<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______________TO _______________.
COMMISSION FILE NUMBER 0-23317
GENE LOGIC INC.
(Exact name of registrant as specified in its charter)
DELAWARE 06-1411336
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
708 QUINCE ORCHARD ROAD
GAITHERSBURG, MARYLAND 20878
(Address of principal executive offices)
(301) 987-1700
(Registrant's phone number, including area code)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS) AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS: : YES [X] NO [ ]
The number of shares outstanding of the Registrant's Common Stock, $.01 par
value, was 25,449,991 as of April 30, 2000.
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GENE LOGIC INC.
TABLE OF CONTENTS
<TABLE>
<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at March 31, 2000 and December 31, 1999............. 3
Consolidated Statements of Operations for the Three Months Ended
March 31, 2000 and 1999................................................ 4
Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 2000 and 1999................................................ 5
Notes to Consolidated Financial Statements...................................... 6
Item 2. Management's Discussion and Analysis
of Results of Operations and Financial Condition....................... 9
Item 3. Quantitative and Qualitative Disclosure About Market Risk.............. 13
PART II OTHER INFORMATION
Item 1. Legal Proceedings...................................................... 13
Item 2. Changes in Securities and Use of Proceeds.............................. 14
Item 3. Defaults Upon Senior Securities........................................ 14
Item 4. Submission of Matters to a Vote of Security Holders.................... 14
Item 5. Other Information...................................................... 14
Item 6. Exhibits and Reports on Form 8-K....................................... 15
Signatures...................................................................... 16
</TABLE>
2.
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PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GENE LOGIC INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT NUMBER OF SHARES AND PAR VALUE)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
--------- ---------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents ................................................. $ 257,496 $ 5,294
Marketable securities available-for-sale .................................. -- 7,152
Due from collaborators .................................................... 5,396 3,549
Inventory ................................................................. 1,388 1,735
Prepaid expenses .......................................................... 1,024 822
Other current assets ...................................................... 1,261 1,335
--------- ---------
Total Current Assets .................................................. 266,565 19,887
Property and Equipment, net .................................................... 10,475 10,527
Long-term Investment ........................................................... 1,000 1,000
Notes Receivable from Employee ................................................. 113 735
Goodwill, net .................................................................. 5,344 5,725
Intangible and Other Assets, net ............................................... 4,070 3,292
--------- ---------
Total Assets .......................................................... $ 287,567 $ 41,166
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable ......................................................... $ 2,806 $ 4,506
Accrued expenses ......................................................... 3,833 2,759
Current portion of capital lease obligation .............................. 67 192
Current portion of long-term debt ........................................ 1,346 1,335
Deferred revenue ......................................................... 7,609 5,672
--------- ---------
Total Current Liabilities ............................................ 15,661 14,464
Capital Lease Obligation ....................................................... -- 201
Long-Term Debt ................................................................. 2,618 2,862
Other Noncurrent Liabilities ................................................... 584 571
--------- ---------
Total Liabilities ................................................. 18,863 18,098
--------- ---------
Commitments and Contingencies
Stockholders' Equity:
Preferred Stock, $.01 par value; 10,000,000 shares authorized; no shares
issued and outstanding as of March 31, 2000 and December 31, 1999 ....... -- --
Common Stock, $.01 par value; 60,000,000 shares authorized; 25,441,239 and
20,005,688 shares issued and outstanding as of March 31, 2000 and
December 31, 1999, respectively ......................................... 254 200
Additional paid-in capital ............................................... 353,685 103,497
Deferred compensation on stock options, net .............................. (2,113) (2,488)
Accumulated other comprehensive loss ..................................... -- (3)
Accumulated deficit ...................................................... (83,122) (78,138)
--------- ---------
Total Stockholders' Equity ............................................ 268,704 23,068
--------- ---------
Total Liabilities and Stockholders' Equity ............................ $ 287,567 $ 41,166
========= =========
</TABLE>
See accompanying notes.
3.
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GENE LOGIC INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
2000 1999
-------- --------
<S> <C> <C>
Revenues .......................................... $ 4,998 $ 4,067
Expenses:
Research and development ........................ 8,479 7,031
Selling, general and administrative ............. 3,379 1,773
Amortization of goodwill ........................ 381 381
-------- --------
Total expenses ............................. 12,239 9,185
-------- --------
Loss from operations ....................... (7,241) (5,118)
Interest income, net .............................. 2,357 239
Other income (expense) ............................ -- 30
-------- --------
Loss Before Income Tax Expense ............. (4,884) (4,849)
Income tax expense ................................ 100 100
-------- --------
Net Loss ................................... $ (4,984) $ (4,949)
======== ========
Basic and Diluted Net Loss Per Common Share ....... $ (0.21) $ (0.25)
======== ========
Shares Used In Computing Basic and Diluted Net Loss
Per Common Share ............................... 23,498 19,710
======== ========
</TABLE>
See accompanying notes.
4.
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GENE LOGIC INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------------
2000 1999
--------- ---------
<S> <C> <C>
Cash Flows From Operating Activities:
Net loss ................................................. $ (4,984) $ (4,949)
Adjustments to reconcile net loss to net cash flows from
operating activities:
Depreciation and amortization ......................... 1,037 707
Amortization of goodwill .............................. 381 381
Amortization of deferred compensation ................. 375 375
Other non-cash expense ................................ 73 --
Changes in operating assets and liabilities:
Due from collaborators ................................ (1,847) 751
Inventory ............................................. 347 --
Prepaid expenses ...................................... (202) (130)
Other current assets .................................. 74 (155)
Intangibles and other assets .......................... (898) (225)
Accounts payable ...................................... (1,700) 397
Accrued expenses ...................................... 1,074 (1,582)
Accrued restructuring ................................. -- (96)
Deferred revenue ...................................... 1,937 1,304
Other noncurrent liabilities .......................... 13 22
--------- ---------
Net Cash Flows From Operating Activities ......... (4,320) (3,200)
--------- ---------
Cash Flows From Investing Activities:
Purchases of property and equipment .................... (1,152) (876)
Decrease in notes receivables from employees ........... 622 --
Proceeds from sale and maturity of marketable securities
available-for-sale ................................... 7,155 --
--------- ---------
Net Cash Flows From Investing Activities ......... 6,625 (876)
--------- ---------
Cash Flows From Financing Activities:
Proceeds from public offering ......................... 262,080 --
Issuance costs of public offering ..................... (14,624) --
Proceeds from issuance of common stock ................ 2,713 189
Repayments of financing agreement ..................... -- (48)
Repayments of capital lease obligations and
equipment loans .................................... (272) (320)
--------- ---------
Net Cash Flows From Financing Activities ......... 249,897 (179)
--------- ---------
Net Increase (Decrease) in Cash and Cash Equivalents ..... 252,202 (4,255)
Cash and Cash Equivalents, beginning of period ........... 5,294 16,191
--------- ---------
Cash and Cash Equivalents, end of period ................. $ 257,496 $ 11,936
========= =========
Supplemental Disclosure:
Interest expense paid ................................. $ 91 $ 112
========= =========
Non-Cash Transaction:
Capital lease termination.............................. $ 288 $ -
========= =========
</TABLE>
See accompanying notes.
5.
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GENE LOGIC INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(UNAUDITED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The unaudited consolidated financial statements include the accounts of
Gene Logic Inc. and its wholly owned subsidiary (the "Company"). The
accompanying unaudited consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. The consolidated balance sheet as of March 31, 2000, consolidated
statements of operations for the three months ended March 31, 2000 and 1999 and
the consolidated statements of cash flows for the three months ended March 31,
2000 and 1999 are unaudited, but include all adjustments (consisting of normal
recurring adjustments) which the Company considers necessary for a fair
presentation of the financial position, operating results and cash flows for the
periods presented. Although the Company believes that the disclosures in these
financial statements are adequate to make the information presented not
misleading, certain information and footnote information normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and regulations
of the Securities and Exchange Commission.
Results for any interim period are not necessarily indicative of
results for any future interim period or for the entire year. The accompanying
unaudited consolidated financial statements should be read in conjunction with
the financial statements and notes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1999.
Comprehensive Loss
The Company accounts for comprehensive loss as prescribed by Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
("SFAS No. 130"). Comprehensive income is the total net income (loss) plus all
changes in equity during the period except those changes resulting from
investment by owners and distribution to owners. The Company's other
comprehensive loss includes unrealized holding gains (losses) from marketable
securities available-for-sale for the three months ended March 31, 2000 and 1999
as follows:
<TABLE>
<CAPTION>
MARCH 31,
----------------------
2000 1999
------- -------
(in thousands)
<S> <C> <C>
Net Loss ............................................ $(4,984) $(4,949)
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on marketable securities 3 (17)
------- -------
Total other comprehensive income (loss) ........ 3 (17)
------- -------
Comprehensive Loss .................................. $(4,981) $(4,966)
======= =======
</TABLE>
6.
<PAGE> 7
Marketable Securities Available-for-Sale
All marketable securities are classified as available-for-sale.
Available-for-sale securities are carried at fair value with accumulated
unrealized gains and losses reported as a separate component of stockholders'
equity in the accompanying consolidated balance sheets. Realized gains and
losses and declines in value judged to be other than temporary for
available-for-sale securities are included in other income.
Goodwill
Goodwill, from the acquisition of Oncormed, Inc. ("Oncormed") in
September 1998, represents the excess of the purchase price over the fair market
value of the net assets acquired. Goodwill is being amortized over five years at
a rate of approximately $1.5 million per year. Amortization expense was $0.4
million for the three months ended March 31, 2000 and 1999. Accumulated
amortization of goodwill was $2.3 million and $1.9 million as of March 31, 2000
and December 31, 1999, respectively.
Revenue Recognition
Technology and database access fees are recognized evenly over the term
of the Company's collaboration agreements. Revenues from research and
development support are recognized when they are earned which is ordinarily when
the work is performed or costs are incurred. Milestone payments are recognized
as revenue in accordance with the applicable performance requirements and
contractual terms. Subscription fees to the GeneExpress(TM) database suite are
recognized evenly over the term of the subscription. Revenues for such amounts
are deferred until earned.
Nonrefundable upfront payments received for the value of data
purchased, transferred technology or other contractual rights that are not
contingent upon future performance under the terms of the collaboration
agreements are recognized as revenue when earned. Under collaboration agreements
in which the Company creates a research database in exchange for a fixed fee,
revenues from such collaborations are recognized on the percentage-of-completion
method.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, Revenue Recognition in Financial Statements ("SAB
101"). SAB 101 is based upon existing accounting rules and provides guidance on
how those rules should be applied. SAB 101 specifically addresses revenue
recognition for nonrefundable upfront fees in the biotechnology industry. Should
a change in accounting policy be necessary, the change would be reported as a
cumulative effect adjustment with resulting deferred revenue being recognized in
future periods over the remaining terms of the agreements. The Company will
adopt SAB 101 for the second quarter of fiscal 2000 and is currently evaluating
the effect the implementation of SAB 101 will have on its results of operations
and financial position.
7.
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NOTE 2. STOCKHOLDERS EQUITY
On February 1, 2000, the Company completed a public offering of its
common stock at $56.00 per share. The Company sold 4,680,000 shares, including
the underwriters' over-allotment option. Net proceeds to the Company, after
deducting the underwriting discounts and commissions and offering expenses, were
approximately $247.5 million.
NOTE 3. LITIGATION:
On October 19, 1999, a lawsuit was filed in the Circuit Court of Cook
County, Illinois against Oncormed, Inc. and Gene Logic Inc. alleging that
Oncormed was negligent in determining and reporting laboratory test results of
a genetic test conducted by Oncormed. Oncormed sold its testing business to a
third-party company prior to our acquisition of Oncormed. We are not engaged in
any type of genetic testing, nor do we have plans to enter such markets. We
maintain insurance coverage against such claims, and do not believe this action
will have a material adverse impact on our business, financial condition or
results of operations.
In December 1999, Incyte Pharmaceuticals, Inc. ("Incyte") filed an action
against the Company in the United States District Court for the Northern
District of California, Case No. C99-5180 MJJ. In the action, Incyte asserts
claims against the Company for infringement of certain patent rights held by
Incyte. The alleged infringement involves the Company's use of a process that
Affymetrix, Inc. recommends be used in preparation of samples for use with
the Affymetrix GeneChip(R). The Company intends to defend its position
vigorously. There can be no guarantee that such defense will be successful and
neither the ultimate outcome nor the range of any losses resulting from this
action can be made at this time. This action will continue to
require significant management time and expense for the foreseeable future.
NOTE 4. SEGMENT INFORMATION
At December 31, 1998, the Company adopted Statement of Financial
Accounting Standards No. 131, "Disclosure about Segments of an Enterprise and
Related Information" ("SFAS No. 131"). SFAS No. 131 establishes standards for
reporting information about operating segments in annual and interim financial
statements and related disclosures about its products, services geographic areas
and major customers. The Company's operations are treated as one operating
segment.
The following is a breakdown of revenue by major collaborators
exceeding ten percent (10%) of such revenues and by geographic areas:
<TABLE>
<CAPTION>
MAJOR COLLABORATORS GEOGRAPHIC AREA
--------------------------------- --------------------------
A B C D JAPAN EUROPE US
----- ------ ------ ----- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
For the three months ended:
March 31, 2000....................... 38% 22% -- 11% 38% 11% 22%
March 31, 1999....................... 38% 26% 16% 14% 38% 30% 26%
</TABLE>
8.
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
This Report on Form 10-Q contains forward-looking statements that involve
risks and uncertainties. We generally use words such as "anticipate,"
"estimate," "plans," "projects," "continuing," "ongoing," "expects," "management
believes," "we believe," "we intend" and similar expressions to indicate when we
are making forward-looking statements. You should not place undue reliance on
these forward-looking statements. The forward-looking statements speak only as
of the date on which they are made, and we undertake no obligation to update any
forward-looking statement. Forward-looking statements include statements about
the performance and utility of our products, the timing and availability of
products under development, the ability of our customers to develop products
identified using our products, the adequacy of capital resources and other
expectations, plans, objectives, assumptions or future events. These statements
involve estimates, assumptions and uncertainties that could cause actual results
to differ materially from those expressed in this Report on Form 10-Q. These
risks and uncertainties include, but are not limited to, the extent of
utilization of genomic information by the pharmaceutical and biotechnology
industries in both research and development, our ability to retain existing and
obtain additional database customers, risks relating to the development of
genomic database products and their use by existing and potential customers, the
impact of technological advances and competition, our ability to enforce our
intellectual property rights, and the impact of the intellectual property rights
of others, as well as other risks and uncertainties included in our Annual
Report on Form 10-K for the year ended December 31, 1999 filed with the
Securities and Exchange Commission.
GeneExpress(TM) and Flow-thru Chip(TM) are our trademarks. GeneChip(R)
is a registered trademark of Affymetrix, Inc.
OVERVIEW
We were incorporated in September 1994 and have devoted substantially
all of our resources to the development of our genomics technologies,
bioinformatics systems and database products for use in pharmaceutical,
diagnostic and agricultural product research and development. Our current
customers include American Home Products Corp.'s Wyeth-Ayerst Research unit,
Aventis, Aventis CropScience, Fujisawa Pharmaceutical Co., Ltd., Japan Tobacco
Inc., Merck & Co., Inc., N.V. Organon, a unit of Akzo Nobel NV, NeuralStem
Biopharmaceuticals, Ltd., PE Biosystems, Pfizer Inc., Procter & Gamble
Pharmaceuticals, Inc., Schering-Plough Corporation's Schering-Plough Research
Institute, SmithKline Beecham PLC, Therapeutic Genomics, Inc. and UCB Research
Inc., a division of UCB Pharma.
Since 1997, we have developed custom gene expression databases designed
for each of our customers' internal programs and needs and targeted to specific
therapeutic areas of interest, including heart failure, kidney disease,
osteoporosis, psychiatric disorders and other major illnesses. Building on this
know-how, in March 1999, we began developing our GeneExpress database suite of
reference gene expression information. The GeneExpress databases contain
information from a broad range of normal and diseased human tissues, tissues
from experimental animals, human and animal cell lines and tissues that have
been treated with many different drugs. We completed development of the first
commercial version of the GeneExpress database suite in November 1999. We
currently market GeneExpress through nonexclusive subscriptions to customers in
the pharmaceutical, biotechnology and diagnostic industries, and are developing
versions of the database suite to market to the academic and government life
science research community and to physicians and patients. We sold our first
GeneExpress subscription in December 1999.
Customers for our custom database and related software products can
provide us with various combinations of recurring technology and database access
fees, research fees, certain additional payments upon the attainment of research
and product development milestones, royalty payments based on sales of any
products resulting from their use of our products, and nonrefundable upfront
payments all of which are recognized as revenue in accordance with relevant
generally accepted accounting principles.
9.
<PAGE> 10
Subscribers to our GeneExpress database suite pay us varying database
subscription fees depending upon the level and type of information they obtain.
Technology and database access fees are recognized evenly over the term
of each customer agreement. We recognize revenues from research and development
support when they are earned which is ordinarily when the work is performed or
costs are incurred. Milestone payments and royalties are recognized when they
are earned in accordance with the applicable performance requirements and
contractual terms. Subscription fees to the GeneExpress database suite are
recognized evenly over the term of the subscription. Revenues for such amounts
are deferred until earned. Nonrefundable upfront payments received for the value
of data purchased, transferred technology or other contractual rights that are
not contingent upon future performance under the terms of the agreements are
recognized as revenue when earned. Under collaboration agreements in which we
create research databases in exchange for fixed fees, revenues from such
collaborations are recognized on the percentage-of-completion method.
Our future profitability will depend in part on the successful
establishment of agreements with additional customers which include various
combinations of genomic databases, bioinformatics software and genomics
technology and the successful commercialization of our GeneExpress database
suite. Payments for access to custom databases and the GeneExpress database
suite are expected to be our primary source of revenue for the foreseeable
future. We have not received, and do not expect to receive, significant royalty
or other revenues from development and commercialization of products by our
customers using our databases and other technology for several years, if at all.
Revenues from our customers may be subject to significant fluctuation in both
timing and amount, and, therefore, our results of operations for any period may
not be comparable to the results of operations for any other period.
We have incurred operating losses in each year since our inception. At
March 31, 2000, we had accumulated operating losses of approximately $83.1
million. Our losses have resulted principally from costs incurred in the
development of our gene expression databases, a $35.2 million non-recurring
charge incurred in connection with our acquisition of Oncormed and general and
administrative costs associated with our operations. These costs have exceeded
our revenues which, to date, have been generated principally from agreements for
our custom database and related software products. We expect to incur additional
operating losses in future years.
RESULTS OF OPERATIONS
Three Months Ended March 31, 2000 and March 31, 1999
Revenues increased $0.9 million or twenty-three percent (23%) to $5.0
million for the three months ended March 31, 2000 from $4.1 million for the same
period in 1999. The increase in revenues resulted primarily from our sale of
subscriptions to the GeneExpress database suite as well as the addition of new
custom database customers. Payments from each of Aventis CropScience, Japan
Tobacco and Procter & Gamble accounted for 10% or more of revenues for the three
months ended March 31, 2000, and payments from each of Aventis CropScience,
Japan Tobacco, Organon and Procter & Gamble accounted for 10% or more of
revenues for the same period in 1999. In March 2000, we entered into a series of
agreements with NeuralStem that resulted in the purchase, by NeuralStem, of a
module of the GeneExpress database, and we did not recognize any revenue from
such sale in the three months ended March 31, 2000. We expect to record revenue
in future periods over the term of the agreements with NeuralStem.
Research and development expenses increased to $8.5 million for the
three months ended March 31, 2000 from $7.0 million for the same period in 1999.
The increase in research and development expenses was primarily attributable to
an approximate increase of $1.3 million in laboratory supplies relating to our
efforts in building our GeneExpress database suite which started in 1999, and
expansion of our custom database business to accommodate new and expanded
relationships with customers. We expect research and development expenses to
increase as we expand our
10.
<PAGE> 11
GeneExpress database suite, maintain new and expanding custom database
development programs, and further develop the Flow-thru Chip.
Selling, general and administrative expenses increased to $3.4 million
for the three months ended March 31, 2000 from $1.8 million for the same period
in 1999. These costs include the costs of corporate operations, finance and
accounting, human resources, sales and marketing and other general operations.
Approximately $1.0 million of the increase in selling, general and
administrative expenses was attributable to increases in personnel expenses,
recruiting costs and employee travel related to the expansion of our sales and
marketing efforts and general business operations. We expect that selling,
general and administrative expenses will increase as we expand our product
offerings and sales and marketing efforts.
Amortization of goodwill was $0.4 million for the three months ended
March 31, 2000 and 1999 as a result of the acquisition of Oncormed in September
1998.
Net interest income increased to $2.4 million for the three months
ended March 31, 2000 from $0.2 million for the same period in 1999 primarily due
to investment of the proceeds of our public offering of common stock in February
2000.
LIQUIDITY AND CAPITAL RESOURCES
From inception through March 31, 2000, we financed our operations
through the sale of equity securities, payments under agreements with customers,
and equipment and tenant improvement financing. In February 2000, we completed a
public offering of 4,680,000 shares of our common stock (including exercise of
the underwriters' over-allotment option), generating net proceeds of
approximately $247.5 million. As of March 31, 2000, we have also obtained $0.5
million of capital lease financing and $6.3 million under equipment and tenant
improvement loans. As of March 31, 2000, we had approximately $257.5 million in
cash and marketable securities, compared to $12.4 million as of December 31,
1999.
Net cash used in operating activities was $4.3 million for the three
months ended March 31, 2000 compared to $3.2 million for the same period in
1999. We primarily used cash during the three months ended March 31, 2000 and
1999 to fund our operating losses in addition to expenditures related to
intangibles and other assets.
During the three months ended March 31, 2000 and 1999, we had
expenditures relating to intangibles and other assets of approximately $0.9
million and $0.2 million, respectively. These expenditures were primarily for
software development costs, patent costs and license fees. We expect to begin
amortization of the capitalized software costs associated with our current
release, GeneExpress 2000, in the second quarter of 2000. These expenditures are
necessary and are expected to increase as a result of continuing efforts to
further enhance the GeneExpress database suite, protect our intellectual
property and to secure rights to current technology.
Our investing activities, other than sales, maturities and purchases of
available-for-sale securities, consisted of capital expenditures, which totaled
$1.2 million and $0.9 million in the three months ended March 31, 2000 and 1999,
respectively. The increase in capital expenditures from period to period was
primarily due to the increased efforts in building our GeneExpress database
suite for our customers. During the three months ended March 31, 2000, the
promissory notes issued to two of our officers totaling $0.6 million plus
accrued interest to date were repaid.
Our financing activities, other than the repayment of capital lease
obligations and equipment loans, consisted of the issuance of common stock
primarily through our public offering in February 2000 and the exercise of stock
options.
11.
<PAGE> 12
In September 1999 and January 2000, we signed amendments to a
Collaboration and License Agreement we entered into in 1997 with Organon, one of
our significant custom database customers. The amendments enable both parties to
limit the scope and accelerate the date of termination of the original
agreement. At the time of the amendment, we discontinued recognizing revenue
related to the agreement, pending a determination by Organon whether to
terminate the agreement. As amended, Organon can terminate our agreement
effective as of September 15, 2000. In consideration for our agreement to allow
early termination by Organon, which would result in the elimination of its
obligation to provide future financial and other support for the collaboration,
Organon agreed to grant us an exclusive perpetual license upon any such early
termination for data developed pursuant to such agreement by Organon and us. We
believe this data has significant value and would significantly enhance our
GeneExpress database suite. If Organon terminates the agreement early, Organon
must pay $2.0 million owed to us, $1.7 million of which has been previously
recognized as revenue, and we must simultaneously purchase, for $2.0 million,
the exclusive license. At this time, we believe it is unlikely that the
agreement will be terminated as permitted by the amendment but cannot be certain
of the ultimate outcome. If the agreement is not terminated, the parties will
remain obligated to perform in accordance with the terms of the agreement, as
amended.
In March 2000, we entered into a series of agreements with NeuralStem
that resulted in the purchase, by NeuralStem, of a module of the GeneExpress
database. In addition, we will also gain access to NeuralStem's repository of
neural stem cells for gene expression analysis and inclusion into the
GeneExpress database suite. Subsequent to the end of the period, we completed an
equity investment in NeuralStem. No revenue from the sale of the GeneExpress
database module has been recognized in the first quarter of 2000. We expect to
record revenue in future periods over the term of the agreements with
NeuralStem.
To date, all revenue received by us has been generated principally from
our custom database customers and related software products. We expect that
substantially all increases in revenue for the foreseeable future will come from
subscribers to our GeneExpress database suite. Furthermore, our ability to
achieve profitability will be dependent upon our ability to enter into
additional arrangements with customers and successfully commercialize our
GeneExpress database suite.
We believe that existing cash and marketable securities and anticipated
cash flow from operations will be sufficient to support our operations for the
foreseeable future. These estimates are forward-looking statements that involve
risks and uncertainties. Our actual future capital requirements and the adequacy
of our available funds will depend on many factors, including those discussed in
our Annual Report on Form 10-K for the year ended December 31, 1999 and the
following:
- - progress of our discovery programs;
- - the number and breadth of these programs;
- - our ability to establish and maintain additional arrangements with
customers, including additional subscriptions to the GeneExpress
database suite;
- - the commercial success of the in-process technologies we acquired in
our acquisition of Oncormed;
- - the progress of the development and commercialization efforts of our
customers;
- - the level of our activities relating to our independent discovery
programs and to the development and commercialization rights we retain
in our arrangements with customers;
- - competing technological and market developments;
- - the costs associated with obtaining access to tissue samples and
related information; and
12.
<PAGE> 13
- - the costs involved in preparing, filing, prosecuting, maintaining and
enforcing patent claims and other intellectual property rights.
We could require additional financing in the future, which we may seek
to raise through public or private equity offerings, debt financing or
arrangements with additional customers. Additional financing or arrangements
with additional customers may not be available when needed, or if available, we
might not be able to obtain them on terms favorable to us and our stockholders.
To the extent that we raise additional capital by issuing equity or convertible
debt securities, ownership dilution to stockholders will result. If adequate
financing is not available when needed, we may be required to:
- - curtail significantly one or more of our research and development
programs;
- - obtain funds through arrangements with customers that may require us to
relinquish rights to certain of our technologies, discoveries or
potential products; or
- - grant licenses on terms that are not favorable to us.
NEW PRONOUNCEMENT
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, Revenue Recognition in Financial Statements ("SAB
101"). SAB 101 is based upon existing accounting rules and provides guidance on
how those rules should be applied. SAB 101 specifically addresses revenue
recognition for nonrefundable upfront fees in the biotechnology industry. Should
a change in accounting policy be necessary, the change would be reported as a
cumulative effect adjustment with resulting deferred revenue being recognized in
future periods over the remaining terms of the agreements. We will adopt SAB 101
for the second quarter of fiscal 2000. We are currently evaluating the effect
the implementation of SAB 101 will have on our results of operations and
financial position.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
We do not hold any financial instruments subject to significant market
risk.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On October 19, 1999, a lawsuit was filed in the Circuit Court of Cook
County, Illinois against Oncormed, Inc. and Gene Logic Inc. alleging that
Oncormed was negligent in determining and reporting laboratory test results of a
genetic test conducted by Oncormed. Oncormed sold its testing business to a
third-party company prior to our acquisition of Oncormed. We are not engaged in
any type of genetic testing, nor do we have plans to enter such markets. We
maintain insurance coverage against such claims, and do not believe this action
will have a material adverse impact on our business, financial condition or
results of operations.
In December 1999, Incyte Pharmaceuticals, Inc. filed an action against
us in the United States District Court for the Northern District of California,
Case No. C99-5180 MJJ. In the action, Incyte asserts claims against us for
infringement of certain patents held by Incyte. The alleged infringement
involves our use of a process that Affymetrix recommends be used in the
preparation of samples for use with the Affymetrix GeneChip. We intend to defend
our position vigorously. There can be no guarantee that our defense will be
successful and neither the ultimate outcome nor the range of any losses
resulting from this action can be predicted at this time. We expect this action
will continue to require significant management time and expense for the
foreseeable future.
13.
<PAGE> 14
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Recent Sales of Unregistered Securities
During the quarter ended March 31, 2000, we have sold and issued the
following securities which were not registered under the Securities Act of 1933,
as amended (the "Securities Act"):
On February 10, 2000, we sold 14,530 shares of our common stock to
Montrose Investments, LTD pursuant to the exercise of their warrant dated
February 27, 1998, at a purchase price of $18.27 per share.
On February 10, 2000, we sold 7,823 shares of our common stock to
Westover Investments L.P. pursuant to the exercise of their warrant dated
February 27, 1998, at a purchase price of $18.27 per share.
On February 14, 2000, we sold 8,996 shares of our common stock to Brown
Simpson ORD Investments LLC pursuant to the exercise of their warrant dated
February 22, 1999, at a purchase price of $18.27 per share.
On February 18, 2000, we sold 35,148 shares of our common stock to
Incyte Pharmaceuticals, Inc. pursuant to the exercise of their warrant dated
February 25, 1997, at a purchase price of $92.40 per share.
On February 28, 2000, we sold 25,262 and 4,210 shares of our common
stock to Venture Lending & Leasing, Inc. pursuant to their exercise of two
warrants dated April 26, 1997 and September 30, 1997, both at a purchase price
of $2.20 per share.
On March 2, 2000, we sold 6,789 shares of our common stock to Incyte
pursuant to the exercise of their warrant dated March 24, 1998, at a purchase
price of $18.27 per share.
