Section 31
apply thereto.
29. Estoppel Certificate.
29.1 Tenant shall within ten (10) days of written notice from
Landlord, execute, acknowledge and deliver a statement in writing substantially
in the form attached to this Lease as
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Exhibit "D" with the blanks filled in, and on any other form reasonably
requested by a proposed lender or purchaser, (i) certifying that this Lease
is unmodified and in full force and effect (or, if modified, stating the
nature of such modification and certifying that this Lease as so modified is
in full force and effect) and the dates to which the rental and other charges
are paid in advance, if any, (ii) acknowledging that there are not, to
Tenant's knowledge, any uncured defaults on the part of Landlord hereunder,
or specifying such defaults if any are claimed and (iii) setting forth such
further brief factual information with respect to this Lease or the Demised
Premises as may be reasonably requested thereon. Any such statement may be
relied upon by any prospective purchaser or encumbrancer of all or any
portion of the real property of which the Demised Premises are a part.
Tenant's failure to deliver such statement within such time shall, at the
option of Landlord, constitute a default under this Lease, and, in any event,
shall be conclusive upon Tenant that the Lease is in full force and effect
and without modification except as may be represented by Landlord in any
certificate prepared by Landlord and delivered to Tenant for execution.
Landlord shall similarly deliver to Tenant, upon request, a similar estoppel
certificate or statement setting forth such similar or other brief factual
information as Tenant may reasonably request. Any such statement requested
by Tenant may be relied upon by any assignee, sublessee, purchaser, lender,
investor, advisor or other similar person with respect to Tenant. Landlord's
failure to execute and return any such statement requested by Tenant within
ten (10) days following Landlord's receipt thereof from Tenant shall
constitute conclusive evidence of the facts recited therein.
30. Intentionally omitted.
31. Limitation of Landlord's Liability.
31.1 If Landlord is in default of this Lease, and as a
consequence, Tenant recovers a money judgment against Landlord, the judgment
shall be satisfied only out of the proceeds of sale received on execution of
the judgment and levy against the right, title and interest of Landlord in
the Building and Project of which the Demised Premises are a part, and/or out
of rent or other income from such real property receivable by Landlord,
and/or out of the consideration received by Landlord from the sale,
financing, refinancing, or other disposition of all or any part of Landlord's
right, title, and interest in the Building and Project of which the Demised
Premises are a part, and/or out of any amounts distributed to or otherwise
received by Landlord from and after the date that Tenant has first made a
written demand upon Landlord for such amounts.
31.2 Landlord shall not be personally liable for any deficiency.
If Landlord is a partnership or joint venture, the partners of such
partnership shall not be personally liable and no partner of Landlord shall
be sued or named as a party in any suit or action or service of process be
made against any partner of Landlord except as may be necessary to secure
jurisdiction of the partnership or joint venture. If Landlord is a
corporation, the shareholders, directors, officers, employees, and/or agents
of such corporation shall not be personally liable and no shareholder,
director, officer, employee or agent of Landlord shall be sued or named as a
party in any suit or action or service of process made against any
shareholder, director, officer, employee or agent of Landlord. If Landlord
is a limited liability company, the members, managers, employees and/or
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agents of such limited liability company shall not be personally liable and
no member, manager, employee or agent of Landlord shall be sued or named as a
party in any suit or action or service of process made against any member,
manager, employee or agent except as may be necessary to secure jurisdiction
of such limited liability company. No partner, shareholder, member,
director, employee, or agent of Landlord shall be required to answer or
otherwise plead to any service of process and no judgment will be taken or
writ of execution levied against any partner, shareholder, director, employee
or agent of Landlord. Nothing contained in this Section 31.2 shall restrict
Tenant from commencing a legal action against any person described in this
Section 31.2 seeking to obtain a return of any amounts distributed to or
otherwise received by such person from and after the date that Tenant first
made a written demand upon Landlord for such amounts. The immediately
preceding sentence shall not be applicable to shareholders or other owners
(in such capacity) so long as the stock of Landlord is publicly traded.
31.3 Each of the covenants and agreements of this Article 31 shall
be applicable to any covenant or agreement either expressly contained in this
Lease or imposed by statute or by common law and shall survive the
termination of this Lease.
32. Project Control by Landlord.
32.1 Landlord reserves full control over the Building and Project
to the extent not inconsistent with Tenant's enjoyment of the Demised
Premises in accordance with the terms hereof. Subject to the foregoing, this
reservation includes but is not limited to right of Landlord to subdivide the
Project, convert the Building and or other buildings within the Project to
condominium units, the right to grant easements and licenses to others and
the right to maintain or establish ownership of Building separate from fee
title to land.
32.2 Tenant shall, should Landlord so request, promptly join with
Landlord in execution of such documents as may be reasonably appropriate to
assist Landlord to implement any such action provided Tenant need not execute
any document which is of nature wherein liability is created in Tenant or if
by reason of the terms of such document, Tenant will be deprived of the quiet
enjoyment and use of the Demised Premises as granted by this Lease.
32.3 Landlord may, at any and all reasonable times during business
hours and upon reasonable advance notice (provided that no time restrictions
shall apply or advance notice need be given if an emergency necessitates an
immediate entry), enter the Demised Premises to (a) inspect the same and to
determine whether Tenant is in compliance with its obligations hereunder, (b)
supply any service Landlord is required to provide hereunder, (c) show the
Demised Premises to prospective mortgagees, investors (but not competitors of
Tenant), purchasers or (only during the final 400 days of the Term) tenants,
(d) post notices of nonresponsibility, (e) access the telephone equipment,
electrical substation and fire risers, and (f) alter, improve or repair any
portion of the Building other than the Demised Premises, but for which access
to the Demised Premises is necessary. In connection with any such
alteration, improvement or repair, Landlord may erect in the Demised Premises
or elsewhere in the Project scaffolding and other structures reasonably
required for the work to be performed. In no event shall Tenant's Rent abate
as a result of any such entry or work; provided, however, that all such work
shall be done
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in such a manner as to cause the least interference to Tenant as reasonably
possible. If an emergency necessitates immediate access to the Demised
Premises, Landlord may use whatever force is necessary to enter the Demised
Premises and any such entry to the Demised Premises shall not constitute a
forcible or unlawful entry to the Demised Premises, a detainer of the Demised
Premises, or an eviction of Tenant from the Demised Premises, or any portion
thereof. Other than in the case of an emergency, Landlord's entry into the
Demised Premises shall be subject to such reasonable security restrictions as
Tenant may reasonably impose and Landlord shall not enter any of Tenant's
"secure" areas of which Landlord has notice unless accompanied by a
representative of Tenant; Tenant hereby agreeing to have a representative
available to Landlord for such purpose at all times during business hours.
33. Quiet Enjoyment.
So long as Tenant is not in default, Landlord covenants that
Landlord or anyone acting through or under Landlord will not disturb Tenant's
occupancy of the Demised Premises except as permitted by the provisions of
this Lease.
34. Intentionally omitted.
35. Subordination and Attornment.
35.1 Subject to the other terms hereof, this Lease shall be
subject and subordinate to the lien of any mortgage, deed of trust, or lease
in which Landlord is tenant now or hereafter in force against the Project and
Building and to all advances made or hereafter to be made upon the security
thereof.
35.2 Notwithstanding the foregoing, Tenant shall execute and
deliver upon demand such further reasonable instrument or instruments,
reasonably acceptable to Tenant, evidencing such subordination of this Lease
to the lien of any such mortgage or mortgages or deeds of trust or lease in
which Landlord is tenant as may be reasonably required by Landlord. However,
if any such mortgagee, beneficiary or Landlord under lease wherein Landlord
is tenant so elects, this Lease shall be deemed prior in lien to any such
lease, mortgage, or deed of trust upon or including the Demised Premises
regardless of date and Tenant will execute a statement in writing to such
effect at Landlord's request. Any such statement must be reasonably
acceptable to Tenant.
35.3 In the event any proceedings are brought for foreclosure, or
in the event of the exercise of the power of sale under any mortgage or deed
of trust made by the Landlord covering the Demised Premises, Tenant shall at
the election of the purchaser at such foreclosure or sale attorn to the
purchaser upon any such foreclosure or sale and recognize such purchaser as
the Landlord under this Lease.
35.4 The foregoing subordination is expressly contingent upon
Landlord and each party benefitting therefrom (e.g., the lender or
groundlessor) executing a non-disturbance agreement with Tenant, in such form
as the parties thereto may reasonably agree but providing
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Tenant and the lender or groundlessor, as the case may be, substantially and
in all material respects with the rights and benefits set forth in the form
attached hereto as Exhibit "F".
36. Surrender.
36.1 No surrender of possession of any part of the Demised
Premises shall release Tenant from any of its obligations hereunder unless
accepted by Landlord.
36.2 The voluntary or other surrender of this Lease by Tenant
shall not work a merger, unless Landlord consents and shall, at the option of
Landlord, operate as an assignment to it of any or all subleases or
subtenancies.
36.3 The voluntary or other surrender of any ground or underlying
lease that now exists or may hereafter be executed affecting the Building or
Project, or a mutual cancellation, thereof, or of Landlord's interest
therein, shall not work a merger and shall, at the option of the successor of
Landlord's interest in the Building or Project, operate as an assignment of
this Lease.
37. Waiver and Modification.
37.1 No provision of this Lease may be modified, amended or added
to except by an agreement in writing. The waiver by Landlord of any breach
of any term, covenant or condition herein contained shall not be deemed to be
a waiver of any subsequent breach of the same or any other term, covenant or
condition herein contained.
38. Intentionally omitted.
39. Intentionally omitted.
40. Hazardous Materials.
40.1 Prohibition/Compliance. Tenant shall not cause or permit any
Hazardous Material (as hereinafter defined) to be brought upon, kept or used
in or about the Demised Premises or the Project in violation of applicable
law by Tenant, its agents, employees, contractors or invitees. If Tenant
breaches the obligation stated in the preceding sentence, or if the presence
of Hazardous Materials results in contamination of the Demised Premises, the
Building, the Project or any adjacent Property, or if contamination of the
Demised Premises, the Building, the Project or any adjacent Property by
Hazardous Material otherwise occurs during the term of this Lease or any
extension or renewal hereof or holding over hereunder as a result of the
actions or omissions of Tenant or its agents, then Tenant shall indemnify,
defend and hold Landlord, its agents and contractors harmless from any and
all claims, judgments, damages, penalties, fines, costs, liabilities, or
losses (including, without limitation, diminution in value of the Demised
Premises or any portion of the Project, damages for the loss or restriction
on use of rentable or usable space or of any amenity of the Demised Premises
or Project, damages arising from any adverse impact on marketing of space in
the Demised Premises or the Project, and
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sums paid in settlement of claims, attorneys' fees, consultant fees and
expert fees) which arise during or after the Lease term as a result of such
contamination. This indemnification of Landlord by Tenant includes, without
limitation, costs incurred in connection with any investigation of site
conditions or any cleanup, remedial, removal, or restoration work required by
any federal, state or local governmental agency or political subdivision
because of Hazardous Material present in the air, soil or ground water above
on or under the Demised Premises. Without limiting the foregoing, if the
presence of any Hazardous Material on the Demised Premises, the Building, the
Project or any adjacent Property, caused or permitted by Tenant or its agents
results in any contamination of the Demised Premises, the Building, the
Project or any adjacent Property, Tenant shall promptly take all actions at
its sole expense as are necessary to return the Demised Premises, the
Building, the Project or any adjacent Property, to the condition existing
prior to the time of such contamination, provided that Landlord's approval of
such action shall first be obtained, which approval shall not unreasonably be
withheld so long as such actions would not potentially have any material
adverse long-term or short-term effect on the Demised Premises, the Building
or the Project.
40.1.1 Business. Landlord acknowledges that it is not the
intent of this Article 41 to prohibit Tenant from operating its business as
described in Section 2.1.9 above. Tenant may operate its business according
to the custom of the industry so long as the use or presence of Hazardous
Material is strictly and properly monitored according to all applicable
governmental requirements. As a material inducement to Landlord to allow
Tenant to use Hazardous Material in connection with its business, Tenant
agrees to deliver to Landlord prior to the Term Commencement Date a list
identifying each type of Hazardous Material to be present on the Demised
Premises and setting forth any and all governmental approvals or permits
required in connection with the presence of such Hazardous Material on the
Demised Premises ("Hazardous Material List"). Tenant shall deliver to
Landlord an updated Hazardous Material List at least once a year and shall
also deliver an updated list before any new Hazardous Material is brought
onto the Demised Premises. Tenant shall deliver to Landlord true and correct
copies of the following documents (if any) (hereinafter referred to as the
"Documents") relating to the handling, storage, disposal and emission of
Hazardous Material prior to the Term Commencement Date, or if unavailable at
that time, concurrent with the receipt from or submission to a governmental
agency: permits; approvals; reports and correspondence; storage and
management plans, notice of violations of any laws; plans relating to the
installation of any storage tanks to be installed in or under the Project
(provided, said installation of tanks shall only be permitted after Landlord
has given Tenant its written consent to do so, which consent may be withheld
in Landlord's sole and absolute discretion); and all closure plans or any
other documents required by any and all federal, state and local governmental
agencies and authorities for any storage tanks installed in, on or under the
Project for the closure of any such tanks. Tenant is not required, however,
to provide Landlord with any portion(s) of the Documents containing
information of a proprietary nature which, in and of themselves, do not
contain a reference to any Hazardous Material or hazardous activities. It is
not the intent of this Section to provide Landlord with information which
could be detrimental to Tenant's business should such information become
possessed by Tenant's competitors. At the written request of Landlord,
Tenant agrees that it shall enter into a written agreement with other tenants
at the Building concerning the equitable allocation of fire control areas
within the Building for the storage of
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Hazardous Materials. In the event that Tenant's use of Hazardous Materials
is such that it utilizes fire control areas in the Building in excess of
Tenant's Pro Rata Share of the Building as set forth in Section 2.1.6 above,
Tenant agrees that it shall, at its own expense, and upon the written request
of Landlord, establish and maintain a separate area of the Demised Premises
for the use and storage of Hazardous Materials, or take such other action so
that its share of the fire control areas of the Building is not greater than
Tenant's Pro Rata Share of the Building.
40.2 Termination of Lease. Notwithstanding the provisions of
Section 41.1 above, if (i) the proposed assignee or sublessee of Tenant has
been required by any prior landlord, lender or governmental authority to take
remedial action in connection with Hazardous Material contaminating a
property if the contamination resulted from such party's action or use of the
property in question, or (ii) the proposed assignee or sublessee is subject
to an enforcement order issued by any governmental authority in connection
with the use, disposal or storage of a Hazardous Material, it shall not be
unreasonable for Landlord to withhold its consent to the proposed assignment
or subletting.
40.3 Testing. At any time, and from time to time, prior to the
expiration of the Term (but not more often than three (3) times during the
Term, unless Landlord, in its reasonable judgment, has a demonstrable basis
upon which to believe that contamination has occurred), Landlord shall have
the right to conduct appropriate tests of the Demised Premises, Building and
Project to demonstrate that contamination has occurred as a result of
Tenant's use of the Demised Premises. Tenant shall be solely responsible for
and shall defend, indemnify and hold the Landlord, its agents and contractors
harmless from and against any and all claims, costs and liabilities including
actual attorneys' fees, charges and disbursements, arising out of or in
connection with any removal, clean up, restoration and materials required
hereunder to return the Demised Premises and any other property of whatever
nature to their condition existing prior to the time of any such
contamination. Notwithstanding the provisions of the last sentence of
Section 7.1(c), Tenant shall pay for the cost of the tests of the Demised
Premises.
40.4 Underground Tanks. If underground or other storage tanks
storing Hazardous Materials are located on the Demised Premises or are
hereafter placed on the Demised Premises by or for Tenant, Tenant shall
monitor the storage tanks, maintain appropriate records, implement reporting
procedures, properly close any underground storage tanks, and take or cause
to be taken all other steps necessary or required under the applicable
Maryland and Federal laws.
40.5 Tenant's Obligations. Tenant's obligations under this
Article 40 shall survive the expiration or earlier termination of the Lease.
During any period of time employed by Tenant or Landlord after the
termination of this Lease to complete the removal from the Demised Premises
of any such Hazardous Materials, Tenant shall continue to pay the full Rent
in accordance with this Lease, which Rent shall be prorated daily. In the
event that Landlord leases any portion of the Demised Premises to a third
party, Tenant's obligation to pay Rent with respect to any such leased
portion pursuant to this Section 40.5 shall cease.
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40.6 Definition of "Hazardous Material." As used herein, the term
"Hazardous Material" means any hazardous or toxic substance, material or
waste which is or becomes regulated by any local governmental authority, the
State of Maryland or the United States government, including, without
limitation, the following: (i) "oil" as defined by Maryland Environment Code
Ann., Section 4-401 (g) (1993), as amended from time to time, and regulations
promulgated thereunder; (ii) any "hazardous waste", "hazardous substance" or
"release" as defined by the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended from time to time, and
regulations promulgated thereunder ("CERCLA"; (iii) any "hazardous substance"
or "hazardous waste" as defined by Maryland Environmental Code Ann., Title 7,
Subtitle 2 (1993), as amended from time to time, and regulations promulgated
thereunder; and (iv) any "solid waste" or "disposal" as defined in the
Resource Conservation and Recovery Act of 1976, as amended from time to time,
and the regulations promulgated thereunder ("RCRA"). For purposes of this
Lease, the term "Hazardous Materials" shall not be deemed to include
substances and materials commonly used by tenants of commercial office space.
Nonetheless, Tenant shall only store reasonable quantities of such
substances and materials and shall store, use and dispose of the same in
compliance with all applicable laws, insurance and labelling requirements.
41. Intentionally omitted.
42. Options to Extend Term.
42.1 Provided that (i) this Lease is in full force and effect,
(ii) no material adverse change in Tenant's financial condition shall have
occurred, and (iii) Tenant shall not have been in default in respect of the
payment of Rent at any time during the two (2) year period prior to the date
on which Tenant exercises its right to extend the term of this Lease, Tenant
shall have the option to extend the term of this Lease for a first renewal
term of five (5) years at a Basic Annual Rental during the first renewal term
equal to the Basic Annual Rental on the last day of the term prior to the
first renewal term plus three percent (3%) or such other amount as may be
agreed upon by Landlord and Tenant, and otherwise on the same terms,
covenants and conditions as are contained in this Lease.
42.2 Tenant shall give Landlord written notice of Tenant's
election to extend the term of this Lease no less than 270 days, but not more
than 360 days, prior to the expiration of the then current term of this Lease.
42.3 Provided that (i) Tenant shall have effectively exercised its
option to extend the term for a first renewal term, (ii) this Lease shall be
in full force and effect, (iii) no material adverse change in Tenant's
financial condition shall have occurred, and (iv) Tenant shall not have been
in default in respect of the payment of Rent at any time during the two (2)
year period prior to the date on which Tenant exercises its right to extend
the term of this Lease for a second renewal term, Tenant shall have the
option to extend the term of this Lease for a second renewal term of five (5)
years at a Basic Annual Rental during the second renewal term equal to the
Basic Annual Rental on the last day of the first renewal term plus three
percent (3%) or such other amount as may be agreed upon by Landlord and
Tenant, and otherwise on the same terms, cove-
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nants and conditions as are contained in this Lease, except that there shall
be no further option to extend the term of this Lease.
42.4 Tenant shall give Landlord written notice of Tenant's
election to extend the term of this Lease no less than 270 days, but no more
than 360 days, prior to the expiration of the then current term of this Lease.
43. Miscellaneous.
43.1 Terms and Headings. Where applicable in this Lease, the
singular includes the plural and the masculine or neuter includes the
masculine, feminine and neuter. The section headings of this Lease are not a
part of this Lease and shall have no effect upon the construction or
interpretation of any part hereof.
43.2 Examination of Lease. Submission of this instrument for
examination or signature by Tenant does not constitute a reservation of or
option for lease, and it is not effective as a lease or otherwise until
execution by and delivery to both Landlord and Tenant.
43.3 Time. Time is of the essence with respect to the performance
of every provision of this Lease in which time of performance is a factor.
43.4 Covenants and Conditions. Each provision of this Lease
performable by Tenant shall be deemed both a covenant and a condition.
43.5 Consents. Whenever consent or approval of either party is
required, that party shall not unreasonably withhold such consent or
approval, except as may be expressly set forth to the contrary.
43.6 Entire Agreement. The terms of this Lease are intended by
the parties as a final expression of their agreement with respect to the
terms as are included herein, and may not be contradicted by evidence of any
prior or contemporaneous agreement. The Basic Lease Provisions, general
provisions and Exhibits all constitute a single document and are incorporated
herein.
43.7 Severability. Any provision of this Lease which shall prove
to be invalid, void, or illegal in no way affects, impairs or invalidates any
other provision hereof, and such other provisions shall remain in full force
and effect.
43.8 Recording. Upon request by Tenant, Landlord shall execute
and deliver to Tenant a document, in recordable form, evidencing the
existence of this Lease (without stating any of the rental provisions) which
document Tenant shall have the right to record in the land records of
Montgomery County, Maryland. Tenant shall pay any and all recordation,
transfer or other taxes or fees associated with the recordation of such
document.
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43.9 Impartial Construction. The language in all parts of this
Lease shall be in all cases construed as a whole according to its fair
meaning and not strictly for or against either Landlord or Tenant.
43.10 Inurement. Each of the covenants, conditions and agreements
herein contained shall inure to the benefit of and shall apply to and be
binding upon the parties hereto and their respective heirs, legatees,
devisees, executors, administrators, successors, assigns, sublessees, or any
person who may come into possession of said Demised Premises or any part
thereof in any manner whatsoever. Nothing contained in this Section 43.10
shall in any way alter the provisions against assignment or subletting in
this Lease provided.
43.11 Notices. Any notice, consent, demand, bill, statement, or
other communication required or permitted to be given hereunder must be in
writing and shall be effective upon receipt (or refusal of receipt) (a) when
delivered in person, or (b) when sent by registered or certified mail, return
receipt requested, postage prepaid, or (c) when delivered by a nationally
recognized overnight courier service, addressed to Tenant at the Demised
Premises, or to Tenant or Landlord at the addresses shown in Section 2.1.10
of the Basic Lease Provisions. Either party may, by notice to the other
given pursuant to this Section, specify additional or different addresses for
notice purposes.
43.12 Maryland Jurisdiction. This Lease shall be governed by,
construed and enforced in accordance with the laws of the State of Maryland,
applied to contracts made in Maryland for Maryland domiciliaries to be wholly
performed in Maryland.
43.13 Authority. That individual or those individuals signing
this Lease warrant and represent that said individual or individuals have the
power, authority and legal capacity to sign this Lease on behalf of and to
bind all entities, corporations, partnerships, joint venturers or other
organizations and/or entities on whose behalf said individual or individuals
have signed.
43.14 On or before the third business day following the Delivery
Date Tenant shall deliver to Landlord a Warrant for the purchase of 20,000
shares of common stock of Tenant, such Warrant to be in form and substance
reasonably satisfactory to Landlord and Tenant. In the event that agreement
has not been reached between Landlord and Tenant in respect of the form and
substance of the Warrant prior to the Delivery Date Landlord shall have the
right to terminate this Lease. In the event that Landlord does not elect to
so terminate Landlord shall not have any obligation to deliver to Tenant the
additional allowance described in paragraph 11 of Exhibit "B".
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IN WITNESS WHEREOF, the parties hereto have executed this Lease as of
the date first above written.
Landlord: Tenant:
ARE-708 QUINCE ORCHARD, LLC GENE LOGIC INC.
By: /S/ Alan Gold By: /S/ Mark D. Gessler
------------------------------ --------------------------------
Name: Alan Gold Name: Mark D. Gessler
------------------------- ------------------------------
Title: President Title: Senior Vice President and CFO
------------------------- -----------------------------
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EXHIBITS
- - - --------
"A" Legal Description
"B" Work Letter
"C" Rules and Regulations
"D" Estoppel Certificate
"E" Form of Acknowledgment of Term Commencement Date
"F" Form of Non-Disturbance Agreement
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EXHIBIT A
LEGAL DESCRIPTION
All that lot or parcel of land located in the 9th Election District of
Montgomery County, Maryland and described as follows:
Lot Numbered Six (6) in Block Letter "C" in the subdivision known as "Diamond
Farm" as per plat filed in Plat Book 116 as Plat No. 13679 among the Land
Records of Montgomery County, Maryland.
Together with the Easement for Ingress and Egress as established and shown
on plat recorded in Plat Book 116 as Plat No. 13679. Parcel I.D.
No.: 9-206-2153278.
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EXHIBIT A-1
[Diagram of property.]
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EXHIBIT B
WORK AGREEMENT
1. Tenant's Authorized Representative. Tenant designates Christopher
T. Dunne ("Tenant's Authorized Representative") as the person authorized to
initial all plans, drawings, change orders and approvals pursuant to this
Exhibit. Landlord shall not be obligated to respond to or act upon any such
item until such item has been initialed by Tenant's Authorized Representative.
2. Tenant's Work. All work to be performed shall be performed by
Tenant ("Tenant's Work") at Tenant's sole cost and expense (except for the
Allowance, the Optional Allowance and the Additional Allowance, as such terms
are hereinafter defined) and in accordance with the plans and specifications
hereinafter referred to in this Exhibit B. All plans and specifications
shall be prepared by architects and engineers selected by Tenant and approved
by Landlord, Landlord's approval not to be unreasonably withheld, conditioned
or delayed. Landlord hereby approves Kling Lindquist, as Tenant's architect,
and The Whiting-Turner Contracting Company, Inc. as Tenant's general
contractor. Tenant shall prepare and submit to Landlord for approval
schematics covering Tenant's Work prepared in conformity with the applicable
provisions of this Exhibit B. The schematics shall contain sufficient
information to convey Tenant's proposed design to Landlord. Landlord shall
notify Tenant of any objections to such schematics within three (3) business
days after receipt thereof. If Landlord makes objections to Tenant's
schematics, Tenant shall cause such objections to be remedied in the working
drawings and specifications Tenant submits to Landlord for approval. Within
three (3) business days after receipt by Landlord of said working drawings,
Landlord shall notify Tenant of the manner, if any, in which said working
drawings and specifications as submitted by Tenant are unacceptable and
Tenant shall re-submit such working drawings and specifications to Landlord
for approval. Landlord shall respond to all requests for consents,
approvals, directions or the like made by Tenant pursuant to this Exhibit B
within three (3) business days following Landlord's receipt of such request.
Requests need be sent only to Vincent R. Ciruzzi at Landlord's San Diego
office. Landlord's failure to respond within such three (3) day period shall
be deemed approval by Landlord.
3. Completion of Tenant's Work. Tenant will perform and complete
Tenant's Work in compliance with this Lease and such rules and regulations as
Landlord may reasonably make and in accordance with all applicable laws,
orders, regulations and requirements of all governmental authorities,
Landlord's insurance carriers and the board of fire underwriters having
jurisdiction. Prior to the commencement of Tenant's Work, Tenant shall submit
to Landlord, for Landlord's approval (which approval shall not be
unreasonably withheld, conditioned or delayed), a list of project managers,
contractors and/or subcontractors who will perform Tenant's Work. Landlord
shall give Tenant notice of its approval or disapproval within three (3)
business days after Landlord's receipt of Tenant's list. Landlord may
require that Tenant's contractor provide a performance and payment bond in
industry standard form. All Tenant's Work shall be subject to Landlord's or
Landlord's representative's reasonable approval. Tenant's Work shall be
performed in accordance with the approved working drawings and specifications
and this Exhibit
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B. For all major subcontracts, Tenant's general contractor shall be required
to provide to Tenant at least two (2) competitive bids.
4. Obligations of Tenant Before Lease Term Begins. Tenant shall
perform promptly such of its obligations contained in this Exhibit B as are
to be performed by it prior to the beginning of the Lease Term; and Tenant
shall also observe and perform all of its obligations under this Lease
(excepting its obligations to pay Basic Annual Rent and Operating Expenses)
from the date upon which the Demised Premises are made available to Tenant
for Tenant's Work until the actual commencement date of the Lease Term in the
same manner as though the Lease Term began when the Premises were so made
available to Tenant.
5. Completion of Tenant's Construction Obligations. Tenant, at
Tenant's sole cost and expense and without cost to Landlord (except for the
Allowance, the Optional Allowance and the Additional Allowance), shall
complete Tenant's Work described in this Exhibit B in all respects in
accordance with the provisions of this Lease. Tenant's Work shall be
completed at such time as Tenant, at its sole cost and expense and without
cost to Landlord (except for the Allowance, the Optional Allowance and the
Additional Allowance) shall (1) furnish evidence satisfactory to Landlord
that all of Tenant's Work has been completed and paid for in full (which may
be evidenced by the architect's certificate of completion and the general
contractor's and subcontractor's final waivers and releases of liens) (and
such work has been accepted by Landlord); that any and all liens therefor
that have been or might be filed have been discharged of record (by payment,
bond, order of a court of competent jurisdiction or otherwise) or waived and
that no security interests relating thereto are outstanding; (2) furnish to
Landlord all certifications and approvals with respect to Tenant's Work that
may be required from any governmental authority and any board of fire
underwriters or similar body for the use and occupancy of the Demised
Premises; (3) furnish to Landlord the insurance required by the Lease; and
(4) furnish an affidavit from Tenant's architect certifying that all work
performed in the Demised Premises is in substantial accordance with the
working drawings and specifications approved by Landlord.
6. Insurance. Tenant's contractors and subcontractors shall be
required to provide, in addition to the insurance required of Tenant pursuant
to this Lease the following types of insurance:
A. Builders Risk Insurance. At all times during the period
between the commencement of construction of Tenant's Work and the date of the
opening for business in the Demised Premises, Tenant shall maintain, or cause
to be maintained, casualty insurance in Builder's Risk Form, covering
Landlord, Landlord's agents, Tenant and Tenant's contractors, as their
interests may appear, against loss or damage by fire, vandalism, and
malicious mischief and other such risks as are customarily covered by the
so-called "broad form extended coverage endorsement" upon all Tenant's Work
and builder's machinery, tools and equipment, all while forming a part of, or
contained in, such improvements or temporary structures while on the Demised
Premises, or when adjacent thereto, all on a completed value basis for the
full insurable value at all times. Said Builder's Risk Insurance shall
contain an express waiver of any right of subrogation by the insurer against
Landlord, its agents and employees.
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B. Workers' Compensation. At all times during the period of
construction of Tenant's Work, Tenant will require contractors and
subcontractors to maintain statutory Workers' Compensation as required by law.
7. Liability. It is agreed that Tenant assumes the responsibility and
liability for any and all injuries or death of any persons, including
Tenant's contractors and subcontractors, and their respective employees and
for any and all damages to property caused by, or resulting from or arising
out of any act or omission on the part of Tenant, Tenant's contractors or
subcontractors or their respective employees, in the prosecution of Tenant's
Work and with respect to such work agrees to indemnify and save free and
harmless Landlord, from and against all losses and/or expenses, including
reasonable legal fees and expenses, which Landlord may suffer or pay as the
result of claims or lawsuits due to, because of, or arising out of any and
all such injuries or death and/or damage, whether real or alleged and Tenant
and Tenant's contractors and/or subcontractors or their respective insurance
companies shall assume and defend at their own expense all such claims or
lawsuits; provided, however, that nothing contained in this Exhibit B shall
be deemed to indemnify or otherwise hold Landlord harmless from or against
the negligent or wrongful acts or omissions of Landlord, its agents,
employees and contractors nor to affect or modify the terms of Section 21.7
of the Lease. Any approval or consent by Landlord shall in no way obligate
Landlord in any manner whatsoever in respect of the finished product designed
and/or constructed by Tenant. Any deficiency in design or construction,
although the same has prior approval of Landlord, shall be solely the
responsibility of Tenant. All materials and equipment furnished by Tenant as
Tenant Work shall be new or "like-new" and all work shall be performed in a
first-class workmanlike manner.
8. Allowance. Landlord shall contribute $2,850,000.00 (the
"Allowance") toward the costs and expenses incurred in connection with the
performance of Tenant's Work, of which no more than $315,000.00 may be
payable to Tenant's architects and engineers. Upon request by Tenant the
Allowance may be increased by an amount up to $1,000,000.00. In the event
that Tenant requests such an increase, the Annual Basic Rent shall be
increased by $0.14 per annum for each additional $1.00 advanced by Landlord
to Tenant pursuant to Tenant's request. Landlord shall be paid by Tenant the
sum of $30,000.00 for monitoring and inspecting Tenant's Work, which sum
shall be deducted from the Allowance. If the entire Allowance is not applied
toward or reserved for the costs of Tenant's Work, Tenant shall receive a
credit of such unused portion of the Allowance (the "Unused Allowance"),
provided, however, the Unused Allowance shall not exceed $275,000.00.
Landlord shall, at Tenant's request (to be submitted no later than thirty
(30) days after the Term Commencement Date), apply a portion of the Unused
Allowance toward payment of the first full monthly payments of Annual Basic
Rent. Upon submission by Tenant to Landlord of a statement ("Advance
Request") setting forth the amount requested and a reasonably detailed
summary of the work performed (which shall be satisfied by a copy of an AIA
standard form Application for Payment (G 702) executed by the general
contractor and by the architect) accompanied by lien releases from the
general contractor and the subcontractors in respect of the prior advance.
Landlord, within five (5) business days following receipt by Landlord of the
Advance Request and the accompanying materials, shall advance to Tenant such
amount as Landlord shall reasonably determine to be due in accordance with
the Advance Request and the accompanying statements. The Allowance may be
used for the payment of
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construction and other costs including, without limitation, laboratory
improvements, finishes, Building fixtures, building permits and fees,
architectural, engineering, design and consulting fees. Tenant shall have
the right to retain its own specialty contractors (subject to approval by
Landlord, such approval not to be unreasonably withheld, conditioned or
delayed) to perform any portion of the work necessary to construct and outfit
the Demised Premises which work shall not be payable out of the Allowance
unless approved by Landlord. If approved by Landlord, the costs for such
work may be paid from the Allowance provided that all Tenant's Work has been
paid for. Such specialty work may include, without limitation, data cabling,
telephone and data equipment, security, audio/visual equipment, white noise
and furniture systems. The Allowance shall in no event be used to purchase
any furniture, personal property or other non-building system equipment of
Tenant. In the event that a portion of the Allowance is not used to pay for
Tenant Work or specialty work or credited against Annual Basic Rent, the
Annual Basic Rent shall be reduced at the rate of Fifteen Cents ($0.15) per
One Dollar ($1.00) per rentable square foot of unused or unapplied Allowance,
up to a maximum Unused Allowance of Seven and 50/100 Dollars ($7.50) per
square foot. Notwithstanding anything to the contrary set forth elsewhere in
this Exhibit "B", Landlord shall not have any obligation to advance to Tenant
any portion of the Allowance until Landlord shall have reasonably approved
the project budget for the Tenant's Work. Prior to approval of the project
budget Tenant shall pay all of the costs and expenses incurred in connection
with the Tenant's Work. In the event that the approved project budget is
greater than the Allowance, Landlord's advances against the Allowance shall
be in an amount equal to Landlord's pro rata portion of requested amounts and
Landlord shall reimburse Tenant in an amount equal to Landlord's pro rata
share of sums advanced by Tenant prior to approval by Landlord of the project
budget.
9. Existing Building Materials; Removal of Tenant's Property. Any
existing building materials within the Demised Premises that Tenant reuses
(e.g., lights, doors, frames, hardware, etc.) shall be at no cost to Tenant
and shall not be deducted from the Allowance.
10. Optional Allowance. At the request of Tenant, Landlord shall
contribute up to $853,500.00 ($60.00 per square foot x 14,225 square feet)
(the "Optional Allowance") toward the costs and expenses incurred in
connection with the performance of certain work which may be performed by
Tenant prior to July 31, 2000 in respect of the 14,225 square feet of the
Demised Premises in respect of which the rental rate is $13.50 per square
foot per annum. The rental rate in respect of such space shall be increased
by $0.14 per square foot per annum for each one dollar per square foot of the
Optional Allowance paid by Landlord to Tenant commencing upon the date of
each such advance. In the event that Tenant desires to have Landlord advance
all or any portion of the Optional Allowance, Tenant shall give notice to
Landlord on or before July 31, 1999 which notice shall set forth the amount
Tenant desires to have advanced. Landlord shall not be obligated to make any
advances in respect of the Optional Allowance after July 31, 2000. The work
to be paid for through the Optional Allowance shall be performed, and
advances of the Optional Allowance shall be disbursed, in accordance with the
applicable provisions of the Lease including this Exhibit "B" and the
provisions of this Exhibit "B" governing the Allowance shall be applicable to
the Optional Allowance except that (i) there shall be no fee charged by
Landlord for monitoring and inspecting the work, (ii) there shall not be any
"Unused Allowance" and (iii) there shall not be any rent reduction in the
event the entire Optional Allowance is not used.
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11. Additional Allowance. Landlord shall deliver to Tenant on or
before the second business day following the delivery by Tenant to Landlord
of the Warrant pursuant to Section 43.14 of the Lease the sum of $398,300.00
(the "Additional Allowance") which may be used by Tenant for Lease related
purposes.
53
<PAGE>
EXHIBIT "C"
RULES AND REGULATIONS
1. Tenant will not pile, place or permit to be placed any goods,
materials, equipment or other obstructions on the sidewalks or parking lots
in the front, rear or sides of the Building, or in a place and in a matter so
as not block the sidewalks, parking lots and loading areas. Tenant will not
obstruct, in any way, the entry passages, corridors, halls, stairways or
elevators of the Building, or use them in any way other than as a means of
passage to and from the Demised Premises. Tenant will not do anything that
directly or indirectly takes away any of the rights of ingress, egress or
natural light from any other tenant in the Building. Tenant will not clean
the exterior of the windows.
2. At any time that other tenants occupy the Project, the delivery,
shipping, loading and unloading of supplies, fixtures and all other items to
and from the Demised Premises will be subject to the reasonable rules and
regulations Landlord may promulgate from time to time with respect to
deliveries and shipments.
3. The plumbing facilities will not be used for any purpose other than
that for which they are constructed. Nor foreign substance of any kind will
be thrown into the plumbing facilities. The expense of any breakage,
stoppage or damage resulting from a violation of this provision by Tenant or
any of its servants, agents, invitees, employees and/or licensees will be
borne solely by Tenant.
4. No radio, speakers, television, phonograph or other sound or
similar device (other than a voice and/or phone paging and/or alert system)
will be installed or operated in the Demised Premises on any floor where
Tenant is not the sole tenant without Landlord's prior written reasonable
approval. Tenant will prevent sounds emanating from the Demised Premises
from being heard outside the Demised Premises in a manner unreasonably
disturbing or annoying to other tenants.
5. Tenant, before closing and leaving the Demised Premises, will
ensure that all entrance doors and all exterior windows are locked.
6. Tenant will not use the Demised Premises for the sale of any goods,
wares or merchandise to the general public. Tenant will not permit anyone to
lodge or sleep in the Demised Premises.
7. Landlord reserves to itself all rights not granted to Tenant under
this Lease, including, but not limited to, the right to install and maintain
"for sale" signs on the exterior of the Building and, during the last 400
days of the Term (or earlier if an Event of Default has occurred and is
continuing), "for lease" signs on the exterior of the Building. In addition,
Landlord shall have the right to erect a tasteful monument sign.
54
<PAGE>
EXHIBIT "D"
FORM OF ESTOPPEL CERTIFICATE
THIS TENANT ESTOPPEL CERTIFICATE (this "Certificate"), dated as of
____________, 1997, is executed by Gene Logic Inc. ("Lessee") in favor of
Alexandria Real Estate Equities, Inc., a Maryland corporation ("Lessor") and
_____________________ ("_________").
RECITALS
A. Lessee and Lessor have entered into a Lease Agreement dated as of
August __, 1997 ("Lease") for a portion of the Property located at
______________________ (the "Property").
B. Pursuant to the Lease, Lessee has agreed that upon the request of
Lessor, Lessee would execute and deliver a tenant estoppel certificate
certifying to the status of the Lease.
C. Lessor has requested that Lessee execute this Certificate. Lessee
certifies, warrants, and represents to Lessor and ____ as follows:
Section 1. Lessee.
Lessee is the lessee of the Property (the "Leased Premises"),
pursuant to the Lease, a correct copy of which is attached as Exhibit A.
Section 2. Leased Premises.
The Leased Premises consist of ________________ (_________) square
feet of the (_____________) floor of the Property, as more particularly
described in the Lease.
Section 3. Full Force of Lease.
As of the date of this Certificate, the Lease is in full force, has
not been terminated, and is to Lessee's knowledge, subject only to any
offsets, counter-claims, or defenses of Lessee as are set forth herein.
Section 4. Complete Agreement.
The Lease constitutes the complete agreement between Lessor and
Lessee for the Leased Premises and the Property, and no amendments,
modifications or extensions to the Lease, either written or oral, currently
exist, other than
_____________________________________________________________________________
____________________________________________________________________________.
55
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Section 5. Acceptance of Leased Premises.
Lessee has accepted and is currently occupying the Leased Premises.
Section 6. Lease Term.
The term of the Lease commenced on _________ and ends on
__________, subject to the following options to extend: __________________
_____________________________________________________________.
Section 7. Purchase Rights.
Lessee has no option, right of first refusal, right of first offer,
or other right to purchase all or any portion of the Leased Premises or all
or any portion of the Property, except as follows: __________________________
Section 1. Rights of Lessee.
Except as expressly stated in this Certificate, Lessee:
(a) has no right to renew or extend the term of the Lease;
(b) has no option or other right to purchase all or any part
of the Leased Premises or all or any part of the Property;
(c) has no right, title, or interest in the Leased Premises,
other than as Lessee under the Lease.
Section 2. Rent.
(a) The rent under the Lease is current, and Lessee is not in
default in the performance or any of its obligations under the Lease.
(b) Lessee is currently paying base rent under the Lease in
the amount of $__________ per month. Lessee has not received and is not
entitled to any abatement, refunds, rebates, concessions or forgiveness of
rent or other charges, free rent, partial rent, or credits, offsets or
reductions in rent, except as follows:______________________________________.
(c) Lessee's estimated share of operating expenses, common
area charges, insurance, real estate taxes and administrative and overhead
expenses is 100% and is currently being paid at the rate of $_______ per
month.
(d) To Lessee's knowledge, there are no existing defenses or
offsets against rent due or to become due under the terms of the Lease, and
there has been no default or
56
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other wrongful act or omission by the landlord under the lease or otherwise
in connection with Lessee's occupancy of the Leased Premises, except as
follows: ____________________________________________________________________
______________________________________________________________. (if none,
please state "None").
Section 1. Security Deposit.
The amount of Lessee's security deposit held by Lessor under the
Lease is __________________________ Dollars ($_______).
Section 2. Prepaid Rent.
the amount of prepaid rent, separate from the security deposit, is
_________________ Dollars ($_______) covering the period from ___________ to
_________________.
Section 3. Insurance.
All insurance, if any, required to be maintained by Lessee under
the Lease is presently in effect.
Section 4. Tenant Improvements.
To Lessee's knowledge, all construction of buildings, site
improvements and facilities and interior tenant improvements and other
requirements respecting the Leased Premises which Lessor was to have
performed in accordance with the terms of the Lease have been performed and
completed in all respects and accepted by Lessee, except ____________________
________________________________________. All tenant allowances,
reimbursements for construction costs and other, similar sums agreed to be
paid by the landlord respecting the Leased Premises have been paid, except as
follows: ____________________________________________________________________
_____________________________________________________________________________.
Section 5. Lessor's Obligations.
As of the date of this Certificate, to Lessee's knowledge, Lessor
has performed all obligations required of Lessor under the Lease; no offsets,
counterclaims, or defenses of Lessee under the Lease exist against Lessor,
and no events have occurred that, with the passage of time or the giving of
notice, would constitute a basis for offsets, counterclaims, or defenses
against Lessor, except as follows: __________________________________________
_____________________________________________________________________________.
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Section 6. Assignments by Landlord.
Lessee has received no notice of any assignment, hypothecation or
pledge of the Lease or rentals under the Lease by Landlord.
Section 7. Assignments by Lessee.
Lessee has not sublet or assigned the Leased Premises or leased any
portion thereof to any sublessee or assignee. The address for notices to be
sent to Lessee is as set forth in the Lease.
Section 8. Environmental Matters.
(a) Lessee is in compliance with Section 40 of the Lease.
(b) Lessee has not received any notice, written or oral, of
violation of any Environmental Law and there are no writs, injunctions,
decrees, orders or judgments outstanding, no lawsuits, claims, proceedings or
investigations pending or threatened, relating to the use, maintenance or
operation of the Leased Premises.
Section 9. Notification by Lessee.
From the date of this Certificate and continuing until ___________,
Lessee agrees to immediately notify Lessor and ___________ at the following
addresses, on the occurrence of any event or the discovery of any fact that
would make any representation contained in this Certificate inaccurate:
Alexandria Real Estate Equities, Inc.
114400 West Bernardo Court
Suite 170
San Diego, California 92127
Attn: Alan D. Gold
______________________________________
______________________________________
______________________________________
______________________________________
Lessee makes this Certificate with the knowledge that it will be
relied on by _____________________ in agreeing to _______________________.
Lessee has executed this Certificate as of the date first written
above by the person named below, who are duly authorized to do so.
58
<PAGE>
LESSEE:_______________________________
By:___________________________________
Its:__________________________________
Dated:________________________________
59
<PAGE>
EXHIBIT E
ACKNOWLEDGEMENT OF TERM COMMENCEMENT DATE
This acknowledgement is made pursuant to Section 4.4 of that
certain Lease dated August 22, 1997 by and between ARE-708 QUINCE ORCHARD,
LLC, a Delaware limited liability company, Landlord, and GENE LOGIC, INC., a
Delaware corporation, Tenant, with respect to 708 Quince Orchard Road,
Gaithersburg in the County of Montgomery, Maryland.
We hereby acknowledge that the Term Commencement Date of the Lease
is August 26, 1997.
ACCEPTED:
("Landlord")
ARE-708 QUINCE ORCHARD LLC,
a Delaware limited liability company
By: _________________________________
Its:_____________________________
Date: _______________________________
ACCEPTED:
("Tenant")
GENE LOGIC, INC.,
a Delaware corporation
By: _________________________________
Its:_____________________________
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<PAGE>
EXHIBIT F
SUBORDINATION, NON-DISTURBANCE
AND ATTORNMENT AGREEMENT
THIS SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT (the
"Agreement") is made as of _________, ____, between GENE LOGIC INC., a
Delaware Corporation ("Tenant"), having an address at _______________________
____________. ("Lender") having an address at ______________________________.
WITNESSETH:
WHEREAS, Tenant is the tenant under that certain lease (the "Lease")
dated ________, 1997, by and between Tenant and ARE-708 QUINCE ORCHARD, LLC
wherein Landlord leased to Tenant certain premises known as 708 Quince
Orchard Road, Gaithersburg, MD 20878 (the "Premises") and located on that
certain land escribed in Exhibit A attached hereto and made a part hereof
(the "Land"); and
WHEREAS, Landlord is about to make, execute and deliver its Promissory
Note ("Note") to Lender, which Note shall be secured by, among other
security, a lien encumbering the Land and the improvements constructed
thereon (the Land and such improvements being hereinafter referred to as the
"Mortgaged Property") pursuant to a Mortgage, Security Agreement and
Assignment of Leases and Rents (as thereafter amended and modified, the
"Mortgage") (the Mortgage and all other instruments securing the Note are
herein collectively called the "Security Documents");and
WHEREAS, Lender and Tenant desire to confirm their agreements with
respect to the Lease and the Security Documents.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, Lender and Tenant hereby agree and covenant as follows:
1. Subordination.The Lease and all right, title and interest in the
Mortgaged Property created thereby (including without limitation, any
purchase options, rights of first refusal, lease renewal rights, etc.) are,
shall be and shall at all times remain and continue to be subject and
subordinate in all respects to the liens and effect of the Security
Documents.
2. Non-Disturbance.So long as the Lease is in full force and effect
and Tenant is not in default under the Lease (after notice, if required
pursuant to the Lease, and beyond any period given Tenant to cure such
default) or under this Agreement after notice and a reasonable opportunity to
cure:
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(a) Subject to Paragraph 3 hereof, Lender will recognize the Lease
and Tenant's possession of the Premises and Tenant's right and
privileges under the Lease shall not be diminished or interfered with by
Lender, and Tenant's occupancy of the Premises shall not be disturbed by
Lender for any reason whatsoever during the term of the Lease or any
extensions or renewals thereof; and
(b) Lender will not join Tenant as a party defendant in any action
or proceeding to foreclose the Mortgage or to enforce any rights or
remedies of Lender under the Mortgage which would cut-off, destroy,
terminate or extinguish the Lease or Tenant's interest and estate under
the Lease.
Notwithstanding the foregoing provisions of this paragraph, if it shall be
required under applicable law for Lender to name or join Tenant as a party in
a foreclosure proceeding with respect to the Mortgage, Lender may so name or
join Tenant without in any way diminishing or otherwise affecting the rights
and privileges granted to, or inuring to the benefit of, Tenant under this
Agreement and the Lease, and Lender shall not seek affirmative relief from
Tenant in such action or proceeding, nor shall the Lease be cut off or
terminated, nor Tenant's possession thereunder disturbed.
3. Attornment.
(a) Tenant acknowledges that it has notice that Landlord's
interest under the Lease and the rents and all other sums due thereunder
have been assigned to Lender as part of the security for the Note
secured by the Mortgage. Notwithstanding anything to the contrary
contained herein or in the Lease, in the event that Lender notifies
Tenant of a default under the Mortgage and demands that Tenant pay its
rent and all other sums due under the Lease to Lender, Tenant agrees
that it shall pay its rent and all other sums due under the Lease to
Lender, provided, however, that Tenant shall be provided written notice
at least ten (10) days prior to Tenant's obligation to pay rent and
other sums due under the Lease to Lender, and provided, further that in
such event, upon the payment to Lender of such rent and other sums
Landlord, subject to the provisions of subparagraph 3(c), shall remain
liable to Tenant for the performance of Landlord's obligations under the
Lease. All rents and other sums paid by Tenant to Lender shall be
credited against Tenant's rental obligations under the Lease, and
payment to Lender of rents and such other sums due under the Lease will
be deemed to be payment to Lender of rents and such other sums due under
the Lease will be deemed to be payment to Landlord for purposes of the
Lease. Landlord joins in the execution of this Agreement for the
purpose of, among other things, consenting to the provisions of this
subparagraph 3(a).
(b) If Lender (or its nominee or designee) shall succeed to the
rights of Landlord under the Lease through possession or foreclosure
action, delivery of a deed or otherwise, or another person purchases the
Premises upon or following foreclosure of the Mortgage, then at the
request of Lender (or its nominee or designee) or such purchaser
(Lender, its nominees and designees, and such purchaser, each being a
"Successor-Landlord"), Tenant shall attorn to and recognize
Successor-Landlord as Tenant's landlord under the Lease
62
<PAGE>
and shall promptly deliver any instrument that Successor-Landlord may
reasonably request to evidence such attornment. Upon such attornment,
the Lease shall continue in full force and effect as, or as if it were,
a direct lease between Successor-Landlord and Tenant upon all terms,
conditions and covenants as are set forth in the Lease, except that
Successor-Landlord shall not:
i) be liable for any previous act or omission of Landlord under the
Lease; provided, however, that the foregoing provisions of this
clause (b) shall not exculpate the Successor Landlord from
liability for performing Landlord's obligations under this Lease
which are of a continuing nature including, without limitation,
Landlord's repair and maintenance obligations under the Lease;
ii) be subject to any off-set, which shall have previously accrued
to Tenant against Landlord;
iii) be bound by any modification of the Lease (if such
modification was made after the date that Successor-Landlord
obtained its mortgagee interest) or by any previous prepayment of
rent or additional rent for more than one month which Tenant might
have paid to Landlord (other than any security deposit), unless
such modification or prepayment shall have been expressly approved
in writing by Lender;
iv) be liable for any security deposited under the Lease unless
such security has been physically delivered to Lender; or
v) be obligated to commence or complete any construction or to
make any contribution toward construction or installation of any
improvements upon the Mortgaged Property required under the Lease.
4. Lease Modifications. Tenant agrees that without the prior written
consent of Lender, it shall not: (a) amend, modify, terminate or cancel the
Lease or any extensions or renewals thereof; (b) tender a surrender of the
Lease or make a prepayment of any rent or additional rent in excess of one
(1) month; or (c) subordinate or permit the subordination of the Lease to any
lien subordinate to the Mortgage. Any such purported action without such
consent shall be void as against the holder of the Mortgage.
5. Notice of Default; Opportunity to Cure.
(a) Any default or similar notice required or permitted to be
given by Tenant to Landlord shall be simultaneously given also to
Lender, and any right of Tenant dependent upon such notice shall take
effect only after such notice to Lender is so given. Performance by
Lender shall satisfy any conditions of the Lease requiring performance
by Landlord, and Lender shall have a reasonable time to complete such
performance as provided in section (b) below.
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(b) Without limiting the generality of the foregoing, Tenant shall
promptly notify Lender of any default, act or omission of Landlord which
would give Tenant the right, immediately or after the lapse of a period
of time, to cancel or terminate the Lease or to claim a partial or total
eviction (a "Landlord Default") (except that the terms of this
subparagraph 5(b) shall not be applicable to Section 4.1 or Article 22
of the Lease). In the event of a Landlord Default, Tenant shall not
exercise any rights available to it to cancel or terminate the Lease: i)
until it has given written notice of such Landlord Default to Lender;
and ii) unless Lender has failed, within sixty (60) days after Lender
receives such notice, to cure or remedy the Landlord Default or, if the
same is of a nature that same cannot with due diligence be remedied by
Lender within such sixty (60) days after Lender receives such notice,
until a reasonable period for remedying such Landlord Default has
elapsed following the giving of such notice and following the time when
Lender shall have become entitled under the Security Documents to remedy
the same (which reasonable period shall in no event be less than the
period during which Landlord would be entitled under the Lease or
otherwise, after similar notice, to effect such remedy); provided that
Lender shall with due diligence commence and prosecute a remedy for such
Landlord Default. If Lender cannot reasonably remedy a Landlord Default
until after Lender obtains possession of the Mortgaged Property, Tenant
may not terminate or cancel the Lease or claim a partial or total
eviction by reason of such Landlord Default until the expiration of a
reasonable period necessary for the remedy after Lender institutes
proceedings to obtain possession of the Mortgaged Property through a
foreclosure or otherwise, or for the appointment of a receiver for the
Mortgaged Property, provided that Lender institutes and prosecutes such
proceedings with due diligence. Lender shall have no obligation
hereunder to remedy any Landlord Default.
6. Notice of Lien. To the extent that the Lease entitles Tenant to
notice of the existence of any mortgage and the identity of any lender, this
Agreement shall constitute such notice to Tenant, with respect to the
Mortgage.
7. Limitation of Liability. Except as specifically provided in this
Agreement, Lender shall not, by virtue of this Agreement, the Mortgage or any
other instrument to which Lender may be a party, be or become subject to any
liability or obligation to Tenant under the Lease or otherwise.
8. Priority.
(a) Tenant acknowledges and agrees that this Agreement supersedes
(but only to the extent inconsistent with) any provisions of the Lease
relating to the priority or subordination of the Lease and the interests
or estates created thereby to the Mortgage.
(b) Tenant agrees to enter into a subordination, non-disturbance
and attornment agreement with any entity which shall succeed Lender with
respect to the Mortgaged Property, or any portion thereof, provided such
agreement is substantially similar to this Agreement.
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9. Notices. Any notice, consent, request or other communication
required or permitted to be given hereunder shall be in writing and shall be:
(a) personally delivered; (b) delivered by Federal Express or other
comparable overnight delivery service; or (c) transmitted by postage prepaid
registered or certified mail, return receipt requested. All such notices,
consents, requests or other communications shall be addressed to Tenant or
Lender at the address for such party previously set forth in this Agreement,
or to such other address as Tenant or Lender shall in like manner designate
in writing. All notices and other communications shall be deemed to have
been duly given on the first to occur of actual receipt of the same or: (i)
the date of delivery if personally delivered; (ii) one (1) business day after
depositing the same with the delivery service if by overnight delivery
service; and (iii) three (3) days following posting if transmitted by mail.
Any party may change its address for purposes hereof by notice to the other
parties given in accordance with the provisions hereof.
10. General. This Agreement may not be modified or terminated orally.
This Agreement shall inure to the benefit of and be binding upon the parties
hereto, their successors and assigns. The term "Lender" shall mean the then
holder of any interest in the Mortgage. The term "Landlord" shall mean the
then holder of the lessor's interest in the Lease. The term "person" shall
mean any individual, joint venture, corporation, partnership, trust,
unincorporated association or other entity. All references herein to the
Lease shall mean the Lease as modified by this Agreement and any amendments
or modifications to the Lease which are consented to in writing by Lender.
Any inconsistency between the Lease and the provisions of this Agreement
shall be resolved in favor of this Agreement.
11. Waivers. Both Tenant and Lender hereby irrevocably waive all right
to trial by jury in any action, proceeding or counterclaim arising out of or
relating to this Agreement.
12. Governing Law. This agreement shall be governed by and construed in
accordance with the laws of the state in which the Land is located.
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IN WITNESS WHEREOF, the parties hereto have executed this Subordination,
Non-Disturbance and Attornment Agreement to be effective as of the day and
year first stated above.
"LENDER"
______________________________________
By: __________________________________
Name:
Title:
"TENANT"
GENE LOGIC INC.
a Delaware Corporation
By: __________________________________
Printed Name: ________________________
Title: _______________________________
AGREED AND CONSENTED TO:
"BORROWER"
ARE-708 QUINCE ORCHARD, LLC,
a Maryland limited liability company
By: ___________________________________
Printed Name: _________________________
Title: ________________________________
66
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ACKNOWLEDGMENTS
[Insert appropriate state acknowledgments]
67
<PAGE>
EXHIBIT A
Legal Description
The real property situated in the County of _____, State of _________,
described as follows:
68
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Exhibit 10.24
Confidential Treatment Requested
Under 17 C.F.R. Sections 200.80(b)(4),
200.83 and 230.406
*** Indicates omitted material that is the subject of a confidential
treatment request filed separately with the Commission.
TARGET DISCOVERY COLLABORATION
AND LICENSE AGREEMENT
BETWEEN
GENE LOGIC INC.
AND
PROCTER & GAMBLE PHARMACEUTICALS, INC.
DATED AS OF MAY 27, 1997
<PAGE>
Table Of Contents
Page
1. DEFINITIONS........................................................... 1
1.1 "Affiliate"...................................................... 1
1.2 "Agreement Term"................................................. 2
1.3 "Alliance Director".............................................. 2
1.4 "cDNA"........................................................... 2
1.5 "cDNA Sequence Analysis"......................................... 2
1.6 "Commercialization Field"........................................ 2
1.7 "Control"........................................................ 2
1.8 "Diagnostic Product"............................................. 2
1.9 "Drug Approval Application"...................................... 2
1.10 "Effective Date"................................................. 2
1.11 "FDA"............................................................ 2
1.12 "Field".......................................................... 2
1.13 "Further Research and Development"............................... 3
1.14 "Gene Product"................................................... 3
1.15 "Gene Target".................................................... 3
1.16 "Gene Logic Software"............................................ 3
1.17 "Gene Logic Technology".......................................... 3
1.18 "Heart Failure".................................................. 3
1.19 "IND"............................................................ 3
1.20 "Invention(s)"................................................... 3
1.21 "Major Market"................................................... 3
1.22 "NDA"............................................................ 3
1.23 "Net Sales"...................................................... 3
1.24 "Patent Right(s)"................................................ 4
1.25 "Product"........................................................ 4
1.26 "Protein Product"................................................ 4
1.27 "Regulatory Approval"............................................ 4
1.28 "Research Database".............................................. 5
1.29 "Research Management Committee" or "RMC"......................... 5
1.30 "Research Plan".................................................. 5
1.31 "Research Program"............................................... 5
1.32 "Research Term".................................................. 5
1.33 "Samples"........................................................ 5
1.34 "Scientific FTE"................................................. 5
1.35 "Stage I"........................................................ 5
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
Page
1.36 "Stage II"...................................................... 5
1.37 "Therapeutic Product"........................................... 5
1.38 "Third Party"................................................... 6
1.39 "Utility"....................................................... 6
2. Research Program..................................................... 6
2.1 Undertaking and Scope........................................... 6
2.2 Personnel and Resources......................................... 6
2.3 Establishment of Link to Research Database...................... 6
2.4 Term of the Research Program.................................... 7
2.5 Selection of Gene Targets....................................... 7
2.6 Selection of Gene Targets Following Termination of Research
Term .......................................................... 8
3. Research Management Committee; Alliance Directors;
Dispute Resolution................................................... 8
3.1 Research Management Committee.................................... 8
3.2 RMC Meetings..................................................... 9
3.3 Alliance Directors............................................... 9
3.4 Dispute Resolution............................................... 9
4. Patents, Know-How Rights And Inventions............................... 9
4.1 Ownership of Inventions.......................................... 9
4.2 Rights to Gene Logic Technology, Gene Logic Software and
Research Database............................................... 9
4.3 Rights to Improvements to Gene Logic Technology and Gene
Logic Software................................................... 10
4.4 Patent Protection................................................ 10
4.5 Infringement by Third Parties.................................... 11
4.6 Allegations of Infringement by Third Parties..................... 11
4.7 Independent Efforts.............................................. 12
5. Licenses............................................................... 12
5.1 Research Database and Software License to P&GP.................... 12
5.2 Licenses to Gene Logic............................................ 13
5.3 Gene Target License to P&GP....................................... 13
5.4 P&GP [***] ....................................................... 13
5.5 Gene Logic [***] ................................................. 14
ii.
CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
Page
6. Diligence and Gene Target License Termination......................... 14
6.1 Diligence........................................................ 14
7. Reporting Obligations................................................. 15
7.1 Information and Reports Concerning the Research Program.......... 15
7.2 Diligence Reports................................................ 16
8. Collaboration Expansion Options....................................... 16
9. Payments and Royalties................................................ 16
9.1 Research Reimbursement Payments to Gene Logic.................... 16
9.2 Technology Access Payment to P&GP................................ 17
9.3 Gene Target Fees................................................. 17
9.4 Royalties Payable by P&GP........................................ 17
9.5 Currency of Payment.............................................. 18
9.6 Payment and Reporting............................................ 19
9.7 Records and Audits............................................... 19
10. Milestones............................................................ 19
10.1 Milestones for Therapeutic Products and Protein Products......... 19
10.2 Milestones for Diagnostic Products............................... 20
10.3 Payment of Milestones............................................ 20
11. Confidentiality and Security.......................................... 20
11.1 Security of Research Database.................................... 20
11.2 Confidentiality.................................................. 21
11.3 Permitted Disclosures............................................ 22
11.4 Publicity........................................................ 22
11.5 Publication...................................................... 22
12. Representations And Warranties........................................ 23
12.1 Legal Authority.................................................. 23
12.2 Valid Licenses................................................... 23
12.3 No Conflicts..................................................... 23
12.4 Disclaimer....................................................... 23
13. Term; termination..................................................... 24
13.1 Term............................................................. 24
iii.
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TABLE OF CONTENTS
(CONTINUED)
Page
13.2 Termination for Breach.......................................... 24
13.3 Effect of Bankruptcy............................................ 25
13.4 Remedies........................................................ 25
14. Arbitration........................................................... 25
15. General Provisions.................................................... 26
15.1 Mutual Indemnification........................................... 26
15.2 Assignment....................................................... 26
15.3 Change of Control................................................ 26
15.4 Non-Waiver....................................................... 27
15.5 Governing Law.................................................... 28
15.6 Partial Invalidity............................................... 28
15.7 Notice........................................................... 28
15.8 Headings......................................................... 28
15.9 No Implied Licenses or Warranties................................ 29
15.10 Force Majeure................................................... 29
15.11 Survival........................................................ 29
15.12 Entire Agreement................................................ 29
15.13 Amendments...................................................... 29
15.14 Independent Contractors......................................... 29
15.15 Counterparts.................................................... 30
iv.
<PAGE>
TARGET DISCOVERY COLLABORATION
AND LICENSE AGREEMENT
This Target Discovery Collaboration And License Agreement ("Agreement") is
made as of May 27, 1997, by and between Gene Logic inc., a Delaware corporation
("Gene Logic"), located at 10150 Old Columbia Road, Columbia, Maryland 21046 and
Procter & Gamble Pharmaceuticals, Inc. ("P&GP"), an Ohio corporation, having a
place of business at 8700 Mason-Montgomery Road, Mason, Ohio 45040.
Witnesseth:
Whereas, Gene Logic has developed technologies and know-how with respect to
high throughput analysis of gene expression and gene regulation for use in the
identification of gene targets and the discovery of pharmaceutical and
diagnostic products;
Whereas, P&GP is a company engaged in the development and commercialization
of pharmaceutical and diagnostic products;
Whereas, P&GP and Gene Logic wish to enter into a collaborative effort
directed toward the development of a Research Database (as defined herein) to
identify genes associated with the onset and progression of heart failure and
ischemic cardiomyopathies (the "Collaboration"); and
Whereas, the parties intend to use the genes so identified to discover,
develop and market human pharmaceutical and diagnostic products.
Now, Therefore, in consideration of the foregoing premises and the mutual
promises, covenants and conditions contained herein, Gene Logic and P&GP agree
as follows:
1. Definitions.
The following capitalized terms shall have the meanings indicated for
purposes of this Agreement:
1.1 "Affiliate" shall mean any corporation, association or other entity
which directly or indirectly controls, is controlled by or is under common
control with the party in question. As used in this definition of "Affiliate,"
the term "control" shall mean direct or indirect beneficial ownership of more
than 50% of the voting or income interest in such corporation or other business
entity.
1.
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1.2 "Agreement Term" shall mean the period from the Effective Date until,
with respect to each Product, the expiration of the last royalty obligation owed
by P&GP to Gene Logic with respect to such Product, or until this Agreement is
otherwise terminated pursuant to its terms.
1.3 "Alliance Director" shall have the meaning set forth in Section 3.3.
1.4 "cDNA" shall mean a DNA copy of a mRNA, including, without
limitation, all cDNA clones and cDNA templates derived from a given gene
transcript and its corresponding coding sequence, including the full length
sequence.
1.5 "cDNA Sequence Analysis" shall mean all sequence information from all
cDNA templates derived from the same gene within a given cDNA library.
1.6 "Commercialization Field" shall mean the development or
commercialization of Products for the prevention, treatment or diagnosis of
Heart Failure and ischemic cardiomyopathies in humans and other animals.
1.7 "Control" shall mean possession of the ability to grant the licenses
or sublicenses as provided for herein without violating the terms of any
agreement or other arrangement with any Third Party.
1.8 "Diagnostic Product" shall mean any product or service or combination
thereof used for the diagnosis, prognosis and/or monitoring of progression of
any disease or disorder in humans and other animals which is developed
utilizing, or is comprised of, any Gene Target or which incorporates any Gene
Target DNA or RNA sequence, other than a Protein Product.
1.9 "Drug Approval Application" shall mean an application for Regulatory
Approval required before commercial sale or use of a Product.
1.10 "Effective Date" shall mean the date of this Agreement first written
above.
1.11 "FDA" shall mean the United States Food and Drug Administration.
1.12 "Field" shall mean research, discovery and characterization of genes
associated with the onset and progression of Heart Failure and ischemic
cardiomyopathies through the application of bioinformatics and genomic
technologies to analyze Samples, and the use of such genes for the development
of Products. As used herein, the term "genomic technologies" shall mean,
without limitation, technologies for the analysis of gene expression and gene
regulation, hybridization array techniques, high speed sequencing and generation
of expressed sequence tags.
2.
<PAGE>
1.13 "Further Research and Development" shall have the meaning set forth
in Section 2.5.
1.14 "Gene Product" shall mean all partial cDNAs, DNAs, genes, full length
cDNAs corresponding thereto and proteins encoded therefrom.
1.15 "Gene Target" shall have the meaning set forth in Section 2.5.
1.16 "Gene Logic Software" shall mean Gene Logic's software programs for
the analysis of gene expression and gene regulation and the identification and
prioritization of gene targets, including all software programs and analysis
tools that are Controlled by Gene Logic as of the Effective Date or during the
Research Term.
1.17 "Gene Logic Technology" shall mean (i) all discoveries, inventions,
information, data, know-how, trade secrets and materials (whether or not
patentable) that are Controlled by Gene Logic as of the Effective Date or during
the Research Term, including without limitation, the Research Database, Gene
Logic's READS-TM- and MUST-TM- technologies and its Gene Express-TM- database
and (ii) all intellectual property rights of Gene Logic covering the foregoing.
1.18 "Heart Failure" shall mean the inability of the heart to maintain a
circulation sufficient to meet the needs of the body.
1.19 "IND" shall mean an Investigational New Drug Application to the FDA
to commence human clinical testing of a Product, as defined by the FDA, or the
equivalent application in any other Major Market.
1.20 "Invention(s)" shall have the meaning set forth in Section 4.1.
1.21 "Major Market" shall mean the European Union or any one or more of
the following countries: the United States, Canada, United Kingdom, France,
Germany, Italy or Japan.
1.22 "NDA" shall mean a New Drug Application or Product License
Application, as appropriate, and all supplements filed pursuant to the
requirements of the FDA, including all documents, data and other information
concerning Products which are necessary for or included in FDA approval to
market a Product, or the equivalent application in any other Major Market.
1.23 "Net Sales" shall mean the gross invoices delivered by P&GP or its
Affiliates or sublicensees, as appropriate, for the sale of a Product, less the
following deductions:
3.
<PAGE>
(1) Prompt payment or other trade or quantity discounts actually
allowed and taken in such amounts as are customary in the trade;
(2) Amounts repaid or credited by reason of timely rejections or
returns;
(3) Any sales or value-added taxes or any other taxes measured by
the amount of sales or gross receipts due on the sale of a Product; and
(4) Allowances for bad debt to the extent such amounts were
previously invoiced and included in Net Sales for royalty purposes and were
subsequently actually written off by P&GP; and
(5) Rebates or discounts actually allowed and taken by government
or other health care organizations, national or other health insurance schemes,
Medicare and Medicaid and the like, state-based or other formularies and managed
care organizations and discounts actually allowed and taken for special
purchases made by hospitals or clinics.
Notwithstanding the foregoing, amounts received by such party or its
Affiliates for the sale of Products among such party and its Affiliates whether
for their internal use or for resale or other disposition will not be included
in the computation of Net Sales hereunder.
1.24 "Patent Right(s)" shall mean, with respect to Gene Logic or P&GP,
all United States and foreign patents (including all reissues, extensions,
confirmations, registrations, re-examinations, and inventor's certificates) and
patent applications (including, without limitation, all substitutions,
continuations, continuations-in-part and divisionals thereof) owned or
Controlled by Gene Logic or P&GP at any time during the Agreement Term.
1.25 "Product" shall mean a Therapeutic Product, Protein Product, or
Diagnostic Product, as applicable.
1.26 "Protein Product" shall mean any product for the prevention or
treatment of any disease or disorder in humans and other animals which
incorporates a protein or peptide (excluding peptides discovered through
screening of Gene Targets) encoded by the full, partial or mutated RNA or DNA
sequence corresponding to a Gene Target RNA or DNA sequence, in any dosage form
for delivery by any route of administration.
1.27 "Regulatory Approval" shall mean (i) approval of an NDA or comparable
applicable filing by the FDA permitting commercial sale of a Product and (ii)
any comparable approval permitting commercial sale of a Product granted by
applicable authorities in any other Major Market.
4.
<PAGE>
1.28 "Research Database" shall mean the database created by Gene Logic
using the Gene Logic Technology pursuant to the Research Plan. The Research
Database shall contain data derived from experiments conducted with respect to
the Gene Products identified by Gene Logic pursuant to the Research Program,
including all derivative materials of the Samples and all cDNA sequences,
partial cDNAs and their corresponding full-length cDNAs and cDNA Sequence
Analysis.
1.29 "Research Management Committee" or "RMC" shall have the meaning set
forth in Section 3.1.
1.30 "Research Plan" shall have the meaning set forth in Section 2.1.
1.31 "Research Program" shall mean that program of research performed by
the parties in the Field pursuant to Section 2.
1.32 "Research Term" shall mean the period commencing on the Effective
Date and ending upon the last day of Stage II, subject to extension or earlier
termination as set forth herein.
1.33 "Samples" shall mean tissue samples supplied by P&GP to Gene Logic
for analyses pursuant to the Research Plan.
1.34 "Scientific FTE" shall mean the equivalent of a full-time
researcher's or program manager's work time expended on activities pursuant to
the Research Plan over a 12 month period (including normal vacations, sick days
and holidays).
1.35 "Stage I" shall mean the initial phase of the Research Program and
shall commence as of the Effective Date and extend until the earlier of (i) the
completion by Gene Logic of the [***] analysis of [***], or (ii) [***] from the
Effective Date.
1.36 "Stage II" shall mean the second phase of the Research Program,
commencing on the day following the last day of Stage I and extending until the
[***] anniversary thereof. Stage II may be extended upon mutual agreement of
the parties, as provided in Section 2.4(a).
1.37 "Therapeutic Product" shall mean any product for the prevention or
treatment of any disease or disorder in humans and other animals in any dosage
form by any route of administration, which product incorporates as an active
ingredient a molecule, compound or other agent that (a) is discovered utilizing,
in whole or in part, a Gene Target, whether or not during the Research Term, or
(b) was identified prior to the Effective Date but the utility of which is
discovered utilizing, in whole or in part, a Gene Target, whether or not during
the Research Term, excluding any Diagnostic Product and
5.
CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
any Protein Product. For example, "Therapeutic Product" expressly includes any
gene therapy product or antisense product which consists of any full, partial or
mutated RNA or DNA sequence corresponding to, or complementary to a Gene Target
RNA or DNA sequence (a "Biological Therapeutic Product").
1.38 "Third Party" shall mean any party other than P&GP or Gene Logic or
an Affiliate of either of them.
1.39 "Utility" of a target shall mean when the complete cDNA sequence is
available and the corresponding clone is characterized; the recombinant protein
corresponding to the cDNA has been expressed and is purified; and manipulation
of the expression or activity of the molecular target modulates heart function
in an animal model.
2. Research Program.
2.1 Undertaking and Scope. During the first 30 days after the Effective
Date, the parties shall work together to develop a plan for the creation and use
of the Research Database (a "Research Plan") by the parties. The Research
Management Committee will review and approve or modify the general direction of
such Research Plan. The Research Plan shall include such correspondence and
other material of the parties documenting the parties' work to create the
Research Database. At least 90 days before each anniversary of the Effective
Date during the Research Term, the parties shall propose to the RMC a Research
Plan for the subsequent year's work under the Research Program. The RMC shall
review, modify, if appropriate, and amend the Research Plan. Each party agrees
to use all reasonable efforts to perform the activities detailed in the Research
Plan, in a professional and timely manner.
2.2 Personnel and Resources. During the Research Term, each party
agrees to commit the personnel, consultants, facilities, expertise,
technology and other resources necessary to perform its obligations under
the Research Plan. During Stage I of the Research Term, Gene Logic shall
commit no fewer than [***] Scientific FTEs. During Stage II of the Research
Term, P&GP and Gene Logic will each maintain the number of Scientific FTEs
devoted to cooperative work as are required under the Research Plan; provided
that such research support at Gene Logic shall not be fewer than [***]
Scientific FTEs or at such lower level as the parties may mutually agree
taking into account the work to be accomplished pursuant to the Research
Plan. P&GP will provide funding to support Gene Logic's performance of its
obligations under the Research Plan as set forth in Section 9.1(c).
2.3 Establishment of Link to Research Database. During the 30 days after
the Effective Date, the parties shall work together to establish a secure
internet link to the
6.
CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
Research Database at P&GP and Gene Logic will make a representative available
at P&GP's facility to assist in such process. In the event that access to the
link to the Research Database is disrupted for a period of one working day or
more, other than due to the fault of P&GP, then the period during which P&GP
shall have access to the Research Database under Section 5.1 shall be
commensurately extended for a period equal to the number of full working days
during which such access was disrupted.
2.4 Term of the Research Program.
(a) Work under the Research Program will commence as of the
Effective Date and, unless terminated earlier pursuant to the terms of this
Agreement or extended by mutual agreement of the parties, will terminate
upon expiration of the Research Term. The parties may extend Stage II of the
Research Term for additional [***] periods by mutual written consent. The
Research Term may be terminated by P&GP upon expiration of Stage I with six
months' prior written notice to Gene Logic, or at any time subsequent to the
expiration of Stage I as long as P&GP has provided six months' prior written
notice to Gene Logic; provided, however, that both parties shall be obligated
to continue all Research Program studies ongoing at the time of such written
notice until the effective date of such termination. Upon early termination
by P&GP of the Research Term pursuant to the preceding sentence, Gene Logic
shall return to P&GP any Samples which have not been analyzed, but shall
retain all derivative materials of Samples previously analyzed. Gene Logic
shall not be entitled to terminate the Research Term during Stage I so long
as P&GP has made all required payments to Gene Logic during Stage I.
(b) If the Research Term is terminated by P&GP as provided in
Section 2.4(a), P&GP may elect to recommence the Research Program for [***]
additional [***] periods of time (each, an "Additional Research Program
[***]") by notifying Gene Logic of its election at least 90 days prior to either
(i) the first anniversary of the termination of the Research Term or (ii) the
expiration of the first Additional Research Program [***], as applicable,
subject to P&GP's payment to Gene Logic, at the time such notice is provided,
of the amounts set forth in Sections 9.1(b) and 9.1(c) to fund the research to
be performed under the Research Program during any such Additional Research
Program [***].