The sales and issuances of the securities described above were deemed
to be exempt from registration under the Securities Act by virtue of Section
4(2) promulgated thereunder.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
14.
<PAGE> 15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A) EXHIBITS:
3.2 By-Laws, as amended and restated.
* 10.55 Executive Severance Plan, as amended March 2000.
* 10.59 Employment Agreement, dated January 4, 2000, between
Registrant and David S. Murray.
+ 10.60 STEMExpress Product Purchase Agreement, dated March
27, 2000, between Registrant and NeuraStem
BioPharmaceutical, Ltd.
+ 10.61 Gene Express(TM) Product Access Agreement, dated
March 27, 2000, between Registrant and NeuralStem
BioPharmaceutical, Ltd.
+ 10.62 Series A Preferred Stock Purchase Agreement, dated
April 20, 2000, between Registrant and NeuralStem
BioPharmaceutical, Ltd.
* 10.63 Employment Agreement, dated September 1, 1997,
between Registrant and Victor M. Markowitz
11.1 Statement regarding computation of net loss per share
27.1 Financial Data Schedule
- -----------
* Indicates management compensatory plan, contract or arrangement.
+ Confidential treatment has been requested with respect to
certain portions of this exhibit. Omitted portions have been
filed separately with the Securities and Exchange Commission.
B) REPORTS ON FORM 8-K:
No reports on Form 8-K were filed during the three months
ended March 31, 2000.
15.
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GENE LOGIC INC.
Date: May 15, 2000 By: /s/ Philip L. Rohrer, Jr.
------------------------------------
Philip L. Rohrer, Jr.
Chief Financial Officer
(Principal Financial and
Accounting Officer)
16.
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED
BY-LAWS
OF
GENE LOGIC, INC.
(A DELAWARE CORPORATION)
ADOPTED: MARCH 9, 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE I OFFICES..........................................................................................1
Section 1. Registered Office..........................................................................1
Section 2. Other Offices..............................................................................1
ARTICLE II CORPORATE SEAL...................................................................................1
Section 3. Corporate Seal.............................................................................1
ARTICLE III STOCKHOLDERS' MEETINGS...........................................................................1
Section 4. Place Of Meetings..........................................................................1
Section 5. Annual Meetings............................................................................1
Section 6. Special Meetings...........................................................................3
Section 7. Notice Of Meetings.........................................................................4
Section 8. Quorum.....................................................................................5
Section 9. Adjournment And Notice Of Adjourned Meetings...............................................5
Section 10. Voting Rights..............................................................................5
Section 11. Joint Owners Of Stock......................................................................6
Section 12. List Of Stockholders.......................................................................6
Section 13. Action Without Meeting.....................................................................6
Section 14. Organization...............................................................................6
ARTICLE IV DIRECTORS........................................................................................7
Section 15. Number And Term Of Office..................................................................7
Section 16. Powers.....................................................................................7
Section 17. Classes of Directors.......................................................................7
Section 18. Vacancies..................................................................................7
Section 19. Resignation................................................................................8
Section 20. Removal....................................................................................8
Section 21. Meetings...................................................................................8
Section 22. Quorum And Voting..........................................................................9
Section 23. Action Without Meeting....................................................................10
Section 24. Fees And Compensation.....................................................................10
Section 25. Committees................................................................................10
Section 26. Organization..............................................................................11
</TABLE>
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
PAGE
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE V OFFICERS.........................................................................................11
Section 27. Officers Designated........................................................................11
Section 28. Tenure And Duties Of Officers..............................................................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...........................................................................16
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
ARTICLE XII NOTICES..........................................................................................20
Section 44. Notices....................................................................................20
ARTICLE XIII AMENDMENTS.......................................................................................22
Section 45. Amendments.................................................................................22
ARTICLE XIV LOANS TO OFFICERS................................................................................22
Section 46. Loans To Officers..........................................................................22
</TABLE>
<PAGE> 4
AMENDED AND RESTATED 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. Nominations of persons for election
to the Board of Directors of the corporation and the proposal of business to be
considered by the stockholders may be made at an annual meeting of stockholders:
(i) pursuant to the corporation's notice of meeting of stockholders; (ii) by or
at the direction of the Board of Directors; or (iii) by any stockholder of the
corporation who was a stockholder of record at the time of giving of notice
provided for in the following paragraph,
<PAGE> 5
who is entitled to vote at the meeting and who complied with the notice
procedures set forth in Section 5.
(b) At an annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting. For
nominations or other business to be properly brought before an annual meeting by
a stockholder pursuant to clause (iii) of Section 5(a) of these By-laws, (i) the
stockholder must have given timely notice thereof in writing to the Secretary of
the corporation, (ii) such other business must be a proper matter for
stockholder action under the of Delaware General Corporation Law, (iii) if the
stockholder, or the beneficial owner on whose behalf any such proposal or
nomination is made, has provided the corporation with a Solicitation Notice (as
defined in this Section 5(b)), such stockholder or beneficial owner must, in the
case of a proposal, have delivered a proxy statement and form of proxy to
holders of at least the percentage of the corporation's voting shares required
under applicable law to carry any such proposal, or, in the case of a nomination
or nominations, have delivered a proxy statement and form of proxy to holders of
a percentage of the corporation's voting shares reasonably believed by such
stockholder or beneficial owner to be sufficient to elect the nominee or
nominees proposed to be nominated by such stockholder, and must, in either case,
have included in such materials the Solicitation Notice, and (iv) if no
Solicitation Notice relating thereto has been timely provided pursuant to this
section, the stockholder or beneficial owner proposing such business or
nomination must not have solicited a number of proxies sufficient to have
required the delivery of such a Solicitation Notice under this Section 5. To be
timely, a stockholder's notice shall be delivered to the Secretary at the
principal executive offices of the corporation not later than the close of
business on the ninetieth (90th) day nor earlier than the close of business on
the one hundred twentieth (120th) day prior to the first anniversary of the
preceding year's annual meeting; provided, however, that in the event that the
date of the annual meeting is advanced more than thirty (30) days prior to or
delayed by more than thirty (30) days after the anniversary of the preceding
year's annual meeting, notice by the stockholder to be timely must be so
delivered not earlier than the close of business on the one hundred twentieth
(120th) day prior to such annual meeting and not later than the close of
business on the later of the ninetieth (90th) day prior to such annual meeting
or the tenth (10th) day following the day on which public announcement of the
date of such meeting is first made. In no event shall the public announcement of
an adjournment of an annual meeting commence a new time period for the giving of
a stockholder's notice as described above. Such stockholder's notice shall set
forth: (A) as to each person whom the stockholder proposed to nominate for
election or reelection as a director all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors in an election contest, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "1934 Act") and Rule 14a-11 thereunder (including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected); (B) as to any other business that the stockholder proposes
to bring before the meeting, a brief description of the business desired to be
brought before the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such stockholder and the
beneficial owner, if any, on whose behalf the proposal is made; and (C) as to
the stockholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made (i) the name and address of such
stockholder, as they appear on the corporation's books, and of such beneficial
owner, (ii) the class and number of shares of the corporation which are
<PAGE> 6
owned beneficially and of record by such stockholder and such beneficial owner,
and (iii) whether either such stockholder or beneficial owner intends to deliver
a proxy statement and form of proxy to holders of, in the case of the proposal,
at least the percentage of the corporation's voting shares required under
applicable law to carry the proposal or, in the case of a nomination or
nominations, a sufficient number of holders of the corporation's voting shares
to elect such nominee or nominees (an affirmative statement of such intent, a
"Solicitation Notice").
(c) Notwithstanding anything in the second sentence of Section
(b) of these By-laws to the contrary, in the event that the number of directors
to be elected to the Board of Directors of the corporation is increased and
there is no public announcement naming all of the nominees for director or
specifying the size of the increased Board of Directors made by the corporation
at least one hundred (100) days prior to the first anniversary of the preceding
year's annual meeting, a stockholder's notice required by this Section 5 shall
also be considered timely, but only with respect to nominees for any new
positions created by such increase, if it shall be delivered to the Secretary at
the principal executive offices of the corporation not later than the close of
business on the tenth (10th) day following the day on which such public
announcement is first made by the corporation.
(d) Only such persons who are nominated in accordance with the
procedures set forth in this Section 5 shall be eligible to serve as directors
and only such business shall be conducted at a meeting of stockholders as shall
have been brought before the meeting in accordance with the procedures set forth
in this Section 5. Except as otherwise provided by law, the Chairman of the
meeting shall have the power and duty to determine whether a nomination or any
business proposed to be brought before the meeting was made, or proposed, as the
case may be, in accordance with the procedures set forth in these By-laws and,
if any proposed nomination or business is not in compliance with these By-laws,
to declare that such defective proposal or nomination shall not be presented for
stockholder action at the meeting and shall be disregarded.
(e) Notwithstanding the foregoing provisions of this Section 5, 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.
Nothing in these By-laws shall be deemed to affect any rights of stockholders to
request inclusion of proposals in the corporation's proxy statement pursuant to
Rule 14a-8 under the 1934 Act.
(f) 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
<PAGE> 7
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 properly 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 Section 7 of these By-laws. If the notice is
not given within one hundred (100) days after the receipt of the request, the
person or persons properly 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.
(c) Nominations of persons for election to the Board of Directors
may be made at a special meeting of stockholders at which directors are to be
elected pursuant to the corporation's notice of meeting (i) by or at the
direction of the Board of Directors or (ii) by any stockholder of the
corporation who is a stockholder of record at the time of giving notice provided
for in these By-laws who shall be entitled to vote at the meeting and who
complies with the notice procedures set forth in this Section 6(c). In the event
the corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board of Directors, any such stockholder
may nominate a person or persons (as the case may be), for election to such
position(s) as specified in the corporation's notice of meeting, if the
stockholder's notice required by Section 5(b) of these By-laws shall be
delivered to the Secretary at the principal executive offices of the corporation
not earlier than the close of business on the one hundred twentieth (120th) day
prior to such special meeting and not later than the close of business on the
later of the ninetieth (90th) day prior to such meeting or the tenth (10th) day
following the day on which public announcement is first made of the date of the
special meeting and of the nominees proposed by the Board of Directors to be
elected at such meeting. In no event shall the public announcement of an
adjournment of a special meeting commence a new time period for the giving of a
stockholder's notice as described above.
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
<PAGE> 8
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 statute, the Certificate of Incorporation or these
By-laws, in all matters other than the election of directors, the affirmative
vote of the majority of shares present in person or represented by proxy at the
meeting and entitled to vote on the subject matter shall be the act of the
stockholders. Except as otherwise provided by statute, the Certificate of
Incorporation or these By-laws, 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 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. 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.
<PAGE> 9
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 Delaware General Corporation Law, 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.
(a) 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.
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
<PAGE> 10
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 adoption
and filing of the Certificate of Incorporation providing for the classified
Board, 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 the Certificate of
Incorporation providing for the classified Board, 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 the Certificate of Incorporation providing for the
classified Board, 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, 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.
<PAGE> 11
SECTION 18. VACANCIES.
(a) 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.
(b) If at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole board (as constituted immediately prior to any such increase), the
Delaware Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent (10%) of the total number of the
shares at the time outstanding having the right to vote for such directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the directors chosen by the directors then
in offices as aforesaid, which election shall be governed by Section 211 of the
Delaware General Corporation Law.
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
(a) Neither the Board of Directors nor any individual director may
be removed without cause.
(b) Subject to any limitation imposed by law, any individual
director or directors may be removed with cause by the affirmative vote of a
majority of the voting power of the corporation entitled to vote at an election
of directors.
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
<PAGE> 12
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. Unless otherwise restricted by the
Certificate of Incorporation, regular meetings of the Board of Directors may be
held at any time or date and at any place within or without the State of
Delaware which has been designated by the Board of Directors and publicized
among all directors. No formal notice shall be required for regular meetings of
the Board of Directors.
(c) SPECIAL MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation, special meetings of the Board of Directors may be
held at any time and place 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.
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
<PAGE> 13
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 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, 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 (i) approving or adopting, or
recommending to the stockholders, any action or matter expressly required by the
Delaware General Corporation Law to be submitted to stockholders for approval,
or (ii) adopting, amending or repealing any bylaw of the corporation.
(b) OTHER COMMITTEES. The Board of Directors may, 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 any 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 any requirements of any
outstanding series of preferred stock and
<PAGE> 14
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
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 (if a director), or if the President is absent, the most
senior Vice President (if a director), or, in the absence of any such person, a
chairman of the meeting chosen by a majority of the directors present, shall
preside over the meeting. The Secretary, or in his absence, any 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 and the
Controller, all of whom shall be elected at the annual
<PAGE> 15
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.
(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
<PAGE> 16
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.
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
<PAGE> 17
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.
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 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
<PAGE> 18
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 agree to indemnify the corporation in such manner as it shall
require or to give the corporation a surety bond in such form and amount as it
may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost, stolen,
or destroyed.
SECTION 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 Delaware General Corporation Law.
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, subject to applicable law, 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
<PAGE> 19
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.
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
and applicable law, 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 and applicable law.
<PAGE> 20
SECTION 41. DIVIDENDS 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.
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 or any other applicable 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 any other applicable 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 or any other applicable law.
The Board of Directors shall have the power to delegate the determination of
whether indemnification shall be given to any such person (except executive
officers) to such officers or other persons as the Board of Directors shall
determine.
<PAGE> 21
(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,
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 or any other applicable 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 or any
other applicable
<PAGE> 22
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 applicable 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 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, or by any other applicable 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 or any other applicable 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. If this Section
43 shall be invalid due to the application of the indemnification provisions of
another jurisdiction, then the corporation shall indemnify each director and
executive officer to the full extent under 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.
<PAGE> 23
(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.
(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 overnight
delivery service, facsimile, telex or telegram, except that such notice other
than one which is delivered personally shall be sent to
<PAGE> 24
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 or by
overnight delivery service, 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.
(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
<PAGE> 25
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 shares of the voting stock of the
corporation entitled to vote. 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.
<PAGE> 1
EXHIBIT 10.55
GENE LOGIC INC.
EXECUTIVE SEVERANCE PLAN
ADOPTED MARCH 19, 1999
AMENDED BY THE COMPENSATION COMMITTEE ON MARCH 9, 2000
SECTION 1. INTRODUCTION.
The Gene Logic Inc. Executive Severance Plan (the "Plan") was
approved by the Board of Directors of Gene Logic Inc. on March 19, 1999. The
purpose of the Plan is to encourage eligible employees of the Company to
continue as employees of the Company in the event of a Change of Control (as
defined herein) and to provide for the payment of severance benefits to such
employees in the event their employment with the Company is terminated, as
provided herein, within a specified period preceding or following a Change of
Control. Except as otherwise stated herein, this Plan shall supersede both any
severance benefit plan, policy or practice previously maintained by the Company
and any employment agreement entered into by the Company with an individual
employee, but only to the extent that such plan, policy, practice or individual
employment agreement addressed the provision of severance benefits under
circumstances covered by the Plan. Notwithstanding the foregoing, this Plan
shall not limit or restrict in any way the provisions of the Gene Logic Inc.
Equity Incentive Plan, as amended (the "Equity Incentive Plan"), including but
not limited to the provisions of that section entitled "Adjustments upon Changes
in Stock," and any provisions of the Plan relating to the treatment of stock
awards issued under the Equity Incentive Plan shall be construed only to provide
additional benefits to Eligible Employees holding one or more stock awards
granted under the Equity Incentive Plan. This Plan document is also the Summary
Plan Description for the Plan.
SECTION 2. ELIGIBILITY FOR BENEFITS.
(a) "Eligible Employees" are the Chief Executive Officer, President, and
Chief Operating Officer of the Company, all employees who hold the position of
senior vice president of the Company, and selected employees who hold the title
vice president, "director" or "senior director" with the Company and are
designated in writing by the Company, in its sole and absolute discretion, as
eligible to receive benefits under the Plan. No other employees of or
consultants to the Company shall be eligible to receive benefits under the Plan.
An Eligible Employee shall be eligible for benefits under the Plan if such
Eligible Employee's employment with the Company terminates due to an Involuntary
Termination Without Cause or a Constructive Termination, in either case on or
within three (3) months prior to, upon the occurrence of, or on or within
thirteen (13) months following, the effective date of a Change of Control. In
addition, an Eligible Employee shall be eligible for benefits under the Plan if
such Eligible Employee's employment with the Company terminates due to death or
Disability on or within thirteen (13) months following the effective date of a
Change of Control. Notwithstanding anything herein to the contrary, upon a
Change of Control: (i) an Eligible Employee shall become 100% fully vested in
the Eligible Employee's nonvested stock options, if any, that were previously
granted to the Eligible Employee under the Company's discretionary stock plans,
1.
<PAGE> 2
including, without limitation, the Gene Logic Inc. 1997 Equity Incentive Plan
and (ii) the Company's repurchase option with respect to any unvested option
shares that were acquired on or before the Change of Control will expire in
full. An employee who otherwise is an Eligible Employee will not receive
benefits under the Plan if the Eligible Employee's employment with the Company
is terminated due to any reason other than Involuntary Termination Without
Cause, Constructive Termination, death or Disability.
(b) In order to be eligible to receive benefits under the Plan, an
Eligible Employee must execute the form of Acknowledgement and Acceptance of
Plan Benefits in the form attached hereto as Exhibit A and must execute a
general waiver and release in the form attached hereto as Exhibits B and Exhibit
C, as appropriate. BENEFITS..
SECTION 3. BENEFITS.
(a) Eligible Employees will receive the benefits described in the
appropriate Benefit Schedule covering the job title held by the Eligible
Employee at the time of his or her Termination Date and for which the Eligible
Employee has been designated by the Company, as applicable, which Benefit
Schedule is attached hereto. In the event that the Eligible Employee holds one
or more job titles for which different benefits are provided under the Plan, the
Eligible Employee shall be eligible to receive benefits under the schedule with
the more valuable set of benefits.
(b) COBRA CONTINUATION.
(i) Each Eligible Employee who is enrolled in a group health plan
sponsored by the Company may be eligible to continue coverage under such group
health plan under the Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA") at the time of the Eligible Employee's termination of employment. The
Company will notify the individual of any such right to continue health coverage
at the time of termination.
(ii) The Company will pay the Eligible Employee's COBRA premiums
during the Severance Period. The Company will pay the COBRA premiums for the
Eligible Employee's dependents during the Severance Period if, and only to the
extent that, such dependents were enrolled in a group health plan sponsored by
the Company prior to the Eligible Employee's Termination Date and some or all of
such dependents' premiums under such plan were paid by the Company prior to the
Eligible Employee's Termination Date. No provision of this Plan will affect the
continuation coverage rules under COBRA, except that the Company's payment of
any applicable premiums during the Severance Period will be credited as payment
by the Eligible Employee for purposes of the Eligible Employee's payment
required under COBRA. Therefore, the period during which an Eligible Employee
must elect to continue the Company's group health coverage at his or her own
expense under COBRA, the length of time during which COBRA coverage will be made
available to the Eligible Employee, and all other rights and obligations of the
Eligible Employee under COBRA (except the obligation to pay premiums that the
Company pays during the Severance Period) will be applied in the same manner
that such rules would apply in the absence of this Plan. At the conclusion of
the Severance Period the Eligible Employee will be responsible for the entire
payment of premiums required under COBRA for the duration of the COBRA period,
if any.
2.
<PAGE> 3
(c) OUTPLACEMENT BENEFITS. Each Eligible Employee will receive
outplacement services through a vendor of the Company's choice following the
Eligible Employee's Involuntary Termination Without Cause or Constructive
Termination. Payment for such outplacement services shall be made directly to
the service provider, and the Company shall not be obligated to make any
payments to the Eligible Employee regardless of whether he or she utilizes such
outplacement services and what the cost of any such outplacement services are.
The total cost to the Company of such outplacement services shall not exceed the
amounts described in the Benefit Schedule attached hereto.
SECTION 4. LIMITATIONS ON BENEFITS.
(a) PARACHUTE PAYMENTS.
(i) If any payment or benefit an Eligible Employee would receive
under this Plan ("Payment"), when combined with any other payment or benefit
such Eligible Employee receives which is treated as contingent on the occurrence
of a change in ownership of the Company within the meaning of Section 280G of
the Internal Revenue Code of 1986, as amended (the "Code") and the regulations
promulgated thereunder, ("Payment") would (i) constitute a "parachute payment"
within the meaning of Section 280G of the Code, and (ii) but for this sentence,
be subject to the excise tax imposed by Section 4999 of the Code (the "Excise
Tax"), then such Payment shall be either (x) the full amount of such Payment or
(y) such lesser amount (with cash payments being reduced before stock option
compensation) as would result in no portion of the Payment being subject to the
Excise Tax, whichever of the foregoing amounts, taking into account applicable
federal, state and local employment taxes, income taxes, the Excise Tax, and any
other applicable taxes, results in the Eligible Employee's receipt, on an
after-tax basis, of the greater portion of the Payment notwithstanding that all
or some portion of the Payment may be subject to the Excise Tax.
(ii) Unless the Company and Eligible Employee otherwise agree in
writing, any determination required under this subsection shall be made in
writing by the Company's independent public accountants (the "Accountants"),
whose determination shall be conclusive and binding upon the Eligible Employee
and the Company for all purposes. For purposes of making the calculations
required by this subsection, the Accountants may make reasonable assumptions and
approximations concerning applicable taxes and may rely on reasonable, good
faith interpretations concerning the application of Sections 280G and 4999 of
the Code. The Company and Eligible Employee shall furnish to the Accountants
such information and documents as the Accountants may reasonably request in
order to make a determination under this subsection. The Company shall bear all
costs the Accountants may reasonably incur in connection with any calculations
contemplated by this subsection.
(iii) If, notwithstanding any reduction described in this
subsection, the IRS determines that the Eligible Employee is liable for
the Excise Tax as a result of the receipt of the payment of benefits as
described above, then the Eligible Employee shall be obligated to pay back to
the Company, within thirty (30) days after a final IRS determination or in the
event that the Eligible Employee challenges the final IRS determination, a final
judicial determination, a portion of the payment equal to the "Repayment
Amount." The Repayment Amount with respect to the payment of benefits shall be
the smallest such amount, if any, as shall be required
3.
<PAGE> 4
to be paid to the Company so that the Eligible Employee's net after-tax proceeds
with respect to any payment of benefits (after taking into account the payment
of the Excise Tax and all other applicable taxes imposed on such payment) shall
be maximized. The Repayment Amount with respect to the payment of benefits shall
be zero if a Repayment Amount of more than zero would not result in the Eligible
Employee's net after-tax proceeds with respect to the payment of such benefits
being maximized. If the Excise Tax is not eliminated pursuant to this paragraph,
the Eligible Employee shall pay the Excise Tax.
(iv) Notwithstanding any other provision of this Subsection 4(a),
if (A) there is a reduction in the payment of benefits as described in this
subsection, (B) the IRS later determines that the Eligible Employee is liable
for the Excise Tax, the payment of which would result in the maximization of the
Eligible Employee's net after-tax proceeds (calculated as if the Eligible
Employee's benefits had not previously been reduced), and (C) the Eligible
Employee pays the Excise Tax, then the Company shall pay to the Eligible
Employee those benefits which were reduced pursuant to this subsection
contemporaneously or as soon as administratively possible after the Eligible
Employee pays the Excise Tax so that the Eligible Employee's net after-tax
proceeds with respect to the payment of benefits is maximized.
(v) If the Eligible Employee either (1) brings any action to
enforce rights pursuant to this subsection 4(a), or (2) defends any legal
challenge to his or her rights hereunder, the Eligible Employee shall be
entitled to recover attorneys' fees and costs incurred in connection with such
action, regardless of the outcome of such action; provided, however, that in the
event such action is commenced by the Eligible Employee, the court finds the
claim was brought in good faith.
(b) DUPLICATION OF BENEFITS. Notwithstanding any other provision of the
Plan to the contrary, any benefits payable to an Eligible Employee under this
Plan shall be in lieu of any severance benefits payable by the Company to such
individual under any other arrangement covering the individual, unless expressly
otherwise agreed to by the Company in writing. In the event that any severance
benefits under any other arrangement covering an Eligible Employee become
payable to such individual prior to the time that the Company's liability to pay
any severance benefits under the Plan pursuant to Subsection 5(a)(i) below
becomes certain, then payment of the benefits under such other arrangement shall
be in lieu of any and all severance benefits payable under the Plan, unless such
other benefits are repaid to the Company in full by such individual prior to the
occurrence of a Change of Control, in which case the Company shall provide the
severance benefits payable under the Plan to such Eligible Employee.
(c) NON-HEALTH EMPLOYEE BENEFITS. All non-health benefits (such as life
insurance and disability coverage) shall terminate as of the employee's
Termination Date or as otherwise provided under the terms of the policy or
agreement setting forth the terms of such benefits (except to the extent that
any conversion privilege, at the Eligible Employee's expense, is available
thereunder).
SECTION 5. TIME OF PAYMENT AND FORM OF BENEFIT; INDEBTEDNESS.
(a) Cash benefits under this Plan as described under the attached Benefit
Schedules (less applicable tax withholdings) shall be paid in a lump sum to the
Eligible Employee or his or
4.
<PAGE> 5
her assignee according to the following schedule (which schedule shall also
correspond to the time of acceleration of vesting of outstanding options as
described under the attached Benefit Schedules):
(i) if an Eligible Employee's employment terminates either (A) on
or within three (3) months prior to the effective date of a Change of Control or
(B) upon the occurrence of a Change of Control, in either case due to an
Involuntary Termination Without Cause or a Constructive Termination, the
benefits shall be payable (and the acceleration of vesting of outstanding
options shall occur) at the time at which the Change of Control becomes
effective; or
(ii) if an Eligible Employee's employment terminates upon or
within thirteen (13) months following the effective date of a Change of Control
due to an Involuntary Termination Without Cause, Constructive Termination, death
or Disability, the benefits shall be payable (and the acceleration of vesting of
outstanding options shall occur) upon the Eligible Employee's Termination Date.
(b) Notwithstanding the foregoing, no payment shall be made (and no
acceleration of vesting of outstanding options shall occur) under this Plan
prior to the last day of any waiting period or revocation period as required by
applicable law in order for the general waiver and release required by Section
2(b) of this Plan to be effective.
(c) If an Eligible Employee is indebted to the Company on his or her
Termination Date, the Company reserves the right to offset any severance
payments under the Plan by the amount of such indebtedness. In addition, the
Company shall withhold appropriate federal, state, local and foreign income and
employment taxes from any payments hereunder. In no event shall payment of any
Plan benefit be made prior to the Eligible Employee's Termination Date.
SECTION 6. RIGHT TO INTERPRET PLAN; AMENDMENT AND TERMINATION; OTHER
ARRANGEMENTS; BINDING NATURE OF PLAN.
(a) EXCLUSIVE DISCRETION. The Plan Administrator shall have the exclusive
discretion and authority to establish rules, forms, and procedures for the
administration of the Plan, and to construe and interpret the Plan and to decide
any and all questions of fact, interpretation, definition, computation or
administration arising in connection with the operation of the Plan, including,
but not limited to, the eligibility to participate in the Plan and the amount of
benefits paid under the Plan. The rules, interpretations, computations and other
actions of the Plan Administrator shall be binding and conclusive on all
persons.
(b) TERM OF PLAN. This Plan shall be effective until amended, suspended
or terminated by the Company.
(c) AMENDMENT, SUSPENSION OR TERMINATION. The Company reserves the right
to amend, suspend or terminate this Plan or the benefits provided hereunder at
any time; provided, however, that no such amendment, suspension or termination
shall affect the right to any unpaid benefit of any Eligible Employee whose
Termination Date has occurred prior to amendment, suspension or termination of
the Plan; and further provided, that for the period of thirteen (13) months
following the effective date of a Change of Control, the Plan shall not be
amended, suspended or terminated, the Plan Administrator shall not be removed,
and no Eligible Employee
5.
<PAGE> 6
shall be reclassified in any manner that would adversely affect the interests of
such Eligible Employee without the written consent of the Eligible Employee so
affected. Subject to the foregoing, this Plan establishes and vests in each
Eligible Employee a contractual right to the benefits to which such Eligible
Employee is entitled hereunder, enforceable by the Eligible Employee against the
Company. Any action amending, suspending or terminating the Plan may be taken
only by the Chief Executive Officer of the Company or the Compensation Committee
of the Board of Directors and shall be in writing, which writing must be
executed by the Chief Executive Officer of the Company or Compensation
Committee, as applicable; provided, however, that any material amendments to the
Plan must be approved by the Compensation Committee.
(d) OTHER SEVERANCE ARRANGEMENTS. The Company reserves the right to make
other arrangements regarding severance benefits in special circumstances.
(e) BINDING EFFECT ON SUCCESSOR TO COMPANY. This Plan shall be binding
upon any successor or assignee, whether direct or indirect, by purchase, merger,
consolidation or otherwise, to all or substantially all of the business or
assets of the Company, or upon any successor to the Company as the result of a
Change of Control, and any such successor or assignee shall be required to
perform the Company's obligations under the Plan, in the same manner and to the
same extent that the Company would be required to perform if no such succession
or assignment or Change of Control had taken place. In such event, the term
"Company," as used in the Plan, shall mean the Company as hereinafter defined
and any successor or assignee as described above which by reason hereof becomes
bound by the terms and provisions of this Plan.
SECTION 7. DEFINITIONS.