2.5 Selection of Gene Targets. Under the Research Program, the parties
will use reasonable efforts consistent with their respective obligations under
the Research Plans to identify Gene Products from Samples [***] as
potential targets within the Field. P&GP shall select certain of such Gene
Products as targets for further development of pharmaceutical and diagnostic
products using information obtained from the Research Database created by Gene
Logic pursuant to the Research Plan and the application of the Gene Logic
Software and other information available to P&GP,
7.
CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
including, without limitation, through public DNA sequence databases and
scientific publications. Any Gene Product identified in the Research Database
which P&GP uses in Further Research and Development (as defined below) shall be
a "Gene Target." Based upon P&GP's standard, internal research and development
criteria, P&GP will, in its sole discretion based upon Utility in Heart Failure,
decide whether to commence Further Research and Development with regard to a
particular Gene Product. P&GP shall notify Gene Logic in writing prior to using
any Gene Target in Further Research and Development and make the payment
described in Section 9.3. For purposes of this Agreement, "Further Research and
Development" of a Gene Target as (i) a Therapeutic Product will include the
[***] of (a) [***] or (b) [***]; (ii) a Protein Product will include the
[***]; and (iii) a Diagnostic Product will include the [***].
2.6 Selection of Gene Targets Following Termination of Research Term. If
P&GP elects to pursue a Gene Target in Further Research and Development within
[***] following expiration of the Research Term, P&GP agrees to notify Gene
Logic in writing and make the payment described in Section 9.3 prior to using
such Gene Target in Further Research and Development. P&GP will be obligated to
make the payments set forth in Sections 9.3, 9.4 and 10 with regard to such Gene
Target.
3. Research Management Committee; Alliance Directors; Dispute
Resolution.
3.1 Research Management Committee. Promptly after the Effective Date,
P&GP and Gene Logic will each appoint three representatives to a research
management committee (the "Research Management Committee" or "RMC"). Attached
as Schedule 3.1 is a list of the representatives the parties intend to appoint
to the RMC. Brian Chamberlain, Ph.D. will serve as chairman of the RMC for the
initial 12 months following the Effective Date. Thereafter, chairmanship will
rotate between a P&GP member and a Gene Logic member every 12 months. P&GP will
determine the scientific priorities and direction of the work to be performed
under the Research Plan, subject to discussion with Gene Logic. The RMC will
review, direct and supervise all operational and scientific aspects related to
the creation of the Research Database. The duties of the Research Management
Committee shall include approving the Research Plans, monitoring the parties'
progress under the Research Plans and evaluating the means through which P&GP
has access to the Research Database. The Research Management Committee will
meet quarterly, or more frequently if mutually agreed, and will alternate sites
of meetings between Cincinnati, Ohio and Columbia, Maryland. The RMC will
8.
CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
otherwise communicate regularly by telephone, facsimile and video conference.
Each party recognizes the importance of the Research Management Committee in the
success of the Collaboration and will use diligent efforts to cause all of its
representatives to such committee to attend all meetings of such committee. A
party may change any of its appointments to the Research Management Committee at
any time upon giving written notice to the other party. Any disputes or
disagreements within the RMC shall be resolved pursuant to Section 3.4.
3.2 RMC Meetings. All committees created hereunder may meet by telephone
or video conference or in person at such times as are agreeable to the members
of each such committee. Attendance at meetings shall be at the respective
expense of the participating parties. The chairman of the RMC shall assure that
agendas and minutes are prepared for each of its meetings. All actions taken
and decisions made by the RMC shall be by unanimous agreement, subject to P&GP's
rights to determine scientific priorities pursuant to Section 3.1. If personal
attendance is not possible for valid reasons, voting by proxy is permissible.
3.3 Alliance Directors. Each party shall designate one of its employees
as an alliance director ("Alliance Director") for all of the activities
contemplated under this Agreement. Such Alliance Directors will be responsible
for the day-to-day coordination of the performance of the Research Program and
will serve to facilitate communication between the parties with respect thereto.
Such Alliance Directors shall be experienced in managing research projects
relevant to the Research Program.
3.4 Dispute Resolution. Disputes or disagreements between the parties
arising hereunder will be referred to the Research Management Committee. If the
RMC is unable to resolve, after 30 days, a dispute regarding any issue presented
to it or arising in it, such dispute will be referred to the Chief Executive
Officer of Gene Logic and the Director, Research of P&GP for good faith
resolution, for a period of 90 days. If such dispute is not resolved by the end
of such 90-day period, then such issue shall be submitted for resolution through
arbitration within 30 days after either party requests arbitration, according to
the terms set forth in Section 14.
4. Patents, Know-How Rights And Inventions.
4.1 Ownership of Inventions. Except as otherwise set forth herein,
ownership of any inventions (whether or not patentable) that are conceived,
generated or reduced to practice during the course of the Research Program
("Inventions") shall be determined in accordance with United States laws of
inventorship.
4.2 Rights to Gene Logic Technology, Gene Logic Software and Research
Database. Notwithstanding the foregoing, subject to the grant of intellectual
property
9.
<PAGE>
rights to P&GP under the non-exclusive or exclusive licenses granted under
Section 5, Gene Logic shall be entitled to all rights to the Gene Logic
Technology, Gene Logic Software and the Research Database, including, but not
limited to, all data and progeny derived from the Samples, all cDNA sequences,
partial cDNAs, and their corresponding full length cDNAs, cDNA Sequence
Analyses, proteins and applications thereof and information relating thereto,
but not including Gene Targets which shall be subject to Section 4.1. P&GP
agrees to grant the license set forth in Section 5.2(b) in order to accomplish
the foregoing. The filing, prosecution and maintenance of patent(s), copyrights
and other proprietary rights directed at the protection of these rights shall be
the responsibility of, and at the discretion of, Gene Logic.
4.3 Rights to Improvements to Gene Logic Technology and Gene Logic
Software. Gene Logic Technology and Gene Logic Software shall also include any
enhancements or improvements to Gene Logic Technology and Gene Logic Software
discovered by either party during the course of the Collaboration. P&GP agrees
to grant the license set forth in Section 5.2(c) in order to accomplish the
foregoing.
4.4 Patent Protection.
(a) Solely Owned Inventions. Subject to Section 4.4(e), any party
that solely owns any patentable Invention shall have the right, at its option
and expense, to prepare, file and prosecute any patent applications with respect
to such Invention and to maintain any patents issued thereon.
(b) Jointly Owned Inventions. Subject to Section 4.4(e), the
parties shall decide which party shall be responsible for preparing, filing and
prosecuting any patent applications with respect to any Invention that is owned
jointly by the parties (a "Joint Invention") and maintaining any patents issued
thereon, using patent counsel reasonably acceptable to the other party; provided
that P&GP will be responsible for preparing, filing and prosecuting patent
applications with respect to Joint Inventions of Gene Targets and maintaining
any patents issued thereon. The parties shall share the out-of-pocket expenses
for such preparation, filing and prosecution.
(c) Cooperation. Each party agrees to cooperate with the party
responsible for the preparation and prosecution of all patent applications on
Inventions specific to the Field and Joint Inventions pursuant to this
Section 4.4 (the "Responsible Party") and in the maintenance of any patents
issued thereon. Such cooperation will include the execution of all documents
necessary or desirable for the Responsible Party to fulfill its obligations
hereunder.
(d) Communication Regarding Patent Protection. The Responsible
Party will prepare, prosecute and maintain (and shall keep the other party
currently
10.
<PAGE>
informed of all steps to be taken in such preparation, prosecution and
maintenance of) all Patent Rights which claim an Invention or Joint Invention
with respect to which it is responsible and shall furnish the other party with
copies of such Patent Rights which claim an Invention specific to the Field or
Joint Invention and other related correspondence relating thereto with respect
to which it is responsible to and from governmental patent agencies or other
authorities and permit the other party to offer its comments thereon before the
Responsible Party makes a submission to a governmental patent agency or other
authority which could materially affect the scope or validity of the patent
coverage that may result. The other party shall offer its comments promptly.
(e) Back-Up Rights. If the Responsible Party with respect to an
Invention specific to the Field or any Joint Invention decides to abandon or not
to pursue prosecution of any Patent Right which claims such Invention or Joint
Invention, it shall permit the other party, at its option and expense, to
undertake such obligations. The party not undertaking such actions shall fully
cooperate with the other party and shall provide to the other party whatever
assignments and other documents that may be needed in connection therewith.
(f) Reimbursement for Gene Target Patent Expenses. In the event
that P&GP selects a Gene Target for Further Research and Development and Gene
Logic has incurred patent expenses in connection with such Gene Target, P&GP
shall reimburse Gene Logic for reasonable out-of-pocket expenses incurred by
Gene Logic for protection of the Gene Target in the Field after the Gene Target
is selected for Further Research and Development within 30 days of receipt of
an invoice therefor.
4.5 Infringement by Third Parties. In the event Gene Logic or P&GP
becomes aware of any actual or threatened infringement of any Patent Right of
either party which claims an Invention or Joint Invention, that party shall
promptly notify the other party, and the parties shall (i) promptly discuss how
to proceed in connection with such actual or threatened infringement and (ii)
use their best efforts in cooperating with each other to terminate such
infringement without litigation, as appropriate and commercially reasonable. If
either party commences any actions or proceedings (legal or otherwise) pursuant
to this Section 4.5, it shall prosecute the same vigorously at its expense and
shall not abandon or compromise them or fail to exercise any rights of appeal
unless commercially reasonable to do so without giving the other party the right
to take over the prosecuting party's conduct at such other party's own expense.
4.6 Allegations of Infringement by Third Parties.
(a) The parties acknowledge that, in order to exploit the rights
contained herein, each party may require licenses under third party patent
rights that may be infringed by the use by such party of the rights granted
herein and it is hereby agreed that
11.
<PAGE>
it shall be the responsibility of the party requiring such license to satisfy
itself as to the need for such licenses and, if necessary, to obtain such
licenses.
(b) P&GP shall be solely responsible for any threatened or actual
claims for Third Party patent infringement or other Third Party intellectual
property right arising out of the manufacture, use, sale or importation of a
Product sold by P&GP, its Affiliates or sublicensees. Upon receiving notice of
such actual or threatened claims, P&GP shall promptly meet with Gene Logic to
discuss the course of action to be taken to resolve or defend any such
infringement litigation.
4.7 Independent Efforts. A party shall not, during the Research Term and
any period of time extended pursuant to Section 2.4(b) or Section 5.1, conduct,
have conducted or fund any research or discovery activities that are focused
primarily within the Field except pursuant to this Agreement without the prior
written consent of the other party. Attached hereto as Exhibit A is a listing
of research relationships established prior to the Effective Date which,
although not primarily focused in the Field, are exempt from the limitations of
the preceding sentence. During the Research Term, such Exhibit A shall be
updated from time to time as relationships are approved by written consent
pursuant to this Section 4.7.
5. Licenses.
5.1 Research Database and Software License to P&GP. Gene Logic hereby
grants to P&GP an exclusive, worldwide license to use the Research Database,
together with a nonexclusive license to use the Gene Logic Software, in each
case solely for research purposes in the Field to identify Gene Targets during
the Research Term and for [***] thereafter. P&GP will have no right to
sublicense to third parties under such rights; and, except for disclosure to
P&GP employees and consultants to the extent permitted under Section 11.3, shall
not provide any Gene Logic Technology to any Third Party without prior written
consent. P&GP may elect to extend the term of the foregoing exclusive Research
Database license and nonexclusive Gene Logic Software license (the "First
Research Database Extension Option") for an additional [***] period (the
"Extended Term") by providing written notice of such election to Gene Logic at
least 90 days prior to the date upon which such exclusive license would
otherwise expire and by paying an extension fee to Gene Logic equal to
[***] within 10 working days from the effective date of such notice. To
the extent that P&GP elects to exercise the First Database Research Option, P&GP
may elect to extend the term of the foregoing exclusive Research Database
license and nonexclusive Gene Logic Software license (the "Second Research
Database Extension Option") for an additional [***] period by providing
written notice of such election to Gene Logic at least 90 days prior to
expiration of the Extended Term and by paying an extension fee to Gene Logic
equal to [***] within 10 working days from the effective date of such
notice.
12.
CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
5.2 Licenses to Gene Logic.
(a) P&GP hereby grants to Gene Logic a nonexclusive, perpetual,
fully-paid, worldwide license to use and analyze the Samples.
(b) P&GP hereby grants to Gene Logic an exclusive, perpetual,
fully-paid worldwide license under its applicable Patent Rights, Inventions and
other intellectual property to any and all rights it may have in the Gene Logic
Technology, Gene Logic Software and the Research Database, including, but not
limited to, all data and progeny derived from the Samples, all cDNA sequences,
partial cDNAs, and their corresponding full length cDNAs, cDNA Sequence
Analyses, Gene Targets outside of the Commercialization Field, proteins and
applications thereof and information relating to the Gene Logic Technology, Gene
Logic Software and the Research Databases, but not including Gene Targets in the
Commercialization Field.
(c) P&GP hereby grants to Gene Logic an exclusive, perpetual,
fully-paid worldwide license under its applicable Patent Rights, Inventions and
other intellectual property to any enhancements or improvements to the Gene
Logic Technology and Gene Logic Software discovered by P&GP during the course of
the Collaboration, including, without limitation, any discoveries and Inventions
related to the function of Gene Targets outside of the Commercialization Field
included in the Research Database, but not including Gene Targets in the
Commercialization Field.
5.3 Gene Target License to P&GP. Subject to the terms and conditions of
this Agreement, Gene Logic hereby grants and agrees to grant to P&GP an
exclusive, worldwide license under Gene Logic's Patent Rights, if any, to use
each Gene Target for which P&GP has paid the fee described in Section 9.3 to
develop, make, have made, use, import, offer for sale and sell (with the right
to sublicense) Products for use in the Commercialization Field.
5.4 P&GP [***]. Gene Logic grants to P&GP, upon the
request of P&GP, [***] to be negotiated in good faith by the parties during the
[***] period following such request by P&GP; provided, however, that the
foregoing shall not apply to [***]. In the event the parties are unable to
reach agreement on [***] within such [***] or to [***] within [***]
following the mutual request by P&GP, the parties shall have no further
obligation under this Section 5.4 with respect to [***].
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CONFIDENTIAL TREATMENT REQUESTED
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5.5 Gene Logic [***]. P&GP shall provide at least [***] prior written
notice of its intent to [***]. P&GP grants to Gene Logic [***] to be
negotiated in good faith by the parties. Gene Logic may [***] upon written
notice to P&GP within [***] after receipt of notice from P&GP. In the event
the parties are unable to reach agreement on [***] within a [***] period
following the notice by Gene Logic or [***] within [***] following the
notice by Gene Logic, the parties shall have no further obligation under this
Section 5.5 with respect to [***].
6. Diligence and Gene Target License Termination.
6.1 Diligence.
(a) Gene Logic shall use commercially reasonable and diligent
efforts, consistent with the Research Plan and milestones thereof, to perform
analysis of the Samples utilizing the Gene Logic Technology. For purposes of
this Agreement, "commercially reasonable and diligent efforts" will mean, unless
the parties agree otherwise, those efforts consistent with the exercise of
prudent scientific and business judgment, as applied to other research efforts
and to products of similar scientific and commercial potential within such
party's relevant research programs and product lines.
(b) P&GP shall use commercially reasonable and diligent efforts to
conduct active, ongoing research activities utilizing the Research Database.
(c) Without limiting the foregoing, P&GP (or its Affiliates or
sublicensees) shall use commercially reasonable and diligent efforts to evaluate
the Gene Targets and to develop and commercialize Products in the
Commercialization Field. P&GP (or its Affiliates or sublicensees) shall be
deemed to have used commercially reasonable and diligent efforts with regard to
the Gene Targets if it is actively engaged in a development process of one or
more Gene Targets in at least one of the following activities: (i) [***];
(ii) [***]; or (iii) [***]. Gene Logic may provide [***] written notice to
P&GP if in its opinion, P&GP is not using commercially
reasonable and diligent efforts with
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CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
regard to the Gene Targets, whereupon the Alliance Directors shall meet within
said [***] period to determine what actions, if any, are necessary or
appropriate to rectify the situation. Upon recommendation by the Alliance
Directors, P&GP shall use commercially reasonable and diligent efforts to take
such recommended actions within [***] after receipt of said recommendation.
In the event that, in the determination of Gene Logic, P&GP has not taken steps
to accomplish such actions recommended by the Alliance Directors within such
[***] period, the parties agree to hold a meeting, attended by individuals with
decision-making authority, to attempt in good faith to negotiate a resolution of
the dispute. If, within [***] after such meeting, the parties have not
succeeded in negotiating a resolution of the dispute, then such dispute shall be
submitted for resolution through arbitration, according to the terms set forth
in Section 14. In the event that such arbitration results in a determination
that P&GP did not use commercially reasonable and diligent efforts with regard
to Gene Targets, then (i) Gene Logic shall be entitled to terminate the
exclusive license granted pursuant to Section 5.3 with respect to such Gene
Target, on a worldwide basis, and (ii) P&GP shall automatically grant to Gene
Logic an exclusive, perpetual, fully-paid worldwide license under its applicable
Patent Rights, Inventions and other intellectual property to any and all rights
it may have in the Gene Targets in the Commercialization Field.
(d) In addition, in the event that P&GP elects not to pursue
exploitation of any Gene Target or development or commercialization of any
Product subject to this Agreement for any reason, P&GP shall promptly notify
Gene Logic thereof, and, upon such notice, (i) the exclusive license granted
pursuant to Section 5.3 with respect to such Gene Target on a worldwide basis
will be terminated, and (ii) P&GP shall automatically grant to Gene Logic an
exclusive, perpetual, fully-paid worldwide license under its applicable Patent
Rights, Inventions and other intellectual property to any and all rights it may
have in the Gene Target in the Field. In the event P&GP automatically grants
the license described in this Section 6.1(d)(ii), the parties shall negotiate a
commercially reasonable royalty rate to be paid by Gene Logic based upon the
value of P&GP's Patent Rights covering such Gene Target.
7. Reporting Obligations.
7.1 Information and Reports Concerning the Research Program. All
information, technology or inventions specific to the Field made by either party
in the course of the Research Program will be promptly disclosed to the other,
with significant discoveries or advances being communicated as soon as
practicable after such information is obtained or its significance is
appreciated. The RMC shall produce a written report at least quarterly
presenting a meaningful summary of the activities performed under this
Agreement; including, without limitation, a summary of the number of Samples
analyzed and consideration of Gene Logic's performance compared to the
milestones set forth in the Promissory Note issued by Gene Logic pursuant to
Section 9.2.
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<PAGE>
7.2 Diligence Reports. P&GP hereby agrees to keep Gene Logic informed on
a reasonable basis of its efforts to select Gene Targets and to develop Products
in the Commercialization Field, and to provide written reports to Gene Logic on
a semi-annual basis (the "Diligence Reports"). The Diligence Reports shall
provide, as applicable, the following information: (i) a listing of the Gene
Products which P&GP has identified as prospects for Further Research and
Development, (ii) P&GP's progress toward selection of particular Gene Products
for Further Research and Development, (iii) P&GP's plans for Further Research
and Development with regard to selected Gene Targets, and (iv) P&GP's progress
in screening, pre-clinical or clinical development for Gene Targets.
8. Collaboration Expansion Options.
From the Effective Date and prior to the completion of Stage I (the
"Expansion Option Period"), P&GP shall have options to enter collaborations with
Gene Logic in the areas of [***] (the "[***] Option") and [***] (the "[***]
Option"), upon the same terms and conditions contained in this
Agreement, including the research funding, milestone payments and royalty
provisions set forth in Sections 9 and 10 and in the aggregate commensurate with
the research and development funding of Gene Logic by P&GP in the [***]
this Agreement. In addition, P&GP shall have the option to extend for one year
the term of the Expansion Option Period for the [***] Option or the [***] Option
with payment of [***] for each option extended. In the event that P&GP does
not exercise the [***] Option or the [***] Option prior to the expiration of the
applicable Expansion Option Period, then Gene Logic shall thereafter be free to
grant rights to a Third Party in the areas of [***] or [***], as applicable.
In the event P&GP does exercise the [***] Option or the [***] Option, the
parties will enter an agreement with terms consistent with the requirements of
this Section 8 in the areas of [***] or [***], as applicable.
9. Payments and Royalties.
9.1 Payments to Gene Logic.
(a) P&GP shall pay Gene Logic $3,000,000 within five business days
of the Effective Date in connection with the licenses granted under this
Agreement and to defray research costs associated with the Research Plans
during Stage I, including, but not limited to, creating the Research Database,
analyzing Samples pursuant to the Research Plans and development of Gene
Logic Technology and upgrades thereof during the Research Term.
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CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
(b) P&GP shall pay Gene Logic [***] upon the commencement of
Stage II and on each anniversary of the commencement of Stage II in connection
with the licenses granted under this Agreement and to defray research costs
associated with the Research Plans during Stage II, including, but not limited
to, creating the Research Database, analyzing Samples pursuant to the Research
Plans and development of Gene Logic Technology and upgrades thereof during the
Research Term. If Stage II of the Research Program ends on an anniversary of
the commencement of Stage II (or within one day thereof) then no [***]
payment shall be due on such anniversary.
(c) During Stage II, P&GP shall provide Gene Logic with financial
support for the Research Program for Gene Logic's Scientific FTEs at a rate of
[***] for 1997 per Scientific FTE. The FTE payment rate payable pursuant to
this Section 9.1(c) shall be reevaluated annually and adjusted in proportion to
the percentage increase for the prior year in the Consumer Price Index of all
urban consumers as provided by the U.S. Bureau of Labor Statistics. The number
of Scientific FTEs for each year of Stage II will be set forth in the applicable
Research Plan; provided that such research funding shall not support fewer than
[***] Scientific FTEs ([***] for 1997) in any one year period commencing with
the start of Phase II or any anniversary thereof (each, a "Program Year") or at
such lower level as the parties may mutually agree taking into account the work
to be accomplished pursuant to the Research Plan.
(d) The research funding to be provided pursuant to Section 9.1(c)
shall be made in four quarterly payments during each Program Year. Such
payments shall be payable in arrears and shall be made within 30 days from the
receipt of an invoice therefor.
9.2 Technology Access Payment to P&GP. On the Effective Date, Gene Logic
shall execute a Promissory Note payable to P&GP in the amount of $2,000,000, in
the form attached as Exhibit B. Except as expressly provided in the Promissory
Note, P&GP shall not be entitled to offset any amount owed by Gene Logic under
such Promissory Note against any payment owed by P&GP to Gene Logic hereunder.
9.3 Gene Target Fees. P&GP shall pay [***] to Gene Logic for each
Gene Target which P&GP selects for Further Research and Development pursuant to
Section 2.5 within 30 days following notification thereof.
9.4 Royalties Payable by P&GP. P&GP will pay Gene Logic royalties at the
following rates on Net Sales of each Product sold by P&GP, its Affiliates and
sublicensees pursuant to this Agreement.
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<PAGE>
Therapeutic Protein
Annual Worldwide Net Sales Product Product
- - - --------------------------- ------------ --------
[***]............................................. [***] [***]
[***]............................................. [***] [***]
[***]............................................. [***] [***]
[***]............................................. [***] [***]
P&GP shall pay Gene Logic a [***] royalty on annual Net Sales of each
Diagnostic Product sold by P&GP, its Affiliates and sublicensees pursuant to
this Agreement.
Net Sales shall be calculated on a calendar year basis. A sample royalty
calculation is set forth on Schedule 9.4.
P&GP shall remain responsible for all royalty payments payable to Gene
Logic pursuant to this Section 9 whether P&GP or its Affiliates or sublicensees
generate Net Sales.
In the event that P&GP obtains a license under any third party patent
rights to a Gene Target required to make, have made, use, sell, offer to sell or
import any Protein Product or Biological Therapeutic Product, the royalty
payable to Gene Logic under this Section 9.4 for any payment period will be
reduced by an amount equal to [***] of royalties actually paid by P&GP to such
third party for such period; provided that, in no event shall the royalty
payable to Gene Logic be reduced to less than [***] of the applicable royalty
rate set forth above for such period.
Royalties shall be payable on all Net Sales of any Product for the period
of time commencing on the date such Product is first sold commercially in any
country and ending, on a country-by-country basis, upon the later of (a) [***]
from the date of such first commercial sale of such Product in such
country, or (b) the expiration of the last to expire of P&GP's Patent Rights
covering such Product in such country; provided that, if there are multiple
Products derived from a single Gene Target, then the maximum amount of time that
royalties will be payable upon Products will be [***] from the date of [***].
9.5 Currency of Payment. All payments to be made under this Agreement
shall be made in United States dollars in the United States to a bank account
designated by Gene Logic. All amounts payable by P&GP to Gene Logic pursuant to
this Section 9 shall be non-refundable and non-creditable against any other
payments due under this Agreement (except as expressly provided in the
Promissory Note executed pursuant to Section 9.2). Royalties shall be
determined based on Net Sales in the currency of the country in which they are
earned converted to its equivalent in United States currency. The buying rates
involved for the currency of the United States into which the currencies
involved are being exchanged shall be the one quoted by The Wall Street Journal
(or if not available, by Citibank (or its successor in interest) in New York,
New York) at the
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CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
close of business on the last business day of the quarterly period in which the
royalties were earned shall be used to determine any such conversion.
9.6 Payment and Reporting. All amounts payable by P&GP to Gene Logic
pursuant to this Section 9 shall be made by wire transfer pursuant to the
instructions set forth on Schedule 9.6. By March 1 of each calendar year, P&GP
will communicate to Gene Logic a forecast of Net Sales for each Product to be
sold pursuant to this Agreement in a given calendar year on a country-by-country
basis, including a calculation of the royalty amount payable for each Product
using such forecast (the "Forecast Royalty Amount") starting the quarter in
which the first commercial sale is made for such Product. Gene Logic will issue
an invoice to P&GP on the first day of the months of April, July and October for
an amount equal to 25% of the Forecast Royalty Amount, payable within 30 days
after the date of such invoice. Within 30 days after the end of each calendar
year, P&GP will communicate to Gene Logic the actual Net Sales for the Products
sold pursuant to this Agreement for such calendar year, including a calculation
of the royalty amount payable on such actual Net Sales (the "Actual Royalty
Amount"). Gene Logic will promptly issue either an invoice to P&GP for the
amount, if any, by which the Actual Royalty Amount exceeds all royalty payments
already made for such calendar year, payable within 30 days after the date of
such invoice or a credit to be applied to the next quarter if an overpayment has
occurred.
9.7 Records and Audits. P&GP shall keep complete and accurate records
pertaining to the sale or other disposition of Products sold by P&GP, its
Affiliates and sublicensees pursuant to this Agreement in sufficient detail to
permit Gene Logic to confirm the accuracy of all payments due hereunder. Gene
Logic shall have the right to cause an independent, certified public accountant
reasonably acceptable to P&GP to audit such records and audit work pages as
presented by Deloitte & Touche to confirm Net Sales and royalty and other
payments for the preceding year. Such audits may be exercised during normal
business hours once a year upon at least 30 working days prior written notice to
P&GP. Gene Logic shall bear the full cost of such audit unless such audit
discloses a variance of more than 5% from the amount of the Net Sales or
royalties or other payments due under this Agreement. In such case, P&GP shall
bear the full cost of such audit and Gene Logic shall have the right to audit
all prior years not previously audited, limited to the 3 previous years.
10. Milestones.
10.1 Milestones for Therapeutic Products and Protein Products. P&GP
shall pay Gene Logic the following amounts with respect to each Therapeutic
Product and each Protein Product sold by P&GP, its Affiliates and sublicensees
pursuant to this Agreement with respect to which each stated milestone is
achieved, within 30 days following the achievement of such milestone:
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(a) [***] (subject to the limitations
set forth below)................................... [***]
(b) [***].............................................. [***]
(c) [***].............................................. [***]
(d) [***].............................................. [***]
With regard to amounts payable pursuant to Section 10.1(a), P&GP will not
be obligated to pay Gene Logic additional [***] milestone payments for
subsequent [***].
10.2 Milestones for Diagnostic Products. P&GP shall pay Gene Logic the
following amounts with respect to each Diagnostic Product sold by P&GP, its
Affiliates and sublicensees pursuant to this Agreement with respect to which
each stated milestone is achieved, within 30 days following the achievement
of such milestone:
(a) [***] [***]
(b) [***] [***]
10.3 Payment of Milestones. Milestone payments made under this section
shall be non-refundable and non-creditable against any other payments due
under this Agreement. All such payments shall be made by wire transfer
pursuant to the instructions set forth on Schedule 9.6. Milestone payments
made under this section shall fund in substantial part the research costs
associated with this Agreement.
11. Confidentiality and Security.
11.1 Security of Research Database.
(a) The parties agree that the following additional terms and
conditions apply to the information and data contained in or derived from the
Research Database that is disclosed under the provisions of this Agreement:
(i) P&GP may use the Research Database only for its own
internal use in secure work facilities by authorized personnel and shall not
make any copies of the Research Database.
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CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
(ii) P&GP will be provided with access to the Research Database
only through a secure, encrypted link to Gene Logic's computer system.
(iii) P&GP will promptly notify Gene Logic of any (i) loss,
theft or unauthorized disclosure of information or data derived from the
Research Database and (ii) unauthorized access to the Research Database.
(iv) Upon termination of the Research Program as provided in
Section 2.5, P&GP shall immediately discontinue use of the Research Database
and of any information or data derived from the Research Database (except for
Gene Targets that are the subject of exclusive licenses as set forth in
Section 5.3), and P&GP shall cooperate with Gene Logic to terminate the
encrypted link to Gene Logic's computer system.
11.2 Confidentiality.
(a) Except as specifically permitted hereunder (including without
limitation all rights granted under Section 5), each party hereby agrees to
hold in confidence and not use on behalf of itself or others all technology,
data, samples, technical and economic information (including the economic
terms hereof), commercialization, clinical and research strategies, know-how
and trade secrets provided by the other party (the "Disclosing Party") from
the date of that certain confidentiality agreement between the parties dated
February 27, 1997 and through the end of the Agreement Term (collectively the
"Confidential Information"), except that the term "Confidential Information"
shall not include:
(i) information that is or becomes part of the public domain
through no fault of the non-Disclosing Party or its Affiliates;
(ii) information that is obtained after the date hereof by the
non-Disclosing Party or one of its Affiliates from any Third Party which is
lawfully in possession of such Confidential Information and not in violation
of any contractual or legal obligation to the Disclosing Party with respect
to such Confidential Information;
(iii) information that is known to the non-Disclosing Party or
one or more of its Affiliates prior to disclosure by the Disclosing Party, as
evidenced by the non-Disclosing Party's written records;
(iv) information that is required to be disclosed to any
governmental authorities or pursuant to any regulatory filings, but only to
the limited extent of such legally required disclosure; and
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(v) information which has been independently developed by the
non-Disclosing Party without the aid or use of Confidential Information as
shown by competent written evidence.
(b) The obligations of this Section 11.2 shall survive the
expiration or termination of this Agreement for a period of 10 years.
11.3 Permitted Disclosures. Confidential Information may be disclosed to
employees, agents, consultants or sublicensees of the non-Disclosing Party or
its Affiliates, but only to the extent required to accomplish the purposes of
this Agreement and only if the non-Disclosing Party obtains prior agreement
from its employees, agents, consultants and sublicensees to whom disclosure
is to be made to hold in confidence and not make use of such information for
any purpose other than those permitted by this Agreement. Each party will
use at least the same standard of care as it uses to protect proprietary or
confidential information of its own to ensure that such employees, agents,
consultants or sublicensees do not disclose or make any unauthorized use of
the Confidential Information. Notwithstanding any other provision of this
Agreement, each party may disclose the terms of this Agreement to lenders,
investment bankers and other financial institutions of its choice solely for
purposes of financing the business operations of such party either (i) upon
the written consent of the other party or (ii) if the disclosing party
obtains a signed confidentiality agreement with such financial institution
with respect to such information, upon terms substantially similar to those
contained in this Section 11.
11.4 Publicity. All publicity, press releases and other announcements
relating to this Agreement or the transaction contemplated hereby shall be
reviewed in advance by, and shall be subject to the approval of, both
parties, which approval shall not be unreasonably withheld; provided,
however, that either party may (i) publicize the existence and general
subject matter of this Agreement consistent with previous press releases and
statements without the other party's approval and (ii) disclose the terms of
this Agreement only to the extent required to comply with applicable
securities laws.
11.5 Publication. The parties shall cooperate in appropriate
publication of the results of research and development work performed
pursuant to this Agreement, but subject to the predominating interest to
obtain patent protection for any patentable subject matter. To this end,
prior to any public disclosure of such results, the party proposing
disclosure shall send the other party a copy of the information to be
disclosed, and shall allow the other party 30 days from the date of receipt
in which to determine whether the information to be disclosed contains
subject matter for which patent protection should be sought prior to
disclosure, or otherwise contains Confidential Information of the reviewing
party. The party proposing disclosure shall be free to proceed with the
disclosure unless prior to the expiration of such 30-day period the
non-disclosing party
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notifies the other party that the disclosure contains subject matter for which
patent protection should be sought or Confidential Information of the
non-disclosing party, and the party proposing publication shall then delay
public disclosure of the information for an additional period of up to three
months to permit the preparation and filing of a patent application on the
subject matter to be disclosed or for the parties to determine a mutually
acceptable modification to such publication to protect the Confidential
Information of the non-disclosing party adequately. The party proposing
disclosure shall thereafter be free to publish or disclose the information. The
determination of authorship for any paper shall be in accordance with accepted
scientific practice.
12. Representations And Warranties.
12.1 Legal Authority. Each party represents and warrants to the other
that it has the legal power, authority and right to enter into this Agreement
and to perform its respective obligations set forth herein.
12.2 Valid Licenses. P&GP represents and warrants that (i) it has
authority to grant the rights and licenses set forth in this Agreement with
respect to the Samples and all derivative materials of such Samples and (ii)
to the best of P&GP's knowledge, Gene Logic shall have free and clear right
to all derivative materials of such Samples. Gene Logic represents and
warrants that it has authority to grant the rights and licenses set forth in
this Agreement.
12.3 No Conflicts. Each party represents and warrants that as of the
date of this Agreement it is not a party to any agreement or arrangement with
any Third Party or under any obligation or restriction, including pursuant to
its Certificate of Incorporation or By-Laws, which in any way limits or
conflicts with its ability to fulfill any of its obligations under this
Agreement.
12.4 Disclaimer. Except as expressly set forth in this Agreement, EACH
PARTY MAKES NO REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY KIND, EITHER
EXPRESS OR IMPLIED. THERE ARE NO EXPRESS OR IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR THAT THE USE OF THE
INFORMATION, MATERIALS, SOFTWARE AND OTHER TECHNOLOGY PROVIDED HEREUNDER WILL
NOT INFRINGE ANY PATENT, COPYRIGHT, TRADEMARK, OR OTHER RIGHTS OF ANY THIRD
PARTY. NEITHER PARTY MAKES ANY WARRANTY OF ANY KIND AS TO THE PATENTABILITY
OF ANY DISCOVERY MADE OR TECHNOLOGY DEVELOPED UNDER THIS AGREEMENT. EACH
PARTY ACKNOWLEDGES THAT THIS AGREEMENT PROVIDES FOR AN INNOVATIVE PROGRAM
UTILIZING NEW TECHNOLOGIES AND THAT NO
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WARRANTY IS MADE AS TO THE UTILITY OF ANY INFORMATION, MATERIALS, SOFTWARE OR
OTHER TECHNOLOGY PROVIDED HEREUNDER.
13. Term; termination.
13.1 Term. The term of this Agreement shall commence upon the Effective
Date and shall expire upon the expiration of all royalty obligations set
forth in Section 9.
13.2 Termination for Breach.
(a) Breach by Gene Logic. If Gene Logic breaches a material term
of this Agreement at any time, and has not cured such breach within 60 days
after written notice thereof from P&GP, then P&GP shall have the right to
terminate this Agreement effective upon written notice thereof, whereupon all
rights and obligations of the parties under this Agreement shall terminate
except as set forth in Section 15.11 and subject to the following: (i) the
licenses granted to P&GP under Section 5 shall remain in full force and
effect for so long as P&GP is not in breach of its obligations to Gene Logic
under this Agreement, (ii) the license granted to Gene Logic under Section
5.2(a) shall remain in full force and effect, (iii) the licenses granted to
Gene Logic under Sections 5.2(b) and 5.2(c) shall terminate, (iv) the right
of first negotiation granted to Gene Logic pursuant to Section 5.5 shall
terminate and (v) Gene Logic shall return to P&GP all Confidential
Information of P&GP.
(b) Breach by P&GP. If P&GP breaches a material term of this
Agreement at any time, and has not cured such breach within 60 days (or
within 15 days in the event of a material breach by P&GP of its obligations
to make any payments due pursuant to Sections 9 and 10) after written notice
thereof from Gene Logic, then Gene Logic shall have the right to terminate
this Agreement effective upon written notice thereof, whereupon all rights
and obligations of the parties under this Agreement shall terminate except as
set forth in Section 15.11 and subject to the following: (i) the licenses
granted to Gene Logic under Section 5 shall remain in full force and effect,
(ii) the option to recommence the Research Program pursuant to Section 2.4(b)
shall terminate, (iii) the license granted to P&GP pursuant to Section 5.1
shall terminate (including all options to extend such license), (iv) the
license granted to P&GP pursuant to Section 5.3 shall terminate (v) the right
of first negotiation granted to P&GP pursuant to Section 5.4 shall terminate,
(vi) the [***] Option and the [***] Option granted pursuant to Section 8 shall
terminate, and (vii) P&GP shall return to Gene Logic all Confidential
Information of Gene Logic. In the event of an uncured material breach by P&GP
of its obligations to pay any royalties due and owing with respect to a Product
pursuant to Section 9, if Gene Logic terminates the licenses it has granted to
P&GP pursuant to Section 5 in respect of such Product, at Gene Logic's request,
P&GP shall grant to Gene Logic an exclusive (even as to P&GP) worldwide license
(with the right to
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CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
sublicense) to such Product, to the extent necessary to make, use or sell
such Product subject to payment of a royalty to P&GP on Net Sales of such
Product (the parties shall negotiate a commercially reasonable royalty rate
to be paid by Gene Logic based upon the value of P&GP's Patent Rights
covering such Product), and shall further assign to Gene Logic all Regulatory
Approvals (to the extent permitted by law) in such countries.
(c) If a dispute arises between the parties relating to the grounds
for the termination under this Section 13.2, the parties agree to hold a
meeting, attended by individuals with decision-making authority, to attempt
in good faith to negotiate a resolution of the dispute. If, within 30 days
after such meeting the parties have not succeeded in negotiating a resolution
of the dispute, then such dispute shall be submitted for resolution through
arbitration, according to the terms set forth in Section 14.
13.3 Effect of Bankruptcy. If, during the Research Term, either party
files a voluntary petition in bankruptcy, is adjudicated a bankrupt, makes a
general assignment for the benefit of creditors, admits in writing that it is
insolvent or fails to discharge within 15 days an involuntary petition in
bankruptcy filed against it, then the Research Term and the entirety of this
Agreement may be immediately terminated by the other party. In addition, in
the event that Gene Logic files a voluntary petition in bankruptcy, is
adjudicated a bankrupt, makes a general assignment for the benefit of
creditors, admits in writing that it is insolvent or fails to discharge
within 15 days an involuntary petition in bankruptcy filed against it, then
the parties hereby acknowledge and agree that P&GP will have right of access
to the Research Database consistent with the terms of this Agreement for
purposes of 11 U.S.C. Section 365(n).
13.4 Remedies. In the event of any breach of any provision of this
Agreement, in addition to the termination rights set forth herein, each party
shall have all other rights and remedies at law or equity to enforce this
Agreement.
14. Arbitration.
14.1 Any controversy arising under or related to this Agreement, and any
disputed claim by either party against the other under this Agreement,
excluding any dispute relating to patent validity or infringement arising
under this Agreement, shall be settled by arbitration in accordance with the
then existing Commercial Arbitration Rules of the American Arbitration
Association.
14.2 Upon request by either party, arbitration will be by a panel of
three arbitrators within 30 days of such arbitration request. Each party
shall select one arbitrator and the third shall be mutually agreed upon in
writing by both parties. In any such arbitration, Gene Logic and P&GP shall
select a panel with relevant experience in
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<PAGE>
the pharmaceutical industry. Judgment upon the award rendered by the panel
shall be final and nonappealable and may be entered in any court having
jurisdiction thereof.
14.3 The parties shall be entitled to all discovery in like manner as if
the arbitration were a civil suit in the Delaware Superior Court.
14.4 Any arbitration shall be held in Wilmington, Delaware unless the
parties hereto mutually agree in writing to another place.
15. General Provisions.
15.1 Mutual Indemnification. Each party agrees to defend, indemnify and
hold harmless the other party and its Affiliates, employees, agents,
officers, directors and permitted from and against any judgments,
settlements, damages, awards, costs (including attorneys' fees and costs) and
other expenses arising out of any claims, actions or other proceedings by a
third party (collectively a "Claim") arising out of or resulting from the
development, manufacture, use, promotion, marketing, handling, storage or
sale of any Product, except to the extent that such Claim arises out of or
results from the negligence or misconduct of the party claiming a right of
indemnification under this Section 15.1. In the event either party seeks
indemnification under this Section 15.1, it shall inform the other party of a
Claim as soon as reasonably practicable after it receives notice of the
Claim, shall permit the other party to assume direction and control of the
defense of the Claim (including the right to settle the Claim solely for
monetary consideration), and shall cooperate as requested (at the expense of
the other party) in the defense of the Claim. The obligations set forth in
this section shall survive the expiration or termination of this Agreement.
15.2 Assignment. This Agreement shall not be assignable by either party
without the prior written consent of the other party, such consent not to be
unreasonably withheld or delayed, except a party may make such an assignment
without the other party's consent to Affiliates or to a successor to
substantially all of the pharmaceutical business of such party, whether in
merger, sale of stock, sale of assets or other transaction; provided,
however, that in the event of such transaction no intellectual property
rights of any Affiliate or Third Party that is an acquiring party shall be
included in the technology licensed hereunder. This Agreement shall be
binding upon and inure to the benefit of the parties' successors, legal
representatives and assigns.
15.3 Change of Control.
(a) In the event of a Change in Control, as that term is defined in
Section 15.3(b), of one party under this Agreement (the "Acquired Company")
[***], then the Acquired Company shall notify the other party of any such
Change of Control as [***] be
26.
CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
[***]. In the event that the Acquired Company is [***] that (i) [***] or
(ii) [***] then the [***] within [***] after receipt of the [***] that the
[***]. Within [***] after receipt of the [***]. In addition, in the event
that [***].
(b) For purposes of this Agreement, a "Change in Control" of a
company shall be deemed to have occurred in the event of (i) [***] (ii) [***]
or (iii) [***]. Notwithstanding the foregoing, [***].
(c) The "Change of Control Fee" shall be determined as follows: As
of the date of [***] the parties shall determine (i) the [***], and (ii) the
[***]. The [***] shall be calculated by [***] and [***].
15.4 Non-Waiver. The waiver by either of the parties of any breach of
any provision hereof by the other party shall not be construed to be a waiver
of any succeeding breach of such provision or a waiver of the provision
itself.
27.
CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
15.5 Governing Law. This Agreement shall be construed and interpreted in
accordance with the laws of the State of Delaware other than those provisions
governing conflicts of law.
15.6 Partial Invalidity. If and to the extent that any court or tribunal
of competent jurisdiction holds any of the terms or provisions of this
Agreement, or the application thereof to any circumstances, to be invalid or
unenforceable in a final nonappealable order, the parties shall use their
best efforts to reform the portions of this Agreement declared invalid to
realize the intent of the parties as fully as practicable, and the remainder
of this Agreement and the application of such invalid term or provision to
circumstances other than those as to which it is held invalid or
unenforceable shall not be affected thereby, and each of the remaining terms
and provisions of this Agreement shall remain valid and enforceable to the
fullest extent of the law.
15.7 Notice. Any notice to be given to a party under or in connection
with this Agreement shall be in writing and shall be (i) personally
delivered, (ii) delivered by a nationally recognized overnight courier, (iii)
delivered by certified mail, postage prepaid, return receipt requested or
(iv) delivered via facsimile, with receipt confirmed, to the party at the
address set forth below for such party:
To P&GP: To Gene Logic:
8700 Mason-Montgomery Road 10150 Old Columbia Road
Mason, Ohio 45040 Columbia, Maryland 21046
Attn: Director, Research P&GP
Phone: (513) 622-3067 Phone: (410) 309-3100
Fax: (513) 622-1264 Fax: (410) 309-3111
with a copy to: with a copy to:
Legal Department Frederick T. Muto, Esq.
8700 Mason-Montgomery Road Cooley Godward LLP
Mason, Ohio 45040 4365 Executive Drive, Suite 1100
San Diego, CA 92121
Phone: (513) 622-3950 Phone: (619) 550-6000
Fax: (513) 622-0270 Fax: (619) 453-3555
or to such other address as to which the party has given written notice
thereof. Such notices shall be deemed given upon receipt.
15.8 Headings. The headings appearing herein have been inserted solely
for the convenience of the parties hereto and shall not affect the
construction, meaning or interpretation of this Agreement or any of its terms
and conditions.
28.
<PAGE>
15.9 No Implied Licenses or Warranties. No right or license under any
patent application, issued patent, know-how or other proprietary information
is granted or shall be granted by implication. All such rights or licenses
are or shall be granted only as expressly provided in the terms of this
Agreement. Neither party warrants that (i) the Research Program shall achieve
any of the research objectives contemplated by them or (ii) any clinical or
other studies will be successful.
15.10 Force Majeure. No failure or omission by the parties hereto in the
performance of any obligation of this Agreement shall be deemed a breach of
this Agreement nor shall it create any liability if the same shall arise from
any cause or causes beyond the reasonable control of the affected party,
including, but not limited to, the following, which for purposes of this
Agreement shall be regarded as beyond the control of the party in question:
acts of nature; acts or omissions of any government; any rules, regulations,
or orders issued by any governmental authority or by any officer, department,
agency or instrumentality thereof; fire; storm; flood; earthquake; accident;
war; rebellion; insurrection; riot; invasion; strikes; and labor lockouts;
provided that the party so affected shall use its best efforts to avoid or
remove such causes of nonperformance and shall continue performance hereunder
with the utmost dispatch whenever such causes are removed.
15.11 Survival. Sections 4.1, 4.2, 4.3, 5.2, 11.2, 12, 13.2 (including
the provisions described therein that are contemplated to continue following
termination), 14, 15.1, 15.5 and 15.11 shall survive the termination or
expiration of this Agreement.
15.12 Entire Agreement. This Agreement constitutes the entire
understanding between the parties with respect to the subject matter
contained herein and supersedes any and all prior agreements, understandings
and arrangements whether oral or written between the parties relating to the
subject matter hereof.
15.13 Amendments. No amendment, change, modification or alteration of
the terms and conditions of this Agreement shall be binding upon either party
unless in writing and signed by the party to be charged.
15.14 Independent Contractors. It is understood that both parties hereto
are independent contractors and are engaged in the operation of their own
respective businesses, and neither party hereto is to be considered the agent
or partner of the other party for any purpose whatsoever. Neither party has
any authority to enter into any contracts or assume any obligations for the
other party or make any warranties or representations on behalf of the other
party.
29.
<PAGE>
15.15 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
In Witness Whereof, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date first above written.
Gene Logic inc. Procter & Gamble
Pharmaceuticals, Inc.
By: /s/ Michael J. Brennan By: /s/ G. G. Cloyd
------------------------------ ----------------------------------
Name: Michael J. Brennan Name: G.G. Cloyd
------------------------------ --------------------------------
Title: President and CEO Title: President
--------------------------- -------------------------------
30.
<PAGE>
EXHIBIT A
Independent Efforts
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
[***]
CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
Schedule 3.1
RMC Representatives
Gene Logic Inc.
- - - ---------------
Keith O. Elliston, Ph.D.
Eric M. Eastman, Ph.D.
Mark D. Gessler
Proctor & Gamble Pharmaceuticals, Inc.
- - - --------------------------------------
Brian Chamberlain, Ph.D.
Richard Kawamoto, Ph.D.
Claus Doersen, Ph.D.
<PAGE>
Schedule 9.4
Sample Royalty Calculation
Example
- - - -------
The forecast for Net Sales of Therapeutic Product A in calendar year 2005 is
[***]. The calculation for the royalty is as follows:
[***]
[***]
[***]
[***]
------
TOTAL [***]
Gene Logic invoices P&GP for [***] on April 1, July 1 and October 1 of year
2005.
The actual Net Sales of Therapeutic Product A in calendar year 2005 are
[***]. The calculation for the royalty is as follows:
[***]
[***]
[***]
[***]
------
TOTAL [***]
Gene Logic invoices P&GP for [***].
CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
Schedule 9.6
Wire Transfer Payment Instructions
[***]
[***]
[***]
[***]
[***]
[***]
CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
EXHIBIT 10.25
Confidential Treatment Requested
Under 17 C.F.R. Sections 200.80 (b)(4),
200.83 and 230.406
*** Indicates omitted material that is the subject of a confidential
treatment request filed separately with the Commission.
PROMISSORY NOTE
$ 2,000,000 May 27, 1997
San Diego, California
For Value Received, Gene Logic Inc., a Delaware corporation
("Borrower"), hereby unconditionally promises to pay to the order of Procter
& Gamble Pharmaceuticals, Inc., an Ohio corporation ("Lender"), in lawful
money of the United States of America and in immediately available funds, the
principal sum of Two Million Dollars ($2,000,000) (the "Loan"), payable on
the dates and in the manner set forth below.
This Promissory Note is the Note referred to in, and is executed and
delivered in connection with, that certain Target Discovery Collaboration and
License Agreement dated as of even date herewith, by and between Borrower and
Lender (as the same may from time to time be amended, modified or
supplemented, the "Collaboration Agreement"). All terms defined in the
Collaboration Agreement shall have the same definitions when used herein,
unless otherwise defined herein.
1. Principal Repayment. The outstanding principal amount of the Loan
and all accrued interest shall be due and payable, unless earlier as provided
in paragraphs 5 or 6 below, upon the expiration or termination of the
Collaboration Agreement in accordance with Section 13 thereof (the "Maturity
Date").
2. No Interest. No interest shall be due on the outstanding principal
amount hereof at any time.
3. Place of Payment. All amounts payable hereunder shall be payable at
the office of Lender, 8700 Mason-Montgomery Road, Mason, Ohio 45050,
Attention: Director of Research, Procter & Gamble Pharmaceuticals, Inc.
unless another place of payment shall be specified in writing by Lender.
4. No Offset. Lender shall not be entitled to offset any amount owed
by Borrower under this Note against any payment owed by Lender to Borrower
pursuant to the Collaboration Agreement; provided, however, that if an Event
of Default as defined in Section 6(b) or 6(c) occurs, then Lender shall be
entitled to offset the amount of the unpaid principal and other amounts owing
hereunder against any payment owed by Lender to Borrower pursuant to the
Collaboration Agreement.
-1-
<PAGE>
5. Waiver of the Loan Obligation. If any of the following events take
place, as confirmed by the Research Management Committee then a portion of
the outstanding principal under this Note shall be forgiven as provided below:
(a) [***] of the initial principal amount of this Note [***] shall
be forgiven upon the earlier of (i) the date [***] on which Borrower
completes [***] under the Collaboration Agreement or (ii) the date [***],
provided that Borrower has completed [***] within a reasonable time period [***]
to allow for the [***] by Borrower;
(b) [***] of the initial principal amount of this Note [***] shall
be forgiven upon the earlier of (i) the date on which Borrower completes [***]
under the Collaboration Agreement or (ii) the [***] provided that Borrower
has completed [***] within a reasonable time period to allow for the [***] by
Borrower; and
(c) The remaining [***] of the initial principal amount of this Note
[***] shall be forgiven upon the earlier of (i) the date on which Borrower
completes [***] under the Collaboration Agreement or (ii) the date [***]
provided that Borrower has completed [***] within a reasonable time period to
allow for the [***] the Borrower.
6. Default. Each of the following shall be an "Event of Default"
hereunder:
(a) Borrower fails to pay any of the principal amount due under this
Note on the date the same becomes due and payable or within five (5) calendar
days thereafter;
(b) Borrower files any petition or action for relief under any
bankruptcy, reorganization, insolvency or moratorium law, or any other law
for the relief of, or relating to, debtors, now or hereafter in effect, or
makes any assignment for the benefit of creditors, or takes any corporate
action in furtherance of any of the foregoing; or
(c) An involuntary petition is filed against Borrower (unless such
petition is dismissed or discharged within sixty (60) days), under any
bankruptcy statute now or hereafter in effect, or a custodian, receiver,
trustee, assignee for the benefit of
-2-
CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
creditors (or other similar official) is appointed to take possession,
custody or control of any property of Borrower.
Upon the occurrence of an Event of Default hereunder, all unpaid
principal and other amounts owing hereunder shall, at the option of Lender,
be immediately collectible by Lender pursuant to applicable law.
7. Waiver. Borrower waives presentment and demand for payment, notice of
dishonor, protest and notice of protest of this Note, and shall pay all costs of
collection when incurred, including, without limitation, reasonable attorneys'
fees, costs and other expenses.
The right to plead any and all statutes of limitations as a defense to
any demands hereunder is hereby waived to the full extent permitted by law.
8. Governing Law. This Note shall be governed by, and construed and
enforced in accordance with, the laws of the State of Delaware, excluding
conflict of laws principles that would cause the application of laws of any
other jurisdiction.
9. Successors and Assigns. The provisions of this Note shall inure to
the benefit of and be binding on any successor to Borrower and shall extend
to any holder hereof.
Borrower: Lender:
Gene Logic Inc. Procter & Gamble Pharmaceuticals, Inc.
By: /S/ Michael J. Brennan By: /S/ G.G. Cloyd
Printed Name: Michael J. Brennan Printed Name: G. G. Cloyd
Title: President and CEO Title: President
-3-
<PAGE>
EXHIBIT 10.26
Confidential Treatment Requested
Under 17 C.F.R. Sections 200.80 (b)(4),
200.83 and 230.406
*** Indicates omitted material that is the subject of a confidential
treatment request filed separately with the Commission.
DRUG TARGET AND DRUG LEAD DISCOVERY
COLLABORATION AGREEMENT
BETWEEN
GENE LOGIC INC.
AND
JAPAN TOBACCO INC.
DATED AS OF SEPTEMBER 9, 1997
<PAGE>
Table Of Contents
Page
1. Definitions........................................................... 1
1.1 "Affiliate"................................................. 1
1.2 "Agreement Date"............................................ 2
1.3 "Agreement Term"............................................ 2
1.4 "Alliance Director"......................................... 2
1.5 "Biological Therapeutic Product"............................ 2
1.6 "cDNA"...................................................... 2
1.7 "cDNA Sequence Analysis".................................... 2
1.8 "Control"................................................... 2
1.9 "Diagnostic Product"........................................ 2
1.10 "Drug Approval Application"................................. 2
1.11 "Effective Date"............................................ 2
1.12 "FDA"....................................................... 2
1.13 "Field"..................................................... 3
1.14 "Further Development"....................................... 3
1.15 "GENE EXPRESS("............................................. 3
1.16 "Gene Logic Assays"......................................... 3
1.17 "Gene Logic Software"....................................... 3
1.18 "Gene Logic Technology"..................................... 3
1.19 "Gene Products"............................................. 3
1.20 "Gene Target"............................................... 3
1.21 "IND"....................................................... 3
1.22 "Indication(s)"............................................. 4
1.23 "Invention(s)".............................................. 4
1.24 "NDA"....................................................... 4
1.25 "Net Sales"................................................. 4
1.26 "Patent Right(s)"........................................... 4
1.27 "Product"................................................... 4
1.28 "Program Term".............................................. 5
1.29 "Protein Product"........................................... 5
1.30 "Regulatory Approval"....................................... 5
1.31 "Research Databases"........................................ 5
1.32 "Research Management Committee" or "RMC".................... 5
1.33 "Research Plan"............................................. 5
1.34 "Research Program".......................................... 5
1.35 "Research Term"............................................. 5
1.36 "Samples"................................................... 5
i.
<PAGE>
Table Of Contents
(continued)
Page
1.37 "Scientific FTE"............................................ 6
1.38 "Therapeutic Product"....................................... 6
1.39 "Third Party"............................................... 6
2. Research Programs..................................................... 6
2.1 Undertaking and Scope....................................... 6
2.2 Personnel and Resources. ................................... 7
2.3 Information and Reports Concerning the Research Databases... 8
2.4 Visiting JT Employees....................................... 8
2.5 Acquisition of Samples...................................... 8
2.6 Term of the Research Program................................ 9
2.7 Selection of Gene Targets................................... 9
3. Research Management Committee; Alliance Directors;
Dispute Resolution.................................................... 10
3.1 Research Management Committee............................... 10
3.2 RMC Meetings................................................ 10
3.3 Alliance Directors.......................................... 10
3.4 Dispute Resolution.......................................... 11
4. Patents, Know-How Rights And Inventions............................... 11
4.1 Ownership of Inventions..................................... 11
4.2 Ownership of Gene Logic Technology, Gene Logic Software,
Gene Logic Assays and Research Databases.................... 11
4.3 Ownership of Improvements to Gene Logic Technology,
Gene Logic Software and Gene Logic Assays................... 11
4.4 Ownership of Products....................................... 12
4.5 Patent Protection........................................... 12
4.6 Infringement by Third Parties............................... 14
4.7 Allegations of Infringement by Third Parties................ 14
4.8 Independent Efforts......................................... 14
5. Grant of Rights....................................................... 15
5.1 Research Databases, GENE EXPRESS( and Software.............. 15
5.2 Samples..................................................... 15
5.3 Gene Targets................................................ 15
5.4 Diligence................................................... 15
5.5 Diligence Reports........................................... 16
ii.
<PAGE>
Table Of Contents
(continued)
Page
6. Collaboration Expansion Options....................................... 17
6.1 Expansion Options........................................... 17
6.2 Equity Funding Commitment................................... 17
7. Payments and Royalties................................................ 17
7.1 Research Reimbursement Payments to Gene Logic............... 17
7.2 Research Support............................................ 18
7.3 Gene Target Fees............................................ 19
7.4 Royalties Payable by JT..................................... 19
7.5 Currency of Payment......................................... 19
7.6 Payment and Reporting....................................... 19
7.7 Records and Audits.......................................... 20
8. Milestones for Therapeutic Products and Protein Products.............. 20
8.1 Milestones.................................................. 20
8.2 Milestone Payments.......................................... 21
8.3 Taxes....................................................... 21
9. Confidentiality and Security.......................................... 22
9.1 Security of Research Databases and Gene Logic Software...... 22
9.2 Confidentiality............................................. 22
9.3 Permitted Disclosures....................................... 23
9.4 Publication................................................. 23
10. Representations And Warranties........................................ 24
10.1 Legal Authority............................................. 24
10.2 Valid Rights and Licenses................................... 24
10.3 No Conflicts................................................ 24
10.4 Disclaimer.................................................. 24
11. Term; termination..................................................... 25
11.1 Term........................................................ 25
11.2 Termination for Breach...................................... 25
11.3 Effect of Bankruptcy........................................ 26
11.4 Remedies.................................................... 26
iii.
<PAGE>
Table Of Contents
(continued)
Page
12. Arbitration........................................................... 26
12.1 Arbitration................................................. 26
12.2 Procedure................................................... 27
13. General Provisions.................................................... 27
13.1 Mutual Indemnification...................................... 27
13.2 Assignment.................................................. 27
13.3 Non-Waiver.................................................. 28
13.4 Governing Law............................................... 28
13.5 Partial Invalidity.......................................... 28
13.6 Notice...................................................... 28
13.7 Headings.................................................... 29
13.8 Retained Rights............................................. 29
13.9 No Implied Licenses or Warranties........................... 29
13.10 Force Majeure............................................... 29
13.11 Survival.................................................... 29
13.12 Entire Agreement............................................ 29
13.13 Amendments.................................................. 30
13.14 Independent Contractors..................................... 30
13.15 Counterparts................................................ 31
iv.
<PAGE>
DRUG TARGET AND DRUG LEAD DISCOVERY
COLLABORATION AGREEMENT
This Drug Target and Drug Lead Discovery Collaboration
Agreement ("Agreement") is made as of September 9, 1997, by and between Gene
Logic Inc., a Delaware corporation ("Gene Logic"), located at 10150 Old
Columbia Road, Columbia, Maryland 21046 and Japan Tobacco Inc., a Japanese
corporation ("JT"), located at JT Building 2-1, Toranomon 2-chome, Minato-ku,
Tokyo 105, Japan.
Witnesseth:
Whereas, Gene Logic has developed technologies and know-how
with respect to high throughput analysis of gene expression and gene
regulation for use in the identification of gene targets and the discovery of
pharmaceutical products;
Whereas, JT is a company engaged in the development and
commercialization of pharmaceutical products;
Whereas, JT and Gene Logic wish to enter into a collaborative
effort directed toward the development of Research Databases (as defined
herein) to identify genes associated with Indication #1 (as such term is
defined on Exhibit A attached hereto, including an option for the development
and application of Gene Logic Assays (as defined herein) for the
identification of human pharmaceutical products and options to expand the
collaborative effort to include the development of Research Databases to
identify genes associated with certain other indications (the
"Collaboration"); and
Whereas, through the Collaboration the parties intend to
discover, develop and market human pharmaceutical products.
Now, Therefore, in consideration of the foregoing premises and
the mutual promises, covenants and conditions contained herein, Gene Logic
and JT agree as follows:
1. Definitions.
The following capitalized terms shall have the meanings
indicated for purposes of this Agreement:
1.1 "Affiliate" shall mean any corporation, association or
other entity which directly or indirectly controls, is controlled by or is
under common control with the party in question; provided, however, that the
Government of Japan shall not be deemed to be an Affiliate of JT. As used in
this definition of "Affiliate," the term "control" shall mean
1.
<PAGE>
direct or indirect beneficial ownership of more than 50% of the voting or
income interest in such corporation or other business entity.
1.2 "Agreement Date" shall mean the date of this Agreement
first written above.
1.3 "Agreement Term" shall mean the period from the Agreement
Date until, with respect to each Product, the expiration of the last royalty
obligation owed by JT to Gene Logic with respect to such Product, or until
this Agreement is otherwise terminated pursuant to its terms.
1.4 "Alliance Director" shall have the meaning set forth in
Section 3.3.
1.5 "Biological Therapeutic Product" shall mean any gene
therapy product or antisense product, in any dosage form or formulation by
any route of administration, which is or comprises any full, partial or
modified RNA or DNA sequence corresponding to or complementary to a Gene
Target RNA or DNA sequence.
1.6 "cDNA" shall mean a DNA copy of a mRNA, including,
without limitation, all cDNA clones and cDNA templates derived from a given
gene transcript and its corresponding coding sequence, including the full
length sequence.
1.7 "cDNA Sequence Analysis" shall mean all sequence
information from all cDNA templates derived from the same gene within a given
cDNA library.
1.8 "Control" shall mean possession of the ability to grant
the rights as provided for herein without violating the terms of any
agreement or other arrangement with any Third Party.
1.9 "Diagnostic Product" shall mean any product or service or
combination thereof used for the diagnosis, prognosis and/or monitoring of
progression of any disease or disorder in humans which is developed
utilizing, or is comprised of, any Gene Target or which incorporates any Gene
Target DNA or RNA sequence.
1.10 "Drug Approval Application" shall mean an application for
Regulatory Approval required before commercial sale or use of a Product.
1.11 "Effective Date" shall mean, with respect to each
Indication, the date on which the Research Management Committee approves the
initial Research Plan for the applicable Research Program pursuant to Section
2.1(a).
1.12 "FDA" shall mean the United States Food and Drug
Administration.
2.
<PAGE>
1.13 "Field" shall mean, with respect to each Indication, the
research, discovery and characterization of genes associated with such
Indication through the application of bioinformatics and genomic technologies
to analyze Samples, and the use of such genes for the development of
Products. As used herein, the term "genomic technologies" shall mean,
without limitation, technologies for the analysis of gene expression and gene
regulation, hybridization array techniques, high speed sequencing and
generation of expressed sequence tags.
1.14 "Further Development" shall have the meaning set forth in
Section 2.7.
1.15 "GENE EXPRESS-TM-" shall mean Gene Logic's GENE EXPRESS-TM-
Database of Normal Gene Expression Patterns.
1.16 "Gene Logic Assays" shall mean assays for the screening
of compounds to evaluate their effect or effects on the expression levels of
one or more genes, which assays utilize Gene Logic's proprietary Flow-Thru
Gene Chip technology. All current patent applications with respect to the
Flow-Thru Gene Chip technology are listed on Schedule 1.16, such schedule to
be updated by Gene Logic from time to time.
1.17 "Gene Logic Software" shall mean Gene Logic's software
programs for the analysis of gene expression and gene regulation and the
identification and prioritization of gene targets that are Controlled by Gene
Logic as of the Agreement Date or during the Research Term.
1.18 "Gene Logic Technology" shall mean (i) all discoveries,
inventions, information, data, know-how, trade secrets and materials (whether
or not patentable) that are Controlled by Gene Logic as of the Agreement Date
or during the Research Term, including without limitation, the Research
Databases, GENE EXPRESS-TM- and Gene Logic's READS-TM- and MuST-TM-
technologies, excluding the Gene Logic Software and any technology related to
the Gene Logic Assays, and (ii) all Patent Rights of Gene Logic covering the
foregoing. All current patent applications with respect to GENE EXPRESS-TM-
and Gene Logic's READS-TM- and MuST-TM- technologies are listed on Schedule
1.18, such schedule to be updated by Gene Logic from time to time.
1.19 "Gene Products" shall mean all partial cDNAs, DNAs,
genes, full length cDNAs corresponding thereto and proteins encoded therefrom.
1.20 "Gene Target" shall have the meaning set forth in Section
2.7.
1.21 "IND" shall mean an Investigational New Drug Application
to the FDA to commence human clinical testing of a Product, as defined by the
FDA, or the equivalent application in any country or jurisdiction other than
the United States.
3.
<PAGE>
1.22 "Indication(s)" shall mean Indication #1, Indication #2
and/or Indication #3, as appropriate.
1.23 "Invention(s)" shall have the meaning set forth in
Section 4.1.
1.24 "NDA" shall mean a New Drug Application or Product
License Application (or Biologics License Application), as appropriate, and
all supplements filed pursuant to the requirements of the FDA, including all
documents, data and other information concerning Products which are necessary
for or included in FDA approval to market a Product, or the equivalent
application in any country or jurisdiction other than United States.
1.25 "Net Sales" shall mean the gross invoices delivered by JT
or its Affiliates or sublicensees, as appropriate, for the sale of a Product,
less the following deductions:
(1) Prompt payment or other trade or quantity discounts
actually allowed and taken in such amounts as are customary in the trade;
(2) Amounts repaid or credited by reason of timely
rejections or returns;
(3) Taxes on the sale of a Product (other than franchise
or income taxes on the income of the seller) actually paid or withheld;
(4) Allowances for bad debt to the extent such amounts
were previously invoiced and included in Net Sales for royalty purposes and
were subsequently actually written off by such party (JT or its Affiliate or
sublicensee); and
(5) Transportation and delivery charges, including
insurance premiums, actually incurred.
Notwithstanding the foregoing, amounts received by such party
(JT or its Affiliate or sublicensee) or such party's Affiliates for the sale
of Products among such party and its Affiliates whether for their internal
use or for resale or other disposition will not be included in the
computation of Net Sales hereunder.
1.26 "Patent Right(s)" shall mean, with respect to Gene Logic
or JT, all United States and foreign patents relevant to the purpose of this
Agreement (including all reissues, extensions, confirmations, registrations,
re-examinations, and inventor's certificates) and patent applications
(including, without limitation, all substitutions, continuations,
continuations-in-part and divisionals thereof) owned or Controlled by Gene
Logic or JT at any time during the Agreement Term.
1.27 "Product" shall mean a Therapeutic Product or Protein
Product, as applicable.
4.
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1.28 "Program Term" shall mean, with respect to each
Indication, the period commencing on the Effective Date for such Indication
and ending upon the end of the Research Term, subject to extension or earlier
termination as set forth herein.
1.29 "Protein Product" shall mean any product for the
prevention or treatment of any disease or disorder in humans, in any dosage
form or formulation for delivery by any route of administration, which is or
comprises a protein or peptide encoded by the full, partial or mutated RNA or
DNA sequence corresponding to a Gene Target RNA or DNA sequence, but
excluding any therapeutic antibody.
1.30 "Regulatory Approval" shall mean (i) all necessary
approvals of an NDA or comparable applicable filing by the FDA permitting
commercial sale of a Product or (ii) all necessary comparable approvals
permitting commercial sale of a Product granted by applicable authorities in
any country or jurisdiction other than the United States.
1.31 "Research Databases" shall mean, with respect to and
related to each Indication, the databases created by Gene Logic using the
Gene Logic Technology pursuant to the Research Plan for such Indication. The
Research Databases for an Indication shall contain data derived from
experiments conducted with respect to the Gene Products identified by Gene
Logic pursuant to the Research Program for such Indication. To the extent
possible, the Research Databases for an Indication shall be created in a
manner to ensure that data derived from Samples obtained by Gene Logic can be
separated from data derived from Samples supplied by JT.
1.32 "Research Management Committee" or "RMC" shall have, with
respect to each Indication, the meaning set forth in Section 3.1.
1.33 "Research Plan" shall have, with respect to each
Indication, the meaning set forth in Section 2.1.
1.34 "Research Program" shall mean, with respect to each
Indication, that program of research performed by the parties in the Field
for such Indication pursuant to Section 2.
1.35 "Research Term" shall mean the period commencing on the
Agreement Date and ending upon the fifth anniversary of the Agreement Date,
subject to extension or earlier termination as set forth herein.
1.36 "Samples" shall mean human or animal tissue samples or
cell lines (i) obtained by Gene Logic pursuant to Section 2.5 or (ii)
supplied by JT to Gene Logic for analyses pursuant to the Research Plan, if
applicable.
5.
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1.37 "Scientific FTE" shall mean the equivalent of a full-time
researcher's or program manager's work time over a 12 month period (including
normal vacations, sick days and holidays).
1.38 "Therapeutic Product" shall mean any product for the
prevention or treatment of any disease or disorder in humans, in any dosage
form or formulation by any route of administration, which product is or
comprises a molecule, compound or other agent or any therapeutic antibody,
regardless of its function or utility, which is discovered or whose utility
is discovered utilizing, in whole or in part, a Gene Target, whether or not
in the course of a Research Program, or, if applicable, which is discovered
or whose utility is discovered through the use of any Gene Logic Assay,
excluding any Biological Therapeutic Product, Diagnostic Product or Protein
Product.
1.39 "Third Party" shall mean any party other than JT or Gene
Logic or an Affiliate of either of them.
2. Research Programs.
With respect to the Research Program for Indication #1 and, if
the applicable option under Section 6 is exercised by JT, the Research
Programs for Indication #2 and Indication #3, the following provisions shall
apply:
2.1 Undertaking and Scope.
(a) Prior to the earlier of (i) the initial meeting of
the Research Management Committee and (ii) in the case of Indication #1, 30
days from the Agreement Date, or in the case of the other Indications, 30
days from the date that the applicable option under Section 6 is exercised by
JT, the parties shall work together to agree upon a plan for the creation and
use of the Research Databases by the parties for the first year of the
Research Program. Such plan shall set forth the schedule of specific
activities to be undertaken during the applicable period of the Program Term,
the resources to be employed, including the allocation of Scientific FTEs and
each scientist's role, the intended acquisition of Samples during such period
(and the timing thereof) and the budget for such period. The Research
Management Committee will review and, in its discretion, approve or modify
the general direction of such plan. Such plan, as approved by the RMC for
any year of the Research Program, is referred to herein as the "Research
Plan." A timeline of the research to be performed under the Research Plan
for Indication #1 and the related staff allocation plan is attached to this
Agreement as Schedule 2.1 for reference purposes. At least 90 days before
each anniversary of the Effective Date during the Program Term, the parties
shall propose to the RMC a Research Plan to govern the further development of
the Research Databases during the following year of the Research Program, and
the RMC shall review, modify if appropriate, and
6.
<PAGE>
approve such Research Plan by such anniversary. At any time, the RMC may
modify or amend any such Research Plan as appropriate or necessary to reflect
the parties' experiences in performing the Research Program. Each party
agrees to use all reasonable efforts to perform the activities detailed in
the Research Plan in a professional and timely manner.
(b) Gene Logic shall use commercially reasonable and
diligent efforts to develop its Flow-Thru Gene Chip technology to permit the
development of Gene Logic Assays. At any time after notification by Gene
Logic to JT that Gene Logic's Flow-Thru Gene Chip technology is suitable for
the development of Gene Logic Assays, JT may request that Gene Logic develop
one or more Gene Logic Assays and run such Gene Logic Assays with respect to
one or more Gene Products within the Research Databases for JT for the
purpose of discovery or discovering the utility of Products in the Field.
Gene Logic shall advise JT of the anticipated schedule and budget to develop
such Gene Logic Assay and, following approval of such schedule and budget by
JT in writing, shall commence the development of such Gene Logic Assay;
provided, however, that it is understood that Gene Logic shall use
commercially reasonable and diligent efforts to comply with any such request
consistent with Gene Logic's internal development of the technology necessary
to implement such requests. To the extent that JT makes any request pursuant
to this Section 2.1(b), JT shall (i) pay Gene Logic a chip design fee of [***]
for each Gene Logic Assay to be developed by Gene Logic in response to such
request ([***]) and (ii) reimburse Gene Logic for all actual costs incurred
by Gene Logic in developing and running each Gene Logic Assay in response to
such request, such costs not to include any of Gene Logic's costs incurred in
developing the core Flow-Thru Gene Chip technology to the point that the
development of Gene Logic Assays is possible.
(c) At any time during a Research Program, JT may
request Gene Logic (i) to conduct its assays (other than Gene Logic Assays)
with respect to one or more Gene Products within the Research Databases; or
(ii) to conduct its assays (including Gene Logic Assays) with respect to
genes selected by JT from sources other than the Research Databases. Upon a
request to conduct an assay under this Section 2.1(c), both parties shall
negotiate in good faith regarding the terms and conditions under which Gene
Logic shall implement such request; provided, however, that neither party
shall assume any additional obligation with respect to such request unless
and until a separate agreement for such assay has been executed by both
parties in writing.
2.2 Personnel and Resources. Each party agrees to commit the
personnel, consultants, facilities, expertise, technology and other resources
necessary to perform its obligations under the Research Plan; provided,
however, that neither party warrants that the Research Program shall achieve
any of the research objectives contemplated by them. During the Research
Program, JT and Gene Logic will each maintain the number of
7.
CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
Scientific FTEs, which in the case of Gene Logic shall not be fewer than
[***] Scientific FTEs, devoted to cooperative work as are required under the
Research Plan. The scientific priorities and direction of the work of such
Scientific FTEs will be determined by the Research Management Committee. JT
will provide funding to support Gene Logic's performance of its obligations
under the Research Plan as set forth in Section 7.
2.3 Information and Reports Concerning the Research
Databases. All information, technology or inventions specific to the Field
made by either party in the course of the Research Program will be promptly
disclosed to the other, with significant discoveries or advances being
communicated as soon as practicable after such information is obtained or its
significance is appreciated. The parties will exchange at least quarterly
written reports presenting a meaningful summary of their activities performed
under this Agreement and will otherwise exchange information concerning the
Research Program as frequently as is necessary.
2.4 Visiting JT Employees. Pursuant to the Research Plan,
JT may request that up to two of JT's scientific employees become employees
of Gene Logic or will otherwise work at Gene Logic during the Program Term;
provided that such employees will not have an employment start date earlier
than January 1, 1998. The nature and scope of the work to be accomplished by
such employees at Gene Logic shall be determined by the RMC, and such
employees shall be subject to periodic performance evaluations by the RMC.
All costs incurred by Gene Logic in connection with the employment of such
employees, which costs will include salary (including payroll tax
withholdings), fringe benefits (including medical, dental, life, disability,
workers' compensation or other insurance coverage provided to Gene Logic
employees), federal, state and local employment-related taxes (including
FICA, Medicare and unemployment insurance) and any other costs incident to
such employees' employment by Gene Logic, shall be reimbursed by JT
semi-annually within 30 days following receipt by JT of the documentation of
such costs reasonably satisfactory to JT (which reimbursement shall be in
addition to any payments to Gene Logic under Section 7.2). Such employees
will enter into Gene Logic's standard agreements regarding proprietary
information and inventions and will be deemed to be Gene Logic employees for
all purposes of this Agreement.
2.5 Acquisition of Samples. Gene Logic shall seek to
establish collaborations to obtain Samples from Third Parties for analysis
pursuant to the Research Plan. JT shall reimburse Gene Logic for any direct
payments (as documented to the reasonable satisfaction of JT) made by Gene
Logic to Third Parties in connection with the acquisition of such Samples.
Gene Logic shall acquire all Samples for purposes of the Research Program
during the Program Term only in accordance with its standard policies and
procedures exercising its typical standard of care, which may be reviewed and
reasonably modified by the RMC, if necessary and appropriate, and shall not
acquire any Samples for purposes of the Research Program during the Program
Term without the prior approval of
8.
CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
JT. Any Samples obtained by Gene Logic pursuant to this Section 2.5 shall be
owned by Gene Logic.
2.6 Term of the Research Program. Work under the Research
Program will commence as of the Effective Date and, unless terminated earlier
by either party pursuant to the terms of this Agreement or extended by JT for
[***] with at least 90 days' prior written notice (which JT may do without
Gene Logic's approval no more than twice with respect to each Research
Program), will terminate upon expiration of the Research Term. Upon the
first anniversary of the Effective Date or at any time thereafter, the
Research Program may be terminated by JT by providing six months' prior
written notice to Gene Logic; provided, however, that if JT has exercised its
option to commence anytime prior to the date of termination another Research
Program in addition to the Research Program to be terminated, JT shall be
entitled to provide only 30 days' prior notice to Gene Logic of such
termination. Upon early termination by JT of a Research Program pursuant to
the preceding sentence, any rights granted to Gene Logic pursuant to Section
5.2 shall remain in full force and effect.