Capitalized terms used in this Plan, unless defined elsewhere in this
Plan, shall have the following meanings:
(a) CAUSE means (i) conviction of, a guilty plea with respect to, or a
plea of nolo contendere to, a charge that the Eligible Employee has committed a
felony under the laws of the United States or of any state or a crime involving
moral turpitude, including, but not limited to, fraud, theft, embezzlement or
any crime that results in or is intended to result in personal enrichment at the
expense of the Company; (ii) material breach of any agreement entered into
between the Eligible Employee and the Company that impairs the Company's
interest therein; (iii) willful misconduct or gross neglect by the Eligible
Employee of the Eligible Employee's duties; or (iv) engagement in any activity
that constitutes a material conflict of interest with the Company.
(b) CHANGE OF CONTROL means the occurrence of one or more of the
following events: (1) a 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 and the stockholders of the Company immediately prior to such merger
or consolidation fail to acquire at least fifty percent (50%) of the beneficial
ownership of the securities of the surviving corporation (or an entity
controlling 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
6.
<PAGE> 7
the merger are converted by virtue of the merger into other property, whether in
the form of securities, cash or otherwise and the stockholders of the Company
immediately prior to such merger fail to acquire at least fifty percent (50%) of
the beneficial ownership of the securities of the Company (or an entity
controlling the Company); 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) 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. "Change of Control" shall
also mean the sale by the Company of one or more of the Company's product
groups, but only with respect to those Eligible Employees working exclusively or
primarily with the affected group or groups.
(c) COMPANY means Gene Logic Inc., a Delaware corporation, including any
successor as provided in Section 6(e) hereof, and any affiliate or related
entity of Gene Logic Inc. that is designated by the Board of Directors of Gene
Logic Inc.
(d) CONSTRUCTIVE TERMINATION means that an Eligible Employee voluntarily
terminates his or her employment with the Company after any of the following are
undertaken without the Eligible Employee's express written consent:
(i) the assignment to the Eligible Employee of any duties or
responsibilities which result in any diminution or adverse change of the
Eligible Employee's position, status or circumstances of employment as in effect
at the beginning of the three (3) month period immediately prior to a Change of
Control, an adverse change in the Eligible Employee's titles or offices or
reporting relationships as in effect at the beginning of the three (3) month
period immediately prior to the effective date of a Change of Control, or any
removal of the Eligible Employee from or any failure to reelect the Eligible
Employee to any of such positions, except in connection with the termination of
the Eligible Employee's service on account of death, disability, retirement, for
Cause, or any voluntary termination of service by the Eligible Employee other
than Constructive Termination;
(ii) a reduction by the Company in the Eligible Employee's annual
base compensation;
(iii) any failure by the Company to continue in effect any benefit
plan or arrangement, including incentive plans or plans to receive securities of
the Company, in which the Eligible Employee is participating at the time of a
Change of Control (hereinafter referred to as "Benefit Plans"), or the taking of
any action by the Company which would adversely affect the Eligible Employee's
participation in or reduce the Eligible Employee's benefits under any Benefit
Plan or deprive the Eligible Employee of any fringe benefit enjoyed by the
Eligible Employee at the time of a Change of Control; provided, however, that
the Eligible Employee will not incur a Constructive Termination following a
Change of Control based on this clause (iii) if the Company offers a range of
benefit plans and programs which, taken as a whole, are comparable to the
Benefit Plans;
7.
<PAGE> 8
(iv) a relocation of the Eligible Employee or the Company's
offices to a location more than twenty five (25) miles from the location at
which the Eligible Employee performed his or her duties prior to a Change of
Control, except for required travel by the Eligible Employee on the Company's
business to an extent substantially consistent with the Eligible Employee's
business travel obligations at the time of a Change of Control;
(v) any breach by the Company of any provision of this Plan; or
(vi) any failure by the Company to obtain the assumption of this
Plan by any successor or assign of the Company.
(e) DISABILITY means the inability of an Eligible Employee, in the
opinion of a qualified physician acceptable to the Company, in the good faith
determination of the Company, to perform the major duties of that Eligible
Employee's position with the Company because of the sickness or injury of the
Eligible Employee.
(f) ELIGIBLE EMPLOYEE means an employee of the Company who is eligible to
participate in the Plan as specified in Section 2 hereof.
(g) INVOLUNTARY TERMINATION WITHOUT CAUSE means the Eligible Employee's
dismissal or discharge by the Company (or, if applicable, by any successor
entity) for a reason other than "Cause." Termination due to an Eligible
Employee's death or Disability shall not constitute Involuntary Termination
Without Cause.
(h) PAY means the Eligible Employee's base pay (exclusive of bonuses,
shift differentials, overtime and other forms of supplemental compensation) at
the rate in effect during the last regularly scheduled payroll period
immediately preceding the Eligible Employee's Termination Date.
(i) PLAN means this Gene Logic Inc. Executive Severance Plan.
(j) SEVERANCE PERIOD means the number of months of Pay used for
calculating the Eligible Employee's cash severance benefits, as specified in the
Benefit Schedule attached hereto.
(k) TERMINATION DATE means the last date on which the Eligible Employee
is in active pay status with the Company. A holiday cannot constitute a
Termination Date unless the Eligible Employee actively provided services for the
Company on such holiday.
SECTION 8. NO IMPLIED EMPLOYMENT CONTRACT.
The Plan shall not be deemed (i) to give any employee or other
person any right to be retained in the employ of the Company or (ii) to
interfere with the right of the Company to discharge any employee or other
person at any time and for any reason or no reason, with or without notice,
which right is hereby reserved.
8.
<PAGE> 9
SECTION 9. MODIFICATION; WAIVER; ENTIRE AGREEMENT; NON-PUBLICATION.
(a) No provisions of the Plan may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing signed by
the Eligible Employee and the Chief Executive Officer of the Company. No waiver
by either party hereto at any time of any breach by the other party of, or
compliance with, any condition or provision of the Plan to be performed by such
other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not expressly set
forth in or referred to in the Plan.
(b) The parties mutually agree not to disclose publicly the terms of the
Plan except to the extent that disclosure is mandated by applicable law.
SECTION 10. LEGAL CONSTRUCTION.
This Plan is intended to be governed by and shall be construed in
accordance with the Employee Retirement Income Security Act of 1974, as amended
("ERISA") and, to the extent not preempted by ERISA, the laws of the State of
Maryland.
SECTION 11. CLAIMS, INQUIRIES AND APPEALS.
(a) APPLICATIONS FOR BENEFITS AND INQUIRIES. Any application for
benefits, inquiries about the Plan or inquiries about present or future rights
under the Plan must be submitted to the Plan Administrator in writing. The Plan
Administrator is:
GENE LOGIC INC.
708 Quince Orchard Road
Gaithersburg, Maryland 20878
Attn: Vice President of Human Resources and Administration
(b) DENIAL OF CLAIMS. In the event that any application for benefits is
denied in whole or in part, the Plan Administrator must notify the applicant, in
writing, of the denial of the application, and of the applicant's right to
review the denial. The written notice of denial will be set forth in a manner
designed to be understood by the employee, and will include specific reasons for
the denial, specific references to the Plan provision upon which the denial is
based, a description of any information or material that the Plan Administrator
needs to complete the review and an explanation of the Plan's review procedure.
This written notice will be given to the employee within 90 days after
the Plan Administrator receives the application, unless special circumstances
require an extension of time, in which case, the Plan Administrator has up to an
additional 90 days for processing the application. If an extension of time for
processing is required, written notice of the extension will be furnished to the
applicant before the end of the initial 90-day period.
This notice of extension will describe the special circumstances
necessitating the additional time and the date by which the Plan Administrator
is to render its decision on the application. If written notice of denial of the
application for benefits is not furnished within the
9.
<PAGE> 10
specified time, the application shall be deemed to be denied. The applicant will
then be permitted to appeal the denial in accordance with the Review Procedure
described below.
(c) REQUEST FOR A REVIEW. Any person (or that person's authorized
representative) for whom an application for benefits is denied (or deemed
denied), in whole or in part, may appeal the denial by submitting a request for
a review to the Plan Administrator within 60 days after the application is
denied (or deemed denied). The Plan Administrator will give the applicant (or
his or her representative) an opportunity to review pertinent documents in
preparing a request for a review. A request for a review shall be in writing and
shall be addressed to:
GENE LOGIC INC.
ATTN: Plan Administrator for the
Executive Severance Plan
708 Quince Orchard Road
Gaithersburg, Maryland 20878
A request for review must set forth all of the grounds on which it is based, all
facts in support of the request and any other matters that the applicant feels
are pertinent. The Plan Administrator may require the applicant to submit
additional facts, documents or other material as it may find necessary or
appropriate in making its review.
(d) DECISION ON REVIEW. The Plan Administrator will act on each request
for review within 60 days after receipt of the request, unless special
circumstances require an extension of time (not to exceed an additional 60
days), for processing the request for a review. If an extension for review is
required, written notice of the extension will be furnished to the applicant
within the initial 60-day period. The Plan Administrator will give prompt,
written notice of its decision to the applicant. In the event that the Plan
Administrator confirms the denial of the application for benefits in whole or in
part, the notice will outline, in a manner calculated to be understood by the
applicant, the specific Plan provisions upon which the decision is based. If
written notice of the Plan Administrator's decision is not given to the
applicant within the time prescribed in this subsection (d), the application
will be deemed denied on review.
(e) RULES AND PROCEDURES. The Plan Administrator will establish rules and
procedures, consistent with the Plan and with ERISA, as necessary and
appropriate in carrying out its responsibilities in reviewing benefit claims.
The Plan Administrator may require an applicant who wishes to submit additional
information in connection with an appeal from the denial (or deemed denial) of
benefits to do so at the applicant's own expense.
(f) EXHAUSTION OF REMEDIES. No legal action for benefits under the Plan
may be brought until the claimant (i) has submitted a written application for
benefits in accordance with the procedures described by Section 11(a) above,
(ii) has been notified by the Plan Administrator that the application is denied
(or the application is deemed denied due to the Plan Administrator's failure to
act on it within the established time period), (iii) has filed a written request
for a review of the application in accordance with the appeal procedure
described in Section 11(c) above and (iv) has been notified in writing that the
Plan Administrator has denied the appeal (or the appeal is deemed to be denied
due to the Plan Administrator's failure to take any action on the claim within
the time prescribed by Section 11(d) above).
10.
<PAGE> 11
SECTION 12. BASIS OF PAYMENTS TO AND FROM PLAN.
All benefits under the Plan shall be paid by the Company. The Plan
shall be unfunded, and benefits hereunder shall be paid only from the general
assets of the Company.
SECTION 13. OTHER PLAN INFORMATION.
(a) EMPLOYER AND PLAN IDENTIFICATION NUMBERS. The Employer Identification
Number assigned to Gene Logic Inc. (which is the "Plan Sponsor" as that term is
used in ERISA) by the Internal Revenue Service is 06-1411336. The Plan Number
assigned to the Plan by the Plan Sponsor pursuant to the instructions of the
Internal Revenue Service is 510.
(b) ENDING DATE FOR PLAN'S FISCAL YEAR. The date of the end of the fiscal
year for the purpose of maintaining the Plan's records is December 31.
(c) AGENT FOR THE SERVICE OF LEGAL PROCESS. The agent for the service of
legal process with respect to the Plan is Vice President of Human Resources and
Administration, Gene Logic Inc., 708 Quince Orchard Road, Gaithersburg, Maryland
20878. The service of legal process may also be made on the Plan by serving the
Plan Administrator.
(d) PLAN SPONSOR AND ADMINISTRATOR. The "Plan Sponsor" and the "Plan
Administrator" of the Plan is Gene Logic Inc., 708 Quince Orchard Road,
Gaithersburg, Maryland 20878. The Plan Sponsor's and Plan Administrator's
telephone number is (301) 987-1700. The Plan Administrator is the named
fiduciary charged with the responsibility for administering the Plan.
SECTION 14. STATEMENT OF ERISA RIGHTS.
Participants in this Plan (which is a welfare benefit plan sponsored by
GENE LOGIC INC.) are entitled to certain rights and protections under ERISA. If
you are an Eligible Employee, you are considered a participant in the Plan and,
under ERISA, you are entitled to:
(a) Examine, without charge, at the Plan Administrator's office and at
other specified locations, such as work sites, all Plan documents and copies of
all documents filed by the Plan with the U.S. Department of Labor, such as
detailed annual reports;
(b) Obtain copies of all Plan documents and Plan information upon written
request to the Plan Administrator. The Administrator may make a reasonable
charge for the copies;
(c) Receive a summary of the Plan's annual financial report, in the case
of a plan which is required to file an annual financial report with the
Department of Labor. (Generally, all pension plans and welfare plans with 100 or
more participants must file these annual reports.)
In addition to creating rights for Plan participants, ERISA imposes
duties upon the people responsible for the operation of the employee benefit
plan. The people who operate the Plan, called "fiduciaries" of the Plan, have a
duty to do so prudently and in the interest of you and other Plan participants
and beneficiaries.
11.
<PAGE> 12
No one, including your employer or any other person, may fire you or
otherwise discriminate against you in any way to prevent you from obtaining a
Plan benefit or exercising your rights under ERISA. If your claim for a Plan
benefit is denied in whole or in part, you must receive a written explanation of
the reason for the denial. You have the right to have the Plan review and
reconsider your claim.
Under ERISA, there are steps you can take to enforce the above rights.
For instance, if you request materials from the Plan and do not receive them
within 30 days, you may file suit in a federal court. In such a case, the court
may require the Plan Administrator to provide the materials and pay you up to
$110 a day until you receive the materials, unless the materials were not sent
because of reasons beyond the control of the Plan Administrator. If you have a
claim for benefits that is denied or ignored, in whole or in part, you may file
suit in a state or federal court. If it should happen that the Plan fiduciaries
misuse the Plan's money, or if you are discriminated against for asserting your
rights, you may seek assistance from the U.S. Department of Labor, or you may
file suit in a federal court. The court will decide who should pay court costs
and legal fees. If you are successful, the court may order the person you have
sued to pay these costs and fees. If you lose, the court may order you to pay
these costs and fees, for example, if it finds your claim is frivolous.
If you have any questions about this statement or about your rights under
ERISA, you should contact the nearest office of the Pension and Welfare Benefits
Administration, U.S. Department of Labor, listed in your telephone directory, or
the Division of Technical Assistance and Inquiries, Pension and Welfare Benefit
Administration, U.S. Department of Labor, 200 Constitution Avenue N.W.,
Washington, D.C. 20210.
SECTION 15. EXECUTION.
To record the adoption of the Plan as set forth herein, effective as of
March 19, 1999, the date on which the Plan was adopted by the Board of Directors
of Gene Logic Inc., Gene Logic Inc. has caused its duly authorized officer to
execute same.
<TABLE>
<CAPTION>
GENE LOGIC INC.
<S> <C>
By: /s/ Micheal J. Brennan, M.D., Ph.D.
---------------------------------------
Title: Chief Executive Officer and Chairman of the Board
----------------------------------------------------
</TABLE>
12.
<PAGE> 13
BENEFIT SCHEDULE
FOR THE
GENE LOGIC INC.
EXECUTIVE SEVERANCE PLAN
SENIOR EXECUTIVE OFFICERS
THE COMPANY SHALL DETERMINE IN ITS SOLE AND ABSOLUTE DISCRETION IN WHICH
CATEGORY AN ELIGIBLE EMPLOYEE SHALL BE PLACED FOR PURPOSES OF RECEIVING
SEVERANCE BENEFITS UNDER THIS PLAN. THE COMPANY'S DETERMINATION SHALL BE FINAL
AND SHALL BE BINDING AND CONCLUSIVE ON ALL PERSONS. THE COMPANY RETAINS THE
RIGHT TO RECLASSIFY AN ELIGIBLE EMPLOYEE PRIOR TO THE TIME OF THE OCCURRENCE OF
A CHANGE OF CONTROL, AND THEREAFTER TO THE EXTENT PERMITTED BY THE PLAN.
1. If an Eligible Employee terminates due to an Involuntary Termination Without
Cause or a Constructive Termination, the cash severance benefit payable under
this Plan for Senior Executive Officers shall be a lump sum payment equal to
twelve (12) months of Pay and an amount equal to the annual maximum bonus award
that the Eligible Employee is eligible to receive as of the Termination Date. If
an Eligible Employee's bonus is calculated on a monthly or quarterly basis, the
maximum bonus award for these purposes shall be the amount derived by
annualizing the maximum monthly or quarterly payment. Any bonus payments that
have been made to an Eligible Employee during the calendar year that includes
the Termination Date (excluding payments that were earned in past years) will
reduce the amount of the maximum annual bonus award herein.
2. If an Eligible Employee terminates due to death or Disability, the cash
severance benefit payable under this Plan for Senior Executive Officers shall be
a lump sum payment equal to six (6) months of Pay and an amount equal to the
annual maximum bonus award that the Eligible Employee is eligible to receive as
of the Termination Date. If an Eligible Employee's bonus is calculated on a
monthly or quarterly basis, the maximum bonus award for these purposes shall be
the amount derived by annualizing the maximum monthly or quarterly payment. Any
bonus payments that have been made to an Eligible Employee during the calendar
year that includes the Termination Date (excluding payments that were earned in
past years) will reduce the amount of the maximum annual bonus award herein.
3. An Eligible Employee who becomes eligible to receive benefits under this Plan
shall become 100% fully vested in the Eligible Employee's nonvested stock
options, if any, that were previously granted to the Eligible Employee under the
Company's discretionary stock compensation plans, including, without limitation,
the Gene Logic Inc. 1997 Equity Incentive Plan. In addition, the Company's
repurchase option with respect to any unvested option shares that were acquired
on or before the Termination Date will expire in full.
4. The Company shall pay, on an Eligible Employee's behalf, the cost of
outplacement services, which cost shall not exceed fourteen thousand five
hundred dollars ($14,500).
<PAGE> 14
5. Payment of the Eligible Employee's COBRA premiums as set forth in Section
3(b) of the Plan.
For purposes of this Benefit Schedule, the following definition shall apply:
SENIOR EXECUTIVE OFFICERS shall mean those Eligible Employees who are serving on
the Company's Executive Committee and whose title is Senior Vice President or
above as reflected on the personnel records of the Company as of the earlier of
the Eligible Employee's Termination Date or effective date of a Change of
Control.
<PAGE> 15
BENEFIT SCHEDULE
FOR THE
GENE LOGIC INC.
EXECUTIVE SEVERANCE PLAN
SELECTED VICE PRESIDENTS AND DIRECTORS
THE COMPANY SHALL DETERMINE IN ITS SOLE AND ABSOLUTE DISCRETION IN WHICH
CATEGORY AN ELIGIBLE EMPLOYEE SHALL BE PLACED FOR PURPOSES OF RECEIVING
SEVERANCE BENEFITS UNDER THIS PLAN. THE COMPANY'S DETERMINATION SHALL BE FINAL
AND SHALL BE BINDING AND CONCLUSIVE ON ALL PERSONS. THE COMPANY RETAINS THE
RIGHT TO RECLASSIFY AN ELIGIBLE EMPLOYEE PRIOR TO THE TIME OF THE OCCURRENCE OF
A CHANGE OF CONTROL, AND THEREAFTER TO THE EXTENT PERMITTED BY THE PLAN.
1. If an Eligible Employee terminates due to an Involuntary Termination Without
Cause or a Constructive Termination, the cash severance benefit payable under
this Plan for Selected Vice Presidents And Directors shall be a lump sum payment
equal to nine (9) months of Pay and an amount equal to three quarters (3/4) of
the annual maximum bonus award that the Eligible Employee is eligible to receive
as of the Termination Date. If an Eligible Employee's bonus is calculated on a
monthly or quarterly basis, the maximum bonus award for these purposes shall be
the amount derived by annualizing the maximum monthly or quarterly payment. Any
bonus payments that have been made to an Eligible Employee during the calendar
year that includes the Termination Date (excluding payments that were earned in
past years) will reduce the amount of the maximum annual bonus award herein.
2. If an Eligible Employee terminates due to death or Disability, the cash
severance benefit payable under this Plan for Selected Vice Presidents And
Directors shall be a lump sum payment equal to six (6) months of Pay and an
amount equal to three quarters (3/4) of the annual maximum bonus award that the
Eligible Employee is eligible to receive as of the Termination Date. If an
Eligible Employee's bonus is calculated on a monthly or quarterly basis, the
maximum bonus award for these purposes shall be the amount derived by
annualizing the maximum monthly or quarterly payment. Any bonus payments that
have been made to an Eligible Employee during the calendar year that includes
the Termination Date (excluding payments that were earned in past years) will
reduce the amount of the maximum annual bonus award herein.
3. An Eligible Employee who becomes eligible to receive benefits under this Plan
shall become 100% fully vested in the Eligible Employee's nonvested stock
options, if any, that were previously granted to the Eligible Employee under the
Company's discretionary stock compensation plans, including, without limitation,
the Gene Logic Inc. 1997 Equity Incentive Plan. In addition, the Company's
repurchase option with respect to any unvested option shares that were acquired
on or before the Termination Date will expire in full.
4. The Company shall pay the cost of outplacement services on an Eligible
Employee's behalf, which cost shall not exceed eleven thousand five hundred
dollars ($11,500).
<PAGE> 16
5. Payment of the Eligible Employee's COBRA premiums as set forth in Section
3(b) of the Plan.
For purposes of this Benefit Schedule, the following definition shall apply:
SELECTED VICE PRESIDENTS AND DIRECTORS shall mean those Eligible Employees whose
title is Vice President (other than Eligible Employees who are members of the
Company's Executive Committee) or Senior Director or Director as reflected on
the personnel records of the Company and who are designated by the Company, in
the Company's sole and absolute discretion, to be Selected Vice Presidents and
Directors as of the earlier of the Eligible Employee's Termination Date or the
effective date of a Change of Control.
"Senior Director" or "Director" as used herein shall not refer to or include the
members of the Board of Directors of the Company.
<PAGE> 17
EXHIBIT A
ACKNOWLEDGEMENT AND ACCEPTANCE OF PLAN BENEFITS
The undersigned has been identified by the Company as an "Eligible
Employee" under the Company's Executive Severance Plan (the "Plan"), which
provides for the payment of certain severance benefits for such Eligible
Employee in the event of a specified termination of employment of such Eligible
Employee within a specified period preceding or following a Change of Control of
the Company, as defined in the Plan ("Change of Control").
The undersigned acknowledges receipt of, and understands and agrees
to, the terms of the Plan.
The undersigned further acknowledges that as of the date hereof, the
Plan sets forth the entire understanding between the undersigned and the Company
regarding the payment of severance benefits in the event the undersigned's
employment with the Company or its successor terminates (i) on or within
thirteen (13) months following the effective date of a Change of Control for any
reason or (ii) on or within three (3) months prior to, upon the occurrence of,
or on the effective date of a Change of Control for any reason other than death
or Disability, as defined in the Plan. Accordingly, the Plan supersedes all
prior oral and written agreements related to severance benefits, including, but
not limited to, any plan, policy, practice or employment agreement.
The undersigned further acknowledges that, as a condition of
receiving benefits under the Plan, he or she shall have no right or claim for
benefits against the Company for severance benefits originating under any such
other plan, policy, practice or employment agreement under the circumstances
described above.
The undersigned hereby authorizes the Company to offset any
severance payment to which he or she is entitled under the Company's Executive
Severance Plan by the amount of my indebtedness to the Company at the time the
severance payment is made, which amount shall be _____________.]
<TABLE>
<CAPTION>
GENE LOGIC INC. ELIGIBLE EMPLOYEE:
<S> <C>
By:
--------------------------- ----------------------------------
Signature
Title: Name:
------------------------ ------------------------
Date: Date:
------------------------ ------------------------
</TABLE>
<PAGE> 18
EXHIBIT B
RELEASE
(INDIVIDUAL TERMINATION)
Certain capitalized terms used in this Release ("Release") are defined in
the Gene Logic Inc. Executive Severance Plan (the "Plan") which I have reviewed.
I hereby confirm my obligations under the Company's proprietary
information and inventions agreement.
In exchange for the benefits I will receive under the Plan, I hereby
release, acquit and forever discharge the Company, its parents and subsidiaries,
its Benefit Plans (except as specifically provided in the Plan), and their
officers, directors, agents, servants, employees, shareholders, successors,
assigns and affiliates, of and from any and all claims, liabilities, demands,
causes of action, costs, expenses, attorneys fees, damages, indemnities and
obligations of every kind and nature, in law, equity, or otherwise, known and
unknown, suspected and unsuspected, disclosed and undisclosed, arising out of or
in any way related to claims and demands directly or indirectly arising out of
my employment with the Company or the termination of that employment, including
but not limited to, claims of intentional and negligent infliction of emotional
distress, any and all tort claims for personal injury, claims or demands related
to salary, bonuses, commissions, or any other ownership interests in the
Company, vacation pay, fringe benefits, expense reimbursements, severance pay,
or any other form of disputed compensation; claims pursuant to any federal,
state or local law or cause of action including, but not limited to, the federal
Civil Rights Act of 1964, as amended; the federal Age Discrimination in
Employment Act of 1967, as amended ("ADEA"); the federal Employee Retirement
Income Security Act of 1974, as amended; the federal Americans with Disabilities
Act of 1990; the California Fair Employment and Housing Act, as amended; Article
49(B) of the Maryland Code (Human Relations Commission Discrimination in
Employment); tort law; contract law; statutory law; common law; wrongful
discharge; discrimination; fraud; defamation; and breach of the implied covenant
of good faith and fair dealing; provided, however, that nothing in this
paragraph shall be construed in any way to release the Company from its
obligation to indemnify me from any third party action brought against me based
on my employment with the Company, pursuant to any applicable agreement or
applicable law or to reduce or eliminate any coverage I may have under the
Company's director and officer liability policy, if any.
I acknowledge that I am knowingly and voluntarily waiving and releasing
any rights I may have under ADEA. I also acknowledge that the consideration
given under the Plan for the waiver and release in the preceding paragraph
hereof is in addition to anything of value to which I was already entitled. I
further acknowledge that I have been advised by this writing, as required by the
ADEA, that: (A) my waiver and release do not apply to any rights or claims that
may arise on or after the date I execute this Release; (B) I should consult with
an attorney prior to executing this Release; (C) I have twenty-one (21) days to
consider this Release (although I may choose to voluntarily execute this Release
earlier); (D) I have seven (7) days following the execution of this Release by
the parties to revoke the Release; and (E) this Release shall not be
<PAGE> 19
effective until the date upon which the revocation period has expired, which
shall be the eighth day after this Release is executed by me.
I acknowledge that this Release is a general release of claims. I
acknowledge that as such, this Release extends to claims which I may not know or
suspect to exist in my favor at the time of executing this Release, even if my
knowledge of such claims would have materially affected my settlement with the
Company. I acknowledge that I have read and understand Section 1542 of the
California Civil Code which reads as follows: "A general release does not extend
to claims which the creditor does not know or suspect to exist in his favor at
the time of executing the release, which if known by him must have materially
affected his settlement with the debtor." I hereby expressly waive and
relinquish all rights and benefits under California Civil Code Section 1542 and
any law of any jurisdiction of similar effect with respect to my release of any
claims I may have against the Company.
[NAME OF EMPLOYEE]
Date:
--------------------- -----------------------
<PAGE> 20
EXHIBIT C
RELEASE
(GROUP TERMINATION)
Certain capitalized terms used in this Release ("Release") are defined in
the Gene Logic Inc. Executive Severance Plan (the "Plan") which I have reviewed.
I hereby confirm my obligations under the Company's proprietary
information and inventions agreement.
In exchange for the benefits I will receive under the Plan, I hereby
release, acquit and forever discharge the Company, its parents and subsidiaries,
its Benefit Plans (except as specifically provided in the Plan) and their
officers, directors, agents, servants, employees, shareholders, successors,
assigns and affiliates, of and from any and all claims, liabilities, demands,
causes of action, costs, expenses, attorneys fees, damages, indemnities and
obligations of every kind and nature, in law, equity, or otherwise, known and
unknown, suspected and unsuspected, disclosed and undisclosed, arising out of or
in any way related to claims and demands directly or indirectly arising out of
my employment with the Company or the termination of that employment, including
but not limited to, claims of intentional and negligent infliction of emotional
distress, any and all tort claims for personal injury, claims or demands related
to salary, bonuses, commissions, or any other ownership interests in the
Company, vacation pay, fringe benefits, expense reimbursements, severance pay,
or any other form of disputed compensation; claims pursuant to any federal,
state or local law or cause of action including, but not limited to, the federal
Civil Rights Act of 1964, as amended; the federal Age Discrimination in
Employment Act of 1967, as amended ("ADEA"); the federal Employee Retirement
Income Security Act of 1974, as amended; the federal Americans with Disabilities
Act of 1990; the California Fair Employment and Housing Act, as amended; Article
49(B) of the Maryland Code (Human Relations Commission Discrimination in
Employment; tort law; contract law; statutory law; common law; wrongful
discharge; discrimination; fraud; defamation; and breach of the implied covenant
of good faith and fair dealing; provided, however, that nothing in this
paragraph shall be construed in any way to release the Company from its
obligation to indemnify me from any third party action brought against me based
on my employment with the Company, pursuant to any applicable agreement or
applicable law or to reduce or eliminate any coverage I may have under the
Company's director and officer liability policy, if any.
I acknowledge that I am knowingly and voluntarily waiving and releasing
any rights I may have under ADEA. I also acknowledge that the consideration
given under the Plan for the waiver and release in the preceding paragraph
hereof is in addition to anything of value to which I was already entitled. I
further acknowledge that I have been advised by this writing, as required by the
ADEA, that: (A) my waiver and release do not apply to any rights or claims that
may arise on or after the date I execute this Release; (B) I should consult with
an attorney prior to executing this Release; (C) I have forty-five (45) days to
consider this Release (although I may choose to voluntarily execute this Release
earlier); (D) I have seven (7) days following the
<PAGE> 21
execution of this Release by the parties to revoke the Release; (E) this Release
shall not be effective until the date upon which the revocation period has
expired, which shall be the eighth day after this Release is executed by me; and
(F) I have received with this Release a detailed list of the job titles and ages
of all employees who were terminated in this group termination and the ages of
all employees of all employees in the same job classification or organizational
unit who were not terminated.
I acknowledge that this Release is a general release of claims. I
acknowledge that as such, this Release extends to claims which I may not know or
suspect to exist in my favor at the time of executing this Release, even if my
knowledge of such claims would have materially affected my settlement with the
Company. I acknowledge that I have read and understand Section 1542 of the
California Civil Code which reads as follows: "A general release does not extend
to claims which the creditor does not know or suspect to exist in his favor at
the time of executing the release, which if known by him must have materially
affected his settlement with the debtor." I hereby expressly waive and
relinquish all rights and benefits under California Civil Code Section 1542 and
any law of any jurisdiction of similar effect with respect to my release of any
claims I may have against the Company.
[NAME OF EMPLOYEE]
Date:
-------------------------- --------------------------
<PAGE> 1
EXHIBIT 10.59
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as
of January 4, 2000 by and between GENE LOGIC INC., a Delaware corporation (the
"Company") and DAVID S. MURRAY, a New Jersey resident ("Murray").
RECITALS:
The Company desires to secure the services of Murray and Murray 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 Murray as a Senior Vice President of the
Company and Murray hereby accepts such employment and such positions. Murray
shall devote his full time, ability, attention, knowledge and skill to
performing all duties as Senior Vice President of the Company as lawfully
assigned or delegated to him by the President and Chief Operating Officer of the
Company.
2. Base Salary. In consideration for Murray's services to the Company
during the term of his employment under this Agreement, Murray shall receive an
annual base salary of $260,000 during 2000, and thereafter in such amounts as
may be mutually agreed by the Company and Murray, but not less than $260,000.
Base salary shall be paid in equal, semi-monthly 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. Stock Options. The Company will grant 120,000 stock options to Murray
upon employment with the Company. On the date of your stock option grant, 20,000
of your stock options will vest. In addition, the remaining 100,000 options will
be subject to vesting at the rate of 1/48 each month for 48 months, beginning on
your date of hire. 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.
4. Additional Compensation and Benefits.
4.1 Annual Performance Bonus. During each calendar year while this
Agreement remains in force, commencing with 2000, Murray shall receive, in
addition to the base salary specified in Section 2 above, an annual performance
bonus divided into two parts--a guaranteed target amount of $90,000 and an
additional $150,000 based on achieving revenue goals as mutually agreed by
Murray and the President and Chief Operating Officer of the Company. Thereafter
any annual cash bonus shall be in such amount as may be mutually agreed by the
Company and Murray, but not less than $240,000.
Page 1
<PAGE> 2
4.2 Medical Benefits, Vacation and Sick Leave. Murray 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-eight (28) days
of paid vacation per year and sick leave on the same basis as the Company's
other senior executives. This paid time off will be prorated depending on actual
start date to accrue at 2.33 days per month.
4.3 Pension Plan. Murray 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, Murray 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 the mutually agreed upon start date and ending four (4) years
later, 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 Murray, if at any time, in the reasonable
opinion of the Company's Board of Directors, (a) Murray 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 Murray in the event of termination of Murray's employment
under this Subsection 7.1 shall be limited to the payment of Murray's salary and
benefits through the effective date of termination.
7.2 Without Cause. Upon any termination of this Agreement without
cause by the Company, the Company shall pay to Murray as severance pay an amount
equal to six (6) months of Murray's annualized base salary for that calendar
year during which the termination becomes effective, in addition to such other
compensation to which Murray may be entitled prior to the date of termination.
7.3 By Murray. Murray 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 Murray in the event of termination of Murray's
employment under this Subsection 7.3 shall be limited to the payment of Murray's
salary and benefits through the effective date of termination and the provisions
of Subsection 7.2 shall not apply.
Page 2
<PAGE> 3
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 Murray 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.
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.
708 Quince Orchard Road
Gaithersburg, MD 20878
To Murray: David S. Murray
3 Ramsey Way
Long Valley, NJ 07853
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.
Page 3
<PAGE> 4
IN WITNESS WHEREOF, the parties have executed this Agreement by their
duly authorized officers or agents as of the date first written above.
<TABLE>
<CAPTION>
"Company" "Employee"
<S> <C>
GENE LOGIC INC. /s/ David S. Murray
a Delaware corporation --------------------
David S. Murray
By: /s/ Mark D. Gessler
-----------------------
Name: Mark Gessler
Title: President and Chief Operating Officer
</TABLE>
Page 4
<PAGE> 1
Exhibit 10.60
CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. Sections 200.800(b)(4), 200.83
and 240.24b-2
STEMEXPRESS PRODUCT PURCHASE AGREEMENT
BETWEEN
GENE LOGIC INC.
AND
NeuralStem Biopharmaceuticals, Ltd.
DATED AS OF MARCH 27, 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
1. DEFINITIONS................................................................. 1
1.1 "Affiliate"........................................................ 1
1.2 "Base Information"................................................. 2
1.3 "cDNA"............................................................. 2
1.4 "Control".......................................................... 2
1.5 "Effective Date"................................................... 2
1.6 "GeneExpress(TM)Data Warehouse..................................... 2
1.7 "Gene Logic Software............................................... 2
1.8 "Gene Logic Technology............................................. 2
1.9 "Gene Products..................................................... 2
1.10 "Improvement"...................................................... 3
1.11 "Patent Rights".................................................... 3
1.12 "Program Inventions................................................ 3
1.13 "STEMExpress Data Mart"............................................ 3
1.14 "STEMExpress Product".............................................. 3
1.15 "Therapeutic Products.............................................. 3
1.16 "Third Party"...................................................... 3
2. STEMEXPRESS(TM) PRODUCT DELIVERY............................................ 3
2.1 Delivery of the STEMExpress Product................................ 3
3. OWNERSHIP AND PURSUIT OF PATENTS AND OTHER RIGHTS AND INVENTIONS............ 3
3.1 Ownership of Inventions............................................ 3
3.2 Ownership of Gene Logic Technology................................. 3
3.3 Pursuit of Intellectual Property Rights............................ 4
3.4 Cooperation........................................................ 4
4. LICENSES.................................................................... 4
4.1 Licenses to Gene Logic from NeuralStem............................. 4
4.2 License to NeuralStem from Gene Logic.............................. 5
</TABLE>
ii.
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
5. PAYMENTS.................................................................... 5
5.1 STEMExpress Product Purchase Fee................................... 5
5.2 Method of Payment.................................................. 5
6. CONFIDENTIALITY AND SECURITY................................................ 5
6.1 Security of STEMExpress Product and Gene Logic Software........... 5
6.2 Confidentiality.................................................... 6
6.3 Permitted Disclosures.............................................. 6
6.4 Publicity.......................................................... 7
6.5 Publication........................................................ 7
7. REPRESENTATIONS AND WARRANTIES.............................................. 8
7.1 Legal Authority.................................................... 8
7.2 Valid Licenses..................................................... 8
7.3 No Conflicts....................................................... 8
7.4 STEMExpress Product................................................ 8
7.5 Representation by Legal Counsel.................................... 8
7.6 Disclaimer......................................................... 8
8. INDEMNIFICATION AND INSURANCE............................................... 9
8.1 Indemnification by NeuralStem...................................... 9
8.2 Indemnification by Gene Logic...................................... 9
8.3 Conditions to Indemnification...................................... 9
8.4 Settlements........................................................ 9
9. GENERAL PROVISIONS.......................................................... 10
9.1 Assignment......................................................... 10
9.2 Non-Waiver......................................................... 10
9.3 Governing Law...................................................... 10
9.4 Partial Invalidity................................................. 10
9.5 Notice............................................................. 10
9.6 Headings........................................................... 11
</TABLE>
iii.
<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
9.7 No Implied Licenses................................................ 11
9.8 Force Majeure...................................................... 11
9.9 Survival........................................................... 11
9.10 Entire Agreement................................................... 11
9.11 Amendments......................................................... 11
9.12 Independent Contractors............................................ 11
9.13 Counterparts....................................................... 11
</TABLE>
iv.
<PAGE> 5
STEMEXPRESS PRODUCT PURCHASE AGREEMENT
THIS STEMEXPRESS PRODUCT PURCHASE AGREEMENT ("Agreement") is made as of
March 27, 2000, ("Effective Date") by and between GENE LOGIC INC., a Delaware
corporation ("Gene Logic"), having an office at 708 Quince Orchard Road,
Gaithersburg, Maryland 20878 and NEURALSTEM BIOPHARMACEUTICALS, LTD., a Maryland
corporation, ("NeuralStem"), having an office at 387 Technology Drive, College
Park, MD. Gene Logic and NeuralStem may each be referred to herein individually
as a "Party" and collectively as the "Parties".
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 drug targets for the discovery of pharmaceutical
products;
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 drug targets for the discovery of pharmaceutical
products;
WHEREAS, NeuralStem is a company engaged in the development and
commercialization of therapies for neurological disorders;
WHEREAS, Gene Logic and NeuralStem wish to enter into this Agreement
to, among other things, provide NeuralStem with (i) perpetual, non-exclusive
access to portions of the GeneExpress(TM) Data Warehouse referred to as a
STEMExpress Data Mart and software analysis tools; and
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual promises, covenants and conditions contained herein, Gene Logic and
NeuralStem 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 having the power to direct or cause the direction
of the management and policies of an entity, whether through direct or indirect
beneficial ownership of more than 50% of the voting or income interest in such
corporation or other business entity. Notwithstanding the foregoing, for
purposes of this Agreement, the term "Affiliate" shall not include subsidiaries
in which a Party or its Affiliates owns a majority of the ordinary voting power
to elect a majority of the board of directors but is
1.
<PAGE> 6
restricted from electing such majority by contract or otherwise, until such time
a such restrictions are no longer in effect.
1.2 "BASE INFORMATION" shall mean data and information comprising (i)
gene expression profiles, (ii) nucleotide sequence information, (iii) protein
sequence information and (iv) clinical and other information associated with
tissue and cell samples and (v) any related annotated information regarding, for
example, the source of the foregoing, their biological function(s), involvement
in any metabolic or regulatory pathway(s), and relationship to any disease(s) or
response to any agent(s).
1.3 "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.
1.4 "CONTROL" shall mean possession of the ability to grant the
licenses or sublicenses or to make the assignments as provided for herein
without violating the terms of any agreement or other arrangement with any Third
Party.
1.5 "EFFECTIVE DATE" shall mean the date of this Agreement first
written above.
1.6 "GENEEXPRESS(TM) DATA WAREHOUSE" shall mean an organized database
architecture containing Base Information.
1.7 "GENE LOGIC SOFTWARE" shall mean software tools for the
visualization, analysis, indexing and mining of data contained in the
GeneExpress(TM) Data Warehouse, controlled by Gene Logic as of the Effective
Date.
1.8 "GENE LOGIC TECHNOLOGY" shall mean: (a) 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 that
relate to: (i) methods and devices for generating Base Information, (ii) the
Gene Logic Software; (iii) the GeneExpress(TM) Data Warehouse other than the
Base Information contained therein; and (b) all Patent Rights or other
intellectual property rights controlled by Gene Logic to the extent they cover
any of the foregoing.
1.9 "GENE PRODUCTS" shall mean tangible products derived from utilizing
the Base Information contained in the STEMExpress Data Mart, comprising (i)
tangible products embodying gene expression profiles, (ii) tangible products
embodying genes, ESTs, cDNAs, partial cDNAs, DNAs, corresponding full length
cDNAs and associated genomic sequences (iii) proteins (iv) tangible products
embodying or which use methods of using the foregoing based on their biological
function(s), involvement in any metabolic or regulatory pathway(s), relationship
to any disease(s) or response to any agent(s), and (v) commercial products which
incorporate the foregoing.
2.
<PAGE> 7
1.10 "IMPROVEMENT" shall mean any enhancement or improvement (whether
or patentable) to the Gene Logic Technology that is made by either Party in the
course of using the STEMExpress Product.
1.11 "PATENT RIGHTS" shall mean all rights associated with 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).
1.12 "PROGRAM INVENTIONS" shall mean any invention or discovery that is
or may be patentable under the laws of the United States or other countries, and
that is conceived or reduced to practice by either Party in the course of using
the STEMExpress Product.
1.13 "STEMEXPRESS DATA MART" shall mean a database containing a subset
of the Base Information contained in the GeneExpress(TM) Data Warehouse
associated with untreated, (i) diseased and normal human tissues, (ii) research
cell lines and (iii) animal model systems, such as mouse and rat, [***].
1.14 "STEMEXPRESS PRODUCT" shall mean a product which consists of the
STEMExpress Data Mart and Gene Logic Software.
1.15 "THERAPEUTIC PRODUCTS" shall mean Gene Products that are directly
used for the therapeutic or prophylactic treatment of diseases or disorders in
humans or animals, including, without limitation, cell therapy, gene therapy,
antisense therapy and protein replacement therapy.
1.16 "THIRD PARTY" shall mean any party other than NeuralStem or Gene
Logic or an Affiliate of NeuralStem or Gene Logic.
2. STEMEXPRESS(TM) PRODUCT DELIVERY.
2.1 DELIVERY OF THE STEMEXPRESS PRODUCT. Gene Logic agrees to deliver
the STEMExpress Product within three (3) days of the Effective Date.
3. OWNERSHIP AND PURSUIT OF PATENTS AND OTHER RIGHTS AND INVENTIONS
3.1 OWNERSHIP OF INVENTIONS. Except as otherwise provided in Article
3.2, the ownership of any Program Inventions shall be determined in accordance
with United States patent law.
3.2 OWNERSHIP OF GENE LOGIC TECHNOLOGY. Gene Logic shall own all rights
to the Gene Logic Technology and Improvements thereof. NeuralStem hereby
irrevocably assigns to Gene Logic all right, title and interest in and to
Improvements to the Gene Logic Technology to the extent made by employees or
agents of NeuralStem. In the event that NeuralStem is legally unable to make a
required assignment of rights to Gene Logic, then NeuralStem agrees either to
* CONFIDENTIAL TREATMENT REQUESTED
3.
<PAGE> 8
waive the enforcement of such rights against Gene Logic and any sublicensees and
assignees; or to grant to Gene Logic an exclusive, irrevocable, perpetual,
worldwide, fully-paid license, with right to sublicense through multiple tiers
of sublicense, to such rights.
3.3 PURSUIT OF INTELLECTUAL PROPERTY RIGHTS.
(a) Gene Logic shall be responsible, in its sole discretion
and at its sole cost, for the filing, prosecution and maintenance of Patent
Rights, copyrights and other proprietary rights claiming or directed to: (i)
Gene Logic Technology and Improvements thereto; and (ii) Program Inventions
conceived solely by Gene Logic.
(b) NeuralStem shall be responsible, in its sole discretion
and at its sole cost, for the filing, prosecution and maintenance of Patent
Rights, copyrights and other proprietary rights claiming or directed to Program
Inventions conceived solely by NeuralStem.
3.4 COOPERATION. Each Party agrees to cooperate upon request of the
other Party in the preparation and prosecution of all Patent Rights and other
proprietary rights under this Article 3 and in the maintenance of any patents,
copyrights or other similar rights issued thereon; the requesting Party shall
reimburse the cooperating Party for its reasonable out-of-pocket expenses
incurred in connection with such cooperation as requested by the other Party.
Such cooperation will include the execution of all documents necessary or
desirable for the requesting Party to fulfill its obligations hereunder.
4. LICENSES
4.1 LICENSES TO GENE LOGIC FROM NEURALSTEM
(a) BASE INFORMATION LICENSE. NeuralStem hereby grants to Gene Logic a
non-exclusive, irrevocable, perpetual, worldwide, fully-paid license, with right
to sublicense through multiple tiers of sublicense, under all rights (including
Patent Rights) which NeuralStem has in the Base Information in the STEMExpress
Data Mart.
(b) [***]. If NeuralStem desires to [***], or [***],
NeuralStem shall inform Gene Logic thereof in writing. If Gene Logic is
interested in [***], it shall inform NeuralStem of its interest in writing
within [***] days ("Notice Period") after the receipt of the written notice from
NeuralStem, and the Parties shall thereafter [***] during an additional period
of [***] days ("[***] Period") such [***] Period to be extended for as long as
the Parties are [***]. If Gene Logic does not provide written notice of its
interest to NeuralStem within the Notice Period, or [***], Gene Logic's [***]
shall expire, and NeuralStem shall be free to [***].
* CONFIDENTIAL TREATMENT REQUESTED
4.
<PAGE> 9
4.2 LICENSE TO NEURALSTEM FROM GENE LOGIC
(a) LICENSE TO THE STEMEXPRESS PRODUCT. Subject to the terms
and conditions of this Agreement, including without limitation payment of the
StemExpress Product Purchase Fee under Section 5.1, Gene Logic hereby grants to
NeuralStem a perpetual, royalty-free, non-exclusive, non-sublicensable (except
to NeuralStem's Affiliates), non-transferable (except as provided in Section 9.1
hereof), worldwide license to use the Base Information in the STEMExpress
Product to perform internal research and drug discovery and development
activities.
(b) RESTRICTION ON DISCLOSURE AND RESALE. Except for
disclosure to NeuralStem's Affiliates, and NeuralStem's and NeuralStem's
Affiliates' respective employees and consultants to the extent permitted under
Section 6.2, NeuralStem shall not provide Base Information contained within the
STEMExpress Product or any Gene Logic Technology or Improvement thereto to any
Third Party for any reason without prior written consent of Gene Logic, which
consent shall not be unreasonably withheld or delayed. The Parties acknowledge
and agree that NeuralStem may desire to enter into collaborations with or grant
licenses to Third Parties to develop pharmaceutical products, including
Therapeutic Products, and that it is reasonable to disclose to Third Parties
specific Base Information contained within the STEMExpress Product in connection
with such collaborations or licenses. The Parties further acknowledge and agree
that NeuralStem shall have no right to disclose to Third Parties Base
Information contained within the STEMExpress Product, for use in generating a
data base containing Base Information that will be made available to other Third
Parties on a commercial basis.
5. PAYMENTS
5.1 STEMEXPRESS PRODUCT PURCHASE FEE. An irrevocable fee will be paid
by NeuralStem to Gene Logic of one million five hundred thousand dollars
($1,500,000), within thirty (30) days of the Effective Date.
5.2 METHOD 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 Party receiving such payment by wire transfer pursuant to the
instructions set forth on Schedule 5.2.
6. CONFIDENTIALITY AND SECURITY
6.1 SECURITY OF STEMEXPRESS PRODUCT 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 STEMExpress Product
provided under the provisions of this Agreement:
(a) NeuralStem may use the STEMExpress Product only in secure work
facilities by authorized personnel and shall not make any copies of the data
contained in the
5.
<PAGE> 10
STEMExpress Product, except as necessary to enable NeuralStem and its Affiliates
to perform internal research and drug discovery and development activities.
(b) NeuralStem will promptly notify Gene Logic of any (i)
loss, theft or unauthorized disclosure of data contained in the STEMExpress
Product; and (ii) unauthorized access to the STEMExpress Product.
6.2 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 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 August 12, 1999 and all data, results and information developed pursuant
to this Agreement that are 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:
(i) information that is or becomes part of the public
domain other than through a breach of this Agreement by the non-Disclosing Party
or its Affiliates;
(ii) information that is obtained after the Effective 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 was already 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
(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 6.2(b) shall survive for a
period of five (5) years from the Effective Date.
6.3 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
6.
<PAGE> 11
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 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 6. In addition,
notwithstanding any other provisions of this Agreement, nothing herein shall
limit Gene Logic's ability to grant non-exclusive access to the Base Information
contained within the STEMExpress Data Mart to multiple subscribers.
6.4 PUBLICITY. The parties agree that a press release announcing the
matters covered by this Agreement will be prepared in advance and will be
subject to the mutual approval of the parties, which approval will not
unreasonably be 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.
6.5 PUBLICATION. The Parties shall cooperate in appropriate publication
of the results of activities contemplated by this Agreement, but subject to the
predominating interest to obtain patent protection for any patentable subject
matter and to Gene Logic's business interest in preserving the value of the
GeneExpress(TM) Data Warehouse. 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, otherwise contains Confidential Information of the
reviewing Party, or, with respect to any proposed disclosure by NeuralStem,
contains information that Gene Logic reasonably believes would impair the value
of the GeneExpress(TM) Data Warehouse. 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 or, if NeuralStem is the
disclosing Party, Gene Logic notifies NeuralStem that Gene Logic reasonably
believes that the disclosure would impair the value of the GeneExpress(TM) Data
Warehouse, 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 or to address Gene Logic's concern regarding
impairment of the value of the GeneExpress(TM) Data Warehouse. 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.
7.
<PAGE> 12
7. REPRESENTATIONS AND WARRANTIES
7.1 LEGAL AUTHORITY. Each Party represents and warrants to the other
that (i) it is a corporation or entity duly organized and validly existing under
the laws of the state or other jurisdiction of incorporation or formation; (ii)
it has the legal power, authority and right to enter into this Agreement and to
perform its respective obligations set forth herein; and (iii) the execution,
delivery and performance of this Agreement by such Party has been duly
authorized by all requisite corporate officials and do not require any
shareholder action or other approval.
7.2 VALID LICENSES. Each Party represents and warrants to the other
Party that it has authority to grant the rights and licenses set forth in this
Agreement.
7.3 NO CONFLICTS. Each Party represents and warrants that as of the
Effective 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 Bylaws, which in any
way limits or conflicts with its ability to fulfill any of its obligations under
this Agreement.
7.4 STEMEXPRESS PRODUCT. Gene Logic hereby represents and warrants (i)
that it has the right to sell NeuralStem the STEMExpress Product, and (ii) that
to the best of the knowledge of the undersigned representative of Gene Logic as
of the Effective Date, the use of the STEMExpress Product as envisaged in this
Agreement does not infringe on the rights of any Third Parties.
7.5 REPRESENTATION BY LEGAL COUNSEL. Each Party hereto represents that
it has been represented by legal counsel in connection with the drafting of this
Agreement and acknowledges that it has participated in the drafting hereof. In
interpreting and applying the terms and provisions of this Agreement, the
Parties agree that no presumption shall exist or be implied against the Party
that drafted such term or provision.
7.6 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. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, 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
WARRANTY IS MADE AS TO THE UTILITY OF ANY INFORMATION, MATERIALS, SOFTWARE OR
OTHER TECHNOLOGY PROVIDED HEREUNDER.
8.
<PAGE> 13
8. INDEMNIFICATION AND INSURANCE
8.1 INDEMNIFICATION BY NEURALSTEM. NeuralStem shall indemnify, defend
and hold harmless Gene Logic and its Affiliates, and each of its and their
respective employees, officers, directors and agents (each, a "Gene Logic
Indemnified Party") from and against any and all liability, loss, damage, cost,
and expense (including reasonable attorneys' fees) (collectively, a "Liability")
which the Gene Logic Indemnified Party may incur, suffer or be required to pay
resulting from or arising in connection with any Third Party action or claim
based upon (i) the breach by NeuralStem of any covenant, representation or
warranty contained in this Agreement, or (ii) negligence or willful misconduct
by NeuralStem, its Affiliates, employees or agents. Notwithstanding the
foregoing, NeuralStem shall have no obligation under this Agreement to
indemnify, defend or hold harmless any Gene Logic Indemnified Party with respect
to claims, demands, costs or judgments which result from willful misconduct or
negligent acts or omissions of Gene Logic, its Affiliates, or any of their
respective employees, officers, directors or agents.
8.2 INDEMNIFICATION BY GENE LOGIC. Gene Logic shall indemnify, defend
and hold harmless NeuralStem and its Affiliates, and each of its and their
respective employees, officers, directors and agents (each, a "NeuralStem
Indemnified Party") from and against any Liability which the NeuralStem
Indemnified Party may incur, suffer or be required to pay resulting from or
arising in connection with any Third Party action or claim based upon (i) the
breach by Gene Logic of any covenant, representation or warranty contained in
this Agreement, or (ii) the negligence or willful misconduct by Gene Logic, its
Affiliates, employees or agents. Notwithstanding the foregoing, Gene Logic shall
have no obligation under this Agreement to indemnify, defend, or hold harmless
any NeuralStem Indemnified Party with respect to claims, demands, costs or
judgments which result from willful misconduct or negligent acts or omissions of
NeuralStem, its Affiliates, or any of their respective employees, officers,
directors or agents.
8.3 CONDITIONS TO INDEMNIFICATION. The obligations of the indemnifying
Party under Sections 8.1 and 8.2 are conditioned upon the delivery of written
notice to the indemnifying Party of any potential Liability promptly after the
indemnified Party becomes aware of such potential Liability. The indemnifying
Party shall have the right to assume the defense of any suit or claim related to
the Liability if it has assumed responsibility for the suit or claim in writing;
however, if in the reasonable judgment of the indemnified Party, such suit or
claim involves an issue or matter which could have a materially adverse effect
on the business operations or assets of the indemnified Party, the indemnified
Party may waive its rights to indemnity under this Agreement and control the
defense or settlement thereof, but in no event shall any such waiver be
construed as a waiver of any indemnification rights such Party may have at law
or in equity. If the indemnifying Party defends the suit or claim, the
indemnified Party may participate in (but not control) the defense thereof at
its sole cost and expense.
8.4 SETTLEMENTS. Neither Party may settle a claim or action related to
a Liability without the consent of the other Party, if such settlement would
impose any monetary obligation on the other Party or require the other Party to
submit to an injunction or otherwise limit the other its Affiliates, employees,
agents, officers and directors (each an "Indemnified Party") permitted from and
against any judgments or settlements.
9.
<PAGE> 14
9. GENERAL PROVISIONS
9.1 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 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. Notwithstanding the
foregoing, NeuralStem may not assign any of its rights or obligations under this
Agreement to any of the competitors listed in Schedule 9.1.
9.2 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.
9.3 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.
9.4 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.
9.5 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 NeuralStem: To Gene Logic:
387 Technology Drive 708 Quince Orchard Road
College Park, MD 20742 Gaithersburg, Maryland 20878
Attn: Chief Executive Officer Attn: Chief Financial Officer
Phone: (301) 571-9323 Phone: (301) 987-1700
Fax: (301) 405-7393 Fax: (301) 987-1701
or to such other address as to which the Party has given written notice thereof.
Such notices shall be deemed given upon receipt.
10.
<PAGE> 15
9.6 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.
9.7 NO IMPLIED LICENSES. 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.
9.8 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; plague of epic proportion; 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.
9.9 SURVIVAL. Sections 3.1, 3.2, 3.3, 3.4, 4.1, 4.2, 6.2, 6.3, 7, 8
(including the provisions therein that are contemplated to continue following
termination), 9.1, 9.4 and 9.10 shall survive the termination or expiration of
this Agreement.
9.10 ENTIRE AGREEMENT. This Agreement, including the exhibits and
schedules hereto, 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.
9.11 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.
9.12 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
NeuralStem 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.
9.13 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.
11.
<PAGE> 16
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. NEURALSTEM BIOPHARMACEUTICALS, LTD.
By:/s/ Mark Gessler By: /s/ I. Richard Garr
------------------------------- -----------------------------
Mark Gessler, President & COO Name: I. Richard Garr, CEO
12.
<PAGE> 17
SCHEDULE 1.13
STEMEXPRESS BASE INFORMATION CONTENT
[***]
i.
*CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 18
SCHEDULE 5.2
WIRE TRANSFER PAYMENT INSTRUCTIONS
To Gene Logic:
Bank: Investors Bank & Trust Company
Location: 200 Clarendon
Boston, MA 02116
ABA #: [***]
For further credit to client funds #: [***]
Account Name: GENE LOGIC INC.
Account #: [***]
ii
*CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 19
SCHEDULE 9.1
[***]
iii
*CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 1
CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. Sections 200.800(b)(4), 200.83
and 240.24b-2
GENEEXPRESS(TM) PRODUCT ACCESS AGREEMENT
BETWEEN
GENE LOGIC INC.
AND
NEURALSTEM BIOPHARMACEUTICALS, LTD.