2.7 Selection of Gene Targets. Under the Research Program,
the parties will use commercially reasonable and diligent efforts consistent
with their respective obligations under the Research Plan to identify Gene
Products from Samples as potential targets within the Field. JT shall select
certain of such Gene Products as targets for further development of human
pharmaceutical products using information obtained from the Research
Databases created by Gene Logic pursuant to the Research Plan and the
application of the Gene Logic Software and other information available to JT,
including, without limitation, through public DNA sequence databases and
scientific publications. Any Gene Product identified in a Research Database
which JT uses in Further Development (as defined below) shall be a "Gene
Target." Based upon JT's standard, internal research and development
criteria, JT will, in its sole discretion, decide whether to commence Further
Development with regard to a particular Gene Product. JT shall notify Gene
Logic in writing and make the payment described in Section 7.3 prior to using
any Gene Target in Further Development. For purposes of this Agreement,
"Further Development" of a Gene Target as (i) a Therapeutic Product will be
the [***]; or (ii) a Protein Product will include the
[***].
9.
CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
3. Research Management Committee; Alliance Directors; Dispute
Resolution.
With respect to the Research Program for Indication #1 and, if
the applicable option under Section 6 is exercised by JT, the Research
Programs for Indication #2 and Indication #3, the following provisions shall
apply:
3.1 Research Management Committee. JT and Gene Logic will
each appoint four representatives to a research management committee (the
"Research Management Committee" or "RMC"). Attached as Schedule 3.1 is a
list of representatives the parties intend to appoint to the RMC for
Indication #1; in the case of the other Indications, JT and Gene Logic will
each appoint their respective representatives to the RMC promptly after the
date that the applicable option under Section 6 is exercised by JT but in any
event within 10 days. One of the representatives will be identified as
chairman of the RMC for the initial period ending 12 months following the
Effective Date; the initial chairman of the RMC for Indication #1 is
identified on Schedule 3.1. Thereafter, chairmanship will rotate between a JT
member and a Gene Logic member every 12 months. The RMC will review, direct
and supervise all operational and scientific aspects related to the creation
of the Research Databases. The duties of the Research Management Committee
shall include approving the Research Plan, agreeing to resource allocations
(including the allocation of Scientific FTEs), monitoring the parties'
progress under the Research Plan, evaluating the means through which JT has
access to the Research Databases and discussing any other matter related to
the Research Program. The Research Management Committee will meet quarterly,
or more frequently if mutually agreed, and will alternate sites of meetings
between Columbia, Maryland and Yokohama, Japan. Each party recognizes the
importance of the Research Management Committee in the success of the
Research Program and the overall Collaboration and will use diligent efforts
to cause all of its representatives to such committee to attend all meetings
of such committee. A party may change any of its appointments to the
Research Management Committee at any time upon giving written notice to the
other party. Any disputes or disagreements within the RMC shall be resolved
pursuant to Section 3.4.
3.2 RMC Meetings. The Research Management Committee may meet
by telephone or video conference or in person at such times as are agreeable
to the members of such committee. Attendance at meetings shall be at the
respective expense of the participating parties. The chairman of the RMC
shall assure that agendas and minutes are prepared for each of its meetings.
All actions taken and decisions made by the RMC shall be by unanimous
agreement. If personal attendance is not possible for valid reasons, voting
by proxy is permissible.
3.3 Alliance Directors. Each party shall designate one of
its employees as an alliance director ("Alliance Director") for all of the
activities contemplated under the
10.
<PAGE>
Research Program. Such Alliance Directors will be responsible for the
day-to-day coordination of the performance of the Research Program and will
serve to facilitate communication between the parties with respect thereto.
Such Alliance Directors shall be experienced in managing research projects
relevant to the Research Program.
3.4 Dispute Resolution. Disputes or disagreements between
the parties arising hereunder will be referred to the Research Management
Committee. If the RMC is unable to resolve, after 30 days, a dispute
regarding any issue presented to it or arising in it, such dispute will be
referred to the Chief Executive Officer of Gene Logic and the Executive Vice
President, Central Pharmaceutical Research Institute of JT for good faith
resolution, for a period of 90 days. If such dispute is not resolved by the
end of such 90-day period, then such issue shall be submitted for resolution
through arbitration within 30 days after either party requests arbitration,
according to the terms set forth in Section 12.
4. Patents, Know-How Rights And Inventions.
4.1 Ownership of Inventions. Except as otherwise set forth
herein, ownership of any inventions (whether or not patentable) that are
conceived, generated or reduced to practice during the course of a Research
Program ("Inventions") shall be determined in accordance with United States
laws of inventorship.
4.2 Ownership of Gene Logic Technology, Gene Logic Software,
Gene Logic Assays and Research Databases. Notwithstanding the foregoing,
subject to the grant of rights to JT under Section 5, Gene Logic shall own
all rights to the Gene Logic Technology, Gene Logic Software, Gene Logic
Assays and the Research Databases, including, but not limited to, all data
and progeny derived from the Samples, all cDNA sequences, partial cDNAs, and
their corresponding full length cDNAs, cDNA Sequence Analyses, Gene Targets,
proteins and applications thereof and information relating thereto. The
filing, prosecution and maintenance of patent(s), copyrights and other
proprietary rights directed at the protection of these rights shall be the
responsibility of, and at the discretion of, Gene Logic.
4.3 Ownership of Improvements to Gene Logic Technology, Gene
Logic Software and Gene Logic Assays. Gene Logic Technology, Gene Logic
Software and Gene Logic Assays shall also include any enhancements or
improvements to Gene Logic Technology, Gene Logic Software and Gene Logic
Assays discovered by either party during the course of the Collaboration,
including, without limitation, any discoveries and Inventions related to the
function of Gene Targets included in a Research Database. JT hereby
irrevocably assigns to Gene Logic all right, title and interest in and to
enhancements or improvements to such Gene Logic Technology, Gene Logic
Software and Gene Logic Assays discovered by JT. If JT has any rights that
cannot be assigned to Gene Logic, JT waives the enforcement of such rights,
and if JT has any rights that cannot
11.
<PAGE>
be assigned or waived, JT hereby grants to Gene Logic an exclusive,
irrevocable, perpetual, worldwide, fully-paid license, with right to
sublicense through multiple tiers of sublicense, to such rights. JT agrees
to cooperate with Gene Logic, both during and after the term of this
Agreement, in the procurement and maintenance of Gene Logic's rights to such
intellectual property and to execute, when requested, any other documents
deemed necessary by Gene Logic to carry out the purpose of this Section.
4.4 Ownership of Products.
(a) By JT. Gene Logic hereby irrevocably assigns to JT
all of its right, title and interest in and to any Patent Rights covering a
Product discovered pursuant to the Collaboration. The filing, prosecution
and maintenance of such Patent Rights shall be the responsibility of, and at
the discretion of, JT. Gene Logic agrees to cooperate with JT, both during
and after the term of this Agreement, in the procurement and maintenance of
such Patent Rights and to execute, when requested, any other documents deemed
necessary by JT to carry out the purpose of this Section 4.4(a); provided,
that JT shall reimburse Gene Logic for out-of-pocket expenses incurred by
Gene Logic in connection with such cooperation.
(b) By Gene Logic. JT hereby irrevocably assigns to
Gene Logic all of its right, title and interest in and to any Patent Rights
covering a Biological Therapeutic Product or Diagnostic Product discovered
pursuant to the Collaboration; provided, however, that in the event such
Patent Rights also cover a Product, then in lieu of such assignment, JT shall
grant to Gene Logic an exclusive, irrevocable, perpetual, worldwide,
fully-paid license, with right to sublicense through multiple tiers of
sublicense, to such Patent Rights for use as a Biological Therapeutic Product
or Diagnostic Product. The filing, prosecution and maintenance of such
assigned Patent Rights shall be the responsibility of, and at the discretion
of, Gene Logic, and the filing, prosecution and maintenance of such licensed
Patent Rights shall be the responsibility of, and at the discretion of, JT.
JT and Gene Logic shall cooperate, both during and after the term of this
Agreement, in the procurement and maintenance of such Patent Rights and to
execute, when requested, any other documents deemed necessary by the party
owning such Patent Rights to carry out the purpose of this Section 4.4(b);
provided, that the party owning such Patent Rights shall reimburse the other
party for its out-of-pocket expenses incurred in connection with such
cooperation.
4.5 Patent Protection.
(a) Solely Owned Inventions. Any party that solely owns
any patentable Invention shall have the right, at its option and expense, to
prepare, file and prosecute any patent applications or other appropriate
filings with respect to such Invention and to maintain any patents issued
thereon, copyrights or other similar rights.
12.
<PAGE>
(b) Jointly Owned Inventions. Subject to Section
4.5(e), the parties shall decide which party shall be responsible for
preparing, filing and prosecuting any patent applications or other
appropriate filings with respect to any Invention that is owned jointly by
the parties (a "Joint Invention") and maintaining any patents, copyrights or
other similar rights issued thereon, using patent counsel reasonably
acceptable to the other party. The parties shall share the out-of-pocket
expenses for such preparation, filing and prosecution.
(c) Cooperation. Each party agrees to cooperate with
the party responsible for the preparation and prosecution of all patent
applications or other appropriate filings on Inventions specific to the Field
and Joint Inventions pursuant to this Section 4.5 (the "Responsible Party")
and in the maintenance of any patents, copyrights or other similar rights
issued thereon. Such cooperation will include the execution of all documents
necessary or desirable for the Responsible Party to fulfill its obligations
hereunder.
(d) Communication Regarding Patent Protection. The
Responsible Party will prepare, prosecute and maintain (and shall keep the
other party currently informed of all steps to be taken in such preparation,
prosecution and maintenance of) all Patent Rights, copyrights or other
similar rights, which claim an Invention or Joint Invention with respect to
which it is responsible and shall furnish the other party with copies of
documentation of such Patent Rights, copyrights or other similar rights which
claim an Invention specific to the Field or Joint Invention and other related
correspondence relating thereto with respect to which it is responsible to
and from governmental patent agencies or other authorities and permit the
other party to offer its comments thereon before the Responsible Party makes
a submission to a governmental patent agency or other authority which could
materially affect the scope or validity of the coverage of any patent,
copyright or other similar rights that may result. The other party shall
offer its comments promptly.
(e) Back-Up Rights. If the Responsible Party with
respect to any Joint Invention decides to abandon or not to pursue
prosecution of any Patent Rights, copyrights or other similar rights which
claim a Joint Invention, it shall permit the other party, at its option and
expense, to undertake such obligations. The party not undertaking such
actions shall fully cooperate with the other party and shall provide to the
other party whatever assignments and other documents that may be needed in
connection therewith. If a party undertakes the obligations of a
"Responsible Party" under this Section 4 with respect to any such Patent
Right, copyright or other similar right which claims a Joint Invention under
this Section 4.5(e), it shall prosecute and maintain the same vigorously at
its own expense, and shall not abandon or compromise such rights or fail to
exercise any rights of appeal without giving the other party the right to
take over the prosecuting party's conduct, at such other party's own expense.
13.
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(f) Reimbursement for Gene Target Patent Expenses. In
the event that JT selects a Gene Target for Further Development and Gene
Logic has incurred patent expenses in connection with such Gene Target, JT
shall reimburse Gene Logic for [***] of the out-of-pocket expenses incurred by
Gene Logic after the Gene Target is selected for Further Development within
30 days of receipt of an invoice therefor.
4.6 Infringement by Third Parties. In the event Gene Logic
or JT becomes aware of any actual or threatened infringement of any Patent
Right, copyright, trademark, trade secret or other intellectual property
right of either party which claims an Invention or Joint Invention, that
party shall promptly notify the other party, and the parties shall (i)
promptly discuss how to proceed in connection with such actual or threatened
infringement and (ii) use their best efforts in cooperating with each other
to terminate such infringement without litigation. If either party commences
any actions or proceedings (legal or otherwise) pursuant to this Section 4.6,
it shall prosecute the same vigorously at its expense and shall not abandon
or compromise them or fail to exercise any rights of appeal without giving
the other party the right to take over the prosecuting party's conduct at
such other party's own expense.
4.7 Allegations of Infringement by Third Parties.
(a) The parties acknowledge that, in order to exploit
the rights contained herein, JT may require licenses under Third Party patent
rights that may be infringed by the use by JT of the rights granted herein
and it is hereby agreed that it shall be JT's responsibility to satisfy
itself as to the need for such licenses and, if necessary, to obtain such
licenses.
(b) JT shall be solely responsible for any threatened or
actual claims for Third Party patent infringement or other Third Party
intellectual property right arising out of the manufacture, use, sale or
importation of a Product sold by JT, its Affiliates or sublicensees. Upon
receiving notice of such actual or threatened claims, JT shall promptly meet
with Gene Logic to discuss the course of action to be taken to resolve or
defend any such infringement litigation.
4.8 Independent Efforts. A party shall not, during the
Research Term, conduct, have conducted or fund any research, discovery or
development activities primarily directed toward the development of a
database of gene expression, gene regulation or gene targets within any Field
utilizing high through-put analysis of gene expression except pursuant to
this Agreement without the prior written consent of the other party;
provided, however, that the foregoing shall not preclude JT from (a)
performing its obligations under those certain agreements described on
Schedule 4.8 or (b) commencing such independent efforts with respect to a
Field, the Research Program for which has been terminated by JT pursuant to
Section 2.6.
14.
CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
5. Grant of Rights.
With respect to the Research Program for Indication #1 and, if
the applicable option under Section 6 is exercised by JT, the Research
Programs for Indication #2 and Indication #3, the following provisions shall
apply:
5.1 Research Databases, GENE EXPRESS-TM- and Software. Gene
Logic hereby grants to JT an exclusive, worldwide right to use the Research
Databases, together with a nonexclusive, worldwide right to use GENE
EXPRESS-TM- and a nonexclusive, worldwide right to use and perform the Gene
Logic Software, in each case solely for research purposes in the Field to
identify Gene Targets during the Program Term and for an additional 90 days
thereafter (such 90-day period shall be referred to as the "Research Database
Access Term"). JT will have no right to assign such rights to Third Parties
and shall not provide the Research Databases, the Gene Logic Software or any
Gene Logic Technology with respect thereto, to any Third Party (other than
consultants to whom disclosure is permitted under Section 9.3) without prior
written consent of Gene Logic. JT may elect to extend the term of the
foregoing exclusive right to the Research Databases and the foregoing
nonexclusive rights to GENE EXPRESS-TM- and the Gene Logic Software (the
"Research Database Extension Option") for an additional [***] period
following the end of the Research Database Access Term (the "Extended Term")
by providing written notice of such election to Gene Logic at least 90 days
prior to the date upon which such rights would otherwise expire and by paying
an extension fee to Gene Logic equal to [***] at the time such notice is
provided.
5.2 Samples. In the event that JT provides Samples to Gene
Logic, JT grants to Gene Logic the right to use and analyze the Samples
provided by JT and the data and progeny derived therefrom on a nonexclusive,
perpetual, fully-paid, worldwide basis.
5.3 Gene Targets. Subject to the terms and conditions of
this Agreement, Gene Logic hereby grants and agrees to grant to JT the right
to use within the Field each Gene Target for which JT has paid the fee
described in Section 7.3 on an exclusive, worldwide basis to develop, make,
have made, use, import, offer for sale, and sell Products for any purpose.
5.4 Diligence.
(a) Gene Logic shall use commercially reasonable and
diligent efforts, consistent with the Research Program, to perform analysis
of the Samples utilizing the Gene Logic Technology. For purposes of this
Agreement, "commercially reasonable and diligent efforts" will mean, unless
the parties agree otherwise, those efforts consistent with the exercise of
prudent scientific and business judgment, as applied to other research
15.
CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
efforts and to products of similar scientific and commercial potential within
such party's relevant research programs and product lines.
(b) JT shall use commercially reasonable and diligent
efforts to conduct active, ongoing research activities utilizing the Research
Databases.
(c) Without limiting the foregoing, JT (or its
Affiliates or sublicensees) shall use commercially reasonable and diligent
efforts to evaluate Gene Targets, to pursue lead compounds identified through
the use of the Gene Logic Assays and to develop and commercialize Products.
JT (or its Affiliates or sublicensees) shall be deemed to have used
commercially reasonable and diligent efforts with regard to a particular Gene
Target if it is actively engaged in at least one of the following activities:
(i) [***]; (ii) [***]; or (iii) [***]. JT (or its Affiliates or
sublicensees) shall be deemed to have used commercially reasonable and
diligent efforts with regard to lead compound(s) identified through the use
of a Gene Logic Assay if it is [***]. Gene Logic may provide [***] written
notice to JT if in its opinion, JT (or its Affiliates or sublicensees) is not
using commercially reasonable and diligent efforts with regard to a Gene
Target, lead compound or Product, whereupon the parties agree to hold a
meeting, attended by individuals with decision-making authority, to attempt
in good faith to negotiate a resolution of the dispute. If, within [***]
after such meeting, the parties have not succeeded in negotiating a
resolution of the dispute, then such dispute shall be submitted for
resolution through arbitration, according to the terms set forth in Section
12.
(d) In addition, in the event that JT elects not to
pursue exploitation of any Gene Target or development or commercialization of
any Product subject to this Agreement for any reason, JT shall promptly
notify Gene Logic thereof, and, upon such notice, (i) the exclusive right
granted pursuant to Section 5.3 with respect to such Gene Target on a
worldwide basis will be terminated, and (ii) JT shall automatically grant to
Gene Logic an exclusive, perpetual, fully-paid worldwide license under its
applicable Patent Rights, Inventions and other intellectual property to any
and all rights it may have in such Gene Target or such Product in the Field.
In the event JT automatically grants the license described in this Section
5.4(d), the parties shall negotiate a commercially reasonable royalty rate to
be paid by Gene Logic based upon the value of JT's Patent Rights covering
such Gene Target or such Product.
5.5 Diligence Reports. JT hereby agrees to keep Gene Logic
informed on a reasonable basis of its efforts to select Gene Targets and to
develop Products, and to provide written reports to Gene Logic on a
semi-annual basis (the "Diligence Reports").
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The Diligence Reports shall provide, as applicable, the following
information: (i) a listing of the Gene Products which JT has identified as
prospects for Further Development, (ii) JT's progress toward selection of
particular Gene Products for Further Development, (iii) JT's plans for
Further Development with regard to selected Gene Targets, (iv) JT's progress
in screening, pre-clinical or clinical development for Gene Targets, and (v)
JT's progress in lead optimization and pre-clinical or clinical development
of lead compounds identified through the use of Gene Logic Assays, if
applicable.
6. Collaboration Expansion Options.
6.1 Expansion Options. For the first two years following the
Agreement Date, JT shall have options to expand the Collaboration to include
the areas of Indication #2 (as such term is defined on Exhibit A attached
hereto) (the "Indication #2 Option") and Indication #3 (as such term is
defined on Exhibit A attached hereto) (the "Indication #3 Option") upon the
terms and conditions contained in this Agreement. If the Research Program
with respect to Indication #1 is terminated by JT pursuant to Section 2.6
prior to the exercise or expiration of either Indication #2 Option or
Indication #3 Option, JT shall inform Gene Logic in writing prior to the
expiration of the applicable six-month notice period of whether or not JT
will be exercising either or both of such options prior to its expiration and
if so, when it will exercise such option. In the event that JT does not
exercise the Indication #2 Option or the Indication #3 Option prior to the
expiration of the two-year period following the Agreement Date or their
earlier termination as provided in this Section 6.1, then Gene Logic shall
thereafter be free to grant rights to a Third Party in the areas of
Indication #2 or Indication #3, as applicable.
6.2 Equity Funding Commitment. In consideration for the
Indication #2 Option and the Indication #3 Option, Gene Logic shall have the
right to require JT to purchase $3,000,000 of Gene Logic's Common Stock in a
private placement to close concurrently with Gene Logic's initial public
offering of Common Stock at the price per share in the initial public
offering provided that such initial public offering shall have closed within
[***] from the Agreement Date.
7. Payments and Royalties.
With respect to the Research Program for Indication #1 and, if
the applicable option under Section 6 is exercised by JT, the Research
Programs for Indication #2 and Indication #3, the following provisions shall
apply:
7.1 Research Reimbursement Payments to Gene Logic. The
following payments will be made to Gene Logic to defray research costs
associated with creating the Research Databases and analyzing Samples
pursuant to the Research Plan:
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(a) JT shall pay Gene Logic [***] within 15 days of
the Effective Date for the first year of the Program Term.
(b) JT shall pay Gene Logic [***] in advance for
each subsequent year of the Program Term payable on each anniversary of the
Effective Date. Gene Logic shall issue signed invoices in advance for each
payment due hereunder.
7.2 Research Support.
(a) During the Program Term, JT shall provide Gene Logic
with financial support for the Research Program for Gene Logic's Scientific
FTEs (as documented to the reasonable satisfaction of JT) at a rate of
[***] per Scientific FTE. The FTE payment rate payable pursuant to this
Section 7.2(a) shall be adjusted annually in proportion to the percentage
increase or decrease in the U.S. Consumer Price Index, unless otherwise
agreed upon by the parties in writing. The number of Scientific FTEs for
each year of the Program Term will be set forth in the applicable Research
Plan; provided that such number shall be not less than [***] Scientific FTEs
in any one year period.
(b) Research funding payments shall be made in advance
in four quarterly payments during each year of the Program Term (i.e., on or
before April 1, July 1, October 1 and January 1 of each year for use in the
next quarter). An initial payment will be made within 15 days of the
Effective Date, pro-rated to cover the remainder of such calendar quarter.
The last payment for the Research Program shall be pro-rated to the end of
the Program Term.
(c) If the Research Program is terminated by JT pursuant
to Section 2.6, JT shall continue to provide Gene Logic with financial
support for the terminated Research Program for the number of Scientific FTEs
provided in the then applicable Research Plan as otherwise provided in this
Section 7.2 until the effective date of the termination following the notice
period as provided in Section 2.6; provided, however, that unless JT has
exercised its option to commence another Research Program in addition to the
Research Program to be terminated, such financial support shall be at [***] of
the rate otherwise provided in this Section 7.2 and such support shall be
discontinued at the earlier of (i) the Effective Date of another Research
Program in addition to the terminated Research Program or (ii) the effective
date of the termination of the Research Program following the notice period
as provided in Section 2.6.
(d) Gene Logic shall issue signed invoices in advance
for each payment due hereunder.
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7.3 Gene Target Fees. JT shall pay [***] to Gene Logic
for each Gene Target which JT selects for Further Development pursuant to
Section 2.7. The [***] payment shall be made to Gene Logic prior to
commencement of Further Development using such Gene Target. Gene Logic shall
issue signed invoices in advance for each payment due hereunder.
7.4 Royalties Payable by JT.
(a) JT will pay Gene Logic royalties at the following
rates on Net Sales of each Product:
(i) JT shall pay Gene Logic a [***] royalty on
Net Sales of each Therapeutic Product (other than any Therapeutic Product
which is discovered or whose utility is discovered through the use of a Gene
Logic Assay). JT shall pay Gene Logic a [***] royalty on Net Sales of each
Therapeutic Product which is discovered or whose utility is discovered
through the use of a Gene Logic Assay.
(ii) JT shall pay Gene Logic a [***] royalty on
Net Sales of each Protein Product.
(b) Royalties shall be payable on all Net Sales of any
Product for the period of time commencing on the date such Product is first
sold commercially in any country and ending, on a country-by-country basis,
upon the later of (i) [***] from the date of such first commercial sale
of such Product in such country, or (ii) the expiration of the last to expire
of any Patent Rights covering such Product in such country. JT shall remain
responsible for all royalty payments payable to Gene Logic pursuant to this
Section 7 whether JT or its Affiliates or sublicensees generate Net Sales.
7.5 Currency of Payment. All payments to be made under this
Agreement shall be made in United States dollars in the United States to a
bank account designated by Gene Logic. All amounts payable by JT to Gene
Logic pursuant to this Section 7 shall be non-refundable and non-creditable
against any other payments due under this Agreement. Royalties shall be
determined in the currency of the country in which they are earned and then
converted to its equivalent in United States currency. The buying rates
involved for the currency of the United States into which the currencies
involved are being exchanged shall be the one quoted by The Wall Street
Journal (or, if not available, by Citibank (or its successor in interest) in
New York, New York) at the close of business on the last business day of the
quarterly period in which the royalties were earned to determine any such
conversion.
7.6 Payment and Reporting. The royalties due under Section
7.4 shall be paid quarterly, within two months after the close of each
calendar quarter, or earlier if practicable (i.e., on or before the last day
of each of the months of May, August,
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November and February), immediately following each quarterly period in which
such royalties are earned. All amounts payable to Gene Logic pursuant to
this Agreement shall be made by wire transfer pursuant to the instructions
set forth on Schedule 7.6. With each quarterly payment, the payor shall
furnish the payee a royalty statement (the "Royalty Statement") setting forth
on a country-by-country basis the total number of units of each
royalty-bearing Product sold hereunder for the quarterly period for which the
royalties are due, gross invoices for such Products, the deductions applied
in arriving at Net Sales, and supporting data sufficient to confirm the
accuracy of such calculations.
7.7 Records and Audits. JT shall keep complete and accurate
records pertaining to the development and sale or other disposition of
Products in sufficient detail to permit Gene Logic to confirm the accuracy of
all payments due hereunder for a period consistent with JT's policies in
effect from time to time but in any event not less than five years from the
date of sale of such Product. Gene Logic shall have the right to cause an
independent, certified public accountant reasonably acceptable to JT to audit
such records to confirm Net Sales and royalty and other payments for the
preceding year. Such audits may be exercised during normal business hours
once a year upon at least 30 working days' prior written notice to JT. Gene
Logic shall bear the full cost of such audit unless such audit discloses a
variance of more than 5% from the amount of the Net Sales or royalties or
other payments due under this Agreement. In such case, JT shall bear the full
cost of such audit and Gene Logic shall have the right to audit all prior
years not previously audited to the extent that JT keeps such records
pursuant to this Section 7.7.
8. Milestones for Therapeutic Products and Protein Products.
8.1 Milestones.
(a) JT shall pay Gene Logic the following amounts with
respect to each Therapeutic Product (other than any Therapeutic Product which
is discovered or whose utility is discovered through the use of a Gene Logic
Assay, which shall be subject to Section 8.1(b)) and each Protein Product
with respect to which each stated milestone is achieved, within 30 days
following the achievement of such milestone:
(i) [***] (subject to the limitations [***]
set forth below)
(ii) [***] [***]
(iii) [***] [***]
(iv) [***] [***]
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(v) [***] [***]
With regard to amounts payable pursuant to Section 8.1(a)(i), JT will not be
obligated to pay Gene Logic additional [***] milestone payments for
subsequent [***] (A) for molecules directed at the same Gene Target or (B) in
additional countries or jurisdictions following the [***] of the [***] with
respect to such Product.
(b) JT shall pay Gene Logic the following amounts with
respect to each Therapeutic Product which is discovered or whose utility is
discovered through the use of a Gene Logic Assay with respect to which each
stated milestone is achieved, within 30 days following the achievement of
such milestone:
(i) [***] [***]
(ii) [***] [***]
(iii) [***] [***]
(iv) [***] [***]
(v) [***] [***]
(vi) [***] [***]
With regard to amounts payable pursuant to Section 8.1(b)(ii), JT will not be
obligated to pay Gene Logic additional [***] milestone payments for
subsequent [***] (A) for molecules identified using the same Gene Logic Assay
or (B) in additional countries or jurisdictions following the [***] of the
[***] with respect to such Therapeutic Product.
8.2 Milestone Payments. Milestone payments made under this
Section 8 shall be non-refundable and non-creditable against any other
payments due under this Agreement. Milestone payments made under this
Section 8 shall fund in substantial part the research costs associated with
this Agreement.
8.3 Taxes. All income taxes and taxes in lieu of income
taxes levied on account of the payments made by JT to Gene Logic under this
Agreement (including without limitation milestone and royalty payments) shall
be paid by Gene Logic for its own account. If provision is made in law or
regulation for withholding, such tax shall be deducted from the payments made
by JT to the proper taxing authority and a receipt of payment of the tax
secured and promptly delivered to Gene Logic. Each party agrees to
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CONFIDENTIAL TREATMENT REQUESTED
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assist the other party in claiming exemption from or credit for such
deductions or withholdings under any double taxation or similar agreement or
treaty from time to time in force.
9. Confidentiality and Security.
9.1 Security of Research Databases and Gene Logic
Software. The parties agree that the following additional terms and
conditions apply to the information and data contained in or derived from the
Research Databases that are disclosed and Gene Logic Software that is
provided under the provisions of this Agreement:
(a) JT may use the Research Databases and Gene Logic
Software only for its own internal use in secure work facilities by
authorized personnel and shall not make any copies of any Research Database
or the Gene Logic Software.
(b) JT will be provided with access to the Research
Databases and the Gene Logic Software only through a secure, encrypted link
to Gene Logic's computer system.
(c) JT will promptly notify Gene Logic of any (i) loss,
theft or unauthorized disclosure of information or data derived from a
Research Database or the Gene Logic Software or (ii) unauthorized access to a
Research Database or the Gene Logic Software.
(d) Upon termination of the Research Program as provided
in Section 2.6, JT shall immediately discontinue use of the Research
Databases and the Gene Logic Software and of any information or data derived
from a Research Database (except for Gene Targets that are the subject of
exclusive rights as set forth in Section 5.3), and JT shall (i) cooperate
with Gene Logic to terminate the encrypted link to Gene Logic's computer
system and (ii) promptly deliver to Gene Logic copies of any information and
data derived from a Research Database or the Gene Logic Software.
9.2 Confidentiality.
(a) Except as specifically permitted hereunder, each
party hereby agrees to hold in confidence and not use on behalf of itself or
others all technology, data, samples, technical information,
commercialization, clinical and research strategies, know-how and trade
secrets provided by the other party (the "Disclosing Party") during the
Agreement Term and all data, results and information developed pursuant to
the Collaboration and solely owned by the Disclosing Party or jointly owned
by the parties (collectively the "Confidential Information"), except that the
term "Confidential Information" shall not include:
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(i) information that is or becomes part of the
public domain through no fault of the non-Disclosing Party or its Affiliates;
(ii) information that is obtained after the date
hereof by the non-Disclosing Party or one of its Affiliates from any Third
Party which is lawfully in possession of such Confidential Information and
not in violation of any contractual or legal obligation to the Disclosing
Party with respect to such Confidential Information;
(iii) information that is known to the
non-Disclosing Party or one or more of its Affiliates prior to disclosure by
the Disclosing Party, as evidenced by the non-Disclosing Party's written
records; and
(iv) information that is required to be disclosed to
any governmental authorities or pursuant to any regulatory filings, but only
to the limited extent of such legally required disclosure.
(b) The obligations of this Section 9.2 shall survive
the expiration or termination of this Agreement.
9.3 Permitted Disclosures. Confidential Information may be
disclosed to employees, agents, consultants or sublicensees of the
non-Disclosing Party or its Affiliates, but only to the extent required to
accomplish the purposes of this Agreement and only if the non-Disclosing
Party obtains prior agreement from its employees, agents, consultants and
sublicensees to whom disclosure is to be made to hold in confidence and not
make use of such information for any purpose other than those permitted by
this Agreement. Each party will use at least the same standard of care as it
uses to protect proprietary or confidential information of its own to ensure
that such employees, agents, consultants or sublicensees do not disclose or
make any unauthorized use of the Confidential Information. Notwithstanding
any other provision of this Agreement, each party may disclose the terms of
this Agreement to lenders, investment bankers and other financial
institutions of its choice solely for purposes of financing the business
operations of such party either (i) upon the written consent of the other
party or (ii) if the disclosing party obtains a signed confidentiality
agreement with such financial institution with respect to such information,
upon terms substantially similar to those contained in this Section 9.
9.4 Publication. The parties shall cooperate in appropriate
publication of the results of research and development work performed
pursuant to the Research Programs, but subject to the predominating interest
to obtain patent protection for any patentable subject matter. To this end,
prior to any public disclosure of such results, the party proposing
disclosure shall send the other party a copy of the information to be
disclosed, and shall allow the other party 30 days from the date of receipt
in which to determine
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whether the information to be disclosed contains subject matter for which
patent protection should be sought prior to disclosure, or otherwise contains
Confidential Information of the reviewing party. The party proposing
disclosure shall be free to proceed with the disclosure unless prior to the
expiration of such 30-day period the non-disclosing party notifies the other
party that the disclosure contains subject matter for which patent protection
should be sought or Confidential Information of the non-disclosing party, and
the party proposing publication shall then delay public disclosure of the
information for an additional period to be mutually agreed upon to permit the
preparation and filing of a patent application on the subject matter to be
disclosed or for the parties to determine a mutually acceptable modification
to such publication to protect the Confidential Information of the
non-disclosing party adequately. The party proposing disclosure shall
thereafter be free to publish or disclose the information. The determination
of authorship for any paper shall be in accordance with accepted scientific
practice.
10. Representations And Warranties.
10.1 Legal Authority. Each party represents and warrants to
the other that it has the legal power, authority and right to enter into this
Agreement and to perform its respective obligations set forth herein.
10.2 Valid Rights and Licenses. Each party represents and
warrants that it has authority to grant the rights and licenses set forth in
this Agreement. Gene Logic further represents and warrants to JT that as of
the Agreement Date Gene Logic has not received notice of and there are no
claims pending or, to the best of its knowledge, threatened that Gene Logic's
current Patent Rights covering the Flow-Thru Gene Chip Technology and the
Gene Logic Technology infringe, violate or conflict with the patent rights of
any Third Party or that such Patent Rights are invalid or unenforceable.
10.3 No Conflicts. Each party represents and warrants that as
of the Agreement Date it is not a party to any agreement or arrangement with
any Third Party or under any obligation or restriction, including pursuant to
its Certificate of Incorporation or By-Laws or other charter documents, which
in any way limits or conflicts with its ability to fulfill any of its
obligations under this Agreement.
10.4 Disclaimer. Except as expressly set forth in this
Agreement, EACH PARTY MAKES NO REPRESENTATIONS AND EXTENDS NO WARRANTIES OF
ANY KIND, EITHER EXPRESS OR IMPLIED. THERE ARE NO EXPRESS OR IMPLIED
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR THAT
THE USE OF THE INFORMATION, MATERIALS, SOFTWARE AND OTHER TECHNOLOGY PROVIDED
HEREUNDER WILL NOT INFRINGE ANY PATENT, COPYRIGHT, TRADEMARK,
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OR OTHER RIGHTS OF ANY THIRD PARTY. NEITHER PARTY MAKES ANY WARRANTY OF ANY
KIND AS TO THE PATENTABILITY OF ANY DISCOVERY MADE OR TECHNOLOGY DEVELOPED
UNDER THIS AGREEMENT. EACH PARTY ACKNOWLEDGES THAT THIS AGREEMENT PROVIDES
FOR AN INNOVATIVE PROGRAM UTILIZING NEW TECHNOLOGIES AND THAT NO WARRANTY IS
MADE AS TO THE UTILITY OF ANY INFORMATION, MATERIALS, SOFTWARE OR OTHER
TECHNOLOGY PROVIDED HEREUNDER.
11. Term; termination.
11.1 Term. The term of this Agreement shall commence upon the
Agreement Date and shall expire upon the expiration of all royalty
obligations set forth in Section 7.
11.2 Termination for Breach.
(a) Breach by Gene Logic. If Gene Logic breaches a
material term of this Agreement at any time, and has not cured such breach
within 60 days after written notice thereof from JT, then JT shall have the
right to terminate this Agreement effective upon written notice thereof,
whereupon all rights and obligations of the parties under this Agreement
shall terminate, including JT's commitment to purchase shares of Gene Logic
Common Stock pursuant to Section 6.2 (if such commitment has not already been
satisfied at the time of termination), except as set forth in Section 13.11
and subject to the following: (i) the rights granted to JT under Section 5
shall remain in full force and effect for so long as JT is not in breach of
its obligations to Gene Logic under this Agreement, and (ii) Gene Logic shall
return to JT (A) all Confidential Information of JT and (B) all unprocessed
Samples supplied by JT, including the physical progeny of Samples supplied by
JT, and a copy of data derived from the Samples supplied by JT to the extent
practicable; provided that the rights granted to Gene Logic under Section 5.2
shall remain in full force and effect with respect to data derived from the
Samples supplied by JT which are not practicably separable.
(b) Breach by JT. If JT breaches a material term of
this Agreement at any time, and has not cured such breach within 60 days (or
within 15 days in the event of a material breach by JT of its obligations to
make any payments due) after written notice thereof from Gene Logic, then
Gene Logic shall have the right to terminate this Agreement effective upon
written notice thereof, whereupon all rights and obligations of the parties
under this Agreement shall terminate except as set forth in Section 13.11 and
subject to the following: (i) the rights granted to Gene Logic under Section
5.2 shall remain in full force and effect, (ii) the rights granted to JT
pursuant to Section 5.1 (including all options to extend such rights) and
Section 5.3 shall terminate, (iii) the Indication #3 Option and the
Indication #2 Option granted pursuant to Section 6 shall terminate, and (iv)
JT shall return to Gene Logic all Confidential Information of Gene
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Logic. In the event of an uncured material breach by JT of its obligations
to pay any royalties due and owing with respect to a Product pursuant to
Section 7, if Gene Logic terminates the rights it has granted to JT pursuant
to Section 5 in respect of such Product, at Gene Logic's request, JT shall
grant to Gene Logic an exclusive (even as to JT) worldwide license (with the
right to sublicense) to such Product, to the extent necessary to make, use or
sell such Product subject to payment of a royalty, which shall be mutually
agreed upon by the parties but shall in no event exceed [***], to JT on Net
Sales of such Product, and shall further assign to Gene Logic all Regulatory
Approvals (to the extent permitted by law) in such countries; provided that,
if a dispute arises between the parties relating to the grounds for
termination and/or the applicable royalty rate under this Section 11.2(b) and
such dispute is submitted for resolution through arbitration according to the
terms set forth in Section 12, this sentence shall not apply.
(c) Dispute Relating to Grounds for Termination. If a
dispute arises between the parties relating to the grounds for the
termination under this Section 11.2, the parties agree to hold a meeting,
attended by individuals with decision-making authority, to attempt in good
faith to negotiate a resolution of the dispute. If, within 60 days after
such meeting the parties have not succeeded in negotiating a resolution of
the dispute, then such dispute shall be submitted for resolution through
arbitration, according to the terms set forth in Section 12.
11.3 Effect of Bankruptcy. If, during the Research Term,
either party files a voluntary petition in bankruptcy, is adjudicated a
bankrupt, makes a general assignment for the benefit of creditors, admits in
writing that it is insolvent or fails to discharge within 15 days an
involuntary petition in bankruptcy filed against it, then the Research Term
and the entirety of this Agreement may be immediately terminated by the other
party. In addition, in the event that Gene Logic files a voluntary petition
in bankruptcy, is adjudicated a bankrupt, makes a general assignment for the
benefit of creditors, admits in writing that it is insolvent or fails to
discharge within 15 days an involuntary petition in bankruptcy filed against
it, then the parties hereby acknowledge and agree that JT will have right of
access to the Research Databases, GENE EXPRESS-TM- and the Gene Logic
Software consistent with the terms of this Agreement for purposes of 11
U.S.C. Section 365(n).