DATED AS OF MARCH 27, 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
1. DEFINITIONS..........................................................1
1.1 "Affiliate".................................................1
1.2 "Base Information"..........................................2
1.3 "cDNA"......................................................2
1.4 "Control"...................................................2
1.5 "Effective Date"............................................2
1.6 "GeneExpress(TM) Product"...................................2
1.7 "GeneExpress(TM) Data Warehouse"............................2
1.8 "Gene Logic Software".......................................2
1.9 "Gene Logic Technology".....................................2
1.10 "Gene Products".............................................2
1.11 "Gene Target"...............................................3
1.12 "Improvement"...............................................3
1.13 "NSBExpress Data Mart"......................................3
1.14 "Patent Rights".............................................3
1.15 "Program Inventions"........................................3
1.16 "Raw Data"..................................................3
1.17 "Samples"...................................................3
1.18 "STEMExpress Data Mart".....................................3
1.19 "Term"......................................................3
1.20 "Therapeutic Products"......................................4
1.21 "Third Party"...............................................4
1.22 "Update"....................................................4
2. GENEEXPRESS(TM) PRODUCT ACCESS AND SAMPLE PROVISION..................4
2.1 Access to the GeneExpress(TM) Product.......................4
2.2 Personnel and Resources.....................................4
2.3 GeneExpress(TM) Updates.....................................4
2.4 Provision of [***]..........................................4
2.5 Support and Training........................................4
</TABLE>
i. *CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
2.6 Customization...............................................5
2.7 Sample Provision............................................5
2.8 [***].......................................................5
2.9 Research Plan...............................................5
3. MANAGEMENT...........................................................5
3.1 Alliance Directors..........................................5
3.2 Dispute Resolution..........................................6
4. OWNERSHIP AND PURSUIT OF PATENTS AND OTHER RIGHTS AND INVENTIONS.....6
4.1 Ownership of Inventions.....................................6
4.2 Ownership of Gene Logic Technology..........................6
4.3 Pursuit of Intellectual Property Rights.....................6
4.4 Cooperation and Communication...............................7
4.5 Infringement by Third Parties...............................7
4.6 Allegations of Infringement of Third Party Rights...........8
5. LICENSES.............................................................9
5.1 Licenses to Gene Logic from NeuralStem......................9
5.2 License to NeuralStem from Gene Logic......................10
6. PAYMENTS............................................................10
6.1 GeneExpress(TM) Product Access Fees........................10
6.2 Sample Acquisition Fee.....................................10
6.3 Method of Payment..........................................11
7. CONFIDENTIALITY AND SECURITY........................................11
7.1 Security of GeneExpress(TM) Product and Gene
Logic Software......................................11
7.2 Confidentiality............................................11
7.3 Permitted Disclosures......................................12
7.4 Publicity..................................................13
7.5 Publication................................................13
8. REPRESENTATIONS AND WARRANTIES......................................13
8.1 Legal Authority............................................13
</TABLE>
* CONFIDENTIAL TREATMENT REQUESTED
ii.
<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
8.2 Valid Licenses.............................................13
8.3 No Conflicts...............................................14
8.4 Samples....................................................14
8.5 GeneExpress(TM) Product....................................14
8.6 Representation by Legal Counsel............................14
8.7 Disclaimer.................................................14
9. TERM AND TERMINATION................................................15
9.1 Term.......................................................15
9.2 Termination by Gene Logic..................................15
9.3 Termination for Breach.....................................15
9.4 Effect of Bankruptcy.......................................15
9.5 Remedies...................................................16
10. INDEMNIFICATION AND INSURANCE.......................................16
10.1 Indemnification by NeuralStem..............................16
10.2 Indemnification by Gene Logic..............................16
10.3 Conditions to Indemnification..............................16
10.4 Settlements................................................17
11. GENERAL PROVISIONS..................................................17
11.1 Assignment.................................................17
11.2 Non-Waiver.................................................17
11.3 Governing Law..............................................17
11.4 Partial Invalidity.........................................17
11.5 Notice.....................................................18
11.6 Headings...................................................18
11.7 No Implied Licenses........................................18
11.8 Force Majeure..............................................18
11.9 Survival...................................................18
11.10 Entire Agreement...........................................18
11.11 Amendments.................................................19
</TABLE>
iii.
<PAGE> 5
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
11.12 Independent Contractors....................................19
11.13 Counterparts...............................................19
</TABLE>
iv.
<PAGE> 6
GENEEXPRESS(TM) PRODUCT ACCESS AGREEMENT
THIS GENEEXPRESS(TM) PRODUCT ACCESS AGREEMENT ("Agreement") is made as
of March 27, 2000, ("Effective Date") by and between GENE LOGIC INC., a Delaware
corporation ("Gene Logic"), having an office at 708 Quince Orchard Road,
Gaithersburg, Maryland 20878 and NEURALSTEM BIOPHARMACEUTICALS, LTD., a Maryland
corporation, ("NeuralStem"), having an office at 387 Technology Drive, College
Park, MD. Gene Logic and NeuralStem may each be referred to herein individually
as a "Party" and collectively as the "Parties".
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 drug targets for the discovery of pharmaceutical
products;
WHEREAS, NeuralStem is a company engaged in the development and
commercialization of therapies for neurological disorders;
WHEREAS, Gene Logic can provide partners with gene expression data and
data analysis tools to effectively allow them to mine these databases which
include both publicly available and proprietary information. NeuralStem would
like to access such information including the analysis of proprietary samples
which it would provide.
WHEREAS, Gene Logic and NeuralStem wish to enter into this Agreement
to, among other things, provide NeuralStem with non-exclusive access to portions
of the GeneExpress(TM) Data Warehouse. NeuralStem will access the
GeneExpress(TM) Data Warehouse through a subscription (which include software
analysis tools) to the NSBExpress Data Mart (as described in Section 1.13) and
through the purchase of the STEMExpress Data Mart.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual promises, covenants and conditions contained herein, Gene Logic and
NeuralStem 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 having the power to direct or cause
the direction of the management and policies of an entity, whether through
direct or indirect beneficial ownership of more than 50% of the voting or income
interest in such
1
<PAGE> 7
corporation or other business entity. Notwithstanding the foregoing, for
purposes of this Agreement, the term "Affiliate" shall not include subsidiaries
in which a Party or its Affiliates owns a majority of the ordinary voting power
to elect a majority of the board of directors but is restricted from electing
such majority by contract or otherwise, until such time a such restrictions are
no longer in effect.
1.2 "BASE INFORMATION" shall mean data and information comprising
(i) gene expression profiles, (ii) nucleotide sequence information, (iii)
protein sequence information and (iv) clinical and other information associated
with tissue and cell samples (including the Samples) and (v) any related
annotated information regarding, for example, the source of the foregoing, their
biological function(s), involvement in any metabolic or regulatory pathway(s),
and relationship to any disease(s) or response to any agent(s).
1.3 "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.
1.4 "CONTROL" shall mean possession of the ability to grant the
licenses or sublicenses or to make the assignments as provided for herein
without violating the terms of any agreement or other arrangement with any Third
Party.
1.5 "EFFECTIVE DATE" shall mean the date of this Agreement first
written above.
1.6 "GENEEXPRESS(TM) PRODUCT" shall mean a product which consists
of the NSBExpress Data Mart and the Gene Logic Software.
1.7 "GENEEXPRESS(TM) DATA WAREHOUSE" shall mean an organizeD
database architecture containing Base Information but not including Raw Data.
1.8 "GENE LOGIC SOFTWARE" shall mean software tools for the
visualization, analysis, indexing and mining of data contained in the
GeneExpress(TM) Data Warehouse, controlled by Gene Logic as of the Effective
Date or during the Term.
1.9 "GENE LOGIC TECHNOLOGY" shall mean: (a) 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 at
any time during the Term that relate to: (i) methods and devices for generating
Base Information, (ii) the Gene Logic Software; (iii) the GeneExpress(TM) Data
Warehouse other than the Base Information contained therein; and (b) all Patent
Rights or other intellectual property rights controlled by Gene Logic to the
extent they cover any of the foregoing.
1.10 "GENE PRODUCTS" shall mean tangible products derived from
utilizing the Base Information contained in the NSBExpress Data Mart, comprising
(i) tangible products embodying gene expression profiles, (ii) tangible products
embodying genes, ESTs, cDNAs, partial cDNAs, DNAs, corresponding full length
cDNAs and associated genomic sequences (iii)
2
<PAGE> 8
proteins (iv) tangible products embodying or which use methods of using the
foregoing based on their biological function(s), involvement in any metabolic or
regulatory pathway(s), relationship to any disease(s) or response to any
agent(s), and (v) commercial products which incorporate the foregoing.
1.11 "GENE TARGET" shall mean a Gene Product, including the
associated Base Information, that is used as a target for the screening and
optimization of pharmaceutical products.
1.12 "IMPROVEMENT" shall mean any enhancement or improvement
(whether or patentable) to the Gene Logic Technology that is made by either
Party in the course of using the GeneExpress(TM) Product during the Term.
1.13 "NSBEXPRESS DATA MART" shall mean a database containing that
[***] of the [***] contained in the GeneExpress(TM) Data Warehouse which is
[***] and includes the [***] derived from the [***]. The NSBExpress Data Mart
does not include the [***].
1.14 "PATENT RIGHTS" shall mean all rights associated with 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).
1.15 "PROGRAM INVENTIONS" shall mean any invention or discovery
that is or may be patentable under the laws of the United States or other
countries, and that is conceived or reduced to practice by either Party in the
course of using the GeneExpress(TM) Products during the Term.
1.16 "RAW DATA" shall mean the unanalyzed and unmodified data
generated directly from analysis of the Samples over GeneChips(TM) by Gene
Logic, including dat, cel, and chp files.
1.17 "SAMPLES" shall mean treated and untreated cell extracts
including the necessary material to create cDNA libraries and other materials to
allow for gene-based research supplied by NeuralStem. The Samples to be provided
for the first year of the Term are enumerated in Schedule 1.17.
1.18 "STEMEXPRESS DATA MART" shall mean a database containing a
subset of the Base Information contained in the GeneExpress(TM) Data Warehouse
associated with untreated, (i) diseased and normal human tissues, (ii) research
cell lines and (iii) animal model systems, such as mouse and rat, [***]. The
rights and obligations of the Parties with respect to the STEMExpress Data Mart
are the subject of a separate STEMExpress Data Mart Asset Purchase Agreement
dated March 27, 2000.
1.19 "TERM" shall mean the period commencing on the Effective Date
and continuing until the [***] anniversary of the Effective Date unless
terminated earlier as set forth herein.
*CONFIDENTIAL TREATMENT REQUESTED
3
<PAGE> 9
1.20 "THERAPEUTIC PRODUCTS" shall mean Gene Products that are
directly used for the therapeutic or prophylactic treatment of diseases or
disorders in humans or animals, including, without limitation, cell therapy,
gene therapy, antisense therapy and protein replacement therapy.
1.21 "THIRD PARTY" shall mean any party other than NeuralStem or
Gene Logic or an Affiliate of NeuralStem or Gene Logic.
1.22 "UPDATE" shall mean (i) incorporating any bug fixes and
patches required to remedy any errors in, and any changes adding or improving
the functionality of, the Gene Logic Software (the incorporation timing to be
the sole discretion of Gene Logic), and (ii) changes in the NSBExpress Data Mart
including adding or correcting Base Information. Updates during the first year
of the Term include both [***] and [***]. Updates during the second and
subsequent years of the Term [***].
2. GENEEXPRESS(TM) PRODUCT ACCESS AND SAMPLE PROVISION
2.1 ACCESS TO THE GENEEXPRESS(TM) PRODUCT. Gene Logic agrees to
provide Neural Stem access to the GeneExpress(TM) Product within [***] days of
the first [***] being incorporated into the GeneExpress(TM) Data Warehouse.
2.2 PERSONNEL AND RESOURCES. During the Term, Gene Logic agrees to
commit the personnel, consultants, facilities, expertise, technology and other
resources necessary to create and Update the NSBExpress Data Mart and to
maintain the GeneExpress(TM) Product during the Term. NeuralStem shall be
responsible for acquiring and maintaining any hardware or third party software
necessary for the use of the GeneExpress(TM) Product, although at present it is
envisaged that the access to the GeneExpress(TM) Product would be web based.
2.3 GENEEXPRESS(TM) UPDATES. During the Term, Gene Logic will
provide Updates of the GeneExpress(TM) Product on a [***] basis.
2.4 PROVISION OF [***]. Gene Logic will provide to NeuralStem all
[***] generated in the performance of this Agreement on a [***] basis. Such
[***] shall be supplied to NeuralStem on [***] as the Parties may agree upon,
together with [***] of [***] which is not available in electronic form.
2.5 SUPPORT AND TRAINING. During the Term, Gene Logic will provide
to NeuralStem: (a) any subsequent release or version of the Gene Logic Software
(including bug fixes, patches and maintenance releases) included in the
GeneExpress(TM) Product as Gene Logic makes such releases generally available;
and (b) support and maintenance of Gene Logic Software included in the
GeneExpress(TM) Product through reasonable consultation via scheduled visits,
telephone, fax, electronic mail or otherwise during Gene Logic's normal business
hours (8:00 a.m. to 5:00 p.m. Eastern Time on regular U.S. business days,
holidays excepted). Gene Logic will train NeuralStem users at a single site at
NeuralStem's facilities for [***] days within [***] days after delivery of the
GeneExpress(TM) Product. Should NeuralStem require additional training sessions,
Gene Logic will provide additional training at commercially reasonable rates.
*CONFIDENTIAL TREATMENT REQUESTED
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2.6 CUSTOMIZATION. To the extent NeuralStem desires customization
work to the Gene Logic Software, the parties agree to use good faith efforts to
negotiate the terms of such engagement pursuant to which Gene Logic will be paid
commercially reasonable development rates.
2.7 SAMPLE PROVISION.
(a) During the Term, NeuralStem agrees to provide [***] to
Gene Logic during each year of the Term, or pro-rata portion thereof. Upon
mutual agreement of the Parties, NeuralStem will provide other Samples to Gene
Logic which are under its Control during the Term, under terms and conditions as
may be agreed to from time to time. The Samples are valuable trade secrets of
NeuralStem, and Gene Logic shall store such Samples at all times in a secure
facility where access is controlled and limited to employees of Gene Logic who
need to access such Samples for the purpose of performing this Agreement.
(b) Gene Logic shall not transfer the Samples to any Third
Party except to contractors bound by obligations of non-disclosure not less
stringent than those contained in this Agreement, and engaged by Gene Logic for
the sole purpose of performing analyses required or permitted pursuant to this
Agreement.
2.8 [***].
(a) Gene Logic agrees to provide NeuralStem with those types
of Base Information generated from [***] Samples. The depth of the [***] and the
manner in which the Base Information is provided to Neural Stem will be
determined by discussion between the Parties respective Chief Scientific
Officers.
(b) NeuralStem shall have the [***] to use and apply the data
provided pursuant to this Section 2.8. Accordingly, Gene Logic will only retain
a single copy of such Base Information for archival purposes and will not
analyze such Base Information for any reason.
2.9 RESEARCH PLAN. The Parties shall perform the activities as
described in the Content and Research Plan attached as Schedule 1.17. Within
thirty (30) days following the Effective Date, the appropriate representative of
each Party shall convene at a research planning meeting to discuss and agree on
any appropriate modifications. The Parties agree that each year of the Term they
will discuss that next years Content and Research Plan at least thirty (30) days
prior to the anniversary of the Effective Date.
3. MANAGEMENT
3.1 ALLIANCE DIRECTORS. Each Party shall designate one of its
employees as an alliance director ("Alliance Director") to facilitate
communications between the parties.
*CONFIDENTIAL TREATMENT REQUESTED
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3.2 DISPUTE RESOLUTION. During the Term, any material disputes or
disagreements between Gene Logic and NeuralStem arising hereunder will be
referred to the Alliance Directors. If Alliance Directors are unable to resolve
such disputes or disagreements within 30 days, or if the dispute or disagreement
arises after the Term, then such dispute or disagreements will be referred to
the Chief Executive Officer(s) of Gene Logic and NeuralStem or their designees
for good faith resolution for a period of 90 days. If the parties are unable to
resolve their dispute or disagreement, either Party may pursue other remedies.
4. OWNERSHIP AND PURSUIT OF PATENTS AND OTHER RIGHTS AND INVENTIONS
4.1 OWNERSHIP OF INVENTIONS. Except as otherwise provided in
Article 4.2, the ownership of any Program Inventions shall be determined in
accordance with United States law.
4.2 OWNERSHIP OF GENE LOGIC TECHNOLOGY. Gene Logic shall own all
rights to the Gene Logic Technology and Improvements thereof. NeuralStem hereby
irrevocably assigns to Gene Logic all right, title and interest in and to
Improvements to the Gene Logic Technology to the extent made by employees or
agents of NeuralStem. In the event that NeuralStem is legally unable to make a
required assignment of rights to Gene Logic, then NeuralStem agrees either to
waive the enforcement of such rights against Gene Logic and any sublicensees and
assignees; or to grant to Gene Logic an exclusive, irrevocable, perpetual,
worldwide, fully-paid license, with right to sublicense through multiple tiers
of sublicense, to such rights.
4.3 PURSUIT OF INTELLECTUAL PROPERTY RIGHTS.
(a) Gene Logic shall be responsible, in its sole discretion
and at its sole cost, for the filing, prosecution and maintenance of Patent
Rights, copyrights and other proprietary rights claiming or directed to: (i)
Gene Logic Technology and Improvements thereto; and (ii) Program Inventions
conceived solely by Gene Logic.
(b) NeuralStem shall be responsible, in its sole discretion
and at its sole cost, for the filing, prosecution and maintenance of Patent
Rights, copyrights and other proprietary rights claiming or directed to Program
Inventions conceived solely by NeuralStem.
(c) With respect to any Program Invention that is owned
jointly by the Parties ("Joint Program Invention"), the Parties shall decide
which Party shall be responsible ("Responsible Party") for preparing, filing and
prosecuting any patent applications or other appropriate filings and maintaining
any patents, copyrights or other similar rights issued thereon, using patent
counsel reasonably acceptable to the other Party, and the Parties shall share
equally the out-of-pocket expenses for such preparation, filing, prosecution and
maintenance, including, without limitation, any out-of-pocket expenses incurred,
paid or reimbursed by a Party. A Party may, at any time, by written notice to
the other Party elect not to continue sharing such expenses with respect to any
Joint Program Invention, in which event, the Party making such election shall,
upon the written request of the other Party, assign to the other Party all of
its right, title and interest in and to such Joint Program Invention.
4.4 COOPERATION AND COMMUNICATION.
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(a) COOPERATION. Each Party agrees to cooperate, both during
and after the Term, upon request of the other Party in the preparation and
prosecution of all Patent Rights and other proprietary rights under this Article
4 and in the maintenance of any patents, copyrights or other similar rights
issued thereon; provided, however, that, following the Term, the requesting
Party shall reimburse the cooperating Party for its reasonable out-of-pocket
expenses incurred in connection with such cooperation as requested by the other
Party. Such cooperation will include the execution of all documents necessary or
desirable for the requesting Party to fulfill its obligations hereunder. In the
event NeuralStem provides Samples, if reasonably requested by Gene Logic,
NeuralStem agrees to provide background information (including, for example,
mRNA sources, the identity of any cell or Sample and mode of activation, if any,
of the cell or Sample, from which the mRNA has been prepared) in support of the
preparation and prosecution of any related patent applications or other filings
(b) COMMUNICATION REGARDING PATENT PROTECTION. The Responsible
Party for Joint Program Inventions 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 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 and other related correspondence relating thereto to and
from governmental patent agencies or other authorities. The Responsible Party
shall diligently consider and address any comments or suggestions made by the
other Party regarding preparation, prosecution and maintenance of all Patent
Rights, copyrights or other similar rights.
(c) RELEASE OF RIGHTS. If the Responsible Party with respect
to any Joint Program Invention decides to abandon or not to pursue prosecution
or continue the maintenance of any Patent Right, copyright or other proprietary
right which claims such Joint Program 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.
4.5 INFRINGEMENT BY THIRD PARTIES.
(a) INFRINGEMENT OF JOINTLY OWNED PROGRAM INVENTIONS. If
either Party should become aware of any infringement or threatened infringement
or misappropriation, as the case may be, of any of the Patent Rights claiming a
Joint Program Invention, it shall promptly notify the other Party in writing and
shall provide such other Party with all available evidence supporting such
allegation of infringement or threatened infringement or misappropriation. As
soon as practicable the Parties shall confer on the particulars of such
infringement or misappropriation and the possible courses of action to be taken.
The Parties shall jointly determine which Party shall have the primary right and
responsibility (but not the obligation) to institute, prosecute, and control any
action or proceeding with respect to infringement or misappropriation of such
Joint Patent Rights and the other Party shall have the right, at its
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expense (subject to reimbursement as provided herein), to be represented by its
counsel. Each Party hereby consents to the filing of any such action by the
other Party with respect to any such Joint Patent Rights in accordance with this
Section 4.5. If one Party brings any such action or proceeding, the other Party
hereby consents to being joined as a party plaintiff where necessary and, in
case of joining, such other Party agrees to give the first Party reasonable
assistance and authority to file and to prosecute such suit, at the expense of
the Party bringing such suit. If either Party prosecutes an infringement or
misappropriation of such Joint Patent Rights, any damages and costs recovered in
any proceedings or by way of settlement under this Section 4.5 shall be shared
by the Parties as follows:
(i) the actual costs and expenses of all suits brought by
either Party under this Section 4.5 shall be
reimbursed first to the filing Party and then to the
participating Party; and
(ii) any remaining proceeds shall [***].
(b) SETTLEMENTS. In connection with any proposed settlement in
respect of any infringement or threatened infringement of any Joint Patent
Rights, the Party prosecuting such infringement in accordance with this Section
4.5 and intending to settle shall notify and consult with the other Party as to
the terms of settlement, whose written consent shall be required prior to any
such settlement, such consent not to be unreasonably withheld.
(c) COOPERATION. In connection with any action taken by either
Party against a Third Party to protect or enforce any Patent Rights claiming
Program Inventions, the other Party shall, if requested, consult with the Party
taking such action, and make available as witnesses its employees or as evidence
any materials, and/or data as are reasonably necessary for the furtherance of
such action. The out of pocket expenses in connection with the providing of
witnesses and/or the making available of any materials and/or data shall be
borne by the Party taking action against the Third Party.
4.6 ALLEGATIONS OF INFRINGEMENT OF THIRD PARTY RIGHTS. In the
event that in order to exploit the rights contained herein, either Party, in the
opinion of outside patent counsel reasonably acceptable to each Party, [***], it
is hereby agreed that the Party [***] to be utilized shall use its commercially
reasonable best efforts (i) to [***], or (ii) to [***], or (iii) to [***]. In
the event the first Party [***]. If the first Party is unable to [***]
*CONFIDENTIAL TREATMENT REQUESTED
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[***]. [***], all licenses and rights granted by a Party to the other Party
hereunder which are not perpetual in nature [***].
5. LICENSES
5.1 LICENSES TO GENE LOGIC FROM NEURALSTEM
(a) BASE INFORMATION LICENSE. NeuralStem hereby grants to Gene
Logic a non-exclusive, irrevocable, perpetual, worldwide, fully-paid license,
with right to sublicense through multiple tiers of sublicense, under all rights
(including Patent Rights) which NeuralStem has in the Base Information in the
GeneExpress(TM) Data Warehouse including the Base Information derived from the
Samples.
(b) GENE TARGET LICENSE. NeuralStem hereby grants to Gene
Logic a non-exclusive, irrevocable, perpetual, worldwide, fully-paid license,
with right to sublicense through multiple tiers of sublicense, to the rights to
Gene Targets which are Controlled by NeuralStem during the Term and derived from
the Samples.
(c) [***] LICENSE. During the Term, and for a period of time
equal to [***], NeuralStem agrees not to license, sell or otherwise transfer
[***] which are controlled by NeuralStem to (i) Third Parties for use in [***]
that will be made available to other Third Parties on a commercial basis and
(ii) to any of the parties listed in Schedule 11.1 for any purpose.
(d) NON-EXCLUSIVE SAMPLE LICENSE. Subject to 5.1(c),
NeuralStem agrees to non-exclusively (i) provide Samples to other partners of
Gene Logic on NeuralStem's then customary terms and (ii) grant Gene Logic a
non-exclusive, perpetual (unless this Agreement is terminated pursuant to
Section 9.3(a)) non-transferable, non-sublicensable license to utilize the
Samples transferred prior to the end of the Term for research, development and
commercialization, subject to the obligations of Section 2.7(b).
(e) [***]. If NeuralStem desires to [***], or [***],
NeuralStem shall inform Gene Logic thereof in writing. If Gene Logic is
interested in [***], it shall inform NeuralStem of its interest in writing
within [***] days ("Notice Period") after the receipt of the written notice from
NeuralStem, and the Parties shall thereafter [***] during an additional period
of [***] days ("[***] Period") such [***] Period to be extended by mutual
agreement so long as the Parties are in [***]. If Gene Logic does not provide
written notice of its interest to NeuralStem within the Notice Period, or [***],
Gene Logic's [***] shall expire, and NeuralStem shall be free to [***].
*CONFIDENTIAL TREATMENT REQUESTED
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5.2 LICENSE TO NEURALSTEM FROM GENE LOGIC
(a) LICENSE TO THE GENEEXPRESS(TM) PRODUCT. Subject to the
terms and conditions of this Agreement, including without limitation payment of
the Access Fees under Section 6.1, Gene Logic hereby grants to NeuralStem a
royalty-free, non-exclusive, non-sublicensable (except to NeuralStem's
Affiliates), non-transferable (except as provided in Section 11.1 hereof),
worldwide license to use the Base Information in the GeneExpress(TM) Product
during the Term to enable NeuralStem and its Affiliates to perform internal
research and drug discovery and development activities.
(b) RESTRICTION ON DISCLOSURE AND RESALE. Except for
disclosure to NeuralStem's Affiliates, and NeuralStem's and NeuralStem's
Affiliates' respective employees and consultants to the extent permitted under
Section 7.3, NeuralStem shall not provide Base Information contained within the
GeneExpress(TM) Product or the GeneExpress(TM)Data Warehouse, Raw Data or any
Gene Logic Technology or Improvement thereto to any Third Party for any reason
without prior written consent of Gene Logic, which consent shall not be
unreasonably withheld or delayed. The Parties acknowledge and agree that
NeuralStem may desire to enter into collaborations with or grant licenses to
Third Parties to develop pharmaceutical products, including Therapeutic
Products, and that it is reasonable to disclose to Third Parties specific Base
Information contained within the GeneExpress(TM)Product or the
GeneExpress(TM)Data Warehouse, or RAW Data in connection with such
collaborations or licenses. The Parties further acknowledge and agree that
NeuralStem shall have no right to disclose to Third Parties Base Information
contained within the GeneExpress(TM)Product or the GeneExpress(TM)Data
Warehouse, or Raw Data, for use in generating a data base containing Base
Information that will be made available to other Third Parties on a commercial
basis.
(c) LICENSE TO [***]. Subject to the restrictions of 5.2(b),
Gene Logic hereby grants to NeuralStem a non-exclusive, irrevocable, perpetual
(unless this Agreement is terminated pursuant to Section 9.3(b)), worldwide,
fully-paid license to [***].
(d) [***] LICENSE. Gene Logic hereby grants to NeuralStem a
non-exclusive, irrevocable, perpetual, worldwide, fully-paid license, with right
to sublicense through multiple tiers of sublicense, to [***] which are
Controlled by GeneLogic during the Term and are derived from the Samples.
6. PAYMENTS
6.1 GENEEXPRESS(TM) PRODUCT ACCESS FEES. NeuralStem will pay Gene
Logic an annual fee to cover the initial and ongoing access of the
GeneExpress(TM) Product and Updates. The fee for the first year is [***]. The
fees for the second and third year will [***] annually. The annual fees will be
payable in [***], with the first payment due within [***] days after [***].
6.2 SAMPLE ACQUISITION FEE. Gene Logic will pay NeuralStem an
annual fee of [***] for the provision of Samples. The annual fee for the second
and third year of this Agreement will
*CONFIDENTIAL TREATMENT REQUESTED
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not be payable to NeuralStem until Gene Logic agrees that [***] Samples which
pass Gene Logic's Quality Control Standards (as described in Schedule 6.2) have
been provided in the previous year. The annual fee will be paid on a pro rata
basis for only Samples which pass Gene Logic's Quality Control Standards, [***].
Payments due ([***]) will be deferred on a pro-rata basis for each Sample that
is not delivered to Gene Logic on a timely basis and passes Gene Logic's Quality
Control Standards during the preceding [***]. Gene Logic will make the first
[***] payment and each subsequent payment on or before the [***]. Should
NeuralStem in its [***] for the [***] which are [***] hereunder, NeuralStem will
[***].
6.3 METHOD 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 Party receiving such payment by wire transfer pursuant to
the instructions set forth on Schedule 6.3.
7. CONFIDENTIALITY AND SECURITY
7.1 SECURITY OF GENEEXPRESS(TM) PRODUCT 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 GeneExpress(TM)
Products provided under the provisions of this Agreement:
(a) NeuralStem may use the GeneExpress(TM) Products only in
secure work facilities by authorized personnel and shall not make any copies of
the data contained in the GeneExpress(TM) Products, except as necessary to
enable NeuralStem and its Affiliates to perform internal research and drug
discovery and development activities, and to disclose such data to Third Parties
as permitted pursuant to Section 5.2(b).
(b) NeuralStem will promptly notify Gene Logic of any (i)
loss, theft or unauthorized disclosure of data contained in the GeneExpress(TM)
Products; and (ii) unauthorized access to the GeneExpress(TM) Products.
(c) Upon the end of the Term or upon Gene Logic's termination
of this Agreement under Section 9.2, NeuralStem shall immediately discontinue
use of the GeneExpress(TM) Product; and NeuralStem shall (i) cooperate with Gene
Logic to terminate any encrypted link to Gene Logic's computer system and (ii)
if the Agreement is terminated by Gene Logic pursuant to Section 9.3(b),
promptly deliver to Gene Logic copies of the Raw Data. NeuralStem may, however,
continue to use any results it generates during the Term from use of the
GeneExpress(TM) Product.
7.2 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 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
*CONFIDENTIAL TREATMENT REQUESTED
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August 12, 1999 and through the end of the Term and all data, results and
information developed pursuant to this Agreement that are 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:
(i) information that is or becomes part of the
public domain other than through a breach of this Agreement by the
non-Disclosing Party or its Affiliates;
(ii) information that is obtained after the
Effective 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 was already 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
(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 7.2 shall survive the
expiration or termination of this Agreement for a period of 5 years.
7.3 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 and 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 7. In addition, notwithstanding any other provisions of this
Agreement, nothing herein shall limit Gene Logic's ability to grant
non-exclusive access to the Base Information contained within the
GeneExpress(TM) Data Warehouse to multiple subscribers.
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7.4 PUBLICITY. The parties agree that a press release announcing
the matters covered by this Agreement will be prepared in advance and will be
subject to the mutual approval of the parties, which approval will not
unreasonably be 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.
7.5 PUBLICATION. The Parties shall cooperate in appropriate
publication of the results of activities contemplated by this Agreement, but
subject to the predominating interest to obtain patent protection for any
patentable subject matter and to Gene Logic's business interest in preserving
the value of the GeneExpress(TM) Data Warehouse. 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, otherwise contains Confidential
Information of the reviewing Party, or, with respect to any proposed disclosure
by NeuralStem, contains information that Gene Logic reasonably believes would
impair the value of the GeneExpress(TM) Data Warehouse. 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 or, if
NeuralStem is the disclosing Party, Gene Logic notifies NeuralStem that Gene
Logic reasonably believes that the disclosure would impair the value of the
GeneExpress(TM) Data Warehouse, 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 or to address Gene Logic's
concern regarding impairment of the value of the GeneExpress(TM) Data Warehouse.
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.
8. REPRESENTATIONS AND WARRANTIES
8.1 LEGAL AUTHORITY. Each Party represents and warrants to the
other that (i) it is a corporation or entity duly organized and validly existing
under the laws of the state or other jurisdiction of incorporation or formation;
(ii) it has the legal power, authority and right to enter into this Agreement
and to perform its respective obligations set forth herein; and (iii) the
execution, delivery and performance of this Agreement by such Party has been
duly authorized by all requisite corporate officials and do not require any
shareholder action or other approval.
8.2 VALID LICENSES. Each Party represents and warrants to the
other Party that it has authority to grant the rights and licenses set forth in
this Agreement.
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8.3 NO CONFLICTS. Each Party represents and warrants that as of
the Effective 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 Bylaws, which in any
way limits or conflicts with its ability to fulfill any of its obligations under
this Agreement.
8.4 SAMPLES. NeuralStem hereby represents and warrants that it has
(i) the right to provide to Gene Logic those Samples that are provided by
NeuralStem hereunder, (ii) that any such Samples provided by NeuralStem
hereunder shall be in compliance with all applicable quality control provisions
and Institutional Review Board requirements
8.5 GENEEXPRESSTM PRODUCT. Gene Logic hereby represents and
warrants (i) that it has the right to provide to NeuralStem access to the
GeneExpress(TM) Product, and (ii) that to the best of the knowledge of the
undersigned representative of Gene Logic as of the Effective Date, the use of
the GeneExpress(TM) Product as envisaged in this Agreement does not infringe on
the rights of any Third Parties.
8.6 REPRESENTATION BY LEGAL COUNSEL. Each Party hereto represents
that it has been represented by legal counsel in connection with the drafting of
this Agreement and acknowledges that it has participated in the drafting hereof.
In interpreting and applying the terms and provisions of this Agreement, the
Parties agree that no presumption shall exist or be implied against the Party
that drafted such term or provision.
8.7 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. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT,
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
WARRANTY IS MADE AS TO THE UTILITY OF ANY INFORMATION, MATERIALS, SOFTWARE OR
OTHER TECHNOLOGY PROVIDED HEREUNDER.
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9. TERM AND TERMINATION
9.1 TERM. This Agreement shall expire at the end of the Term.
9.2 TERMINATION BY GENE LOGIC.
(a) Gene Logic may terminate this Agreement [***]. Gene Logic
will exercise such early termination by notifying NeuralStem in writing of
termination no later than sixty (60) days [***].
(b) Gene Logic may also terminate this Agreement by written
notice effective thirty (30) days after receipt of notice from NeuralStem that
[***], accordingly, NeuralStem agrees to notify Gene Logic of the [***] within
seven (7) days of [***].
9.3 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 sixty
(60) days after written notice thereof from NeuralStem, then NeuralStem 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 11.10 subject to the
following, Gene Logic shall return to NeuralStem all Confidential Information of
NeuralStem.
(b) BREACH BY NEURALSTEM. If NeuralStem breaches a material
term of this Agreement at any time, and has not cured such breach within sixty
(60) days (or within thirty (30) days in the event of a material breach by
NeuralStem of its obligations to make any payment due pursuant to Section 6.1)
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 11.9 and subject to the following;
NeuralStem shall return to Gene Logic all Confidential Information of Gene
Logic.
(c) RESOLUTION OF DISPUTES. If a dispute arises between the
Parties relating to the grounds for the termination under this Section 9.3, 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 the Parties may pursue any
available remedy, at law or in equity.
9.4 EFFECT OF BANKRUPTCY. If, during the 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 this Agreement may be immediately terminated by the other
* CONFIDENTIAL TREATMENT REQUESTED
15
<PAGE> 21
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 NeuralStem will have right of
access to the GeneExpress(TM) Data Warehouse consistent with the terms of this
Agreement for purposes of 11 U.S.C. Section 365(n).
9.5 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.
10. INDEMNIFICATION AND INSURANCE
10.1 INDEMNIFICATION BY NEURALSTEM. NeuralStem shall indemnify,
defend and hold harmless Gene Logic and its Affiliates, and each of its and
their respective employees, officers, directors and agents (each, a "Gene Logic
Indemnified Party") from and against any and all liability, loss, damage, cost,
and expense (including reasonable attorneys' fees) (collectively, a "Liability")
which the Gene Logic Indemnified Party may incur, suffer or be required to pay
resulting from or arising in connection with any Third Party action or claim
based upon (i) the breach by NeuralStem of any covenant, representation or
warranty contained in this Agreement, or (ii) negligence or willful misconduct
by NeuralStem, its Affiliates, employees or agents. Notwithstanding the
foregoing, NeuralStem shall have no obligation under this Agreement to
indemnify, defend or hold harmless any Gene Logic Indemnified Party with respect
to claims, demands, costs or judgments which result from willful misconduct or
negligent acts or omissions of Gene Logic, its Affiliates, or any of their
respective employees, officers, directors or agents.
10.2 INDEMNIFICATION BY GENE LOGIC. Gene Logic shall indemnify,
defend and hold harmless NeuralStem and its Affiliates, and each of its and
their respective employees, officers, directors and agents (each, a "NeuralStem
Indemnified Party") from and against any Liability which the NeuralStem
Indemnified Party may incur, suffer or be required to pay resulting from or
arising in connection with any Third Party action or claim based upon (i) the
breach by Gene Logic of any covenant, representation or warranty contained in
this Agreement, or (ii) the negligence or willful misconduct by Gene Logic, its
Affiliates, employees or agents. Notwithstanding the foregoing, Gene Logic shall
have no obligation under this Agreement to indemnify, defend, or hold harmless
any NeuralStem Indemnified Party with respect to claims, demands, costs or
judgments which result from willful misconduct or negligent acts or omissions of
NeuralStem, its Affiliates, or any of their respective employees, officers,
directors or agents.
10.3 CONDITIONS TO INDEMNIFICATION. The obligations of the
indemnifying Party under Sections 10.1 and 10.2 are conditioned upon the
delivery of written notice to the indemnifying Party of any potential Liability
promptly after the indemnified Party becomes aware of such potential Liability.
The indemnifying Party shall have the right to assume the defense of any suit or
claim related to the Liability if it has assumed responsibility for the suit or
claim in writing; however, if in the reasonable judgment of the indemnified
Party, such suit or claim involves an issue or matter which could have a
materially adverse effect on the business operations or assets of the
indemnified Party, the indemnified Party may waive its rights to indemnity under
this
16
<PAGE> 22
Agreement and control the defense or settlement thereof, but in no event shall
any such waiver be construed as a waiver of any indemnification rights such
Party may have at law or in equity. If the indemnifying Party defends the suit
or claim, the indemnified Party may participate in (but not control) the defense
thereof at its sole cost and expense.
10.4 SETTLEMENTS. Neither Party may settle a claim or action
related to a Liability without the consent of the other Party, if such
settlement would impose any monetary obligation on the other Party or require
the other Party to submit to an injunction or otherwise limit the other its
Affiliates, employees, agents, officers and directors (each an "Indemnified
Party") permitted from and against any judgments or settlements.
11. GENERAL PROVISIONS
11.1 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 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. Notwithstanding the
foregoing, NeuralStem may not [***] listed in Schedule 11.1.
11.2 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.
11.3 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.
11.4 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.
11.5 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:
*CONFIDENTIAL TREATMENT REQUESTED
17
<PAGE> 23
To NeuralStem: To Gene Logic:
387 Technology Drive 708 Quince Orchard Road
College Park, MD 20742 Gaithersburg, Maryland 20878
Attn: Chief Executive Officer Attn: Chief Financial Officer
Phone: (301) 571-9323 Phone: (301) 987-1700
Fax: (301) 405-7393 Fax: (301) 987-1701
or to such other address as to which the Party has given written notice thereof.
Such notices shall be deemed given upon receipt.
11.6 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.
11.7 NO IMPLIED LICENSES. 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.
11.8 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; plague of
epic proportion; 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.
11.9 SURVIVAL. Except as expressly proveded herein, sections 2.8
(b), 4.1, 4.2, 4.3, 4.4, 4.5, 5.2 (b) (c) & (d), 7.2, 7.3, 7.5, 8, 9 (including
the provisions therein that are contemplated to continue following termination),
10, 11.1, 11.4 and 11.10 shall survive the termination or expiration of this
Agreement.
11.10 ENTIRE AGREEMENT. This Agreement, including the exhibits and
schedules hereto, 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.
11.11 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.
18
<PAGE> 24
11.12 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
NeuralStem 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.
11.13 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. NEURALSTEM BIOPHARMACEUTICALS, LTD.
By:/S/ MARK GESSLER By: /S/ I. RICHARD GARR.
------------------------------- -------------------------------
Mark Gessler, President & COO Name: I. Richard Garr, CEO
19
<PAGE> 25
SCHEDULE 1.17
CONTENT AND RESEARCH PLAN
[***]
*CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 26
SCHEDULE 1.18
STEMEXPRESS BASE INFORMATION CONTENT
[***]
*CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 27
SCHEDULE 6.2
GENE LOGIC QUALITY CONTROL STANDARDS
[***]
*CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 28
SCHEDULE 6.3
WIRE TRANSFER PAYMENT INSTRUCTIONS
To Gene Logic:
Bank: Investors Bank & Trust Company
Location: 200 Clarendon
Boston, MA 02116
ABA #: [***]
For further credit to client funds #: [***]
Account Name: GENE LOGIC INC.
Account #: [***]
To NeuralStem:
Bank: Century National Bank
1875 Eye Street NW
Washington, DC 20006
(202)496-4000
Routing Number [***]
Account Number To be provided before first wire
Acct Name [***]
*CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 29
SCHEDULE 11.1
[***]
*CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 1
CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. Sections 200.800(b)(4),
200.83 and 240.24b-2
Exhibit 10.62
NEURALSTEM BIOPHARMACEUTICALS, LTD.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
APRIL 20, 2000
<PAGE> 2
<TABLE>
<S> <C>
1. AGREEMENT TO SELL AND PURCHASE......................................... 1
1.1 Authorization of Shares.......................................... 1
1.2 Sale and Purchase................................................ 1
2. CLOSING, DELIVERY AND PAYMENT.......................................... 2
2.1 Closing.......................................................... 2
2.2 Delivery......................................................... 2
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................... 2
3.1 Organization, Good Standing and Qualification.................... 2
3.2 Subsidiaries..................................................... 2
3.3 Capitalization; Voting Rights.................................... 2
3.4 Authorization; Binding Obligations............................... 3
3.5 Financial Statements............................................. 4
3.6 Liabilities...................................................... 4
3.7 Agreements; Action............................................... 4
3.8 Obligations to Related Parties................................... 5
3.9 Changes.......................................................... 5
3.10 Title to Properties and Assets; Liens, Etc....................... 6
3.11 Intellectual Property............................................ 7
3.12 Compliance with Other Instruments................................ 8
3.13 Litigation....................................................... 8
3.14 Tax Returns and Payments......................................... 8
3.15 Employees........................................................ 8
3.16 Obligations of Management........................................ 9
3.17 Registration Rights and Voting Rights............................ 9
3.18 Compliance with Laws; Permits.................................... 9
3.19 Environmental and Safety Laws.................................... 9
3.20 Offering Valid................................................... 10
3.21 Full Disclosure.................................................. 10
3.22 Minute Books..................................................... 10
3.23 Real Property Holding Corporation................................ 10
3.24 Insurance........................................................ 10
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER............................ 10
4.1 Requisite Power and Authority.................................... 10
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
4.2 Investment Representations....................................... 11
4.3 Transfer Restrictions............................................ 12
5. CONDITIONS TO CLOSING.................................................. 12
5.1 Conditions to Purchaser's Obligations at the Closing............. 12
5.2 Conditions to Obligations of the Company......................... 13
6. MISCELLANEOUS.......................................................... 14
6.1 Governing Law.................................................... 14
6.2 Survival......................................................... 14
6.3 Successors and Assigns........................................... 14
6.4 Entire Agreement................................................. 14
6.5 Severability..................................................... 14
6.6 Amendment and Waiver............................................. 14
6.7 Delays or Omissions.............................................. 15
6.8 Notices.......................................................... 15
6.9 Expenses......................................................... 15
6.10 Attorneys' Fees.................................................. 15
6.11 Titles and Subtitles............................................. 15
6.12 Counterparts..................................................... 16
6.13 Broker's Fees.................................................... 16
6.14 Confidentiality.................................................. 16
6.15 Pronouns......................................................... 16
</TABLE>
<PAGE> 4
NEURALSTEM BIOPHARMACEUTICALS, LTD.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES A PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is made
and entered into as of April 20, 2000, by and among NEURALSTEM
BIOPHARMACEUTICALS, LTD., a Maryland corporation (the "Company"), and GENE LOGIC
INC., a Delaware corporation ("Purchaser").
RECITALS
WHEREAS, the Company has authorized the sale and issuance of an aggregate
of [***] shares of its Series A Preferred Stock (the "Shares");
WHEREAS, Purchaser desire to purchase the Shares on the terms and
conditions set forth herein; and
WHEREAS, the Company desires to issue and sell the Shares to Purchaser on
the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises, representations, warranties, and covenants hereinafter set forth and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. AGREEMENT TO SELL AND PURCHASE.
1.1 AUTHORIZATION OF SHARES. On or prior to the Closing (as defined in
Section 2 below), the Company shall have authorized (a) the sale and issuance to
Purchaser of the Shares and (b) the issuance of such shares of Common Stock to
be issued upon conversion of the Shares (the "Conversion Shares"). The Shares
and the Conversion Shares shall have the rights, preferences, privileges and
restrictions set forth in the Articles of Amendment of the Company, in the form
attached hereto as Exhibit A (the "Restated Charter").
1.2 SALE AND PURCHASE. Subject to the terms and conditions hereof, at the
Closing (as hereinafter defined) the Company hereby agrees to issue and sell to
Purchaser, and Purchaser agrees to purchase from the Company, the Shares at a
purchase price of Seven Dollars and Sixty-Four Cents ($7.64) per Share.
*CONFIDENTIAL TREATMENT REQUESTED
1.
<PAGE> 5
2. CLOSING, DELIVERY AND PAYMENT.
2.1 CLOSING. The closing of the sale and purchase of the Shares under this
Agreement (the "Closing") shall take place at 9:00 a.m. on the date hereof, at
the offices of Cooley Godward LLP, Five Palo Alto Square, 3000 El Camino Real,
Palo Alto, CA, 94306-2155 or at such other time or place as the Company and
Purchaser may mutually agree (such date is hereinafter referred to as the
"Closing Date").
2.2 DELIVERY. At the Closing, subject to the terms and conditions hereof,
the Company will deliver to Purchaser a certificate representing the number of
Shares to be purchased at the Closing by Purchaser, against payment of the
purchase price therefor by check, wire transfer made payable to the order of the
Company, cancellation of indebtedness or any combination of the foregoing.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth on a Schedule of Exceptions delivered by the Company
to Purchaser at the Closing specifically identifying the relevant Section
hereof, the Company hereby represents and warrants to Purchaser as of the date
of this Agreement as set forth below.
3.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Maryland. The Company has all requisite corporate power and
authority to own and operate its properties and assets, to execute and deliver
this Agreement and the Investor Rights Agreement in the form attached hereto as
Exhibit B (the "Investor Rights Agreement") and the Co-Sale Agreement in the
form attached hereto as Exhibit C (the "Co-Sale Agreement") (collectively, the
"Related Agreements"), to issue and sell the Shares and the Conversion Shares,
and to carry out the provisions of this Agreement, the Related Agreements and
the Restated Charter and to carry on its business as presently conducted and as
presently 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.
3.2 SUBSIDIARIES. The Company does not own or control any equity security
or other interest of any other corporation, limited partnership or other
business entity. The Company is not a participant in any joint venture,
partnership or similar arrangement.
3.3 CAPITALIZATION; VOTING RIGHTS.
(a) The authorized capital stock of the Company, immediately prior to the
Closing, consists of (i) 10,000,000 shares of Common Stock, par value $.01 per
share, [***] shares of which are issued and outstanding, and (ii) 5,000,000
shares of Preferred Stock, par value $.01 per share, 1,047,588 shares of which
are designated Series A Preferred Stock, none of which is issued and
outstanding.
(b) Under the Company's Stock Option Plan (the "Plan"), (i) [***] shares
have been issued pursuant to restricted stock purchase agreements and/or the
exercise of
*CONFIDENTIAL TREATMENT REQUESTED
2.
<PAGE> 6
outstanding options, (ii) options to purchase [***] shares have been granted and
are currently outstanding (as listed on Exhibit D), and (iii) [***] shares of
Common Stock remain available for future issuance to officers, directors,
employees and consultants of the Company.
(c) Pursuant to the warrants, promissory notes and agreements described on
Exhibit D hereto, an aggregate of [***] shares of Common Stock (the "Additional
Reserved Shares") are reserved for issuance upon the exercise of the rights
embodied in such warrants, notes and agreements.
(d) Other than the shares reserved for issuance under the Plan and the
Additional Reserved Shares and except as may be granted pursuant to this
Agreement and the Related Agreements, there are no outstanding options,
warrants, rights (including conversion or preemptive rights and rights of first
refusal), proxy or stockholder agreements, or agreements of any kind for the
purchase or acquisition from the Company of any of its securities.
(e) All issued and outstanding shares of the Company's Common Stock and
Preferred Stock (i) have been duly authorized and validly issued to the persons
listed on Exhibit D hereto and are fully paid and nonassessable, and (ii) were
issued in compliance with all applicable state and federal laws concerning the
issuance of securities.
(f) The rights, preferences, privileges and restrictions of the Shares are
as stated in the Restated Charter. The Shares are convertible into Common Stock
on a one-for-one basis as of the date hereof. The Conversion Shares have been
duly and validly reserved for issuance. When issued in compliance with the
provisions of this Agreement and the Restated Charter, the Shares and the
Conversion Shares will be validly issued, fully paid and nonassessable, and will
be free of any liens or encumbrances other than liens and encumbrances created
by or imposed upon Purchaser; provided, however, that the Shares and the
Conversion Shares may be subject to restrictions on transfer under state and/or
federal securities laws as set forth herein or as otherwise required by such
laws at the time a transfer is proposed.
(g) No stock plan, stock purchase, stock option or other agreement or
understanding between the Company and any holder of any equity securities or
rights to purchase equity securities provides for acceleration or other changes
in the vesting provisions or other terms of such agreement or understanding as
the result of any merger, consolidated sale of stock or assets, change in
control or any other transaction(s) by the Company.
3.4 AUTHORIZATION; BINDING OBLIGATIONS. All corporate action on the part
of the Company, its officers, directors and stockholders necessary for the
authorization of this Agreement and the Related Agreements, the performance of
all obligations of the Company hereunder and thereunder at the Closing and the
authorization, sale, issuance and delivery of the Shares pursuant hereto and the
Conversion Shares pursuant to the Restated Charter has been taken or will be
taken prior to the Closing. The Agreement and the Related Agreements, when
executed and delivered, will be valid and binding obligations of the Company
enforceable in accordance with their terms, except (a) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application affecting enforcement of creditors' rights, (b) general principles
of equity that restrict the availability of equitable remedies, and (c) to the
extent that the enforceability of the indemnification provisions in
*CONFIDENTIAL TREATMENT REQUESTED
3.
<PAGE> 7
Section 2.9 of the Investor Rights Agreement may be limited by applicable laws.
The sale of the Shares and the subsequent conversion of the Shares into
Conversion Shares are not and will not be subject to any preemptive rights or
rights of first refusal that have not been properly waived or complied with.
3.5 FINANCIAL STATEMENTS. The Company has made available to Purchaser its
unaudited balance sheet as at February 29, 2000 (the "Statement Date") and
unaudited statement of income and cash flows for the 11 months ended on the
Statement Date (collectively, the "Financial Statements"). The Financial
Statements, together with the notes thereto, are complete and correct in all
material respects, have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated, except as disclosed therein, and present fairly the financial
condition and position of the Company as of the Statement Date; provided,
however, that the Financial Statements are subject to normal recurring year-end
audit adjustments (which are not expected to be material), and do not contain
all footnotes required under generally accepting accounting principles.
3.6 LIABILITIES. The Company has no material liabilities and, to the best
of its knowledge, knows of no material contingent liabilities not disclosed in
the Financial Statements, except current liabilities incurred in the ordinary
course of business subsequent to the Statement Date which have not been, either
in any individual case or in the aggregate, materially adverse.
3.7 AGREEMENTS; ACTION.
(a) Except for agreements explicitly contemplated hereby and agreements
between the Company and its employees with respect to the sale of the Company's
Common Stock, there are no agreements, understandings or proposed transactions
between the Company and any of its officers, directors, affiliates or any
affiliate thereof.
(b) There are no agreements, understandings, instruments, contracts,
judgments, orders, writs or decrees to which the Company is a party or to its
knowledge by which it is bound which may involve (i) obligations (contingent or
otherwise) of, or payments to, the Company in excess of $100,000 (other than
obligations of, or payments to, the Company arising from purchase or sale
agreements entered into in the ordinary course of business), or (ii) the
transfer or license of any patent, copyright, trade secret or other proprietary
right to or from the Company (other than licenses arising from the purchase of
"off the shelf" or other standard products), or (iii) provisions restricting the
development, manufacture or distribution of the Company's products or services,
or (iv) indemnification by the Company with respect to infringements of
proprietary rights (other than indemnification obligations arising from
purchase, or sale or license agreements entered into in the ordinary course of
business).
(c) The Company has not (i) declared or paid any dividends, or authorized
or made any distribution upon or with respect to any class or series of its
capital stock, (ii) incurred any indebtedness for money borrowed or any other
liabilities (other than with respect to dividend obligations, distributions,
indebtedness and other obligations incurred in the ordinary course of business
or as disclosed in the Financial Statements) individually in excess of $100,000
or, in the case of indebtedness and/or liabilities individually less than
$100,000, in excess of $250,000 in the aggregate, (iii) made any loans or
advances to any person, other than ordinary advances for travel expenses, or
(iv) sold, exchanged or otherwise disposed of any of its assets or rights, other
than
4.
<PAGE> 8
ordinary advances for travel expenses, or (iv) sold, exchanged or otherwise
disposed of any of its assets or rights, other than the sale of its inventory in
the ordinary course of business.
(d) For the purposes of subsections (b) and (c) above, all indebtedness,
liabilities, agreements, understandings, instruments, contracts and proposed
transactions involving the same person or entity (including persons or entities
the Company has reason to believe are affiliated therewith) shall be aggregated
for the purpose of meeting the individual minimum dollar amounts of such
subsections.
(e) The Company has not engaged in the past three (3) months in any
discussion (i) with any representative of any corporation or corporations
regarding the consolidation or merger of the Company with or into any such
corporation or corporations, (ii) with any corporation, partnership, association
or other business entity or any individual regarding the sale, conveyance or
disposition of all or substantially all of the assets of the Company, or a
transaction or series of related transactions in which more than fifty percent
(50%) of the voting power of the Company is disposed of, or (iii) regarding any
other form of acquisition, liquidation, dissolution or winding up, of the
Company.
3.8 OBLIGATIONS TO RELATED PARTIES. There are no obligations of the
Company to officers, directors, stockholders, or employees of the Company other
than (a) for payment of salary for services rendered, (b) reimbursement for
reasonable expenses incurred on behalf of the Company and (c) for other standard
employee benefits made generally available to all employees (including stock
option agreements outstanding under any stock option plan approved by the Board
of Directors of the Company). None of the officers, directors or, to the best of
the Company's knowledge, key employees or stockholders of the Company or any
members of their immediate families, are indebted to the Company or have any
direct or indirect ownership interest in any firm or corporation with which the
Company is affiliated or with which the Company has a business relationship, or
any firm or corporation which competes with the Company, other than passive
investments in publicly traded companies (representing less than 1% of such
company) which may compete with the Company. No officer, director or
stockholder, or any member of their immediate families, is, directly or
indirectly, interested in any material contract with the Company (other than
such contracts as relate to any such person's ownership of capital stock or
other securities of the Company). Except as may be disclosed in the Financial
Statements, the Company is not a guarantor or indemnitor of any indebtedness of
any other person, firm or corporation.
3.9 CHANGES. Since the Statement Date, there has not been to the Company's
knowledge:
(a) Any change in the assets, liabilities, financial condition or
operations of the Company from that reflected in the Financial Statements, other
than changes in the ordinary course of business, none of which individually or
in the aggregate has had a material adverse effect on such assets, liabilities,
financial condition or operations of the Company;
(b) Any resignation or termination of any officer, key employee or group
of employees of the Company; and the Company, to the best of its knowledge, does
not
5.
<PAGE> 9
know of the impending resignation or termination of employment of any such
officer, key employee or group of employees;
(c) Any material change, except in the ordinary course of business, in the
contingent obligations of the Company by way of guaranty, endorsement,
indemnity, warranty or otherwise;
(d) Any damage, destruction or loss, whether or not covered by insurance,
materially and adversely affecting the properties, business or prospects or
financial condition of the Company;
(e) Any waiver by the Company of a valuable right or of a material debt
owed to it;
(f) Any direct or indirect loans made by the Company to any stockholder,
employee, officer or director of the Company, other than advances made in the
ordinary course of business;
(g) Any material change in any compensation arrangement or agreement with
any employee, officer, director or stockholder;
(h) Any declaration or payment of any dividend or other distribution of
the assets of the Company;
(i) Any labor organization activity related to the Company;
(j) Any debt, obligation or liability incurred, assumed or guaranteed by
the Company, except those for immaterial amounts and for current liabilities
incurred in the ordinary course of business;
(k) Any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets;
(l) Any change in any material agreement to which the Company is a party
or by which it is bound which materially and adversely affects the business,
assets, liabilities, financial condition, operations or prospects of the
Company;
(m) Any other event or condition of any character that, either
individually or cumulatively, has materially and adversely affected the
business, assets, liabilities, financial condition or operations of the Company;
or
(n) Any arrangement or commitment by the Company to do any of the acts
described in subsection (a) through (m) above.
3.10 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. The Company has good and
marketable title to its properties and assets, including the properties and
assets reflected in the most recent balance sheet included in the Financial
Statements, and good title to its leasehold estates, in each case subject to no
mortgage, pledge, lien, lease, encumbrance or charge, other
6.
<PAGE> 10
than (a) those resulting from taxes which have not yet become delinquent, (b)
minor liens and encumbrances which do not materially detract from the value of
the property subject thereto or materially impair the operations of the Company,
and (c) those that have otherwise arisen in the ordinary course of business. All
facilities, machinery, equipment, fixtures, vehicles and other properties owned,
leased or used by the Company are in good operating condition and repair and are
reasonably fit and usable for the purposes for which they are being used. The
Company is in compliance with all material terms of each lease to which it is a
party or is otherwise bound.
3.11 INTELLECTUAL PROPERTY.
(a) To the best of its knowledge, the Company owns or possesses sufficient
legal rights to all patents, trademarks, service marks, trade names, copyrights,
trade secrets, licenses, information and other proprietary rights and processes
necessary for its business as now conducted and as presently proposed to be
conducted, without any known infringement of the rights of others. There are no
outstanding options, licenses or agreements of any kind relating to the
foregoing proprietary rights, nor is the Company bound by or a party to any
options, licenses or agreements of any kind with respect to the patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
information and other proprietary rights and processes of any other person or
entity other than such licenses or agreements arising from the purchase of "off
the shelf" or standard products.
(b) The Company has not received any communications alleging that the
Company has violated or, by conducting its business as presently proposed, would
violate any of the patents, trademarks, service marks, trade names, copyrights
or trade secrets or other proprietary rights of any other person or entity, nor
is the Company aware of any basis therefor.
(c) The Company is not aware that any of its employees is obligated under
any contract (including licenses, covenants or commitments of any nature) or
other agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with their duties to the Company or
that would conflict with the Company's business as presently proposed to be
conducted. Each former and current employee, officer and consultant of the
Company has executed a proprietary information and inventions agreement. No
former or current employee, officer or consultant of the Company has excluded
works or inventions made prior to his or her employment with the Company from
his or her assignment of inventions pursuant to such employee, officer or
consultant's proprietary information and inventions agreement. The Company does
not believe it is or will be necessary to utilize any inventions, trade secrets
or proprietary information of any of its employees made prior to their
employment by the Company, except for inventions, trade secrets or proprietary
information that have been assigned to the Company.