11.4 Remedies. In the event of any breach of any provision of
this Agreement, in addition to the termination rights set forth herein, each
party shall have all other rights and remedies at law or equity to enforce
this Agreement.
12. Arbitration.
12.1 Arbitration. Any controversy arising under or related to
this Agreement, and any disputed claim by either party against the other
under this Agreement, excluding
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any dispute relating to patent validity or infringement arising under this
Agreement, shall be settled by arbitration in accordance with the then
existing arbitration rules of the International Chamber of Commerce.
12.2 Procedure. Upon request by either party, arbitration
will be by a Third Party arbitrator mutually agreed upon in writing by Gene
Logic and JT within 30 days of such arbitration request. In any such
arbitration, Gene Logic and JT shall select an arbitrator with relevant
experience in the biopharmaceutical industry. The parties shall be entitled
to all discovery in like manner as determined by the arbitrator. Any
arbitration shall be held in Geneva, Switzerland unless the parties hereto
mutually agree in writing to another place. Judgment upon the award rendered
by the arbitrator shall be final and nonappealable and may be entered in any
court having jurisdiction thereof.
13. General Provisions.
13.1 Mutual Indemnification. Each party agrees to defend,
indemnify and hold harmless the other party and its Affiliates, employees,
agents, officers, directors and permitted from and against any judgments,
settlements, damages, awards, costs (including attorneys' fees and costs) and
other expenses arising out of any claims, actions or other proceedings by a
Third Party (collectively a "Claim") arising out of or resulting from the
development, manufacture, use, promotion, marketing, handling, storage or
sale of any Product, except to the extent that such Claim arises out of or
results from the negligence or misconduct of the party claiming a right of
indemnification under this Section 13.1. In the event either party seeks
indemnification under this Section 13.1, it shall inform the other party of a
Claim as soon as reasonably practicable after it receives notice of the
Claim, shall permit the other party to assume direction and control of the
defense of the Claim (including the right to settle the Claim solely for
monetary consideration), and shall cooperate as requested (at the expense of
the other party) in the defense of the Claim. The obligations set forth in
this Section shall survive the expiration or termination of this Agreement.
13.2 Assignment. This Agreement shall not be assignable by
either party without the prior written consent of the other party, such
consent not to be unreasonably withheld or delayed, except a party may make
such an assignment without the other party's consent to Affiliates or to a
successor to substantially all of the pharmaceutical business of such party,
whether in merger, sale of stock, sale of assets or other transaction;
provided, however, that in the event of such transaction, no intellectual
property rights of any Affiliate or Third Party that is an acquiring party
shall be included in the technology licensed hereunder. This Agreement shall
be binding upon and inure to the benefit of the parties' successors, legal
representatives and assigns.
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13.3 Non-Waiver. The waiver by either of the parties of any
breach of any provision hereof by the other party shall not be construed to
be a waiver of any succeeding breach of such provision or a waiver of the
provision itself.
13.4 Governing Law. This Agreement shall be construed and
interpreted in accordance with the laws of the State of Delaware other than
those provisions governing conflicts of law.
13.5 Partial Invalidity. If and to the extent that any court
or tribunal of competent jurisdiction holds any of the terms or provisions of
this Agreement, or the application thereof to any circumstances, to be
invalid or unenforceable in a final nonappealable order, the parties shall
use their best efforts to reform the portions of this Agreement declared
invalid to realize the intent of the parties as fully as practicable, and the
remainder of this Agreement and the application of such invalid term or
provision to circumstances other than those as to which it is held invalid or
unenforceable shall not be affected thereby, and each of the remaining terms
and provisions of this Agreement shall remain valid and enforceable to the
fullest extent of the law.
13.6 Notice. Any notice to be given to a party under or in
connection with this Agreement shall be in writing and shall be (i)
personally delivered, (ii) delivered by a nationally recognized overnight
courier, (iii) delivered by certified mail, postage prepaid, return receipt
requested or (iv) delivered via facsimile, with receipt confirmed, to the
party at the address set forth below for such party:
To JT: To Gene Logic:
JT Building 2-1, Toranomon 2-chome 10150 Old Columbia Road
Minato-ku, Tokyo 105 Japan Columbia, Maryland 21046
Attn: Vice President Pharmaceutical Attn: President
Business Development
Phone: +81-3-3582-3111 Phone: +1-410-309-3100
Fax: +81-3-5572-1449 Fax: +1-410-309-3111
with a copy to: with a copy to:
Isomi Suzuki, Esq. Frederick T. Muto, Esq.
Koga & Partners Cooley Godward LLP
22-1-401, Toranomon 3-chome 4365 Executive Drive, Suite 1100
Minato-ku, Tokyo 105 Japan San Diego, CA 92121
Phone: +81-3-3578-8681 Phone: +1-619-550-6000
Fax: +81-3-3578-8682 Fax: +1-619-453-3555
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or to such other address as to which the party has given written notice
thereof. Such notices shall be deemed given upon receipt.
13.7 Headings. The headings appearing herein have been
inserted solely for the convenience of the parties hereto and shall not
affect the construction, meaning or interpretation of this Agreement or any
of its terms and conditions.
13.8 Retained Rights. Gene Logic retains all rights to
Biological Therapeutic Products and Diagnostic Products pursuant to Section
4.4(b) or otherwise. Upon the termination of the rights to use a Research
Database, GENE EXPRESS-TM- and Gene Logic Software pursuant to Section 5.1
(including any extension thereof), all rights to all Gene Products and
related information, excluding any Gene Target being pursued in Further
Development by JT, will revert to Gene Logic. JT retains all rights to
Therapeutic Products and Protein Products pursuant to Section 4.4(a) or
otherwise.
13.9 No Implied Licenses or Warranties. No right or license
under any patent application, issued patent, know-how or other proprietary
information is granted or shall be granted by implication. All such rights
or licenses are or shall be granted only as expressly provided in the terms
of this Agreement. Neither party warrants that (i) the Research Program shall
achieve any of the research objectives contemplated by them or (ii) any
clinical or other studies will be successful.
13.10 Force Majeure. No failure or omission by the
parties hereto in the performance of any obligation of this Agreement shall
be deemed a breach of this Agreement nor shall it create any liability if the
same shall arise from any cause or causes beyond the reasonable control of
the affected party, including, but not limited to, the following, which for
purposes of this Agreement shall be regarded as beyond the control of the
party in question: acts of nature; acts or omissions of any government; any
rules, regulations, or orders issued by any governmental authority or by any
officer, department, agency or instrumentality thereof; fire; storm; flood;
earthquake; accident; war; rebellion; insurrection; riot; invasion; strikes;
and labor lockouts; provided that the party so affected shall use its best
efforts to avoid or remove such causes of nonperformance and shall continue
performance hereunder with the utmost dispatch whenever such causes are
removed.
13.11 Survival. Sections 4.1, 4.2, 4.3, 9.2, 10, 11.2
(including the provisions therein that are contemplated to continue following
termination) 12, 13.1, 13.4 and 13.11 shall survive the termination or
expiration of this Agreement.
13.12 Entire Agreement. This Agreement, including the
exhibits and schedules hereto, together with the Share Purchase Agreement of
even date herewith and the exhibits thereto, constitutes the entire
understanding between the parties with respect to
29.
<PAGE>
the subject matter contained herein and supersedes any and all prior
agreements, understandings and arrangements whether oral or written between
the parties relating to the subject matter hereof, except for the
Confidentiality Agreement dated April 23, 1997.
13.13 Amendments. No amendment, change, modification or
alteration of the terms and conditions of this Agreement shall be binding
upon either party unless in writing and signed by the party to be charged.
13.14 Independent Contractors. It is understood that both
parties hereto are independent contractors and are engaged in the operation
of their own respective businesses, and neither party hereto is to be
considered the agent or partner of the other party for any purpose
whatsoever. Neither party has any authority to enter into any contracts or
assume any obligations for the other party or make any warranties or
representations on behalf of the other party.
13.15 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original and all of
which together shall constitute one and the same instrument.
30.
<PAGE>
In Witness Whereof, the parties hereto have caused this
Agreement to be executed by their duly authorized officers as of the date
first above written.
Gene Logic Inc. Japan Tobacco Inc.
By: /s/ Michael J. Brennan By: /s/ Masakazu Kakei
_______________________________ __________________________________
Michael J. Brennan, M.D., Ph.D. Masakazu Kakei
President and Chief Executive Officer Executive Director, Pharmaceutical
Business
Signature Page to Collaboration Agreement
31.
<PAGE>
Exhibit A
Definitions of Indications
The following capitalized terms shall have the meanings indicated for
purposes of this Agreement:
"Indication #1" shall mean [***].
"Indication #2" shall mean [***].
"Indication #3" shall mean [***].
CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
Schedule 1.16
Flow-Thru Gene Chip Technology Patent Rights
[***]
CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
Schedule 1.18
Gene Logic Technology Patent Rights
READS-TM-
[***]
MuST-TM-
[***]
CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
Schedule 2.1
Indication #1 Research Plan Timeline
and
Staff Allocation Plan
[***]
CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
Schedule 3.1
RMC Representatives
JT:
Tatsuji Chuman, Ph.D. Director, Pharmaceutical Frontier Research
Laboratories
Atsushi Mizushima, Ph.D. Deputy General Manager, Biological Research
Laboratories
Yasuo Urata Research Coordinator
Takayuki Naito, Ph.D. Group Leader, Genomic, Pharmaceutical Frontier
Research Laboratories
or
Hitoshi Sasai, Ph.D. Group Leader, Model mouse, Pharmaceutical Frontier
Research Laboratories
Gene Logic:
Keith O. Elliston, Ph.D. Senior Vice President and Chief Scientific Officer
Eric M. Eastman, Ph.D. Vice President, Scientific Operations
Daniel R. Passeri Vice President, Business Development and
Intellectual Property
Greg Lennon Vice President, Genomic Research
<PAGE>
Schedule 4.8
JT Agreements
[***]
CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
Schedule 7.6
Wire Transfer Payment Instructions
[***] [***]
[***] [***]
[***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
[***] [***]
CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
Exhibit 10.27
GENE LOGIC INC.
AND
JAPAN TOBACCO INC.
SHARE PURCHASE AGREEMENT
SEPTEMBER 9, 1997
<PAGE>
Table Of Contents
Page
1. Purchase and Sale of Shares................................... 1
1.1 Grant of Put Option...................................... 1
1.2 Fractional Shares........................................ 2
1.3 Obligation to Purchase Shares and Expiration
of Put Option........................................... 2
2. Closing Date; Delivery........................................ 2
2.1 Closing.................................................. 2
2.2 Delivery................................................. 2
3. Representations And Warranties Of Gene Logic.................. 2
3.1 Organization, Good Standing and Qualification............ 2
3.2 Authorization............................................ 3
3.3 Due Execution............................................ 3
3.4 No Conflict with Other Instruments....................... 3
3.5 Capitalization........................................... 3
3.6 Valid Issuance of Shares................................. 4
3.7 Governmental Consents.................................... 4
4. Representations And Warranties Of JT.......................... 4
4.1 Authorization............................................ 4
4.2 Due Execution............................................ 4
4.3 Investment Representations............................... 4
5. Conditions To Closing......................................... 6
5.1 Conditions to Obligations of JT at Closing............... 6
5.2 Conditions to Obligations of Gene Logic.................. 6
6. Additional Agreements......................................... 7
6.1 Standstill Provision..................................... 7
6.2 Market Stand-Off Provision............................... 7
6.3 Agreement Not To Sell.................................... 8
7. Miscellaneous................................................. 8
7.1 Non-Waiver............................................... 8
7.2 Notices.................................................. 8
7.3 Governing Law............................................ 8
7.4 Dispute Resolution....................................... 8
7.5 Captions................................................. 9
7.6 Entire Agreement and Amendment........................... 9
i
<PAGE>
Table Of Contents
(CONTINUED)
7.7 Assignment............................................... 9
7.8 Partial Invalidity....................................... 9
7.9 Schedule of Exceptions................................... 9
7.10 Finders or Brokers....................................... 9
7.11 Counterparts............................................. 10
ii
<PAGE>
GENE LOGIC INC.
SHARE PURCHASE AGREEMENT
This Share Purchase Agreement (the "Agreement") is made as of September
9, 1997 by and between Gene Logic Inc., a Delaware corporation ("Gene Logic"
or the "Company"), with its principal office at 10150 Old Columbia Road,
Columbia, Maryland 21046 and Japan Tobacco Inc., a Japanese corporation
("JT"), with its principal office at JT Building 2-1, Toranomon 2-chome,
Minato-ku, Tokyo 105 Japan.
Recitals
Whereas, Gene Logic and JT have entered into that certain Drug Target
and Drug Lead Discovery Collaboration Agreement of even date herewith (the
"Collaboration Agreement"); and
Whereas, in connection with, and as a condition of JT entering into, the
Collaboration Agreement, Gene Logic desires an option to sell to JT, and JT
desires to purchase from Gene Logic, shares of Gene Logic's common stock,
having a par value of $.001 (the "Common Stock"), on the terms and subject to
the conditions set forth in this Agreement.
Now, Therefore, in consideration of the foregoing recitals and the
mutual covenants and agreements contained herein, the parties hereto,
intending to be legally bound, do hereby agree as follows:
1. Purchase and Sale of Shares.
1.1 Grant of Put Option. Subject to the terms and conditions hereof,
in consideration for the Indication #2 Option and the Indication #3 Option
granted to JT pursuant to the Collaboration Agreement, Gene Logic shall have
the right (the "Put Option"), but not the obligation, to require JT to
purchase $3,000,000 (the "Total Purchase Price") of Gene Logic's Common Stock
(the "Shares") at the price per share to the public in Gene Logic's initial
public offering of Common Stock (the "Initial Public Offering") in a private
placement transaction occurring concurrently with the Initial Public
Offering. Gene Logic may exercise the Put Option with at least 30 days prior
written notice to JT and solely in connection with the Initial Public
Offering. In the event Gene Logic exercises the Put Option, JT agrees to
purchase at the Closing (as defined below), and Gene Logic agrees to sell and
issue to JT at the Closing, the Shares.
1.
<PAGE>
1.2 Fractional Shares. The number of shares of Common Stock which JT
shall purchase pursuant to this Section 1 shall be equal to the Total
Purchase Price divided by the price per share to the public in the Initial
Public Offering; provided, however, that Gene Logic shall issue no fractional
share and JT shall pay the Total Purchase Price less an amount equal to the
per share price multiplied by such fractional share.
1.3 Obligation to Purchase Shares and Expiration of Put Option. JT
shall be obligated to purchase the Shares from Gene Logic, subject to the
exercise by Gene Logic of the Put Option; provided, however, that the Put
Option shall expire and be of no further force or effect in the event that
the Initial Public Offering has not closed prior to the second anniversary of
the date of this Agreement.
2. Closing Date; Delivery.
2.1 Closing. Subject to the terms of Section 1.1 and Section 5, the
closing of the sale and purchase of Shares under this Agreement (the
"Closing") shall be held at the time and on the date of the closing of the
Initial Public Offering at the offices of Cooley Godward llp, 4365 Executive
Drive, Suite 1100, San Diego, California, or at such other time and place as
Gene Logic and JT may agree.
2.2 Delivery. At the Closing, subject to the terms and conditions
hereof, Gene Logic shall deliver to JT a stock certificate, registered in the
name of JT, representing the Shares dated as of the Closing against payment
of the purchase price therefor by wire transfer, unless other means of
payment shall have been agreed upon by Gene Logic and JT.
3. Representations And Warranties Of Gene Logic.
Subject to and except as disclosed by Gene Logic in the Schedule of
Exceptions provided to JT, Gene Logic hereby represents and warrants to JT as
follows:
3.1 Organization, Good Standing and Qualification. Gene Logic is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. Gene Logic has requisite corporate power and
authority to own, lease and operate its properties and to carry on its
business as now being conducted and as proposed to be conducted. The Company
is duly qualified and is authorized to do business and is in good standing as
a foreign corporation in all jurisdictions in which the nature of its
activities and of its properties (both owned and leased) makes such
qualification necessary, except for those jurisdictions in which failure to
do so would not have a material adverse effect on the Company or its
business.
2.
<PAGE>
3.2 Authorization. All corporate action on the part of Gene Logic, its
officers, directors and stockholders necessary for the authorization,
execution and delivery of this Agreement has been taken. Gene Logic has the
requisite corporate power and authority to execute and deliver this Agreement
and to perform its obligations under the terms of this Agreement. At the
Closing, Gene Logic will have the requisite corporate power to sell the
Shares.
3.3 Due Execution. This Agreement has been duly authorized, executed
and delivered by Gene Logic and, upon due execution and delivery by JT, this
Agreement will be a valid and binding agreement of Gene Logic, enforceable in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally or by equitable principles.
3.4 No Conflict with Other Instruments. The execution, delivery and
performance of this Agreement will not result in any violation of, be in
conflict with, or constitute a default under, with or without the passage of
time or the giving of notice: (a) any provision of Gene Logic's Amended and
Restated Certificate of Incorporation (the "Restated Certificate") or
By-laws; (b) any provision of any judgment, decree or order to which Gene
Logic is a party or by which it is bound; (c) any material contract,
obligation or commitment to which Gene Logic is a party or by which it is
bound; or (d) to Gene Logic's knowledge, any statute, rule or governmental
regulation applicable to Gene Logic.
3.5 Capitalization. The Company has a total authorized capitalization
consisting of Seventeen Million (17,000,000) shares of Common Stock, $0.01
par value per share, of which Six Hundred Ninety-Seven Thousand Seven Hundred
Thirty-Three (697,733) shares are issued and outstanding and Nine Million
Five Hundred Fifty Thousand (9,550,000) shares of preferred stock, $0.01 par
value per share, of which Three Hundred Thirty-Three Thousand Three Hundred
Thirty-Three (333,333) shares are designated as Series A Convertible
Preferred Stock (the "Series A Preferred Stock"), all of which are issued and
outstanding and which shares of Series A Preferred Stock are convertible into
shares of Common Stock on a one-for-one basis, Four Hundred Sixty Two
Thousand Five Hundred (462,500) shares are designated as Series A-1
Convertible Preferred Stock (the "Series A-1 Preferred Stock"), Four Hundred
Twelve Thousand Five Hundred (412,500) of which are issued and outstanding
and which shares of Series A-1 Preferred Stock are convertible into Common
Stock on a one-for-one basis, Four Million One Hundred Fifty-Four Thousand
One Hundred Sixty-Seven (4,154,167) shares are designated as Series B
Convertible Preferred Stock (the "Series B Preferred Stock"), Four Million
Ninety Thousand Nine Hundred Nine (4,090,909) shares of which are issued and
outstanding and which shares of Series B Preferred Stock are convertible into
shares of Common Stock on a one-for-one basis, and Four Million Six Hundred
Thousand (4,600,000) shares are designated as Series C Convertible Preferred
Stock (the "Series C
3.
<PAGE>
Preferred Stock"), of which Four Million Four Hundred Forty-Four Thousand
Four Hundred Forty-Three (4,444,443) shares are issued and outstanding and
which shares of Series C Preferred Stock are convertible into shares of
Common Stock on a one-for-one basis. Other than as set forth in the Schedule
of Exceptions, there are no outstanding options, warrants, rights (including
conversion or preemptive rights and rights of first refusal), proxy or
shareholder agreements, or agreements of any kind for the purchase or
acquisition from the Company of any of its securities. At the Closing, Gene
Logic will update the foregoing capitalization information.
3.6 Valid Issuance of Shares. The Shares, upon the Closing, when
issued, sold and delivered in accordance with the terms hereof for the
consideration set forth herein, will be duly authorized, validly issued,
fully paid and nonassessable and, based in part upon the representations of
JT in this Agreement, will be issued in compliance with all applicable
federal and state securities laws.
3.7 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state, local or provincial governmental authority
on the part of Gene Logic is required in connection with the consummation of
the transactions contemplated by this Agreement, except for notices required
or permitted to be filed with certain state and federal securities
commissions after the Closing, if any, which notices will be filed on a
timely basis.
4. Representations And Warranties Of JT.
JT hereby represents and warrants to Gene Logic as follows:
4.1 Authorization. JT has the requisite corporate power and authority
to execute and deliver this Agreement, to perform its obligations under the
terms of this Agreement and, at the Closing, will have the requisite
corporate power to purchase the Shares.
4.2 Due Execution. This Agreement has been duly authorized, executed
and delivered by JT, and, upon due execution and delivery by Gene Logic, this
Agreement will be a valid and binding agreement of JT, enforceable in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally or by equitable principles.
4.3 Investment Representations.
(a) JT will acquire the Shares for its own account, not as nominee
or agent, for investment and not with a view to, or for resale in connection
with, any distribution or public offering thereof within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"). By executing this
Agreement, JT further represents
4.
<PAGE>
that it does not have any contract, undertaking, agreement or arrangement
with any person to sell, transfer or grant participation to such person or to
any third person, with respect to any of the Shares.
(b) JT understands that (i) the Shares will not be registered
under the Securities Act by reason of a specific exemption therefrom, that
such securities must be held by it indefinitely and that JT must, therefore,
bear the economic risk of such investment indefinitely, unless a subsequent
disposition thereof is registered under the Securities Act or is exempt from
such registration; (ii) each certificate representing the Shares will be
endorsed with the following legends:
(A) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY OTHER SECURITIES
LAWS. SUCH SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED AFTER
SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT COVERING SUCH SECURITIES UNDER THE SECURITIES ACT OF
1933 AND ANY OTHER APPLICABLE SECURITIES LAWS, UNLESS THE HOLDER SHALL HAVE
OBTAINED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION
THAT SUCH REGISTRATION IS NOT REQUIRED."
(B) Any legend required to be placed thereon by Gene Logic's
By-laws or under applicable state securities laws;
(iii) Gene Logic will instruct any transfer agent not to register the
transfer of the Shares (or any portion thereof) unless the conditions
specified in the foregoing legends are satisfied, until such time as a
transfer is made, pursuant to the terms of this Agreement, and in compliance
with Rule 144 or pursuant to a registration statement or, if the opinion of
counsel referred to above is to the further effect that such legend is not
required in order to establish compliance with any provisions of the
Securities Act or this Agreement.
(c) JT has been furnished with all information it considers
necessary or appropriate for deciding whether to purchase the Shares. JT has
been afforded the opportunity to ask questions and receive answers from Gene
Logic regarding the terms and conditions of the offering of the Shares.
(d) JT is an investor in securities of companies in the
development stage and acknowledges that it can bear the economic risk of its
investment and has such knowledge and experience in financial or business
matters that it is capable of evaluating the merits and risks of the
investment in the Shares.
5.
<PAGE>
(e) JT is an "accredited investor" as such term is defined in Rule
501 of the General Rules and Regulations prescribed by the Securities and
Exchange Commission pursuant to the Securities Act, and JT was not formed for
the specific purpose of acquiring the Shares.
5. Conditions To Closing.
5.1 Conditions to Obligations of JT at Closing. JT's obligation to
purchase the Shares at the Closing is subject to the fulfillment to JT's
satisfaction, on or prior to the Closing, of all of the following conditions,
any of which may be waived by JT:
(a) Representations and Warranties True; Performance of
Obligations. The representations and warranties made by Gene Logic in
Section 3 hereof shall be true and correct in all material respects on the
date of the Closing with the same force and effect as if they had been made
on and as of said date; provided, however, that the representations and
warranties shall be modified as required to reflect changes occurring between
the date hereof and the date of the Closing. Gene Logic shall have performed
and complied with all obligations and conditions herein required to be
performed or complied with by it on or prior to the Closing. A certificate
duly executed by an officer of Gene Logic, to the effect of the foregoing,
shall be delivered to JT on the Closing.
(b) Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated at the Closing
and all documents and instruments incident to such transactions shall be
reasonably satisfactory in form and substance to JT, any governmental permits
or approvals necessary to enable JT and Gene Logic to consummate the
transactions contemplated at the Closing (which JT has used good faith and
commercially reasonable efforts to obtain) shall have been obtained, and JT
shall have received all such counterpart originals or certified or other
copies of such documents as they may reasonably request.
5.2 Conditions to Obligations of Gene Logic. Gene Logic's obligation
to issue and sell the Shares at the Closing is subject to the fulfillment to
Gene Logic's satisfaction, on or prior to the Closing of the following
conditions, any of which may be waived by Gene Logic:
(a) Representations and Warranties True; Performance of
Obligations. The representations and warranties made by JT in Section 4
hereof shall be true and correct in all material respects on the date of the
Closing with the same force and effect as if they had been made on and as of
said date; provided, however, that the representations and warranties shall
be modified as required to reflect changes occurring between the date hereof
and the date of the Closing. JT shall have performed and complied
6.
<PAGE>
with all obligations and conditions herein required to be performed or
complied with by it on or prior to the Closing. A certificate duly executed
by an officer of JT, to the effect of the foregoing, shall be delivered to
Gene Logic on the Closing.
(b) Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated at the Closing
and all documents and instruments incident to such transactions shall be
reasonably satisfactory in form and substance to Gene Logic, any governmental
permits or approvals necessary to enable Gene Logic and JT to consummate the
transactions contemplated at the Closing (which Gene Logic has used good
faith and commercially reasonable efforts to obtain) shall have been
obtained, and Gene Logic shall have received all such counterpart originals
or certified or other copies of such documents as they may reasonably request.
(c) Payment of Purchase Price. JT shall have tendered delivery of
the purchase price for the Shares specified in Section 1.1 at the Closing.
6. Additional Agreements.
6.1 Standstill Provision. From and after the date of this Agreement
and until the Collaboration Agreement has expired or been terminated, JT
shall not, and shall cause its affiliates not to, in any manner, singly or as
part of a partnership, limited partnership, syndicate or other "Group"
(within the meaning of Section 13(d)(3) of the Securities and Exchange Act of
1934, as amended), directly or indirectly, acquire, or offer or agree to
acquire, record ownership or beneficial ownership of any shares of Common
Stock of Gene Logic, any securities convertible into or exchangeable for
Common Stock or any other right to acquire Common Stock from Gene Logic or
any other person, without the prior written consent of Gene Logic; provided,
however, that this clause shall not apply to the Shares and any securities
issued with respect to the Shares pursuant to a stock split, stock dividend,
recapitalization or reclassification approved by a disinterested majority of
Gene Logic's Board of Directors.
6.2 Market Stand-Off Provision. JT agrees that, during the period of
duration specified by Gene Logic and an underwriter of Common Stock or other
securities of Gene Logic following the effective date of a registration
statement of Gene Logic filed under the Securities Act, JT shall not, to the
extent requested by Gene Logic, directly or indirectly sell, contract to sell
(including, without limitation, any short sale), grant any option to purchase
or otherwise transfer or dispose of any securities of Gene Logic held by it
at any time during such period. In order to enforce the provisions of this
Section 6.2, Gene Logic may impose stop-transfer instructions with respect to
the securities held by JT that are subject to the foregoing restriction until
the end of such period.
6.3 Agreement Not To Sell. JT agrees that, during the period beginning
on the date of the Closing and ending on the later of (i) completion of the
Research Program (as defined in the Collaboration Agreement), or (ii) the
third anniversary of the date of the
7.
<PAGE>
Closing, but in any event no later than the fifth anniversary of the date of
this Agreement, JT shall not, without the prior written consent of Gene
Logic, directly or indirectly sell, contract to sell (including, without
limitation, any short sale), grant any option to purchase or otherwise
transfer or dispose of any securities of Gene Logic held by it at any time
during such period. In order to enforce the provisions of this Section 6.3,
Gene Logic may impose stop-transfer instructions with respect to the
securities held by JT that are subject to the foregoing restriction until the
end of such period.
7. Miscellaneous.
7.1 Non-Waiver. The waiver by either of the parties of any breach of
any provision hereof by the other party shall not be construed to be a waiver
of any succeeding breach of such provision or a waiver of the provision
itself.
7.2 Notices. All notices, requests, consents and other communications
hereunder shall be in writing, shall be addressed to the receiving party's
address set forth below or to such other address as a party may designate by
notice hereunder, and shall be either (i) delivered by hand, (ii) made by
telex, telecopy or facsimile transmission, (iii) sent by overnight courier,
or (iv) sent by certified mail, return receipt requested, postage prepaid
addressed to Gene Logic or to JT as set forth in the introductory paragraph
of this Agreement or at such other address as Gene Logic or JT may designate.
All notices, requests, consents and other communications hereunder shall be
deemed to have been given (i) if by hand, at the time of the delivery thereof
to the receiving party at the address of such party set forth above, (ii) if
made by telex, telecopy or facsimile transmission, at the time that receipt
thereof has been acknowledged by electronic confirmation or otherwise, (iii)
if sent by overnight courier, on the next business day (or if sent overseas,
on the second business day) following the day such notice is delivered to the
courier service, or (iv) if sent by registered or certified mail, on the 5th
business day (or if sent overseas, on the 10th business day) following the
day such mailing is made.
7.3 Governing Law. This Agreement shall be construed and interpreted
in accordance with the laws of the State of Delaware other than those
provisions governing conflicts of law.
7.4 Dispute Resolution. Any dispute between the parties with respect
to this Agreement shall be resolved in the manner set forth in Section 12 of
the Collaboration Agreement.
7.5 Captions. The captions to the Articles and Sections of this
Agreement are for convenience only, and shall not be deemed of any force or
effect whatsoever in construing this Agreement.
8.
<PAGE>
7.6 Entire Agreement and Amendment. The terms and provisions contained
herein, including the Exhibits hereto, and the Collaboration Agreement,
including the exhibits thereto, constitute the entire agreement between the
parties and shall supersede all previous communications, representations,
agreements or understandings, either oral or written, between the parties
hereto with respect to the subject matter hereof, except for the
Confidentiality Agreement dated April 23, 1997. No amendment, change,
modification or alteration of the terms and conditions of this Agreement
shall be binding upon either party unless in writing and signed by the party
to be charged.
7.7 Assignment. This Agreement shall not be assignable by either party
without the prior written consent of the other party, such consent not to be
unreasonably withheld or delayed, except a party may make such an assignment
without the other party's consent to Affiliates or to a successor to
substantially all of the pharmaceutical business of such party, whether in
merger, sale of stock, sale of assets or other transaction. This Agreement
shall be binding upon and inure to the benefit of the parties' successors,
legal representatives and assigns.
7.8 Partial Invalidity. If and to the extent that any court or
tribunal of competent jurisdiction holds any of the terms or provisions of
this Agreement, or the application thereof to any circumstances, to be
invalid or unenforceable in a final nonappealable order, the parties shall
use their best efforts to reform the portions of this Agreement declared
invalid to realize the intent of the parties as fully as practicable, and the
remainder of this Agreement and the application of such invalid term or
provision to circumstances other than those as to which it is held invalid or
unenforceable shall not be affected thereby, and each of the remaining terms
and provisions of this Agreement shall remain valid and enforceable to the
fullest extent of the law.
7.9 Schedule of Exceptions. Gene Logic may, prior to the Closing, by
notice in accordance with this Agreement, supplement or amend any information
provided in the Schedule of Exceptions attached as Exhibit A hereto.
7.10 Finders or Brokers. JT represents that it has not engaged any
finder or broker in connection with the transactions contemplated hereby.
Gene Logic represents that it has not engaged any finder or broker in
connection with the transactions contemplated hereby. Any fees, commissions
and other payments owing to a financial advisor or advisors in connection
with this Agreement shall be borne solely by the party incurring such fees,
commissions and other payments. Each party hereby agrees to indemnify the
other for any fees, commissions and other payments which may be owing as a
result of such party's breach of its representation made in this Section
7.10.
9.
<PAGE>
7.11 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 only one and the same instrument. Execution and
delivery of this Agreement by exchange of facsimile copies bearing the
facsimile signature of a party hereto shall constitute a valid and binding
execution and delivery of this Agreement by such party. Such facsimile
copies shall constitute enforceable original documents.
10.
<PAGE>
In Witness Whereof, the parties hereto have caused this Agreement to be
executed in duplicate by their duly authorized officers as of the date first
above written.
Gene Logic Inc. Japan Tobacco Inc.
By: /s/ Michael J. Brennan By: /s/ Masakazu Kakei
------------------------------------- -----------------------------
Michael J. Brennan, M.D., Ph.D. Masakazu Kakei
President and Chief Executive Officer Executive Director,
Pharmaceutical Business
<PAGE>
Exhibit 10.28
Confidential Treatment Requested
Under 17 C.F.R. Sections 200.80 (b)(4),
200.83 and 230.406
***Indicates omitted material that is the subject of a confidential treatment
request filed separately with the Commission.
LICENSE AGREEMENT
AGREEMENT effective on the date of the last signature hereon, by and
between YALE UNIVERSITY, a corporation organized and existing under and by
virtue of a charter granted by the general assembly of the Colony and State
of Connecticut and located in New Haven, Connecticut ("YALE"), and Gene
Logic, Inc. a corporation organized and existing under the laws of the State
of Delaware, and with principal offices located at Columbia, MD ("LICENSEE").
WITNESSETH:
WHEREAS, in the course of research conducted under YALE auspices,
Sherman Weissman a faculty member of the YALE School of Medicine and Dr.
Yatindra Prashar, Dr. Girish N. Nallur and Dr. Namadev Baskaran (the four
collectively the "INVENTORS"), have produced inventions entitled [***]; and
[***]; and [***]; and
WHEREAS, pursuant to an assignment by the INVENTORS to YALE of all the
right, title and interest in and to the INVENTIONS and any patents resulting
therefrom, YALE is the owner of the INVENTIONS, subject to rights reserved by
the U.S. government; and
WHEREAS, Licensee wishes to obtain a license to the INVENTIONS and any
patents resulting therefrom, and YALE is willing to grant such a license to
LICENSEE subject to the terms and conditions hereof;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained the parties agree as follows:
Article I Definitions
As used in this Agreement, the following terms shall be defined as set forth
below:
1.1 The "INVENTIONS" shall mean the inventions described in [***],
incorporated herein by reference.
1.2 "LICENSED PATENTS" shall mean any United States or foreign
patent(s) owned, in whole or in part, by YALE during the term of this
Agreement and containing
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CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
claims substantially the same as those of [***] covering the Inventions;
together with any continuations, continuations-in-part, divisional or
substitute patents, any reissues or re-examinations of any such applications
or patents, and any extension of any such patents.
1.3 "LICENSED PRODUCTS" shall mean any products whose manufacture, use
or sale, or any service provided to clients which would, in the absence of
this agreement, infringe a claim of the LICENSED PATENTS.
1.4 "NET SALES" shall mean gross sales of the LICENSED PRODUCTS
invoiced by LICENSEE less delivery or shipping costs if separately invoiced
and less credits or allowances, if any, on account of rejections or returns
of LICENSED PRODUCTS previously sold. LICENSED PRODUCTS shall be deemed to
have been sold when delivered or shipped, invoiced, or when paid for,
whichever is earliest. In the event that LICENSEE shall transfer LICENSED
PRODUCTS to a company owned or controlled by or affiliated with LICENSEE and
such company retransfers the LICENSED PRODUCTS to a third party within one
year of its receipt, then the price charged by the affiliated company to
third parties, shall be included in LICENSEE's gross sales. If such
affiliated company does not retransfer LICENSED PRODUCTS within one year,
then the higher of) the price charged by LICENSEE to such affiliate company
or ii) the average price charged by LICENSEE to third party customers during
such year or in the absence of sales to third party customers, the fair
market price for the LICENSED PRODUCTS, shall be included in LICENSEE's gross
sales. In the event that a LICENSED PRODUCT under the Agreement is sold in a
combination package or kit containing other active products, then NET SALES
or purposes of determining royalty payments on the combination package shall
be calculating by apportionment of the sales price of the package to each of
its components, royalty payments being due on that fraction which is a
LICENSED PRODUCT.
1.5 "EARNED ROYALTIES" means royalties paid or payable by LICENSEE to
YALE.
1.6 "ROYALTY YEAR" shall mean each twelve month period commencing
January 1 and ending December 31 during the term of this Agreement, as
defined in Article III, below. For the first year of this Agreement, the
ROYALTY YEAR shall be the period of time between the signing of the Agreement
and December 31, 1996.
1.7 "QUARTER YEAR" shall mean the three-month periods ending March 31,
June 30, September 30 and December 31 of each Royalty Year.
1.8 "LICENSEE" shall include Gene Logic, Inc. and;
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CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
(a) an organization of which fifty percent (50%) or more Of the
voting stock is controlled or owned directly or indirectly by Gene Logic,
Inc.;
(b) an organization which directly or indirectly owns or controls
fifty percent (50%) or more of the voting stock of Gene Logic, Inc.
(c) an organization, the majority ownership of which is directly
or indirectly common to the majority ownership of Gene Logic Inc.
1.9 SUBLICENSE ROYALTIES shall mean payments made to LICENSEE by any
company to which LICENSEE has given the right to exploit any technology for
the analysis of gene expression or transcription factor identification or to
sell products developed through the utilization of any such technology.
Article II Grant Of License
2.1 YALE hereby grants to LICENSEE, under the LICENSED PATENTS and other
intellectual property rights of YALE, subject to all the terms and conditions
of this Agreement, a non-transferable exclusive worldwide license, with the
right to sublicense, for the term defined by ARTICLE III to make, have made,
use, sell and practice the INVENTION, subject to rights required to be
granted to the U.S. Government.
2.2 YALE shall retain the right to make, use and practice the Invention for
its own non-commercial research purposes. In the event of an invention being
made during the course of research at Yale, exercising this right, Yale shall
promptly notify Licensee. Licensee shall be granted an exclusive option for
a period of ninety days from first notification, in which to negotiate
reasonable terms and conditions from Yale for an exclusive license to the new
invention.
Article III Term Of License
The term of the LICENSE granted hereunder shall commence upon the
signing hereof and shall continue for the life of any applicable patents, and
any license granted hereunder shall expire on a country by country basis when
the last to expire patent in such country expires.
Article IV Royalties
As consideration for the rights granted hereunder, LICENSEE shall make
the following payments to YALE:
4.1 LICENSEE shall pay to YALE:
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(a) an initial fixed royalty of Thirty five Thousand U.S. Dollars
($35,000), within thirty (30) days of the execution of this Agreement. Such
payment shall be separate from and not be credited against any future EARNED
ROYALTIES.
(b) [***] of all [***] paid to Gene Logic, Inc. by collaborators less
payments made to Gene Logic, Inc. to cover research costs related to the
collaboration, provided however that suitable documentation is made available
to YALE to justify the exclusion pursuant to Article VI below.
4.2 In addition, LICENSEE shall pay to YALE EARNED ROYALTIES of NET
SALES of LICENSED PRODUCTS, of [***] of NET SALES; and [***] of SUBLICENSE
ROYALTIES paid to Gene Logic, Inc.