(d) Neither the execution nor delivery of this Agreement or the Related
Agreements, nor the carrying on of the Company's business by the employees of
the Company, nor the conduct of the Company's business as presently proposed,
will, to the Company's knowledge, conflict with or result in a breach of the
terms, conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any employee is now obligated.
7.
<PAGE> 11
3.12 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in violation or
default of any term of its Restated Charter or Bylaws, or of any provision of
any mortgage, indenture, contract, agreement, instrument or contract to which it
is party or by which it is bound or of any judgment, decree, order, writ. The
execution, delivery, and performance of and compliance with this Agreement, and
the Related Agreements, and the issuance and sale of the Shares pursuant hereto
and of the Conversion Shares pursuant to the Restated Charter, will not, with or
without the passage of time or giving of notice, result in any such material
violation, or be in conflict with or constitute a default under any such term,
or result in the creation of any mortgage, pledge, lien, encumbrance or charge
upon any of the properties or assets of the Company or the suspension,
revocation, impairment, forfeiture or nonrenewal of any permit, license,
authorization or approval applicable to the Company, its business or operations
or any of its assets or properties. To its knowledge, the Company has avoided
every condition, and has not performed any act, the occurrence of which would
result in the Company's loss of any right granted under any license,
distribution agreement or other agreement required to be disclosed on the
Schedule of Exceptions.
3.13 LITIGATION. There is no action, suit, proceeding or investigation
pending or, to the Company's knowledge, currently threatened against the Company
that questions the validity of this Agreement, or the Related Agreements or the
right of the Company to enter into any of such agreements, or to consummate the
transactions contemplated hereby or thereby, or which would reasonably be
expected to result, either individually or in the aggregate, in any material
adverse change in the assets, condition, affairs or prospects of the Company,
financially or otherwise, or any change in the current equity ownership of the
Company, nor is the Company aware that there is any basis for any of the
foregoing. The foregoing includes, without limitation, actions pending or, to
the Company's knowledge, threatened or any basis therefor known by the Company
involving the prior employment of any of the Company's employees, their use in
connection with the Company's business of any information or techniques
allegedly proprietary to any of their former employers, or their obligations
under any agreements with prior employers. The Company is not a party or subject
to the provisions of any order, writ, injunction, judgment or decree of any
court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Company currently pending or which the
Company intends to initiate.
3.14 TAX RETURNS AND PAYMENTS. The Company has timely filed all tax
returns (federal, state and local) required to be filed by it. All taxes shown
to be due and payable on such returns, any assessments imposed, and to the
Company's knowledge all other taxes due and payable by the Company on or before
the Closing, have been paid or will be paid prior to the time they become
delinquent. The Company has not been advised (a) that any of its returns,
federal, state or other, have been or are being audited as of the date hereof,
or (b) of any deficiency in assessment or proposed judgment to its federal,
state or other taxes. The Company has no knowledge of any liability of any tax
to be imposed upon its properties or assets as of the date of this Agreement
that is not adequately provided for.
3.15 EMPLOYEES. The Company has no collective bargaining agreements with
any of its employees. There is no labor union organizing activity pending or, to
the Company's knowledge, threatened with respect to the Company. The Company is
not a party to or bound by any currently effective employment contract, deferred
compensation arrangement, bonus plan,
8.
<PAGE> 12
incentive plan, profit sharing plan, retirement agreement or other employee
compensation plan or agreement. To the Company's knowledge, no employee of the
Company, nor any consultant with whom the Company has contracted, is in
violation of any term of any employment contract, proprietary information
agreement or any other agreement relating to the right of any such individual to
be employed by, or to contract with, the Company because of the nature of the
business to be conducted by the Company; and to the Company's knowledge the
continued employment by the Company of its present employees, and the
performance of the Company's contracts with its independent contractors, will
not result in any such violation. The Company has not received any notice
alleging that any such violation has occurred. No employee of the Company has
been granted the right to continued employment by the Company or to any material
compensation following termination of employment with the Company. The Company
is not aware that any officer, key employee or group of employees intends to
terminate his, her or their employment with the Company, nor does the Company
have a present intention to terminate the employment of any officer, key
employee or group of employees.
3.16 OBLIGATIONS OF MANAGEMENT. Each officer and key employee of the
Company is currently devoting substantially all of his or her business time to
the conduct of the business of the Company. The Company is not aware that any
officer or key employee of the Company is planning to work less than full time
at the Company in the future. No officer or key employee is currently working
or, to the Company's knowledge, plans to work for a competitive enterprise,
whether or not such officer or key employee is or will be compensated by such
enterprise.
3.17 REGISTRATION RIGHTS AND VOTING RIGHTS. Except as required pursuant to
the Investor Rights Agreement, the Company is presently not under any
obligation, and has not granted any rights, to register (as defined in Section
1.1 of the Investor Rights Agreement) any of the Company's presently outstanding
securities or any of its securities that may hereafter be issued. To the
Company's knowledge, no stockholder of the Company has entered into any
agreement with respect to the voting of equity securities of the Company.
3.18 COMPLIANCE WITH LAWS; PERMITS. The Company is not in violation of any
applicable statute, rule, regulation, order or restriction of any domestic or
foreign government or any instrumentality or agency thereof in respect of the
conduct of its business or the ownership of its properties which violation would
materially and adversely affect the business, assets, liabilities, financial
condition, or operations of the Company. No governmental orders, permissions,
consents, approvals or authorizations are required to be obtained and no
registrations or declarations are required to be filed in connection with the
execution and delivery of this Agreement and the issuance of the Shares or the
Conversion Shares, except such as has been duly and validly obtained or filed,
or with respect to any filings that must be made after the Closing, as will be
filed in a timely manner. The Company has all franchises, permits, licenses and
any similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
business, properties or financial condition of the Company and believes it can
obtain, without undue burden or expense, any similar authority for the conduct
of its business as planned to be conducted.
3.19 ENVIRONMENTAL AND SAFETY LAWS. The Company is not in violation of any
applicable statute, law or regulation relating to the environment or
occupational health and
9
<PAGE> 13
safety, and to its knowledge, no material expenditures are or will be required
in order to comply with any such existing statute, law or regulation.
3.20 OFFERING VALID. Assuming the accuracy of the representations and
warranties of Purchaser contained in Section 4.2 hereof, the offer, sale and
issuance of the Shares and the Conversion Shares will be exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and will have been registered or qualified (or are exempt
from registration and qualification) under the registration, permit or
qualification requirements of all applicable state securities laws. Neither the
Company nor any agent on its behalf has solicited or will solicit any offers to
sell or has offered to sell or will offer to sell all or any part of the Shares
to any person or persons so as to bring the sale of such Shares by the Company
within the registration provisions of the Securities Act or any state securities
laws.
3.21 FULL DISCLOSURE. The Company has provided Purchaser with all
information requested by Purchaser in connection with their decision to purchase
the Shares. To the Company's knowledge, neither this Agreement, the exhibits
hereto, the Related Agreements nor any other document delivered by the Company
to Purchaser or their attorneys or agents in connection herewith or therewith or
with the transactions contemplated hereby or thereby, contain any untrue
statement of a material fact nor, omit to state a material fact necessary in
order to make the statements contained herein or therein not misleading.
3.22 MINUTE BOOKS. The minute books of the Company made available to
Purchaser contain a complete summary of all meetings of directors and
stockholders since the time of incorporation.
3.23 REAL PROPERTY HOLDING CORPORATION. The Company is not a real property
holding corporation within the meaning of Code Section 897(c)(2) and any
regulations promulgated thereunder.
3.24 INSURANCE. The Company has general commercial, product liability,
fire and casualty insurance policies with coverage customary for companies
similarly situated to the Company.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
Purchaser hereby represents and warrants to the Company as follows (such
representations and warranties do not lessen or obviate the representations and
warranties of the Company set forth in this Agreement):
4.1 REQUISITE POWER AND AUTHORITY. Purchaser has all necessary power and
authority under all applicable provisions of law to execute and deliver this
Agreement and the Related Agreements and to carry out their provisions. All
action on Purchaser's part required for the lawful execution and delivery of
this Agreement and the Related Agreements have been or will be effectively taken
prior to the Closing. Upon their execution and delivery, this Agreement and the
Related Agreements will be valid and binding obligations of Purchaser,
enforceable in accordance with their terms, except (a) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application affecting enforcement of creditors' rights, (b) as limited by
general principles of equity that restrict the availability of
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<PAGE> 14
equitable remedies, and (c) to the extent that the enforceability of the
indemnification provisions of Section 2.9 of the Investor Rights Agreement may
be limited by applicable laws.
4.2 INVESTMENT REPRESENTATIONS. Purchaser understands that neither the
Shares nor the Conversion Shares have been registered under the Securities Act.
Purchaser also understands that the Shares are being offered and sold pursuant
to an exemption from registration contained in the Securities Act based in part
upon Purchaser's representations contained in the Agreement. Purchaser hereby
represents and warrants as follows:
(a) PURCHASER BEARS ECONOMIC RISK. Purchaser has substantial experience in
evaluating and investing in private placement transactions of securities in
companies similar to the Company so that it is capable of evaluating the merits
and risks of its investment in the Company and has the capacity to protect its
own interests. Purchaser must bear the economic risk of this investment
indefinitely unless the Shares (or the Conversion Shares) are registered
pursuant to the Securities Act, or an exemption from registration is available.
Purchaser understands that the Company has no present intention of registering
the Shares, the Conversion Shares or any shares of its Common Stock. Purchaser
also understands that there is no assurance that any exemption from registration
under the Securities Act will be available and that, even if available, such
exemption may not allow Purchaser to transfer all or any portion of the Shares
or the Conversion Shares under the circumstances, in the amounts or at the times
Purchaser might propose.
(b) ACQUISITION FOR OWN ACCOUNT. Purchaser is acquiring the Shares and the
Conversion Shares for Purchaser's own account for investment only, and not with
a view towards their distribution.
(c) PURCHASER CAN PROTECT ITS INTEREST. Purchaser represents that by
reason of its, or of its management's, business or financial experience,
Purchaser has the capacity to protect its own interests in connection with the
transactions contemplated in this Agreement, and the Related Agreements.
Further, Purchaser is aware of no publication of any advertisement in connection
with the transactions contemplated in the Agreement.
(d) ACCREDITED INVESTOR. Purchaser represents that it is an accredited
investor within the meaning of Regulation D under the Securities Act.
(e) COMPANY INFORMATION. Purchaser has received and read the Financial
Statements and has had an opportunity to discuss the Company's business,
management and financial affairs with directors, officers and management of the
Company and has had the opportunity to review the Company's operations and
facilities. Purchaser has also had the opportunity to ask questions of and
receive answers from, the Company and its management regarding the terms and
conditions of this investment.
(f) RULE 144. Purchaser acknowledges and agrees that the Shares, and, if
issued, the Conversion Shares must be held indefinitely unless they are
subsequently registered under the Securities Act or an exemption from such
registration is available. Purchaser has been advised or is aware of the
provisions of Rule 144 promulgated under the Securities Act as in effect from
time to time, which permits limited resale of shares purchased in
11
<PAGE> 15
a private placement subject to the satisfaction of certain conditions,
including, among other things: the availability of certain current public
information about the Company, the resale occurring following the required
holding period under Rule 144 and the number of shares being sold during any
three-month period not exceeding specified limitations.
4.3 TRANSFER RESTRICTIONS. Purchaser acknowledges and agrees that the
Shares and, if issued, the Conversion Shares are subject to restrictions on
transfer as set forth in the Investor Rights Agreement.
5. CONDITIONS TO CLOSING.
5.1 CONDITIONS TO PURCHASER'S OBLIGATIONS AT THE CLOSING. Purchaser's
obligations to purchase the Shares at the Closing are subject to the
satisfaction, at or prior to the Closing Date, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE OF OBLIGATIONS. The
representations and warranties made by the Company in Section 3 hereof shall be
true and correct in all material respects as of the Closing Date with the same
force and effect as if they had been made as of the Closing Date, and the
Company shall have performed all obligations and conditions herein required to
be performed or observed by it on or prior to the Closing.
(b) LEGAL INVESTMENT. On the Closing Date, the sale and issuance of the
Shares and the proposed issuance of the Conversion Shares shall be legally
permitted by all laws and regulations to which Purchaser and the Company are
subject.
(c) CONSENTS, PERMITS, AND WAIVERS. The Company shall have obtained any
and all consents, permits and waivers necessary or appropriate for consummation
of the transactions contemplated by the Agreement and the Related Agreements
(except for such as may be properly obtained subsequent to the Closing).
(d) FILING OF RESTATED CHARTER. The Restated Charter shall have been filed
with the Maryland State Department of Assessment and Taxation and shall continue
to be in full force and effect as of the Closing Date.
(e) CORPORATE DOCUMENTS. The Company shall have delivered to Purchaser or
its counsel, copies of all corporate documents of the Company as Purchaser shall
reasonably request.
(f) RESERVATION OF CONVERSION SHARES. The Conversion Shares issuable upon
conversion of the Shares shall have been duly authorized and reserved for
issuance upon such conversion.
(g) COMPLIANCE CERTIFICATE. The Company shall have delivered to Purchaser
a Compliance Certificate, executed by the President of the Company, dated the
Closing Date, to the effect that the conditions specified in subsections (a),
(c), (d) and (f) of this Section 5.1 have been satisfied.
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<PAGE> 16
(h) SECRETARY'S CERTIFICATE. Purchaser shall have received from the
Company's Secretary, a certificate having attached thereto (i) the Company's
Articles of Incorporation as in effect at the time of the Closing, (ii) the
Company's Bylaws as in effect at the time of the Closing, (iii) resolutions
approved by the Board of Directors authorizing the transactions contemplated
hereby, (iv) resolutions approved by the Company's stockholders authorizing the
filing of the Restated Charter, and (v) good standing certificates (including
tax good standing) with respect to the Company from the applicable
authority(ies) in Maryland and any other jurisdiction in which the Company is
qualified to do business, dated a recent date before the Closing.
(i) INVESTOR RIGHTS AGREEMENT. The Investor Rights Agreement substantially
in the form attached hereto as Exhibit B shall have been executed and delivered
by the parties thereto.
(j) CO-SALE AGREEMENT. The Co-Sale Agreement substantially in the form
attached hereto as Exhibit C shall have been executed and delivered by the
parties thereto. The stock certificates representing the shares subject to the
Co-Sale Agreement shall have been delivered to the Secretary of the Company and
shall have had appropriate legends placed upon them to reflect the restrictions
on transfer set forth on the Co-Sale Agreement.
(k) LEGAL OPINION. Purchaser shall have received from legal counsel to the
Company an opinion addressed to them, dated as of the Closing Date, in
substantially the form attached hereto as Exhibit E.
(l) PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in
connection with the transactions contemplated at the Closing hereby and all
documents and instruments incident to such transactions shall be reasonably
satisfactory in substance and form to Purchaser and its counsel, and Purchaser
and its counsel 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 THE COMPANY. The Company's obligation to
issue and sell the Shares at the Closing is subject to the satisfaction, on or
prior to the Closing, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties in Section 4 made by Purchaser shall be true and correct in all
material respects at the date of the Closing, with the same force and effect as
if they had been made on and as of said date.
(b) PERFORMANCE OF OBLIGATIONS. Purchaser shall have performed and
complied with all agreements and conditions herein required to be performed or
complied with by Purchaser on or before the Closing.
(c) FILING OF RESTATED CHARTER. The Restated Charter shall have been filed
with the Maryland State Department of Assessment and Taxation.
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<PAGE> 17
(d) INVESTOR RIGHTS AGREEMENT. The Investor Rights Agreement substantially
in the form attached hereto as Exhibit B shall have been executed and delivered
by Purchaser.
(e) CO-SALE AGREEMENT. The Co-Sale Agreement substantially in the form
attached hereto as Exhibit C shall have been executed and delivered by the
parties thereto
(f) CONSENTS, PERMITS, AND WAIVERS. The Company shall have obtained any
and all consents, permits and waivers necessary or appropriate for consummation
of the transactions contemplated by the Agreement and the Related Agreements
(except for such as may be properly obtained subsequent to the Closing).
6. MISCELLANEOUS.
6.1 GOVERNING LAW. This Agreement shall be governed in all respects by the
laws of the State of Maryland as such laws are applied to agreements between
Maryland residents entered into and performed entirely in Maryland.
6.2 SURVIVAL. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by Purchaser and the closing of
the transactions contemplated hereby. All statements as to factual matters
contained in any certificate or other instrument delivered by or on behalf of
the Company pursuant hereto in connection with the transactions contemplated
hereby shall be deemed to be representations and warranties by the Company
hereunder solely as of the date of such certificate or instrument.
6.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto
and shall inure to the benefit of and be enforceable by each person who shall be
a holder of the Shares from time to time.
6.4 ENTIRE AGREEMENT. This Agreement, the exhibits and schedules hereto,
the Related Agreements and the other documents delivered pursuant hereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and no party shall be liable or bound to any
other in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.
6.5 SEVERABILITY. In case any provision of the Agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
6.6 AMENDMENT AND WAIVER.
(a) This Agreement may be amended or modified only upon the written
consent of the Company and holders of at least a majority of the Shares (treated
as if converted and including any Conversion Shares into which the Shares have
been converted that have not been sold to the public).
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<PAGE> 18
(b) The obligations of the Company and the rights of the holders of the
Shares and the Conversion Shares under the Agreement may be waived only with the
written consent of the holders of at least a majority of the Shares (treated as
if converted and including any Conversion Shares into which the Shares have been
converted that have not been sold to the public).
6.7 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any party, upon any breach,
default or noncompliance by another party under this Agreement, the Related
Agreements or the Restated Charter, shall impair any such right, power or
remedy, nor shall it be construed to be a waiver of any such breach, default or
noncompliance, or any acquiescence therein, or of or in any similar breach,
default or noncompliance thereafter occurring. It is further agreed that any
waiver, permit, consent or approval of any kind or character on Purchaser's part
of any breach, default or noncompliance under this Agreement, the Related
Agreements or under the Restated Charter or any waiver on such party's part of
any provisions or conditions of the Agreement, the Related Agreements, or the
Restated Charter must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, the Related Agreements, the Restated Charter, by law, or otherwise
afforded to any party, shall be cumulative and not alternative.
6.8 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day, (c) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one (1) day after deposit with
a nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the Company
at its address set forth on the signature page hereof and to Purchaser at its
address set forth on the signature page hereof or at such other address as the
Company or Purchaser may designate by ten (10) days advance written notice to
the other parties hereto.
6.9 EXPENSES. Each party shall pay all costs and expenses that it incurs
with respect to the negotiation, execution, delivery and performance of the
Agreement.
6.10 ATTORNEYS' FEES. In the event that any suit or action is instituted
to enforce any provision in this Agreement, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
6.11 TITLES AND SUBTITLES. The titles of the sections and subsections of
the Agreement are for convenience of reference only and are not to be considered
in construing this Agreement.
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6.12 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
6.13 BROKER'S FEES. Each party hereto represents and warrants that no
agent, broker, investment banker, person or firm acting on behalf of or under
the authority of such party hereto is or will be entitled to any broker's or
finder's fee or any other commission directly or indirectly in connection with
the transactions contemplated herein. Each party hereto further agrees to
indemnify each other party for any claims, losses or expenses incurred by such
other party as a result of the representation in this Section 6.13 being untrue.
6.14 CONFIDENTIALITY. Each party hereto agrees that, except with the prior
written consent of the other party, it shall at all times keep confidential and
not divulge, furnish or make accessible to anyone any confidential information,
knowledge or data concerning or relating to the business or financial affairs of
the other parties to which such party has been or shall become privy by reason
of this Agreement or the Related Agreements, discussions or negotiations
relating to this Agreement or the Related Agreements, the performance of its
obligations hereunder or the ownership of the Shares purchased hereunder. The
provisions of this Section 6.14 shall be in addition to, and not in substitution
for, the provisions of any separate nondisclosure agreement executed by the
parties hereto.
6.15 PRONOUNS. All pronouns contained herein, and any variations thereof,
shall be deemed to refer to the masculine, feminine or neutral, singular or
plural, as to the identity of the parties hereto may require.
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SIGNATURE PAGE
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed the SERIES A
PREFERRED STOCK PURCHASE AGREEMENT as of the date set forth in the first
paragraph hereof.
COMPANY: PURCHASER:
NEURALSTEM BIOPHARMACEUTICALS, LTD. GENE LOGIC INC.
Signature: /s/ I. RICHARD CARR Signature: /s/ PHILIP L. ROHRER, JR.
-------------------------- ---------------------------
Print Name: I. Richard Carr Print Name: Philip L. Rohrer, Jr.
-------------------------- --------------------------
Title: President & CEO Title: Chief Financial Officer
------------------------------- -------------------------------
Address: 3335 Paint Branch Drive Address: 708 Quince Orchard Road
College Park, Maryland 20742 Gaithersburg, Maryland 20878
Attn: I. Richard Garr Attn: Mark D. Gessler
17.
<PAGE> 21
LIST OF EXHIBITS
Articles of Amendment Exhibit A
Investor Rights Agreement Exhibit B
Co-Sale Agreement Exhibit C
List of Stockholders and Optionholders Exhibit D
Form of Legal Opinion Exhibit E
<PAGE> 22
EXHIBIT A
NEURALSTEM PHARMACEUTICALS, LTD.
ARTICLES OF AMENDMENT
NEURALSTEM BIOPHARMACEUTICALS, LTD., a Maryland corporation having its
principal office in Montgomery County, Maryland (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The Articles of Incorporation are hereby amended and restated
in their entirety to read as follows:
I.
The name of the corporation is NEURALSTEM BIOPHARMACEUTICALS, LTD. (the
"Corporation" or the "Company").
II.
The purpose of the Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
Maryland.
III.
The address of the principal office of the Corporation within the State of
Maryland is 8803 Maxwell Drive, Potomac, Maryland 20854.
IV.
The name and address of the registered agent of the Corporation in the
State of Maryland are:
The Corporation Trust Incorporated
300 East Lombard Street
Baltimore, Maryland 21202
V.
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 Fifteen Million
(15,000,000) shares, Ten Million (10,000,000) shares of which shall be Common
Stock (the "Common Stock") and Five Million (5,000,000) shares of which shall be
Preferred Stock (the "Preferred Stock"). The Preferred Stock shall have a par
value of one cent ($.01) per share and the Common Stock shall have a par value
of one cent ($.01) per share.
B. The number of authorized shares of Common Stock may be increased or
decreased (but not below the number of shares of Common Stock then outstanding)
by the
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affirmative vote of the holders of a majority of the stock of the Corporation
(voting together on an as-if-converted basis).
C. The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, within the limitations and
restrictions stated in this Articles of Amendment, to fix or alter the rights,
preferences, privileges and restrictions granted to or imposed upon any wholly
unissued series of Preferred Stock, and the number of shares constituting any
such series and the designation thereof, or any of them; and to increase or
decrease the number of shares of any series prior or subsequent to the issue of
shares of that series, but not below the number of shares of such series then
outstanding. In case the number of shares of any series shall be so decreased,
the shares constituting such decrease shall resume the status which they had
prior to the adoption of the resolution originally fixing the number of shares
of such series.
D. One Million Forty-Seven Thousand Five Hundred Eighty-Eight (1,047,588)
of the authorized shares of Preferred Stock are hereby designated "Series A
Preferred Stock" (the "Series A Preferred").
E. The rights, preferences, privileges, restrictions and other matters
relating to the Series A Preferred are as follows:
1. DIVIDEND RIGHTS.
a. Subject to the rights of any series of Preferred Stock that may from
time to time come into existence, the Holders of Series A Preferred, in
preference to the holders of any other stock of the Company ("Junior Stock"),
shall be entitled to receive, when and as declared by the Board of Directors,
but only out of funds that are legally available therefor, cash dividends at the
rate of eight percent (8%) of the Original Issue Price (as defined below) per
annum on each outstanding share of Series A Preferred (as adjusted for any stock
dividends, combinations, splits, recapitalizations and the like with respect to
such shares). The "Original Issue Price" of the Series A Preferred shall be
Seven Dollars and Sixty-Four Cents ($7.64). Such dividends shall be payable only
when, as and if declared by the Board of Directors and shall be non-cumulative.
b. So long as any shares of Series A Preferred shall be outstanding, no
dividend, whether in cash or property, shall be paid or declared, nor shall any
other distribution be made, on any Junior Stock, nor shall any shares of any
Junior Stock of the Company be purchased, redeemed, or otherwise acquired for
value by the Company (except for acquisitions of Common Stock by the Company
pursuant to agreements which permit the Company to repurchase such shares upon
termination of services to the Company or in exercise of the Company's right of
first refusal upon a proposed transfer) until all dividends (set forth in
Section 1(a) above) on the Series A Preferred shall have been paid or declared
and set apart. In the event dividends are paid on any share of Common Stock, an
additional dividend shall be paid with respect to all outstanding shares of
Series A Preferred in an amount equal per share (on an as-if-converted to Common
Stock basis) to the amount paid or set aside for each share of Common Stock. The
provisions of this Section 1(b) shall not, however, apply to (i) a dividend
payable in Common Stock, (ii) the acquisition of shares of any Junior Stock in
exchange for
2.
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shares of any other Junior Stock, or (iii) any repurchase of any outstanding
securities of the Company that is approved by the Company's Board of Directors.
2. VOTING RIGHTS.
a. GENERAL RIGHTS. Except as otherwise provided herein or as required
by law, the Series A Preferred shall be voted equally with the shares of the
Common Stock of the Company and not as a separate class, at any annual or
special meeting of stockholders of the Company, and may act by written consent
in the same manner as the Common Stock, in either case upon the following basis:
each holder of shares of Series A Preferred shall be entitled to such number of
votes as shall be equal to the whole number of shares of Common Stock into which
such holder's aggregate number of shares of Series A Preferred are convertible
(pursuant to Section 4 hereof) immediately after the close of business on the
record date fixed for such meeting or the effective date of such written
consent.
b. SEPARATE VOTE OF SERIES A PREFERRED. For so long as at least 500,000
shares of Series A Preferred (subject to adjustment for any stock split, reverse
stock split or other similar event affecting the Series A Preferred) remain
outstanding, in addition to any other vote or consent required herein, by law or
pursuant to the rights of any series of Preferred Stock that may from time to
time come into existence, the vote or written consent of the holders of at least
a majority of the outstanding Series A Preferred shall be necessary for
effecting or validating the following actions:
(i) Any increase or decrease in the authorized number of shares of
Series A Preferred;
(ii) Any redemption, repurchase, payment of dividends or other
distributions with respect to Junior Stock (except for acquisitions of Common
Stock by the Company pursuant to agreements which permit the Company to
repurchase such shares upon termination of services to the Company or in
exercise of the Company's right of first refusal upon a proposed transfer); or
(iii) Any action that results in the payment or declaration of a
dividend on any shares of Common Stock or Preferred Stock.
3. LIQUIDATION RIGHTS.
a. Upon any liquidation, dissolution, or winding up of the
Company, whether voluntary or involuntary, before any distribution or payment
shall be made to the holders of any Junior Stock and subject to the rights of
any series of Preferred Stock that may from time to time come into existence,
the holders of Series A Preferred shall be entitled to be paid out of the assets
of the Company an amount per share of Series A Preferred equal to the Original
Issue Price plus all declared and unpaid dividends on the Series A Preferred (as
adjusted for any stock dividends, combinations, splits, recapitalizations and
the like with respect to such shares) for each share of Series A Preferred held
by them. If, upon any such liquidation, dissolution, or winding up, the assets
of the Company shall be insufficient to make payment in full to all holders of
Series A Preferred of the liquidation preference set forth in this Section 3(a),
then subject to the rights of any series of Preferred Stock that may from time
to time come into
3.
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existence, such assets shall be distributed among the holders of Series A
Preferred at the time outstanding, ratably in proportion to the full amounts to
which they would otherwise be respectively entitled.
b. After the payment of the full liquidation preference of the
Series A Preferred as set forth in Section 3(a) above and any other distribution
that may be required with respect to any series of Preferred Stock that may from
time to time come into existence, the remaining assets of the Company legally
available for distribution, if any, shall be distributed ratably to the holders
of the Common Stock.
c. The following events shall be considered a liquidation under
this Section:
(i) any consolidation or merger of the Company with or into
any other corporation or other entity or person, or any other corporate
reorganization, in which the stockholders of the Company immediately prior to
such consolidation, merger or reorganization, own less than 50% of the Company's
voting power immediately after such consolidation, merger or reorganization, or
any transaction or series of related transactions to which the Company is a
party in which in excess of fifty percent (50%) of the Company's voting power is
transferred, excluding any consolidation or merger effected exclusively to
change the domicile of the Company (an "Acquisition"); or
(ii) a sale, lease or other disposition of all or
substantially all of the assets of the Company (an "Asset Transfer").
(iii) In any of such events, if the consideration received
by this corporation is other than cash, its value will be deemed its fair market
value as determined in good faith by the Board of Directors. Any securities
shall be valued as follows:
(a) Securities not subject to investment letter or other
similar restrictions on free marketability covered by (b) below:
(1) If traded on a securities exchange or through
the Nasdaq National Market, the value shall be deemed to be the average of the
closing prices of the securities on such quotation system over the thirty (30)
day period ending three (3) days prior to the closing;
(2) If actively traded over-the-counter, the value
shall be deemed to be the average of the closing bid or sale prices (whichever
is applicable) over the thirty (30) day period ending three (3) days prior to
the closing; and
(3) If there is no active public market, the value
shall be the fair market value thereof, as mutually determined by the Board of
Directors and the holders of at least a majority of the voting power of all then
outstanding shares of Series A Preferred.