4.3 EARNED ROYALTIES shall be payable by LICENSEE on any LICENSED
PRODUCTS during the period that any LICENSED PATENT remains pending or
effective in any applicable country. In the event that a LICENSED PATENT
lapses or if all of its claims are finally declared invalid by a
non-appealable decision of a court of competent jurisdiction through no fault
or cause of LICENSEE, the obligation to pay royalties under that LICENSED
PATENT shall terminate but this Agreement shall remain in effect as to the
remaining LICENSED PATENTS or claims thereunder.
4.4 Notwithstanding anything else in this Agreement, in the event that
the manufacture, sale or commercialization of a LICENSED PRODUCT requires
LICENSEE'S obtaining rights to or under any third party patents, then the
royalty rates set forth in this Article IV shall be reduced by an amount
equal to the LICENSEE'S payments to any such third parry provided that in no
event shall the royalties to be paid under this Article 1V be reduced to less
than [***] of what they would have been in the absence of the section 4.4.
Article V Payments And Report
5.1 (a) Within thirty (30) days after the end of each QUARTER
YEAR, LICENSEE shall furnish to YALE a written report setting forth the NET
SALES, and the EARNED ROYALTIES payable, accompanied by full payment of such
EARNED ROYALTIES due to Yale under 4.1(a) above.
(b) Within thirty (30) days after the end of each YEAR.
LICENSEE shall furnish to YALE a written report setting forth the NET
REVENUES, research expenditures, accompanied by full payment of such fees due
to Yale under 4.1 (b) above.
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5.2 The reports required by this Article VI shall be certified by an
officer of LICENSEE to be correct to the best of LICENSEE's knowledge and
information. Each report shall be accompanied by LICENSEE's payment of the
full amount due, less any taxes required by a governmental agency to be
withheld therefrom; provided, however, that YALE shall have the right to
contest any such taxes and LICENSEE shall provide reasonable assistance with
respect thereto. All royalties shall be paid to YALE in U.S. dollars, and
in full. in the event that conversion from foreign currency is required in
calculating a royalty payment hereunder, the exchange rate used shall be the
rate in effect at the end of the last business day of the month just prior to
the date payment is required to be made hereunder as published in the Wall
Street Journal. If by law, regulation, or fiscal policy of a particular
country, conversion into United States dollars or transfer of funds of a
convertible currency to the United States is restricted or forbidden,
LICENSEE shall give YALE prompt notice in writing and shall pay the royalty
or other amounts due through such means or methods as are lawful in such
country as YALE may reasonably designate.
5.3 If this Agreement should be terminated at any time other than at
the end of a QUARTER YEAR or ROYALTY YEAR, the last report and payment shall
be made within sixty (60) days after the effective date of such termination,
and shall include any EARNED ROYALTIES prorated to the date of termination.
If the amount of LICENSEE's existing inventory of LICENSED PRODUCTS which had
been manufactured but not sold up to the date of termination exceeds a thirty
(30) day supply, LICENSEE shall provide YALE with a report setting forth the
amount of such inventory at the date of termination, and may elect to
continue to render QUARTER YEAR reports on the sales of such existing
inventory and to make payments as though the Agreement were still in effect;
provided, however, that in any event, LICENSEE shall complete payment of
EARNED ROYALTIES thereon within one year from the effective date of
termination.
Article VI Books And Records
LICENSEE, its affiliates and its Sublicensees shall keep and maintain
complete and accurate records and books of account in sufficient detail and
form so as to enable verification of Earned Royalties payable by LICENSEE
hereunder. Such records and books of account shall be maintained for a period
of no less than three (3) years following the HALF YEAR to which they
pertain. LICENSEE shall permit such records and books of account to be
examined by YALE or YALE's duly appointed agent, to the extent necessary for
Yale to verify the amount of royalties payable. Such examination shall be at
YALE's expense, during normal business hours, and upon ten (10) days' prior
written notice to LICENSEE.
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Article VII Patent Protection
7.1 It is understood as that of the date hereof no patent protection
exists in the United States or any foreign country but only the potential to
realize the same.
7.2 LICENSEE shall be responsible for all costs of prosecution and
maintenance of all U.S. patents and patent applications covering the
INVENTION incurred after the date of this Agreement, including without
limitation attorney's fees, taxes, annuities, working fees, maintenance fees,
and renewal and extension charges, and shall, at YALE's option, either
punctually pay such costs directly or punctually reimburse YALE for such
costs. Any and all such U.S. patent applications and patents resulting
therefrom shall remain the property of YALE.
7.3 LICENSEE at LICENSEE's expense, shall prepare and file foreign
patent applications covering the INVENTION in such foreign countries as are
determined by LICENSEE and agreed to by YALE. Any and all such foreign
patent applications and patents resulting therefrom shall remain the property
of YALE. LICENSEE shall be responsible for all costs of prosecution and
maintenance of all such foreign patents and patent applications, including
without limitation attorney's fees, taxes, annuities, working fees,
maintenance fees, and renewal and extension charges, and shall punctually pay
all such costs directly on behalf of both parties. If LICENSEE does not
agree to bear the expenses of filing patent applications or continuing
prosecution in any foreign countries in which YALE wishes to obtain or
maintain patent protection, then YALE may file and/or prosecute such
application at its own expense, and YALE may terminate LICENSEE's license to
the LICENSED PATENTS in such foreign country or countries.
7.4 All U.S. and foreign patent applications relating to the INVENTION
shall be prepared, prosecuted, filed and maintained by independent patent
counsel chosen and engaged by LICENSEE and approved by YALE. For U.S. patent
applications, LICENSEE shall retain substantive control of and responsibility
for direct prosecution, however no modifications to the original patent
applications may be made without written approval by YALE. For foreign
patent applications, LICENSEE shall have substantive control of and
responsibility for direct prosecution. In any case, YALE and LICENSEE shall
instruct patent counsel to keep both YALE and LICENSEE fully informed of the
progress of all U.S. and foreign patent applications and patents, and to give
the party that is not directing prosecution reasonable opportunity to comment
on the type and scope of useful claims and the nature of supporting
disclosure. YALE will not finally abandon any patent application for which
LICENSEE is bearing expenses without LICENSEE's consent. The party directing
prosecution shall have no liability to the other party for damages, whether
direct, indirect, incidental, consequential or otherwise, allegedly arising
from its good faith decisions, actions and omissions in connection with such
prosecution, except as provided in Article VII.
6
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7.5 LICENSEE shall apply, and shall require sublicensees to apply, the
patent marking notices required by the law of any country where LICENSED
PRODUCTS are made, sold or used, to the extent feasible and practical, and in
accordance with the applicable patent laws of that country.
Article VIII Due Diligence in Commercialization
LICENSEE shall conduct research, development, manufacturing or
sublicense programs, as appropriate, directed toward expeditious
commercialization of technology based on the Invention, and make annual
reports to YALE of progress in these programs, which reports to be held in
confidence by YALE. If in YALE's reasonable judgment taking into account the
normal course of such programs conducted with sound and reasonable business
practices, LICENSEE has failed to conduct such programs for any period of six
months after the Effective Date, YALE may request a plan from LICENSEE
indicating its schedule for reinstituting such a program. If LICENSEE fails
to provide a satisfactory plan to YALE within thirty (30) days, YALE shall
have the right to terminate this Agreement.
Article IX Infringement and Litigation
9.1 LICENSEE shall have the sole obligation to defend the LICENSED
PATENTS against infringement or interference by other parties in any country
in which a LICENSED PATENT is in effect hereunder, including by bringing any
legal action for infringement or defending any counterclaim of invalidity or
action of a third party for declaratory judgment of non-infringement or
interference. LICENSEE may settle any such actions solely at its own expense
and through counsel of its selection; provided, however, that YALE shall be
entitled in each instance to participate through counsel of its selection and
at its own expense. YALE shall have no obligation or responsibility with
respect to any such actions unless legally required to participate, except to
provide reasonable assistance to LICENSEE as requested, and LICENSEE shall
reimburse YALE for YALE's out-of-pocket expenses in connection with any such
requested assistance. LICENSEE shall bear the expenses of such actions and
shall obtain all benefits in the recoveries, if any, whether by judgment,
award, decree or settlement, the excess of such recoveries over such expenses
shall be included in LICENSEE's NET SALES. In the event LICENSEE fails to
initiate and pursue or participate in such legal action, YALE shall have the
right to initiate legal action to uphold the LICENSED PATENTS against third
parties in any country in which a LICENSED PATENT is in effect. LICENSEE
shall have no legal or contractual obligation to YALE for its failure to
initiate or participate in any such legal action, except that YALE may
terminate in such a country any then existing exclusive license granted to
LICENSEE hereunder.
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9.2 Each party shall promptly notify the other in writing in the event
that a third party shall bring a claim of infringement against YALE or
LICENSEE, either in the United States or in any foreign country in which
there is a LICENSED PATENT. If the alleged infringement is so substantial as
to threaten the competitive position of LICENSEE and/or LICENSEE is
temporarily enjoined from exercise of its license hereunder, and if YALE
elects not to defend against such claim and not to obtain a license to permit
LICENSEE to exercise its license free of such claim, then LICENSEE may in its
own name and at its sole expense defend such claim and may compromise, settle
or otherwise pursue such defense in such a manner and on such terms as
LICENSEE shall see fit. YALE, at its own expense and through counsel of its
selection may become a party to such defense and/or settlement and
compromise. In any event, YALE shall have the right to defend, at its own
expense, any such third party claim or action and to settle or compromise the
same in such manner as its shall see fit. LICENSEE may participate in such
litigation or claim on its behalf at its own expense.
9.3 In the event LICENSEE is permanently enjoined from exercising its
license rights granted hereunder pursuant to an infringement action brought
by a third party, or if both LICENSEE and YALE elect not to undertake the
defense or settlement of such a claim of alleged infringement for a period of
six months from notice of such claim or suit, then LICENSEE shall have the
right to terminate this Agreement with respect to the infringing patent
claims following thirty (30) days' written notice to YALE and in accordance
with the terms of Article XI hereof.
Article X Use of Yale's Name
LICENSEE shall not use the name "Yale" or "Yale University" for any
purpose without prior written consent obtained from YALE in each instance.
Article XI Termination
11.1 YALE may terminate this Agreement following thirty (30) days
written notice to LICENSEE in the event LICENSEE:
(i) fails to make, within the sixty (60) day period set by
the notice, any payment which is due and payable pursuant to this Agreement
and has been in arrears for more than one (1) month; or
(ii) commits a material breach of any other obligation of this
Agreement which is not cured (if capable of being cured) within the thirty
(30) day period set by the notice; or
(iii) becomes insolvent or, a petition in bankruptcy is
filed against LICENSEE and is consented to, acquiesced in or remains
undismissed for ninety (90)
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<PAGE>
days; or makes a general assignment for the benefit of creditors, or a
receiver is appointed for LICENSEE, and LICENSEE does not return to solvency
before the expiration of said thirty (30) day period set by the notice; or
(iv) fails to exercise due diligence in bringing the LICENSED
PRODUCTS to market in accordance with Article VIII.
11.2 LICENSEE shall be entitled to terminate this Agreement upon thirty
(30) days advance written notice to YALE, in the event of YALE's material
breach of any of the provisions of this Agreement, which breach is not cured
(if capable of being cured) within the thirty (30) day period set by the
notice, or if the conditions of Section 9.3 apply.
11.3 Upon termination of this Agreement and except as otherwise
expressly provided herein, all licenses granted to LICENSEE under the terms
of this Agreement and, at YALE's option, any Sublicenses granted by LICENSEE,
shall terminate and LICENSEE must return to YALE all materials containing the
INVENTION; provided, however, that LICENSEE shall have the right for one year
thereafter to dispose of all LICENSED PRODUCTS then in its inventory, and
shall pay EARNED ROYALTIES thereon, in accordance with the provisions of
Article IV, as though this Agreement had not terminated.
11.4 Termination of this Agreement shall not affect any rights or
obligations accrued prior to the effective date of such termination and
specifically LICENSEE's obligation to pay all EARNED ROYALTIES specified by
Article IV.
11.5 The rights provided in this Article XI shall be in addition and
without prejudice to any other rights which the parties may have with respect
to any breach or violations of the provisions of this Agreement.
11.6 Waiver by either party of a single default or breach or of a
succession of defaults or breaches shall not deprive such party of any right
to terminate this Agreement pursuant to the terms hereof upon the occasion of
any subsequent default or breach.
Article XII No Warranties; Indemnification; Insurance
12.1 YALE makes no representations or warranties that any LICENSED
PATENT is valid, or that the manufacture, use, sale or other disposal of the
LICENSED PRODUCTS does not infringe upon any patent or other rights not
vested in YALE.
12.2 YALE DISCLAIMS ALL WARRANTIES WHATSOEVER, WITH RESPECT TO THE
LICENSED PATENTS, THE INVENTION, AND THE LICENSED PRODUCTS, EITHER EXPRESS OR
IMPLIED, INCLUDING WARRANTIES AS TO
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THE MERCHANTABILITY OR FITNESS OF THE LICENSED PRODUCTS FOR A PARTICULAR
PURPOSE and LICENSEE shall make no statements, representations or warranties
whatsoever to any third parties which are inconsistent with such disclaimer
by YALE.
12.3 With the exception of infringement claims or actions covered by
ARTICLE IX, LICENSEE shall defend, indemnify and hold harmless YALE, its
fellows, officers, employees, and agents, from and against any and all
claims, demands, damages, losses and expenses of any nature (including
attorney's fees), including, but not limited to death, personal injury,
illness, property damage or products liability arising from or in connection
with any of the following:
(i) the use of LICENSEE of any method or process related to
the LICENSED PATENTS; or
(ii) any use, sale or other disposition on any of the LICENSED
PRODUCTS by LICENSEE and/or other transferees or any statement,
representation or warranty of LICENSEE or other transferees with respect
thereto; or
(iii) the use of the LICENSED PRODUCTS by any person.
YALE shall reasonably cooperate with LICENSEE in defending any such claim.
YALE shall be entitled to receive information regarding the status of any
such matter and shall be entitled to retain counsel on its own behalf and at
its sole expense, in addition to counsel retained by LICENSEE to defend YALE,
if YALE is named party and if YALE is not satisfied with the defense provided
by LICENSEE for any reason.
12.4 Prior to commencement of any human trials of a Licensed Product by
LICENSEE, or any Affiliate or Sublicensee, LICENSEE shall purchase and
maintain in effect or shall require its sublicensees to purchase and maintain
in effect a policy of products liability insurance covering all claims with
respect to any LICENSED PRODUCTS manufactured or sold within the term of any
license granted hereunder, which policy shall i) be in such form and amount
of coverage and written by such company as YALE shall reasonably approve, ii)
provide that such policy is primary and not excess or contributory with
regard to other insurance YALE may have, iii) provide at least 30 days notice
to YALE of cancellation-; and iv) include YALE and YALE's directors, officers
and employees, as additional named insureds. LICENSEE shall furnish a
certificate of such insurance to YALE on or before the date of first sale or
use of any LICENSED PRODUCTS.
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Article XIII Notices
Any notice required by this Agreement shall be sent by Registered or
Certified U.S. Mail, or by telex or cable and shall be deemed delivered if
sent to the following addresses of the respective parties or such other
address as is furnished by proper notice to the other party:
FOR YALE: FOR LICENSEE:
Yale University Dr. Michael Brennan
Dr. Gregory Gardiner, Director Gene Logic Inc.
Office of Cooperative Research 10150 Old Columbia Rd.
246 Church St., Ste 401 Columbia, MD 21046
New Haven, CT 06510
Article XIV Laws and Regulations
LICENSEE shall comply with all foreign and United States federal, state,
and local laws, regulations, rules and orders applicable to the testing,
production, transportation, packaging, labeling, export, sale and use of the
LICENSED PRODUCTS. In particular, LICENSEE shall be responsible for assuring
compliance with all U.S. export laws and regulations applicable to this
license and LICENSEE's activities hereunder.
Article XV Miscellaneous
15.1 Any delays in or failure by either party in performance of any
obligations hereunder shall be excused if and to the extent caused by such
occurrences beyond such party's reasonable control, including but not limited
to such occurrences as acts of God, strikes or other labor disturbances, war,
and other causes which cannot reasonably be controlled by the party who
failed to perform.
15.2 This Agreement may not be amended except by written agreement
signed by both of the parties, and shall not be assigned by LICENSEE except
upon the advance written consent of YALE. This Agreement constitutes the
entire agreement of the parties relating to the subject matter hereof, and
all prior representations and understandings are merged into and superseded
hereby.
15.3 This Agreement shall be governed by and in accordance with the laws
of the state of Connecticut except where the federal laws of the United
States are applicable and have precedence.
15.4 The provisions of this Agreement shall be deemed separable. If any
part of this Agreement is rendered void, invalid, or unenforceable, such
shall not affect the
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validity or enforceability of the remainder of this Agreement unless the part
or parts which are void, invalid or unenforceable shall substantially impair
the value of the entire Agreement as to either party.
15.5 No rights or privileges provided in this Agreement except as
provided in the right to sublicense, may be assigned by LICENSEE to any third
party without the written permission of YALE.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate originals by their duly authorized representatives.
Yale University Gene Logic, Inc.
/s/ Gregory E. Gardiner /s/ Michael Brennan
- - - -------------------------------- --------------------------------
By: Gregory E. Gardiner By: Michael Brennan
----------------------------- -----------------------------
Director of Cooperative Res. Chief Executive Officer
Date: 5/20/96 Date: 5/22/96
--------------------------- ---------------------------
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Exhibit 10.29
Confidential Treatment Requested
Under 17 C.F.R. Sections 200.80 (b)(4),
200.83 and 230.406
*** Indicates omitted material that is the subject of a confidential
treatment request filed separately with the Commission.
AMENDMENT TO LICENSE AGREEMENT
THIS AMENDMENT TO LICENSE AGREEMENT (the "Amendment") is entered into as of
October 1, 1997 by and between YALE UNIVERSITY, a corporation organized and
existing under and by virtue of a charter granted by the general assembly of the
Colony and State of Connecticut and located in New Haven, Connecticut ("Yale"),
and GENE LOGIC INC., a corporation organized and existing under the laws of the
State of Delaware and with principal offices located in Columbia Maryland ("Gene
Logic").
RECITALS
WHEREAS, Yale and Gene Logic entered into that certain License Agreement
dated as of May 22, 1996 (the "Agreement") (capitalized terms used but not
otherwise defined in this Amendment shall have the meanings given such terms in
the Agreement); and
WHEREAS, Yale and Gene Logic wish to amend the Agreement in the manner set
forth herein.
AGREEMENT
NOW THEREFORE, in consideration of the mutual promises hereinafter set
forth, the parties hereto agree as follows:
1. Amendment to Section 1.9. Section 1.9 of the Agreement is hereby amended
and restated in its entirety as follows:
"1.9 "SUBLICENSE ROYALTIES" shall mean payments made to LICENSEE
by any independent third party to which LICENSEE has granted a
sublicense under the LICENSED PATENTS to exploit any technology for the
analysis of gene expression or transcription factor identification or to
make, use or sell LICENSED PRODUCTS.
2. Amendment to Article I to add Section 1.10. Article I of the Agreement
is hereby amended to add a new Section 1.10 as follows:
"1.10 "THIRD PARTY PAYMENTS" shall mean the following payments
made to LICENSEE by any independent third party collaborator for the
performance by LICENSEE of gene expression analysis which would, in the
absence of this Agreement, infringe a claim of the LICENSED PATENTS: (a)
[***]; (b) [***]; (c) [***]; and (d) [***]
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THIRD PARTY PAYMENTS shall not include any of the
following payments: (i) [***]; (ii) [***]; and (iii) [***]. In
no event will THIRD PARTY PAYMENTS be included within [***]."
3. Amendment to Section 4.1. Section 4.1 of the Agreement is hereby amended
and restated in its entirety as follows:
"4.1 (a) LICENSEE shall pay to YALE an initial fixed royalty of
Thirty five Thousand U.S. Dollars ($35,000), within thirty (30) days of
the execution of this Agreement. Such payment shall be separate from and
not be credited against any future EARNED ROYALTIES.
(b) LICENSEE shall pay to YALE an EARNED ROYALTY of [***]
of all THIRD PARTY PAYMENTS made to LICENSEE by independent
third party collaborators for the performance by LICENSEE of gene
expression analysis; provided that, in the event that total royalties
payable by LICENSEE to third parties with respect to the performance of
such gene expression analysis together with the royalty payable to YALE
under this Section 4.1(b) exceed [***] of such THIRD PARTY PAYMENTS,
then the royalty payable to YALE will be reduced by [***] of the amount
of any such royalties paid by LICENSEE to third parties; provided further
that in no event will the royalty payable to YALE under this Section 4.1(b)
be reduced to less than [***].
(c) LICENSEE shall pay to YALE an EARNED ROYALTY of
[***] of all license fees paid to LICENSEE by independent third
party collaborators for access to a database incorporating LICENSED
PRODUCTS; provided that, in the event that total royalties payable by
LICENSEE to third parties with respect to access to such database
together with the royalty payable to YALE under this Section 4.1(c)
exceed [***] of such total license fees, then the royalty
payable to YALE will be reduced by [***] of the amount of
any such royalties paid by LICENSEE to third parties; provided further
that in no event will the royalty payable to YALE under this Section
4.1(c) be reduced to less than [***].
2
CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
4. Full Force and Effect. Except as specifically amended by this Amendment,
the terms and conditions of the Agreement shall remain in full force and effect.
5. Governing Law. This Amendment shall be governed by and in accordance with
the laws of the State of Connecticut except where the federal laws of the United
States are applicable and have precedence.
6. Counterparts. This Amendment may be executed in two 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 on the day and
year first written above.
YALE UNIVERSITY GENE LOGIC INC.
By: /s/ Gregory E. Gardiner By: /s/ Mark D. Gessler
------------------------------- -----------------------------
Name: Gregory E. Gardiner Name: Mark D. Gessler
----------------------------- ---------------------------
Title: Director of Cooperative Res. Title: Senior Vice President,
---------------------------- Corporate Development and
Chief Financial Officer
---------------------------
3
<PAGE>
Exhibit 10.30
Confidential Treatment Requested
Under 17 C.F.R. Sections 200.80 (b)(4),
200.83 and 230.406
***Indicates omitted material that is the subject of a confidential
treatment request filed separately with the Commission.
SOLE COMMERCIAL PATENT LICENSE AGREEMENT
THIS AGREEMENT, made effective on the 15th day of June 1997, by and
between LOCKHEED MARTIN ENERGY RESEARCH CORPORATION (hereinafter "LMER"), a
corporation organized and existing under the laws of the State of Delaware
and whose address for notices is Post Office Box 2009, Oak Ridge, Tennessee
37831-8242, and Gene Logic, Inc., (hereinafter "Licensee"), a corporation
organized and existing under the laws of the State of Delaware and whose
address for notices is 10150 Old Columbia Road, Columbia, Maryland 21046.
W I T N E S S:
A. LMER, pursuant to Contract No. DE-AC05-96OR22464 (hereinafter
"Prime Contract") with the United States Government, as represented by the
Department of Energy (hereinafter "DOE") has developed and/or obtained certain
Proprietary Rights relating to Products and Processes, subject to a
nonexclusive, nontransferable, irrevocable, paid-up license reserved by the DOE
for the United States Government (hereinafter Federal government) and certain
march-in rights and any other conditions of waivers granted by the DOE; and
B. Pursuant to that certain Option Agreement dated February 12, 1997
between Licensee and LMER, LMER has granted Licensee an option to enter into a
Sole Commercial Patent License Agreement to such Proprietary Rights; and
1
<PAGE>
C. Licensee desires to exercise the option granted under the Option
Agreement to obtain sole commercial rights under LMER's Proprietary Rights, as
hereinafter stated.
THEREFORE, in consideration of the foregoing premises, and their
respective covenants, undertakings and agreements contained herein, the parties
hereto agree to be bound as follows:
1. Definitions
1.1 "Proprietary Rights" shall mean LMER's patents and patent applications
listed in Exhibit A attached hereto and hereby incorporated into this Agreement
by reference and all the United States and corresponding foreign patents issuing
from such United States patent applications and corresponding patent
applications filed in foreign jurisdictions including all continuations,
continuations-in-part, substitutions, divisions, reissues, reexaminations and
temporal extensions of any of the foregoing.
1.2 "Products and Processes" shall mean any and all processes used and/or
products manufactured, used, sold, imported, or transferred by Licensee or
"Sublicensee(s)," covered by one or more claims of the Proprietary Rights
licensed hereunder.
1.3 "Net Sales" shall mean the total amounts invoiced to purchasers during the
accounting period in question for Products sold by Licensee less allowances for
returns and exchange of Products, bad debts, insurance, government charges,
discounts, rebates,
2
<PAGE>
commissions, freight, postage, insurance, transportation, and taxes on Products
and Processes. Net Sales in the case of Products used or transferred shall mean
the fair market value of Products as if they were sold to an unrelated third
party in similar quantities.
1.4 "Sublicensee" shall mean any third party to whom Licensee has granted a
sublicense.
1.5 "Sublicensing Revenue" shall mean the amount actually paid to Licensee by a
Sublicensee for the manufacture, use or sale of Products or the use or sale of a
Process, including any license fees, royalties and milestone payments or other
consideration.
2. Grants
2.1 Subject to the terms and conditions of this Agreement, LMER hereby grants to
Licensee the worldwide sole commercial right and license under the Proprietary
Rights to use, sell or offer for sale the Process and to manufacture, use, sell
or offer for sale the Products. This grant includes right to grant sublicenses
to others within the same scope and breadth of Licenseeis grant. Licensee agrees
to provide LMER a copy of each sublicense agreement for LMERis review and
approval of the terms and conditions therein prior to the execution thereof.
Such review and approval shall not be unreasonably withheld or delayed.
3
<PAGE>
2.2 LMER hereby agrees not to grant to any other party right and license to
Proprietary Rights in accordance with the grant hereinabove as long as Licensee
abides by the terms and conditions of this Agreement, unless required to so
grant such right and license in accordance with Federal Statutory or Regulatory
enactments conditioning the waiver of rights to LMER by the DOE, particularly as
set forth in 41 CFR 9-9.109-(6)i; 10 CFR Part 781; or 37 CFR Part 404.
2.3 Licensee agrees that any Products for use or sale in the United States shall
be manufactured substantially in the United States.
2.4 Licensee agrees to affix appropriate markings (for example, "Licensed Patent
Pending", or "Patent Pending, Licensed from Lockheed Martin Energy Research
Corporation") of the applicable LMER Proprietary Rights (and the fact that LMER
was the source of these rights) upon or in association with Licensee's licensed
Products and Processes or services and Licensee agrees to use its best efforts
to follow any guidance concerning marking of its licensed Products and Processes
which LMER may hereafter render and to assure that all those under Licensee's
control also mark the licensed Product or Process appropriately.
3. Royalties And Commercialization Plan
4
<PAGE>
3.1 In consideration of the rights and licenses granted herein, Licensee agrees
to the provisions of Exhibit B1, Exhibit B2 and Exhibit C attached hereto and
hereby incorporated into this Agreement by reference.
3.2 No royalties shall be owing on any Processes used or Products produced for
or under any Federal governmental agency contract pursuant to the DOE
nonexclusive license for Federal governmental purposes but only to the extent
that Licensee can show that the Federal government received a discount on
Product sales which discount is equivalent to or greater than the amount of any
such royalty that would otherwise be due. Any sales for Federal governmental
purposes shall be reported under the Records and Reports Section hereinbelow by
providing: (a) a Federal government contract number; (b) identification of the
Federal government agency; and (c) a description as to how the benefit of the
royalty-free sale was passed onto the Federal government.
3.3 The royalty provisions of Exhibit B shall be offset by any advances made by
Licensee in the Infringement by Third Parties Section hereinbelow.
3.4 Upon termination of this Agreement for any reason whatsoever, any royalties
which are due but have not yet been paid shall be properly reported and paid to
LMER within thirty (30) days of any such termination.
5
<PAGE>
3.5 The Royalty provisions hereunder and in Exhibit B shall terminate upon the
expiration of the Proprietary Rights described in Exhibit A, as may be
applicable to any particular Product or Process.
4. Records and Reports
4.1 Licensee agrees to keep adequate records of Licensee in sufficient detail to
enable royalties and Sublicensing Revenue payable hereunder to be determined and
to provide such records for inspection by authorized representatives of LMER, at
any time, upon reasonable advance notice of at least seventy-two (72) hours,
during regular business hours of Licensee. Licensee agrees that any additional
records of Licensee and Sublicensees, related to sales of Products and
Processes, as LMER may reasonably determine are necessary to verify the above
records, shall also be provided to LMER for inspection.
4.2 Within thirty (30) calendar days after the close of each calendar half-year
during the term of this Agreement (i.e. January 31 and July 31), Licensee will
furnish LMER a written report providing: (a) the aggregate amount of all Net
Sales and Sublicensing Revenues in U.S. Dollars during the preceding calendar
half-year period including sales to any Federal governmental agency under
Section 3.2 hereinabove and the aggregate amount of all non-U.S. Net Sales, and
if none, Licensee will so indicate; (b) the
6
<PAGE>
aggregate amount of royalties due LMER in U.S. Dollars for the preceding
calendar half-year period pursuant to the provisions hereof; and (c) the
aggregate amount of the royalties due LMER in U.S. Dollars payable to the order
of Lockheed Martin Energy Research Corporation pursuant to the report to be
transmitted in accordance with the Notices Section hereinbelow.
4.3 Should Licensee fail to make any payment to LMER within the time period
prescribed for such payment, then the unpaid amount shall bear interest at the
lesser of (i) the rate of one and one-half percent (1.5%) per month or, (ii) the
greatest amount permitted by law, from the date when payment was due until
payment in full, with interest, is made.
5. Technical Assistance
5.1 LMER agrees, upon the written request of Licensee, to use best reasonable
efforts and due diligence to assist Licensee in seeking necessary DOE approvals
for LMER to provide technical assistance to Licensee at LMER facilities under
appropriate agreements. The cost of such technical assistance shall be paid by
the Licensee.
5.2 LMER agrees to permit its employees, within LMER corporate policy guidelines
then in effect and subject to DOE requirements then in effect, to provide
consulting services to Licensee with reference to Licensee's use and commercial
exploitation of the
7
<PAGE>
Proprietary Rights as contemplated herein. Licensee shall make payment directly
to the individual consultant(s) for all such services.
6. Infringement by Third Parties
6.1 Licensee shall give notice of any discovered third party infringement of the
Proprietary Rights to LMER. In the event that LMER does not take appropriate
action to stop or prevent such infringement within ninety (90) days after
receiving such notice and diligently pursue such action, Licensee has the right
to take appropriate action to stop and prevent the infringement, including the
right to file suit.
6.2 In the event that Licensee files suit to stop infringement or defends any
action against the validity of any patent included in the Proprietary Rights,
Licensee shall indemnify and hold LMER harmless against all liability, expense
and costs, including attorneys' fees incurred as a result of any such suit.
6.3 Licensee may, however, apply all such costs as a reduction of any royalties
due and payable to LMER under the terms of this Agreement at such time as
verified bills of costs actually incurred are reported to LMER in accordance
with the Records and Reports Section hereinabove.
6.4 In the event Licensee secures a judgment against any third party infringer,
after accounting for and paying all of Licensee's costs associated with
prosecution of such
8
<PAGE>
action as well as paying LMER for any reduction of royalties pursuant to this
section, Licensee shall pay LMER its royalties as set forth hereinabove on any
balance of proceeds actually received and Licensee shall retain any such
remaining balance of proceeds.
6.5 The parties hereby agree to cooperate with each other in the prosecution of
any such legal actions or settlement actions undertaken under this section and
each will provide to the other all pertinent data in its possession which may be
helpful in the prosecution of such actions; provided, however, that the party in
control of such action shall reimburse the other party for any and all costs and
expenses in providing data and other information necessary to the conduct of the
action.
6.6 The party having filed such action shall be in control of such action and
shall have the right to dispose of such action in whatever reasonable manner it
determines to be the best interest of parties hereto, except that any settlement
which affects or admits issues of patent validity shall require the advance
written approval of LMER.
7. Representations and Warranties
7.1 LMER represents and warrants that Exhibit A contains a complete and accurate
listing of all the Proprietary Rights licensed and that LMER has the right to
grant the rights, licenses, and privileges granted herein.
9
<PAGE>
7.2 LMER represents and warrants that LMER has no knowledge of any claims of
infringement filed against LMER for practicing the Exhibit A Proprietary Rights
anywhere in the world.
7.3 Except as set forth hereinabove, LMER makes NO REPRESENTATIONS AND
WARRANTIES, express or implied, with regard to the infringement of proprietary
rights of any third party.
7.4 Licensee acknowledges that the export of any of the Proprietary Rights from
the United States or the disclosure of any of the Proprietary Rights to a
foreign national may require some form of license from the U.S. Government.
Failure to obtain any required export licenses by Licensee may result in
Licensee subjecting itself to criminal liability under U.S. laws.
8. Disclaimers
8.1 Neither LMER, the DOE, nor any persons acting on their behalf shall be
responsible for any injury to or death of persons or other living things or
damage to or destruction of property or for any other loss, damage, or injury of
any kind whatsoever resulting from Licensee's use or sale of any Process,
Licensee's manufacture, use, sale or import of any Products, or the manufacture,
use, sale or import for Licensee of any Products hereunder.
10
<PAGE>
8.2 EXCEPT AS SET FORTH HEREINABOVE, NEITHER LMER, THE DOE, NOR PERSONS ACTING
ON THEIR BEHALF MAKE ANY WARRANTY, EXPRESS OR IMPLIED: (1) WITH RESPECT TO THE
MERCHANTABILITY, ACCURACY, COMPLETENESS, OR USEFULNESS OF ANY SERVICES,
MATERIALS, OR INFORMATION FURNISHED HEREUNDER; (2) THAT THE USE OF ANY SUCH
SERVICES, MATERIALS, OR INFORMATION WILL NOT INFRINGE PRIVATELY OWNED RIGHTS;
(3) THAT THE SERVICES, MATERIALS, OR INFORMATION FURNISHED HEREUNDER WILL NOT
RESULT IN INJURY OR DAMAGE WHEN USED FOR ANY PURPOSE; OR (4) THAT THE SERVICES,
MATERIALS, OR INFORMATION FURNISHED HEREUNDER WILL ACCOMPLISH THE INTENDED
RESULTS OR ARE SAFE FOR ANY PURPOSE, INCLUDING THE INTENDED OR PARTICULAR
PURPOSE. FURTHERMORE, LMER AND THE DOE HEREBY SPECIFICALLY DISCLAIM ANY AND ALL
WARRANTIES, EXPRESS OR IMPLIED, FOR ANY PROCESSES USED OR SOLD, PRODUCTS
MANUFACTURED, USED, SOLD OR IMPORTED BY, OR PRODUCTS MANUFACTURED, USED, SOLD OR
IMPORTED FOR LICENSEE. NEITHER LMER NOR THE DOE SHALL BE LIABLE FOR
CONSEQUENTIAL OR INCIDENTAL DAMAGES IN ANY EVENT.
11
<PAGE>
8.3 Licensee agrees to indemnify LMER, the DOE, and persons acting on their
behalf for all damages, costs, and expenses, including attorney's fees, arising
from, but not limited to, Licensee's making, using, selling or importing of, or
the making, using, selling or importing on behalf of Licensee Products or
Licenseeis using and selling of Processes, in whatever form furnished hereunder,
except for damages, costs and expenses arising out of LMER's gross negligence or
willful misconduct.
9. Term of Agreement and Early Termination
9.1 This Agreement shall until the expiration of the last to expire of the
Proprietary Rights subject to early termination as set forth hereinbelow and the
terms and conditions set forth in Exhibit B1, Exhibit B2 and Exhibit C attached
hereto and hereby incorporated into this Agreement by reference thereto.
9.2 Either Party shall have the right to terminate this Agreement without
judicial resolution upon notice to the other Party after a breach of any
material provision by the other Party has gone uncorrected for sixty (60) days
after the other Party has been notified in writing of such breach. In the event
of a breach, either Party shall have the right to all remedies available at law.
9.3 This Agreement shall terminate automatically upon the extinguishment of all
of the Exhibit A Proprietary Rights, for any reason.
12
<PAGE>
9.4 Licensee shall provide notice to LMER of its intention to file a voluntary
petition in bankruptcy or of another party's intention to file an involuntary
petition in bankruptcy for Licensee. Licensee's failure to provide such notice
to LMER of such intentions shall be deemed a material, pre-petition, incurable
breach of this Agreement.
9.5 Except in the event of a sale to, or merger with, a party succeeding to
substantially all of the assets of the Licensee which relate to the subject
matter of this Agreement and subject to execution of a substantially similar
copy of this Agreement whereby the succeeding party accepts all terms and
conditions hereof, LMER, at its sole discretion, may immediately terminate this
Agreement upon any attempt by Licensee to transfer its interest, in whole or in
part, in this Agreement to any other party.
9.6 The Parties agree that Licensee, if not then in breach of any portion of
Exhibit B1 or Exhibit B2 of this Agreement, may voluntarily terminate this
Agreement upon sixty (60) days notice to LMER and payment to LMER of a pro
rata share of any minimum royalty due LMER in the year of such termination.
10. Rights of Parties After Termination
10.1 Neither Party shall be relieved of any obligation or liability under this
Agreement arising from any act or omission committed prior to the effective date
of such
13
<PAGE>
termination. The obligations under Paragraphs 3, 8, 10, and shall survive any
expiration or termination of this Agreement.
10.2 From and after any termination of this Agreement, Licensee shall have the
right to sell any Products that Licensee had already manufactured prior to
termination, provided that all royalties and reports required hereinabove shall
be submitted to LMER.
10.3 From and after any termination of this Agreement, Licensee shall not
manufacture nor have manufactured any Products nor sell or use any Process
pursuant to this Agreement.
10.4 The rights and remedies granted herein, and any other rights or remedies
which the parties may have, either at law or in equity, are cumulative and not
exclusive of others. On any termination, Licensee shall duly account to LMER and
transfer to it all rights to which LMER may be entitled under this Agreement.
11. Force Majeure
11.1 No failure or omission by LMER or by Licensee in the performance of any
obligation under this Agreement shall be deemed a breach of this Agreement or
create any liability if the same shall arise from acts of God; acts or omissions
of any government or agency thereof, compliance with rules, regulations, or
orders of any governmental
14
<PAGE>
authority; fire; storm; flood; earthquake; accident; acts of the public enemy;
war; rebellion; insurrection; riot; sabotage; invasion; quarantine; restriction;
strikes; failures or delays in transportation; or inability to obtain materials
due to the aforementioned events.
12. Notices
12.1 All notices and reports shall be addressed to the parties hereto as
follows:
If to LMER:
Business Manager-Technology Transfer Facsimile No.
Lockheed Martin Energy Systems, Inc., (423) 576-9465
Post Office Box 2009 Verify No.
Oak Ridge, Tennessee 37831-8242 (423) 241-2353
If to Licensee:
Mark D. Gessler
Facsimile No. Gene Logic, Inc.
(410) 309-3100 ext 109 10150 Old Columbia Road,
Verify No. Columbia, Maryland 21046
(410) 309-9354
12.2 All minimums or royalty payments due LMER shall be sent to:
Lockheed Martin Energy Research Corporation
Royalty Account
Department 888071
Knoxville, TN 37995-8071
12.3 Any notice, report or any other communication required or permitted to be
given by one Party to the other Party by this Agreement shall be in writing and
either (a) served personally on the other Party, (b) sent by express, registered
or certified first-class
15
<PAGE>
mail, postage prepaid, addressed to the other Party at its address as indicated
above, or to such other address as the addressee shall have previously furnished
to the other Party by proper notice, (c) delivered by commercial courier to the
other Party, or (d) sent by facsimile to the other Party at its facsimile number
indicated above or to such other facsimile number as the Party shall have
previously furnished to the other Party by proper notice, with machine
confirmation of transmission.
13. Non-Abatement of Royalties
13.1 LMER and Licensee acknowledge that certain of the Proprietary Rights may
expire prior to the conclusion of the term of this Agreement; however, LMER and
Licensee agree that the royalty rates provided for hereinabove shall be uniform
and undiminished, except as otherwise provided pursuant to this Agreement.
14. Waivers
14.1 The failure of either Party at any time to enforce any provision of this
Agreement or to exercise any right or remedy shall not be construed to be a
waiver of such provisions or of such rights or remedy or the right of that Party
thereafter to enforce each and every provision, right, or remedy.
16
<PAGE>
15. Modifications
15.1 It is expressly understood and agreed by the parties hereto that this
instrument contains the entire agreement between the parties with respect to the
subject matter hereof and that all prior representations, warranties, or
agreements relating hereto have been merged into this document and are thus
superseded in totality by this Agreement. This Agreement may be amended or
modified only by a written instrument signed by the duly authorized
representatives of both of the parties.
16. Confidentiality
16.1 The Parties agree that during the term of this Agreement and for a period
of three (3) years after it terminates, a Party receiving information of the
other Party, which is marked "confidential," will not disclose such confidential
information to any third party without prior written consent of the disclosing
Party, except to those necessary to enable the Parties to perform under this
Agreement or as may be required by LMER's Prime Contract with the DOE under the
same restrictions as set forth herein.
16.2 A Party shall have no obligations with respect to any portion of such
confidential information of the other Party which:
17
<PAGE>
a) is publicly disclosed through no fault of any Party hereto, either
before or after it becomes known to the receiving Party; or
b) was known to the receiving Party prior to the date of this Agreement
which knowledge was acquired independently and not from the other Party;
or
c) is subsequently disclosed to the receiving Party in good faith by a
third party which has a right to make such a disclosure; or
d) has been published by a third party as a matter of right; or
e) is subsequently independently invented or discovered by the receiving
Party without reference to the other Party's confidential information.
17. Headings
17.1 The headings for the sections set forth in this Agreement are strictly for
the convenience of the parties hereto and shall not be used in any way to
restrict the meaning or interpretation of the substantive language of this
Agreement.
18. Law
18.1 This Agreement shall be construed according to the laws of the State of
Tennessee and the United States of America.
18
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed in their respective names by their duly authorized
representatives.
"LMER"
LOCKHEED MARTIN ENERGY RESEARCH CORPORATION
By: /s/ William R. Martin
--------------------------------------
Name: (typed) William R. Martin
------------------------------------
Title: Vice President, Technology Transfer
------------------------------------
Date: 6/9/97
------------------------------------
"Licensee"
Gene Logic, Inc.
By: /s/ Daniel Passeri
--------------------------------------
Name: Daniel Passeri
------------------------------------
Title: VP, Business Development and Intellectual Property
--------------------------------------------------
Date: 6/10/97
------------------------------------
19
<PAGE>
EXHIBIT A, PROPRIETARY RIGHTS
1. [***]
Inventor: [***]
The following national phase applications are based on [***]
2. [***]
3. [***]
4. [***]
5. [***]
Initials
LMER: /s/ WRM
--------------------------
Date: 6/9/97
--------------------------
Licensee: /s/ DRP
----------------------
Date: 6/10/97
--------------------------
20
CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
EXHIBIT B1, EXECUTION FEE, ROYALTIES AND
MINIMUM ANNUAL ROYALTIES AMOUNTS,
PATENT COST REIMBURSEMENT
1. In consideration of the rights and licenses granted herein, Licensee
agrees to pay LMER [***] of which [***] has already been paid, the remaining
[***] to be paid on the execution of this Agreement. Licensee further agrees
to pay LMER an additional [***] upon [***]
2. The royalty rate shall be [***] of Net Sales of Products. If Licensee's
royalty obligation to all licensors is in excess of [***], then the present
sublicensing royalty rates will be reduced on a proportional basis. The
present royalty rate will not be reduced below [***]. If this provision is
invoked, Licensee agrees to report the following information in addition to
the requirements of Paragraph 4.0 of this Agreement:
1) Names of licensors to whom Licensee has licensing royalty obligations
2) Royalty rates for each, before and after the proportional decrease
referred to above.
3. For Net Sales of Products used in Licensee's in-house drug screening
program the royalty rate shall be [***] of Net Sales of Products
4. The [***] shall be calculated as follows: If, by the [***], the [***],
then Licensee shall [***] within thirty (30) days of said anniversary date.
5. Reimbursement of all fees and costs relating to the filing, prosecution,
and maintenance of the Proprietary Rights after the effective date of this
Agreement shall be the responsibility of Licensee. LMER shall invoice
Licensee for these fees and costs. Licensee agrees to reimburse LMER within
30 days of receipt of invoice.
6. Reimbursement of all fees and costs relating to the filing, prosecution,
and maintenance of the Proprietary Rights which were incurred prior to the
effective date of this Agreement shall be provided by Licensee in the amount
of [***]. Of this amount, [***] will be paid upon execution of this Agreement,
CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
in addition to the execution fee described in Paragraph B1 (1) above. The
remaining amount of [***] will be paid on the three-month anniversary of this
Agreement.
Initials
LMER: /s/ WRM Licensee: /s/ DRP
-------------------------------- ----------------------------
Date: 6/9/97 Date: 6/10/97
-------------------------------- --------------------------------
EXHIBIT B2, SUBLICENSE ROYALTIES
In order to maximize the commercialization of the Products and
Processes and LMER's overall income from this Agreement, for sublicenses
granted to third parties, Licensee agrees to pay LMER a sublicense royalty of
amounting to [***] of the total "Sublicensing Revenue" owed Licensee under
said sublicenses.
If Licensee's sublicensing royalty obligation to all licensors is in
excess of [***], then the present sublicensing royalty rates will be reduced
on a proportional basis. The sublicensing royalty rate will not be reduced
below [***] of Sublicensing Revenue. If this provision is invoked, Licensee
agrees to report the following information in addition to the requirements of
Paragraph 4.0 of this Agreement:
1) Names of licensors to whom Licensee has sublicensing royalty
obligations
2) Sublicensing royalty rates for each, before and after the proportional
decrease referred to above.
Initials
LMER: /s/ WRM
--------------------------
Date: 6/9/97
--------------------------
Licensee: DRP
----------------------
Date: 6/10/97
--------------------------
CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
Exhibit 10.31
Confidential Treatment Requested
Under 17 C.F.R. Sections 200.80(b)(4),
200.83 and 230.406
***Indicates omitted material that is the subject of a confidential
treatment request filed separately with the Commission.
LICENSE AGREEMENT
THIS LICENSE AGREEMENT, dated as of May 30, 1997 (the "Effective Date") is
made by and between GENE LOGIC INC., a Delaware corporation ("GLI"), and DR.
KENNETH L. BEATTIE, an individual ("KB").
WHEREAS, GLI is a gene discovery and bioinformatics company engaged in the
identification of new genes through the analysis of gene expression patterns and
gene regulatory elements using its proprietary high throughput assay
technologies;
WHEREAS, KB, pursuant to that certain Assignment Agreement dated December
20, 1996 by and between KB and the Houston Advanced Research Center, is the
owner of certain Proprietary Rights (as hereinafter defined) and Technical
Information (as hereinafter defined) relating to Arbitrary Sequence
Oligonucleotide Fingerprinting ("ASOF") and Oligonucleotide Attachment Chemistry
("OAC");
WHEREAS, pursuant to that certain License Option Agreement dated March 27,
1997 between GLI and KB (the "Option Agreement"), KB has granted GLI an option
for a license to the Proprietary Rights and Technical Information; and
WHEREAS, GLI wishes to exercise the option granted under the Option
Agreement to obtain a license to the Proprietary Rights and Technical
Information on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth, the parties hereto hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1 "Affiliate" means any corporation or other entity which controls, is
controlled by, or is under common control with, a party to this Agreement. A
corporation or other entity shall be regarded as in control of another
corporation or entity if it owns or directly or indirectly controls more than
50% of the voting stock or other ownership interest of the other corporation or
entity, or if it possesses, directly or indirectly, the power to direct or cause
the direction of the management and policies of the corporation or other entity.
1.2 "ASOF Technology" means the Proprietary Rights and Technical
Information relating to ASOF.
1.
<PAGE>
1.3 "Confidential Information" means any confidential information,
including the Licensed Technology, and any other information relating to any
compound, research project, work in process, future development, scientific,
engineering, manufacturing, marketing, business plan, financial or personnel
matter relating to either party, its present or future products, sales,
suppliers, customers, employees, investors or business, whether in oral,
written, graphic or electronic form.
1.4 "Licensed Technology" means the ASOF Technology and the OAC
Technology.
1.5 "Net Sales" means the gross amounts invoiced for sales of Products by
GLI and its Affiliates less (a) discounts actually granted, (b) credits or
allowances actually granted upon claims, damaged goods, rejections or returns of
Products, including recalls, (c) freight, postage, shipping and insurance
charges actually allowed or paid for delivery of Products, to the extent billed
and (d) taxes, duties or other governmental charges (other than income taxes)
levied on, absorbed or otherwise imposed on sales of Products. Sales of Products
for use in clinical trials prior to receipt of regulatory approval for such
Products shall not be included in Net Sales; provided that Net Sales of Products
used in GLI's in-house drug screening program and/or gene expression analysis
shall mean the amount of the access fee paid to GLI for access to the use of
such program. Transfers of Products among GLI and its Affiliates will not be
considered sales.
1.6 "OAC Technology" means the Proprietary Rights and Technical
Information relating to OAC.
1.7 "Product" means any product or process which uses the ASOF Technology
and/or the OAC Technology.
1.8 "Proprietary Rights" means the information, inventions and/or
discoveries covered by the patents and/or patent applications listed in Exhibit
A hereto, including any improvements thereon and any and all patents issuing
therefrom, owned by or under the control of KB, including, without limitation,
all substitutions, continuations, continuations-in-part, divisions, reissues,
extensions and foreign counterparts of the aforementioned.
1.9 "Sublicensing Revenue" means royalties actually paid to GLI by any
Third Party to whom GLI or any of its Affiliates has sublicensed the Licensed
Technology on sales of Products by such Third Party.
1.10 "Technical Information" means all know-how, trade secrets,
inventions, data, processes, procedures, devices, methods, formulas, protocols
and information, whether or not patentable, which are not covered by the
Proprietary Rights, but which are necessary or useful for the commercial
exploitation of the Proprietary Rights and which
2.
<PAGE>
are owned by or under the control of KB and which KB has the lawful right to
license and disclose.
1.11 "Term" means the period that begins on the Effective Date and ends on
the Termination Date.
1.12 "Termination Date" means the expiration of the last to expire of the
issued patents under the Licensed Technology or, if no patent issues under the
Licensed Technology, 10 years after the date of the first commercial sale of any
Product.
1.13 "Third Party" means any entity other than GLI or KB or an Affiliate
of GLI or KB.
ARTICLE 2
GRANT OF LICENSE
2.1 Grant of License. Subject to the terms and conditions of this
Agreement and during the Term, KB grants GLI and its Affiliates a worldwide,
exclusive license, including the right to grant sublicenses, under the Licensed
Technology to develop, make, have made, use, have used, offer for sale, sell and
import Products. KB shall retain the right to develop, make and use the Licensed
Technology solely for research purposes and shall have no right to sublicense or
transfer the Licensed Technology.
2.2 Sublicenses. GLI shall notify any sublicensee hereunder of all rights
and obligations of GLI under this Agreement sublicensed to such sublicensee.
ARTICLE 3
PAYMENTS; ROYALTIES
3.1 License Fee. In partial consideration for the grant of the licenses
set forth in Article 2 above, GLI agrees to pay KB on the Effective Date a
one-time, non-refundable fee equal to [***].
3.2 Patent Expenses. GLI shall reimburse for reasonable patent costs
incurred in connection with the Licensed Technology prior to the Effective Date
in an amount not to exceed [***] in total. Such reimbursement shall be made to
Houston Advanced Research Center for patent costs incurred on behalf of KB. The
parties acknowledge that GLI has previously reimbursed McGregor & Adler for
[***] of patents costs incurred on behalf of KB pursuant to the Option
Agreement.
3.3 Milestone Payments. Within 30 days after achievement of each of the
milestones set forth below, GLI shall pay to KB a milestone payment for each of
the ASOF Technology and the OAC Technology as set forth below:
3.
CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
Milestone Amount
--------- ------
[***] [***]
[***] [***]
The milestone payments set forth above shall be creditable against
royalties payable by GLI to KB pursuant to Section 3.4.
3.4 Royalties.
(a) GLI shall pay to KB royalties of [***] of Net Sales of each
of Products using ASOF Technology and Products using OAC Technology that are
used in GLI's in-house drug screening program and/or gene expression
analysis. In the event that total royalties payable by GLI to Third Parties
with respect to its in-house drug screening program together with the royalty
payable to KB exceed [***] of Net Sales, then the royalty payable to KB under
this Section 3.4(a) will be reduced by the amount of the royalties paid by
GLI to such Third Parties; provided that in no event shall the royalty
payable to KB under this Section 3.4(a) be reduced to less than [***] for
both such Products together.
(b) GLI shall pay to KB royalties of [***] of Net Sales of each
of Products using ASOF Technology and Products using OAC Technology, other
than such Products used in GLI's in-house drug screening program and/or gene
expression analysis. In the event that total royalties payable by GLI to
Third Parties with respect to such Products together with the royalties
payable to KB exceed [***] of Net Sales, then the royalty payable to KB under
this Section 3.4(b) will be reduced by the amount of the royalties paid by
GLI to such Third Parties; provided that in no event shall the royalty
payable to KB under this Section 3.4(b) be reduced to less than [***] royalty
for both such Products together.
(c) GLI shall pay to KB a royalty of [***] of all Sublicensing
Revenue. In the event that total royalties payable by GLI to Third Parties
with respect to Sublicensing Revenue under a sublicense together with the
royalty payable to KB exceed [***] of such Sublicensing Revenue, then the
royalty payable to KB under this Section 3.4(c) will be reduced by the amount
of the royalties paid by GLI to such Third Parties; provided that in no event
shall the royalty payable to KB under this Section 3.4(c) be reduced to less
than [***].
4.
CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
(d) The obligation to pay royalties hereunder shall terminate upon
the Termination Date.
ARTICLE 4
PAYMENTS; RECORDS; AUDITS
4.1 Payment; Reports. Royalty payments and reports for the sale of
Products shall be calculated and reported for each calendar quarter. All royalty
payments due to KB under this Agreement shall be paid within 60 days of the end
of each calendar quarter, unless otherwise specifically provided herein. Each
payment of royalties shall be accompanied by a report of Net Sales of Products
in sufficient detail to permit confirmation of the accuracy of the royalty
payment made, including, without limitation, the number of Products sold, the
gross sales and Net Sales of Products, the royalties payable in U.S. dollars,
the method used to calculate the royalty, the exchange rates used and any
credits taken against royalties.
4.2 Exchange Rate; Manner and Place of Payment. All payments hereunder
shall be payable in U.S. dollars. With respect to each quarter, for countries
other than the United States, whenever conversion of payments from any foreign
currency shall be required, such conversion shall be made at the rate of
exchange reported in The Wall Street Journal on the last business day of the
applicable reporting period. All payments owed under this Agreement shall be
made by wire transfer, unless otherwise specified by KB.
4.3 Records and Audits. During the Term and for a period of five years
thereafter, GLI shall keep complete and accurate records pertaining to the
development and sale or other disposition of Products in sufficient detail to
permit KB to confirm the accuracy of all payments due hereunder. KB shall have
the right to cause an independent, certified public accountant reasonably
acceptable to GLI to audit such records to confirm Net Sales and royalty and
other payments for the preceding year. Such audits may be exercised during
normal business hours once a year upon at least 30 working days' prior written
notice to GLI. KB shall bear the full cost of such audit unless such audit
discloses an underpayment by more than 5% of the amount of the Net Sales or
royalties or other payments due under this Agreement. In such case, GLI shall
bear the full cost of such audit.
5.
<PAGE>
4.4 Taxes. All turnover and other taxes levied on account of the royalties
and other payments accruing to KB under this Agreement shall be paid by KB for
its own account, including taxes levied thereon as income to KB. If provision is
made in law or regulation for withholding, such tax shall be deducted from the
royalty or other payment made by GLI to the proper taxing authority and a
receipt of payment of the tax secured and promptly delivered to KB. Each party
agrees to assist the other party in claiming exemption from such deductions or
withholdings under any double taxation or similar agreement or treaty from time
to time in force.
4.5 Prohibited Payments. Notwithstanding any other provision of this
Agreement, if GLI is prevented from paying any such royalty by virtue of the
statutes, laws, codes or governmental regulations of the country from which the
payment is to be made, then such royalty may be paid by depositing funds in the
currency in which accrued to KB's account in a bank acceptable to KB in the
country whose currency is involved.
ARTICLE 5
CONFIDENTIALITY
5.1 Confidentiality Obligation. During the Term and for a period of five
years thereafter, each party hereto will maintain in confidence all Confidential
Information disclosed to it by the other party hereto. Neither party will use,
disclose or grant use of such Confidential Information of the other party except
as expressly authorized by this Agreement. Each party may disclose to its
employees, agents and consultants Confidential Information of the other party in
order to accomplish the purposes of this Agreement and will obtain prior
agreement from such employees, agents and consultants to whom disclosure is to
be made to hold in confidence and not make use of such information for any
purposes other than those permitted by this Agreement. Each party will use at
least the same standard of care as it uses to protect its own trade secrets or
proprietary information to ensure that such employees, agents, consultants and
clinical investigators do not disclose or make any unauthorized use of such
Confidential Information. Each party will promptly notify the other upon
discovery of any unauthorized use or disclosure of the Confidential Information.
5.2 Exceptions. The obligations of confidentiality contained in Section
5.1 will not apply to the extent that it can be established by the receiving
party by competent proof that such Confidential Information:
(a) was already known to the receiving party, other than under an
obligation of confidentiality, at the time of disclosure by the other party;
6.
<PAGE>
(b) was generally available to the public or otherwise part of the
public domain at the time of its disclosure by the other party;
(c) became generally available to the public or otherwise part of
the public domain after its disclosure and other than through any act or
omission of the receiving party in breach of this Agreement; or
(d) was disclosed to the receiving party, other than under an
obligation of confidentiality, by a Third Party who had no obligation to the
other party not to disclose such information to others.
5.3 Authorized Disclosure. Each party may disclose the Confidential
Information to the extent such disclosure is reasonably necessary in filing or
prosecuting patent applications, prosecuting or defending litigation or
complying with applicable governmental regulations; provided, however, that if
such party is required to make any such disclosure of the Confidential
Information it will to the extent practicable give reasonable advance notice to
the other party of such disclosure requirement and, except to the extent
inappropriate in the case of patent applications, will use its best efforts to
secure confidential treatment of such information required to be disclosed.
ARTICLE 6
INTELLECTUAL PROPERTY RIGHTS
6.1 Ownership. Ownership of inventions shall be determined in accordance
with the rules of inventorship under United States patent law. GLI shall have
sole ownership of all inventions, discoveries, developments and improvements
conceived of and reduced to practice solely by its employees or agents. KB shall
have sole ownership of all Licensed Technology and all inventions, discoveries,
developments and improvements conceived of and reduced to practice solely by him
unless otherwise agreed to in writing by the parties under any consulting
agreement or proprietary information and inventions agreement or otherwise. The
parties shall own jointly all inventions, discoveries, developments and
improvements conceived of and reduced to practice by both employees or agents of
GLI and KB.
6.2 Application, Prosecution and Maintenance of Patent Rights. From and
after the Effective Date, GLI shall, at its expense, have responsibility for
filing, prosecuting and maintaining patents and/or patent applications worldwide
for those inventions within the Proprietary Rights. GLI will keep KB advised of
the status of the filing, prosecution, maintenance, enforcement and defense of
the Proprietary Rights and GLI's overall patent strategy with respect to the
Proprietary Rights.
7.
<PAGE>
6.3 Cooperation of the Parties. KB agrees to cooperate fully in the
preparation, filing, and prosecution of any Proprietary Rights under this
Agreement. In the event that GLI is unable for any reason to secure KB's
signature to any lawful and necessary documents required to apply for, obtain or
maintain any patent or patent application within the Proprietary Rights, KB
hereby irrevocably designates and appoints GLI and its duly authorized officers
and agents, as his agents and attorneys-in-fact to act for and in his behalf and
instead of himself to execute and file any such document and to do all other
lawfully permitted acts to apply for, obtain and maintain any such patents and
patent applications with the same legal force and effect as if executed by KB.
6.4 Infringement by Third Parties. GLI and KB shall promptly notify the
other in writing of any alleged or threatened infringement of any Proprietary
Rights of which they become aware. Both parties shall use their best efforts in
cooperating with each other to terminate such infringement without litigation.
GLI shall have the first right to bring and control any action or proceeding
with respect to such infringement, at its own expense and by counsel of its own
choice, and KB shall have the right, at its own expense, to be represented in
such action by counsel of its own choice. If GLI fails to bring an action or
proceeding within (a) 60 days following the notice of alleged infringement or
(b) 10 days before the time limit, if any, set forth in the appropriate laws and
regulations for the filing of such actions, whichever comes first, KB shall have
the right to bring and control any such action at its own expense and by counsel
of its own choice, and GLI shall have the right, at its own expense, to be
represented in any such action by counsel of its own choice. In the event a
party brings an infringement action, the other party shall cooperate fully,
including if required to bring such action, the furnishing of a power of
attorney. Neither party shall have the right to settle any patent infringement
litigation under this Section 6.4 in a manner that diminishes the rights or
interests of the other party without the consent of such other party. Except as
otherwise agreed to by the parties as part of a cost sharing arrangement, any
recovery realized as a result of such litigation, after reimbursement of any
litigation expenses of GLI and KB, shall belong to the party who brought the
action.
6.5 Infringement of Third Party Rights. GLI and KB shall promptly notify
the other in writing of any allegation by a Third Party that the activity of
either of the parties under this Agreement infringes or may infringe the
intellectual property rights of such Third Party. GLI shall have the first right
to control any defense of such claim at its own expense and by counsel of its
own choice, and KB shall have the right, at its own expense, to be represented
in any such action by counsel of its own choice. If GLI fails to proceed in a
timely fashion with regard to such defense, KB shall have the right to control
any such defense of such claim at its own expense and by counsel of its own
choice, and GLI shall have the right, at its own expense, to be represented in
any such action by counsel of its own choice. Neither party shall have the right
to settle any patent
8.
<PAGE>
infringement litigation under this Section 6.5 in a manner that diminishes the
rights or interests of the other party without the consent of such other party.
6.6 Publication. During the term of this Agreement, KB and GLI each
acknowledge the other party's interest in publishing certain of its results to
obtain recognition within the scientific community and to advance the state of
scientific knowledge. Each party also recognizes the mutual interest in
obtaining valid patent protection and maintaining as confidential any
non-patentable methods which would have commercial value when undisclosed.
Consequently, either party, its employees or consultants wishing to make a
publication (including any oral disclosure made without obligation of
confidentiality) relating to the Licensed Technology or the Proprietary Rights
(the "Publishing Party") shall transmit to the other party (the "Reviewing
Party") a copy of the proposed written publication at least 60 days prior to
submission for publication, or an outline of such oral disclosure at least 30
days prior to presentation. The Reviewing Party shall have the right (a) to
propose modifications to the publication for patent protection of trade secret
or other reasons and (b) to request a delay in publication in order to protect
patentable information. If the Reviewing Party requests such a delay, the
Publishing Party shall delay submission or presentation of the publication for a
period of 90 days to enable patent applications protecting each party's rights
in such information to be filed. If the Reviewing Party reasonably claims that
such information, whether or not patentable, may have significant commercial
value and can be maintained as a trade secret, the Publishing Party shall
publish or disclose only such information which would not adversely affect such
commercial value. Upon the expiration of 60 days or 30 days from transmission to
the Reviewing Party, the Publishing Party shall be free to proceed with the
written publication or the presentation, respectively, unless the Reviewing
Party has requested the delay described above.
ARTICLE 7
REPRESENTATIONS, WARRANTIES AND COVENANTS
7.1 Corporate Power. GLI hereby represents and warrants that it is duly
organized and validly existing under the laws of the state of its incorporation
and has full corporate power and authority to enter into this Agreement and to
carry out the provisions hereof.
7.2 Due Authorization. Each party hereby represents and warrants that such
party is duly authorized to execute and deliver this Agreement and to perform
its obligations hereunder.
7.3 Binding Agreement. Each party hereby represents and warrants that this
Agreement is a legal and valid obligation binding upon it and is enforceable in
accordance with its terms. The execution, delivery and performance of this
Agreement
9.
<PAGE>
by such party does not conflict with any agreement, instrument or understanding,
oral or written, to which it is a party or by which it may be bound, nor violate
any law or regulation of any court, governmental body or administrative or other
agency having authority over it.
7.4 Ownership of Proprietary Rights. KB represents and warrants that (a)
he is the holder of all right, title and interest in and to the Proprietary
Rights, (b) he has not granted any license under the Proprietary Rights and is
under no obligation to grant any such license except to GLI, and (c) there are
no outstanding liens, encumbrances, agreements or understandings of any kind,
either written, oral or implied, regarding the Proprietary Rights which are
inconsistent or in conflict with this Agreement.
7.5 Patent Proceedings. KB represents and warrants that, to the best of
his knowledge, no patent application within the Proprietary Rights is the
subject of any pending interference, opposition, cancellation or other protest
proceeding.
7.6 Disclaimer of Warranties. Neither party guarantees the safety or
usefulness of the Licensed Technology or any Product. EXCEPT AS EXPRESSLY SET
FORTH IN THIS AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATION OR WARRANTY TO
THE OTHER PARTY OF ANY NATURE, EXPRESS OR IMPLIED, INCLUDING, WITHOUT
LIMITATION, ANY WARRANTY OF NONINFRINGEMENT, MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
7.7 Indemnification. GLI hereby agrees to save, defend and hold KB from
and against any and all suits, claims, actions demands, liabilities, expenses
and losses, including reasonable legal expense and attorneys' fees ("Losses")
arising directly or indirectly out of the practice by GLI of the license granted
hereunder, except to the extent such Losses result from the gross negligence or
the willful misconduct of KB. In the event KB seeks indemnification under this
Section 7.7, KB shall inform GLI of a claim as soon as reasonably practicable
after KB receives notice of the claim, shall permit GLI to assume direction and
control of the defense of the claim (including the right to settle the claim
solely for monetary consideration), and shall cooperate as requested (at the
expense of GLI) in the defense of the claim.
ARTICLE 8
TERM; TERMINATION
8.1 Term. The term of this Agreement (the "Term") shall begin on the
Effective Date and shall end on the Termination Date, unless otherwise
terminated in accordance with the terms of this Agreement, or unless extended by
mutual agreement of the parties. Following the expiration of this Agreement in
accordance with this
10.
<PAGE>
Section 8.1, GLI shall have a license on the same terms as set forth in Section
2.1, except that the license shall be a non-exclusive, fully paid, irrevocable
license.
8.2 Termination. Either party may terminate this Agreement prior to the
expiration of the Term upon the occurrence of any of the following:
(a) Upon or after the bankruptcy, insolvency, dissolution or winding
up of the other party (other than dissolution or winding up for the purposes of
reconstruction or amalgamation); or
(b) Upon or after the breach of any material provision of this
Agreement by the other party if the breaching party has not cured such breach
within 60 days after written notice thereof by the other party.
8.3 Termination by GLI. GLI may terminate this Agreement, with or without
cause, upon three months prior written notice following the one year anniversary
of the Effective Date.
8.4 Effect of Termination. Upon any termination of this Agreement by KB
pursuant to Section 8.2 or by GLI pursuant to Section 8.3, all rights to the
Licensed Technology will revert to KB. Upon any termination of this Agreement by
GLI pursuant to Section 8.2, the license granted under Section 2.1 shall remain
in effect so long as GLI does not breach its obligations to KB under this
Agreement. Expiration or termination of this Agreement shall not relieve the
parties of any obligation accruing prior to such expiration or termination.
Notwithstanding any termination, the provisions of Section 4.3, Article 5,
Section 6.1, Article 7, Section 8.4 and Articles 9 and 10 shall survive
termination or expiration of this Agreement.
ARTICLE 9
DISPUTE RESOLUTION
9.1 Disputes. The parties recognize that disputes as to certain matters
may from time to time arise which relate to either party's rights and/or
obligations hereunder. It is the objective of the parties to establish
procedures to facilitate the resolution of such disputes in an expedient manner
by mutual cooperation and without resort to litigation. To accomplish this
objective, the parties agree to follow the procedures set forth in this Article
9 if and when such a dispute arises between the parties.
9.2 Procedure. If a dispute arises between the parties relating to the
interpretation or performance of this Agreement or the grounds for the
termination thereof, and the parties cannot resolve the dispute within 30 days
of a written request by either party to the other, the parties agree to hold a
meeting, attended by individuals with decision-making authority regarding the
dispute, to attempt in good faith to negotiate a
11.
<PAGE>
resolution of the dispute prior to pursuing other available remedies. If, within
30 days after such meeting, the parties have not succeeded in negotiating a
resolution of the dispute, such dispute shall be submitted to final and binding
arbitration under the then current commercial rules and regulations of the
American Arbitration Association ("AAA") relating to voluntary arbitrations in
Baltimore, Maryland. The arbitration shall be conducted by one arbitrator, who
is knowledgeable in the subject matter at issue in the dispute and who will be
selected by mutual agreement of the parties or, failing such agreement, shall be
selected in accordance with the AAA rules. Each party shall initially bear its
own costs and legal fees associated with such arbitration. The prevailing party
in any such arbitration shall be entitled to recover from the other party the
reasonable attorneys' fees, costs and expenses incurred by such prevailing party
in connection with such arbitration. The decision of the arbitrator shall be
final and may be sued on or enforced by the party in whose favor it runs in any
court of competent jurisdiction at the option of the successful party. The
rights and obligations of the parties to arbitrate any dispute relating to the
interpretation or performance of this Agreement, or the grounds for the
termination thereof, shall survive the expiration or termination of this
Agreement for any reason.
ARTICLE 10
MISCELLANEOUS
10.1 Force Majeure. Neither party shall be held liable or responsible to
the other party nor be deemed to have defaulted under or breached this Agreement
for failure or delay in fulfilling or performing any term of this Agreement when
such failure or delay is caused by or results from causes beyond the reasonable
control of the affected party, including, but not limited to fire, floods,
embargoes, war, acts of war (whether war be declared or not), insurrections,
riots, civil commotions, strikes, lockouts or other labor disturbances, acts of
God or acts, omissions or delays in acting by any governmental authority or the
other party.
10.2 Assignment. This Agreement may not be assigned or otherwise
transferred, nor, except as expressly provided hereunder, may any right or
obligations hereunder be assigned or transferred, by either party without the
written consent of the other party; provided, however, that either party may,
without such consent, assign this Agreement and its rights and obligations
hereunder (a) in connection with the transfer or sale of all or substantially
all of its business, if such assets include substantially all of the assets
relating to its performance of its respective obligations hereunder, (b) to a
wholly owned subsidiary or (c) in the event of its merger or consolidation with
another company at any time during the term of this Agreement. Any purported
assignment in violation of this Section 10.2 shall be void. The rights and
obligations of the parties under this Agreement will be binding upon the heirs,
successors and permitted assigns of the parties and the name of a party
appearing herein will be deemed to include the names of such
12.
<PAGE>
party's successors and permitted assigns to the extent necessary to carry out
the intent of this Agreement.
10.3 Publicity. The parties agree that neither party will originate any
press release or other public announcement, written or oral, or otherwise make
any disclosure relating to the existence or terms of or performance under this
Agreement without the prior written approval of the other party, except as may
otherwise be required by law.
10.4 Severability. Both parties hereby expressly agree and contract that
it is the intention of neither party to violate any public policy, statutory or
common laws, rules, regulations, treaty or decision of any government agency or
executive body thereof of any country or community or association of countries.
Should one or several provisions of the Agreement be or become invalid or
unenforceable by reason of such a violation, then the parties hereto shall
substitute, by mutual consent, valid provisions for such invalid provisions,
which valid provisions in their economic effect come so close to the invalid
provisions that it can be reasonably assumed that the parties would have
contracted this Agreement with those new provisions. In case such provisions
cannot be found, the invalidity of one or several provisions of the Agreement
shall not affect the validity of the Agreement as a whole, unless the invalid
provisions are of such essential importance for this Agreement that it is to be
reasonably assumed that the parties would not have contracted this Agreement
without the invalid provisions.
10.5 Notices. Any notices or communications provided for in this Agreement
to be made by either of the parties to the other shall be in writing and
delivered personally or sent by United States mail, registered or certified,
postage paid, by overnight delivery service such as FedEx or UPS or by
facsimile, with confirmation of receipt, addressed as follows:
If to GLI: GENE LOGIC INC.
10150 Old Columbia Road
Columbia, MD 21046
Attn: Mark D. Gessler
Fax No. (410) 309-3111
If to KB: Dr. Kenneth L. Beattie
2 Hollymead Drive
The Woodlands, TX 77381
Fax No. (281) 292-3019
13.
<PAGE>
Either party may by like notice specify or change an address to which
notices and communications shall thereafter be sent. Notices sent by facsimile
shall be effective upon confirmation of receipt, notices sent by mail or
overnight delivery service shall be effective upon receipt, and notices given
personally shall be effective when delivered.
10.6 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to its choice
of law provisions, and any applicable laws of the United States.
10.7 Entire Agreement. This Agreement, including the exhibit hereto,
contains the entire understanding of the parties with respect to the subject
matter hereof. All express or implied agreements and understandings, either oral
or written, heretofore made are expressly merged in and made a part of this
Agreement. This Agreement may be amended, or any term hereof modified, only by a
written instrument duly executed by both parties hereto.
10.8 Headings. The captions contained in this Agreement are not a part of
this Agreement, but are merely guides or labels to assist in locating and
reading the several Articles hereof.
10.9 Independent Contractors. It is expressly agreed that KB and GLI shall
be independent contractors and that the relationship between the two parties
shall not constitute a partnership, joint venture or agency of any kind. Neither
party shall have the authority to make any statements, representations or
commitments of any kind, or to take any action, which shall be binding on the
other, without the prior written authorization of the other party to do so.
10.10 Waiver. The waiver by either party hereto of any right hereunder or
the failure to perform or of a breach by the other party shall not be deemed a
waiver of any other right hereunder or of any other breach or failure by said
other party whether of a similar nature or otherwise.
10.11 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
14.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this License Agreement as of the
date first set forth above.
GENE LOGIC INC. DR. KENNETH L. BEATTIE
By: /s/ Michael J. Brennan /s/ Kenneth L. Beattie
------------------------------- --------------------------------
Name: Michael J. Brennan
-----------------------------
Title: President and CEO
----------------------------
<PAGE>
EXHIBIT A
Proprietary Rights
All subject matter disclosed and/or claimed in [***].
CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
Exhibit 11.1
Statement Re Computation of Per Share Earnings
<TABLE>
<CAPTION>
12/31/94 12/31/95 6/30/96 12/31/96 6/30/97
---------- ------------ ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Common..................................... 100,000 214,274 488,529 572,337 637,733
Average Preferred A........................ 266,666 314,703 333,333 333,333 333,333
Total outstanding.......................... 266,666 333,333 333,333 333,333 333,333
Average Preferred A-1...................... -- 161,002 412,500 412,500 412,500
Total outstanding.......................... -- 412,500 412,500 412,500 412,500
Average Preferred B........................ -- -- 1,675,825 2,647,712 3,636,364
Total outstanding.......................... -- -- 3,465,910 3,636,364 3,636,364
Stock options.............................. 312,184 312,184 312,184 312,184 312,184
Warrants................................... 20,606 20,606 20,606 20,606 20,606
Preferred B shares......................... 454,545 454,545 454,545 454,545 454,545
Common shares
100,000 214,274 488,529 572,337 637,733
Common shares, including warrants and
options
887,335 1,001,609 1,275,865 1,359,672 1,425,068
Pro forma, including common, preferred,
warrants and options
1,154,001 1,477,314 3,697,523 4,753,217 5,807,265
- - - -----------------------------------------------------------------------------------------------------------------
Net Income................................. $ (90,404) $ (744,179) $ (859,370) $ (2,875,072) $ (2,815,480)
Accretion.................................. -- 897 157,736 492,075 367,708
---------- ------------ ----------- ------------- -------------
Adjusted................................... (90,404) (745,076) (1,017,106) (3,367,147) (3,183,188)
Weighted shares............................ $ 887,335 $ 1,001,609 $ 1,275,865 $ 1,359,672 $ 1,425,068
Net loss/share............................. $ (0.10) $ (0.74) $ (0.80) $ (2.48) $ (2.23)
---------- ------------ ----------- ------------- -------------
---------- ------------ ----------- ------------- -------------
- - - ----------------------------------------------------------------------------------------------------------------
Pro Forma
Net Income................................. $ (90,404) $ (744,179) $ (859,370) $ (2,875,072) $ (2,815,480)
Weighted shares............................ 1,154,001 1,477,314 3,697,523 4,753,217 5,807,265
Net loss/share............................. $ (0.08) $ (0.50) $ (0.23) $ (0.60) $ (0.48)
---------- ------------ ----------- ------------- -------------
---------- ------------ ----------- ------------- -------------
- - - ----------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
Exhibit 23.1
[ARTHUR ANDERSEN LLP LETTERHEAD]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports and to all references to our Firm included in or made a part of this
Registration Statement.
/s/ Arthur Andersen LLP
Baltimore, Maryland,
October 6, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1996 JUN-30-1997
<CASH> 1,137 4,900
<SECURITIES> 4,534 200
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 5,785 5,478
<PP&E> 1,823 2,585
<DEPRECIATION> (65) (288)
<TOTAL-ASSETS> 7,817 8,210
<CURRENT-LIABILITIES> 1,195 3,644
<BONDS> 0 0
10,481 10,849
0 0
<COMMON> 7 6
<OTHER-SE> (4,206) (7,380)
<TOTAL-LIABILITY-AND-EQUITY> 7,817 (7,374)
<SALES> 0 0
<TOTAL-REVENUES> 0 167
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 1,747 1,837
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (3,096) (3,923)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (2,875) (2,831)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (2,875) (2,815)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