(b) The method of valuation of securities subject to
investment letter or other restrictions on free marketability (other than
restrictions arising solely
4.
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by virtue of a shareholder's status as an affiliate or former affiliate) shall
be to make an appropriate discount from the market value determined as above in
(A) (1), (2) or (3) to reflect the approximate fair market value thereof, as
mutually determined by the Board of Directors and the holders of at least a
majority of the voting power of all then outstanding shares of such Series A
Preferred.
4. CONVERSION RIGHTS.
The holders of the Series A Preferred shall have the following
rights with respect to the conversion of the Series A Preferred into shares of
Common Stock (the "Conversion Rights"):
a. OPTIONAL CONVERSION. Subject to and in compliance with the
provisions of this Section 4, any shares of Series A Preferred may, at the
option of the holder, be converted at any time into fully-paid and nonassessable
shares of Common Stock. The number of shares of Common Stock to which a holder
of Series A Preferred shall be entitled upon conversion shall be the product
obtained by multiplying the "Series A Preferred Conversion Rate" then in effect
(determined as provided in Section 4(b)) by the number of shares of Series A
Preferred being converted.
b. SERIES A PREFERRED CONVERSION RATE. The conversion rate in effect
at any time for conversion of the Series A Preferred (the "Series A Preferred
Conversion Rate") shall be the quotient obtained by dividing the Original Issue
Price of the Series A Preferred by the "Series A Preferred Conversion Price,"
calculated as provided in Section 4(c).
c. SERIES A PREFERRED CONVERSION PRICE. The conversion price for the
Series A Preferred shall initially be the Original Issue Price of the Series A
Preferred (the "Series A Preferred Conversion Price"). Such initial Series A
Preferred Conversion Price shall be adjusted from time to time in accordance
with this Section 4. All references to the Series A Preferred Conversion Price
herein shall mean the Series A Preferred Conversion Price as so adjusted.
d. MECHANICS OF CONVERSION. Each holder of Series A Preferred who
desires to convert the same into shares of Common Stock pursuant to this Section
4 shall surrender the certificate or certificates therefor, duly endorsed, at
the office of the Company or any transfer agent for the Series A Preferred, and
shall give written notice to the Company at such office that such holder elects
to convert the same. Such notice shall state the number of shares of Series A
Preferred being converted. Thereupon, the Company shall promptly issue and
deliver at such office to such holder a certificate or certificates for the
number of shares of Common Stock to which such holder is entitled and shall
promptly pay (i) in cash or, to the extent sufficient funds are not then legally
available therefor, in Common Stock (at the Common Stock's fair market value
determined by the Board of Directors as of the date of such conversion), any
declared and unpaid dividends on the shares of Series A Preferred being
converted and (ii) in cash (at the Common Stock's fair market value determined
by the Board of Directors as of the date of conversion) the value of any
fractional share of Common Stock otherwise issuable to any holder of Series A
Preferred. Such conversion shall be deemed to have been made at the close of
business on the date of such surrender of the certificates representing
5.
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the shares of Series A Preferred to be converted, and the person entitled to
receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder of such shares of Common Stock on
such date.
e. ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the Company
shall at any time or from time to time after the date that the first share of
Series A Preferred is issued (the "Original Issue Date") effect a subdivision of
the outstanding Common Stock without a corresponding subdivision of the
Preferred Stock, the Series A Preferred Conversion Price in effect immediately
before that subdivision shall be proportionately decreased. Conversely, if the
Company shall at any time or from time to time after the Original Issue Date
combine the outstanding shares of Common Stock into a smaller number of shares
without a corresponding combination of the Preferred Stock, the Series A
Preferred Conversion Price in effect immediately before the combination shall be
proportionately increased. Any adjustment under this Section 4(e) shall become
effective at the close of business on the date the subdivision or combination
becomes effective.
f. ADJUSTMENT FOR COMMON STOCK DIVIDENDS AND DISTRIBUTIONS. If the
Company at any time or from time to time after the Original Issue Date makes, or
fixes a record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in additional shares of Common
Stock, in each such event the Series A Preferred Conversion Price that is then
in effect shall be decreased as of the time of such issuance or, in the event
such record date is fixed, as of the close of business on such record date, by
multiplying the Series A Preferred Conversion Price then in effect by a fraction
(i) the numerator of which is the total number of shares of Common Stock issued
and outstanding immediately prior to the time of such issuance or the close of
business on such record date, and (ii) the denominator of which is the total
number of shares of Common Stock issued and outstanding immediately prior to the
time of such issuance or the close of business on such record date plus the
number of shares of Common Stock issuable in payment of such dividend or
distribution; provided, however, that if such record date is fixed and such
dividend is not fully paid or if such distribution is not fully made on the date
fixed therefor, the Series A Preferred Conversion Price shall be recomputed
accordingly as of the close of business on such record date and thereafter the
Series A Preferred Conversion Price shall be adjusted pursuant to this Section
4(f) to reflect the actual payment of such dividend or distribution.
g. ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND SUBSTITUTION. If at
any time or from time to time after the Original Issue Date, the Common Stock
issuable upon the conversion of the Series A Preferred is changed into the same
or a different number of shares of any class or classes of stock, whether by
recapitalization, reclassification or otherwise (other than an Acquisition or
Asset Transfer as defined in Section 3(c) or a subdivision or combination of
shares or stock dividend or a reorganization, merger, consolidation or sale of
assets provided for elsewhere in this Section 4), in any such event each holder
of Series A Preferred shall have the right thereafter to convert such stock into
the kind and amount of stock and other securities and property receivable upon
such recapitalization, reclassification or other change by holders of the
maximum number of shares of Common Stock into which such shares of Series A
Preferred could have been converted immediately prior to such recapitalization,
reclassification or change, all subject to further adjustment as provided herein
or with respect to such other securities or property by the terms thereof.
6.
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h. REORGANIZATIONS, MERGERS OR CONSOLIDATIONS. If at any time or
from time to time after the Original Issue Date, there is a capital
reorganization of the Common Stock or the merger or consolidation of the Company
with or into another corporation or another entity or person (other than an
Acquisition or Asset Transfer as defined in Section 3(c) or a recapitalization,
subdivision, combination, reclassification, exchange or substitution of shares
provided for elsewhere in this Section 4), as a part of such capital
reorganization, provision shall be made so that the holders of the Series A
Preferred shall thereafter be entitled to receive upon conversion of the Series
A Preferred the number of shares of stock or other securities or property of the
Company to which a holder of the number of shares of Common Stock deliverable
upon conversion would have been entitled on such capital reorganization, subject
to adjustment in respect of such stock or securities by the terms thereof. In
any such case, appropriate adjustment shall be made in the application of the
provisions of this Section 4 with respect to the rights of the holders of Series
A Preferred after the capital reorganization to the end that the provisions of
this Section 4 (including adjustment of the Series A Preferred Conversion Price
then in effect and the number of shares issuable upon conversion of the Series A
Preferred) shall be applicable after that event and be as nearly equivalent as
practicable.
i. CERTIFICATE OF ADJUSTMENT. In each case of an adjustment or
readjustment of the Series A Preferred Conversion Price for the number of shares
of Common Stock or other securities issuable upon conversion of the Series A
Preferred, if the Series A Preferred is then convertible pursuant to this
Section 4, the Company, at its expense, shall compute such adjustment or
readjustment in accordance with the provisions hereof and prepare a certificate
showing such adjustment or readjustment, and shall mail such certificate, by
first class mail, postage prepaid, to each registered holder of Series A
Preferred at the holder's address as shown in the Company's books. The
certificate shall set forth such adjustment or readjustment, showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (i) the Series A Preferred Conversion Price at the time in effect,
and (ii) the type and amount, if any, of other property which at the time would
be received upon conversion of the Series A Preferred.
j. NOTICES OF RECORD DATE. Upon (i) 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 or other
distribution, or (ii) any Acquisition (as defined in Section 3(c)) or other
capital reorganization of the Company, any reclassification or recapitalization
of the capital stock of the Company, any merger or consolidation of the Company
with or into any other corporation, or any Asset Transfer (as defined in Section
3(c)), or any voluntary or involuntary dissolution, liquidation or winding up of
the Company, the Company shall mail to each holder of Series A Preferred at
least ten (10) days prior to the record date specified therein (or such shorter
period approved by a majority of the outstanding Series A Preferred) a notice
specifying (A) the date on which any such record is to be taken for the purpose
of such dividend or distribution and a description of such dividend or
distribution, (B) the date on which any such Acquisition, reorganization,
reclassification, transfer, consolidation, merger, Asset Transfer, dissolution,
liquidation or winding up is expected to become effective, and (C) the date, 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
Acquisition,
7.
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reorganization, reclassification, transfer, consolidation, merger, Asset
Transfer, dissolution, liquidation or winding up.
k. AUTOMATIC CONVERSION.
(i) Each share of Series A Preferred shall automatically be
converted into shares of Common Stock, based on the then-effective Series A
Preferred Conversion Price, (A) at any time upon the affirmative election of the
holders of at least a majority of the outstanding shares of the Series A
Preferred, or (B) immediately upon the closing of a firmly underwritten public
offering pursuant to an effective registration statement under the Securities
Act of 1933, as amended, covering the offer and sale of Common Stock for the
account of the Company in which (x) the per share price is at least $3.00 (as
adjusted for stock splits, dividends, recapitalizations and the like) and (y)
the gross cash proceeds to the Company (before underwriting discounts,
commissions and fees) are at least $7,500,000. Upon such automatic conversion,
any declared and unpaid dividends shall be paid in accordance with the
provisions of Section 4(d).
(ii) Upon the occurrence of either of the events specified
in Section 4(k)(i) above, the outstanding shares of Series A Preferred shall be
converted automatically without any further action by the holders of such shares
and whether or not the certificates representing such shares are surrendered to
the Company or its transfer agent; provided, however, that the Company shall not
be obligated to issue certificates evidencing the shares of Common Stock
issuable upon such conversion unless the certificates evidencing such shares of
Series A Preferred are either delivered to the Company or its transfer agent as
provided below, or the holder notifies the Company or its transfer agent that
such certificates have been lost, stolen or destroyed and executes an agreement
satisfactory to the Company to indemnify the Company from any loss incurred by
it in connection with such certificates. Upon the occurrence of such automatic
conversion of the Series A Preferred, the holders of Series A Preferred shall
surrender the certificates representing such shares at the office of the Company
or any transfer agent for the Series A Preferred. Thereupon, there shall be
issued and delivered to such holder promptly at such office and in its name as
shown on such surrendered certificate or certificates, a certificate or
certificates for the number of shares of Common Stock into which the shares of
Series A Preferred surrendered were convertible on the date on which such
automatic conversion occurred, and any declared and unpaid dividends shall be
paid in accordance with the provisions of Section 4(d).
l. FRACTIONAL SHARES. No fractional shares of Common Stock shall be
issued upon conversion of Series A Preferred. All shares of Common Stock
(including fractions thereof) issuable upon conversion of more than one share of
Series A Preferred by a holder thereof shall be aggregated for purposes of
determining whether the conversion would result in the issuance of any
fractional share. If, after the aforementioned aggregation, the conversion would
result in the issuance of any fractional share, the Company shall, in lieu of
issuing any fractional share, pay cash equal to the product of such fraction
multiplied by the Common Stock's fair market value (as determined by the Board
of Directors) on the date of conversion.
8.
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m. RESERVATION OF STOCK ISSUABLE UPON CONVERSION. 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 conversion of
the shares of the Series A Preferred, 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 the Series A Preferred. If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Series A Preferred, the
Company will take such corporate action as may, in the opinion of its counsel,
be necessary to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purpose.
n. NOTICES. Any notice required by the provisions of this Section 4
shall be in writing and shall be deemed effectively given: (i) upon personal
delivery to the party to be notified, (ii) when sent by confirmed electronic
mail or facsimile if sent during normal business hours of the recipient; if not,
then on the next business day, (iii) five (5) days after having been sent by
registered or certified mail, return receipt requested, postage prepaid, or (iv)
one (1) day after deposit with a nationally recognized overnight courier,
specifying next day delivery, with verification of receipt. All notices shall be
addressed to each holder of record at the address of such holder appearing on
the books of the Company.
o. PAYMENT OF TAXES. The Company will pay all taxes (other than
taxes based upon income) and other governmental charges that may be imposed with
respect to the issue or delivery of shares of Common Stock upon conversion of
shares of Series A Preferred, excluding any tax or other charge imposed in
connection with any transfer involved in the issue and delivery of shares of
Common Stock in a name other than that in which the shares of Series A Preferred
so converted were registered.
p. NO DILUTION OR IMPAIRMENT. The Company shall not amend its
Articles of Incorporation or participate in any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or take
any other voluntary action, for the purpose of avoiding or seeking to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but shall at all times in good faith assist in
carrying out all such action as may be reasonably necessary or appropriate in
order to protect the conversion rights of the holders of the Series A Preferred
against dilution or other impairment.
VI.
A. The liability of the directors for monetary damages shall be eliminated
to the fullest extent under applicable law.
B. Any repeal or modification of this Article VI shall only be prospective
and shall not effect the rights under this Article VI in effect at the time of
the alleged occurrence of any action or omission to act giving rise to
liability.
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
9.
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directors and of its stockholders or any class thereof, as the case may be, it
is further provided that:
A. 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 by the Board
of Directors in the manner provided in the Bylaws, subject to any restrictions
which may be set forth in these Articles of Amendment.
B. The Board of Directors may from time to time make, amend, supplement or
repeal the Bylaws; provided, however, that the stockholders may change or repeal
any Bylaw adopted by the Board of Directors by the affirmative vote of the
percentage of holders of capital stock as provided therein; and, provided
further, that no amendment or supplement to the Bylaws adopted by the Board of
Directors shall vary or conflict with any amendment or supplement thus adopted
by the stockholders.
C. The directors of the Corporation need not be elected by written ballot
unless the Bylaws so provide.
SECOND: The amendment and restatement of the Articles of Incorporation
as hereinabove set forth have been duly advised by the board of directors and
approved by the stockholders of the Corporation;
THIRD: (a) The total number of shares of all classes of stock of the
Corporation heretofore authorized, and the number and par value of the shares
of each class are as follows: 10,000,000 shares of Common Stock with $.01
par value.
(b) The total number of shares of all classes of stock of the
Corporation as increased, and the number and par value of the shares of each
class, are as follows: Ten Million (10,000,000) shares of Common Stock with $.01
par value per share and Five Million (5,000,000) shares of Preferred Stock with
$.01 par value per share, of which One Million Forty-Seven Thousand Five Hundred
Eighty-Eight (1,047,588) shares have been designated Series A Preferred Stock.
10.
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IN WITNESS WHEREOF, NEURALSTEM BIOPHARMACEUTICALS, LTD., has caused these
presents to be signed in its name and on its behalf by its President and
attested by its Assistant Secretary on April 6, 2000.
ATTEST NEURALSTEM BIOPHARMACEUTICALS, LTD.
/s/ Karl K. Johe /s/ I. Richard Garr, President
-------------------------- --------------------------------
Karl K. Johe I. Richard Garr, President
Assistant Secretary
The undersigned, President of NeuralStem Biopharmaceuticals, Ltd., who
executed on behalf of said Corporation, the foregoing Articles of Amendment, of
which this certificate is made a part, thereby acknowledges, in the name and on
behalf of said Corporation, the foregoing Articles of Amendment to be the
corporate act of said Corporation and further certifies that, to the best of his
knowledge, information and belief, the matters and facts set forth therein with
respect to the approval thereof are true in all material respects, under the
penalties of perjury.
/s/ I. Richard Garr, President
-------------------------------
I. Richard Garr, President
11.
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EXHIBIT B
NEURALSTEM BIOPHARMACEUTICALS, LTD.
INVESTOR RIGHTS AGREEMENT
APRIL 20, 2000
<PAGE> 34
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
SECTION 1. GENERAL........................................................................................ 1
1.1 Definitions.................................................................................... 1
SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER......................................................... 2
2.1 Restrictions on Transfer....................................................................... 2
2.2 Demand Registration............................................................................ 4
2.3 Piggyback Registrations........................................................................ 5
2.4 Form S-3 Registration.......................................................................... 6
2.5 Expenses of Registration....................................................................... 7
2.6 Obligations of the Company..................................................................... 8
2.7 Termination of Registration Rights............................................................. 9
2.8 Delay of Registration; Furnishing Information.................................................. 9
2.9 Indemnification................................................................................ 9
2.10 Assignment of Registration Rights.............................................................. 11
2.11 Amendment of Registration Rights............................................................... 12
2.12 Limitation on Subsequent Registration Rights................................................... 12
2.13 "Market Stand-Off" Agreement; Agreement to Furnish Information................................. 12
2.14 Rule 144 Reporting............................................................................. 13
SECTION 3. COVENANTS OF THE COMPANY....................................................................... 13
3.1 Basic Financial Information and Reporting...................................................... 13
3.2 Inspection Rights.............................................................................. 14
3.3 Confidentiality of Records..................................................................... 14
3.4 Reservation of Common Stock.................................................................... 14
3.5 Key Man Insurance.............................................................................. 14
3.6 Visitation Rights.............................................................................. 14
3.7 Proprietary Information and Inventions Agreement............................................... 15
3.8 Assignment of Right of First Refusal........................................................... 15
3.9 Termination of Covenants....................................................................... 15
SECTION 4. RIGHTS OF FIRST REFUSAL........................................................................ 15
4.1 Subsequent Offerings........................................................................... 15
4.2 Exercise of Rights............................................................................. 15
</TABLE>
<PAGE> 35
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
4.3 Issuance of Equity Securities to Other Persons................................................. 16
4.4 Termination and Waiver of Rights of First Refusal.............................................. 16
4.5 Transfer of Rights of First Refusal............................................................ 16
4.6 Excluded Securities............................................................................ 16
SECTION 5. MISCELLANEOUS.................................................................................. 17
5.1 Governing Law.................................................................................. 17
5.2 Survival....................................................................................... 17
5.3 Successors and Assigns......................................................................... 17
5.4 Entire Agreement............................................................................... 18
5.5 Severability................................................................................... 18
5.6 Amendment and Waiver........................................................................... 18
5.7 Delays or Omissions............................................................................ 18
5.8 Notices........................................................................................ 18
5.9 Attorneys' Fees................................................................................ 19
5.10 Titles and Subtitles........................................................................... 19
5.11 Counterparts................................................................................... 19
</TABLE>
ii.
<PAGE> 36
NEURALSTEM BIOPHARMACEUTICALS, LTD.
INVESTOR RIGHTS AGREEMENT
THIS INVESTOR RIGHTS AGREEMENT (the "Agreement") is entered into as of
the 20th day of April, 2000, by and among NEURALSTEM BIOPHARMACEUTICALS, LTD., a
Maryland corporation (the "Company"), and the investors listed on Exhibit A
hereto, referred to hereinafter as the "Investors" and each individually as an
"Investor."
RECITALS
WHEREAS, the Investors are purchasing shares of the Company's Series A
Preferred Stock (the "Series A Stock") pursuant to that certain Series A
Preferred Stock Purchase Agreement (the "Purchase Agreement") of even date
herewith (the "Financing");
WHEREAS, the obligations in the Purchase Agreement are conditioned upon
the execution and delivery of this Agreement; and
WHEREAS, in connection with the consummation of the Financing, the
parties desire to enter into this Agreement in order to grant registration,
information rights and other rights to the Investors as set forth below.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree hereto as follows:
SECTION 1. GENERAL.
1.1 DEFINITIONS. As used in this Agreement the following terms shall
have the following respective meanings:
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Form S-3" means such form under the Securities Act as in
effect on the date hereof or any successor or similar registration form under
the Securities Act subsequently adopted by the SEC which permits inclusion or
incorporation of substantial information by reference to other documents filed
by the Company with the SEC.
"Holder" means any person owning of record Registrable
Securities that have not been sold to the public or any assignee of record of
such Registrable Securities in accordance with Section 2.10 hereof.
"Initial Offering" means the Company's first firm commitment
underwritten public offering of its Common Stock registered under the Securities
Act.
<PAGE> 37
"Register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of
effectiveness of such registration statement or document.
"Registrable Securities" means (a) Common Stock of the Company
issued or issuable upon conversion of the Shares; and (b) any Common Stock of
the Company issued as (or issuable upon the conversion or exercise of any
warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, such
above-described securities. Notwithstanding the foregoing, Registrable
Securities shall not include any securities sold by a person to the public
either pursuant to a registration statement or Rule 144 or sold in a private
transaction in which the transferor's rights under Section 2 of this Agreement
are not assigned.
"Registrable Securities then outstanding" shall be the number
of shares determined by calculating the total number of shares of the Company's
Common Stock that are Registrable Securities and either (a) are then issued and
outstanding or (b) are issuable pursuant to then exercisable or convertible
securities.
"Registration Expenses" shall mean all expenses incurred by
the Company in complying with Sections 2.2, 2.3 and 2.4 hereof, including,
without limitation, all registration and filing fees, printing expenses, fees
and disbursements of counsel for the Company, reasonable fees and disbursements
of a single special counsel for the Holders, blue sky fees and expenses and the
expense of any special audits incident to or required by any such registration
(but excluding the compensation of regular employees of the Company which shall
be paid in any event by the Company).
"SEC" or "Commission" means the Securities and Exchange
Commission.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale.
"Shares" shall mean the Company's Series A Stock issued
pursuant to the Purchase Agreement and held by the Investors listed on Exhibit A
hereto and their permitted assigns.
"Special Registration Statement" shall mean a registration
statement relating to any employee benefit plan or with respect to any corporate
reorganization or other transaction under Rule 145 of the Securities Act.
SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER.
2.1 RESTRICTIONS ON TRANSFER.
(a) Each Holder agrees not to make any disposition of all or
any portion of the Shares or Registrable Securities unless and until:
2.
<PAGE> 38
(i) There is then in effect a registration statement
under the Securities Act covering such proposed disposition and such disposition
is made in accordance with such registration statement; or
(ii) (A) The transferee has agreed in writing to be
bound by the terms of this Agreement, (B) such Holder shall have notified the
Company of the proposed disposition and shall have furnished the Company with a
detailed statement of the circumstances surrounding the proposed disposition,
and (C) if reasonably requested by the Company, such Holder shall have furnished
the Company with an opinion of counsel, reasonably satisfactory to the Company,
that such disposition will not require registration of such shares under the
Securities Act. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144 except in unusual
circumstances.
(iii) Notwithstanding the provisions of paragraphs
(i) and (ii) above, no such registration statement or opinion of counsel shall
be necessary for a transfer by a Holder which is (A) a partnership to its
partners or former partners in accordance with partnership interests, (B) a
corporation to its shareholders in accordance with their interest in the
corporation, (C) a limited liability company to its members or former members in
accordance with their interest in the limited liability company, or (D) to the
Holder's family member or trust for the benefit of an individual Holder;
provided that in each case the transferee will be subject to the terms of this
Agreement to the same extent as if he were an original Holder hereunder.
(b) Each certificate representing Shares or Registrable
Securities shall (unless otherwise permitted by the provisions of the Agreement)
be stamped or otherwise imprinted with a legend substantially similar to the
following (in addition to any legend required under applicable state securities
laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR
UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED.
(c) The Company shall be obligated to reissue promptly
unlegended certificates at the request of any holder thereof if the holder shall
have obtained an opinion of counsel (which counsel may be counsel to the
Company) reasonably acceptable to the Company to the effect that the securities
proposed to be disposed of may lawfully be so disposed of without registration,
qualification or legend.
(d) Any legend endorsed on an instrument pursuant to
applicable state securities laws and the stop-transfer instructions with respect
to such securities shall be removed upon receipt by the Company of an order of
the appropriate blue sky authority authorizing such removal.
3.
<PAGE> 39
2.2 DEMAND REGISTRATION.
(a) Subject to the conditions of this Section 2.2, if the
Company shall receive a written request from the Holders of 50% of the
Registrable Securities (the "Initiating Holders") that the Company file a
registration statement under the Securities Act covering the registration of at
least 50% of the Registrable Securities then outstanding or a lesser percentage
if the anticipated aggregate offering price, net of underwriting discounts and
commissions, would exceed $7,500,000 (a "Qualified Public Offering"), then the
Company shall, within thirty (30) days of the receipt thereof, give written
notice of such request to all Holders, and subject to the limitations of this
Section 2.2, effect, as expeditiously as reasonably possible, the registration
under the Securities Act of all Registrable Securities that the Holders request
to be registered.
(b) If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
this Section 2.2 or any request pursuant to Section 2.4 and the Company shall
include such information in the written notice referred to in Section 2.2(a) or
Section 2.4(a), as applicable. In such event, the right of any Holder to include
its Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
enter into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by a majority in interest of the
Initiating Holders (which underwriter or underwriters shall be reasonably
acceptable to the Company). Notwithstanding any other provision of this Section
2.2 or Section 2.4, if the underwriter advises the Company that marketing
factors require a limitation of the number of securities to be underwritten
(including Registrable Securities) then the Company shall so advise all Holders
of Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares that may be included in the underwriting shall be
allocated to the Holders of such Registrable Securities on a pro rata basis
based on the number of Registrable Securities held by all such Holders
(including the Initiating Holders). Any Registrable Securities excluded or
withdrawn from such underwriting shall be withdrawn from the registration.
(c) The Company shall not be required to effect a registration
pursuant to this Section 2.2:
(i) prior to the earlier of (A) March 31, 2004 or (b)
one hundred eighty (180) days following the effective date of the registration
statement pertaining to the Initial Offering;
(ii) after the Company has effected two (2)
registrations pursuant to this Section 2.2, and such registrations have been
declared or ordered effective;
(iii) during the period starting with the date of
filing of, and ending on the date one hundred eighty (180) days following the
effective date of the registration statement pertaining a public offering, other
than pursuant to a Special Registration Statement; provided that the Company
makes reasonable good faith efforts to cause such registration statement to
become effective;
4.
<PAGE> 40
(iv) if within thirty (30) days of receipt of a
written request from Initiating Holders pursuant to Section 2.2(a), the Company
gives notice to the Holders of the Company's intention to make a public
offering, other than pursuant to a Special Registration Statement, within ninety
(90) days;
(v) if the Company shall furnish to Holders
requesting a registration statement pursuant to this Section 2.2, a certificate
signed by the Chairman of the Board stating that in the good faith judgment of
the Board of Directors of the Company, it would be seriously detrimental to the
Company and its shareholders for such registration statement to be effected at
such time, in which event the Company shall have the right to defer such filing
for a period of not more than one hundred twenty (120) days after receipt of the
request of the Initiating Holders; provided that such right to delay a request
shall be exercised by the Company not more than twice in any twelve (12) month
period; or
(vi) if the Initiating Holders propose to dispose of
shares of Registrable Securities that may be immediately registered on Form S-3
pursuant to a request made pursuant to Section 2.4 below.
2.3 PIGGYBACK REGISTRATIONS. The Company shall notify all Holders of
Registrable Securities in writing at least fifteen (15) days prior to the filing
of any registration statement under the Securities Act for purposes of a public
offering of securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of securities of the
Company, but excluding Special Registration Statements) and will afford each
such Holder an opportunity to include in such registration statement all or part
of such Registrable Securities held by such Holder. Each Holder desiring to
include in any such registration statement all or any part of the Registrable
Securities held by it shall, within fifteen (15) days after the above-described
notice from the Company, so notify the Company in writing. Such notice shall
state the intended method of disposition of the Registrable Securities by such
Holder. If a Holder decides not to include all of its Registrable Securities in
any registration statement thereafter filed by the Company, such Holder shall
nevertheless continue to have the right to include any Registrable Securities in
any subsequent registration statement or registration statements as may be filed
by the Company with respect to offerings of its securities, all upon the terms
and conditions set forth herein.
(a) UNDERWRITING. If the registration statement under which
the Company gives notice under this Section 2.3 is for an underwritten offering,
the Company shall so advise the Holders of Registrable Securities. In such
event, the right of any such Holder to be included in a registration pursuant to
this Section 2.3 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their Registrable Securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other
provision of the Agreement, if the underwriter determines in good faith that
marketing factors require a limitation of the number of shares to be
underwritten, the number of shares that may be included in the underwriting
shall be allocated, first, to the Company; second, to the Holders on a pro rata
basis based on the total number of Registrable Securities held by the Holders;
and third, to any shareholder of the Company (other
5.
<PAGE> 41
than a Holder) on a pro rata basis. No such reduction shall (i) reduce the
securities being offered by the Company for its own account to be included in
the registration and underwriting, or (ii) reduce the amount of securities of
the selling Holders included in the registration below twenty-five percent (25%)
of the total amount of securities included in such registration, unless such
offering is the Initial Offering and such registration does not include shares
of any other selling shareholders, in which event any or all of the Registrable
Securities of the Holders may be excluded in accordance with the immediately
preceding sentence. In no event will shares of any other selling shareholder be
included in such registration which would reduce the number of shares which may
be included by Holders without the written consent of Holders of not less than a
majority of the Registrable Securities proposed to be sold in the offering. If
any Holder disapproves of the terms of any such underwriting, such Holder may
elect to withdraw therefrom by written notice to the Company and the
underwriter, delivered at least ten (10) business days prior to the effective
date of the registration statement. Any Registrable Securities excluded or
withdrawn from such underwriting shall be excluded and withdrawn from the
registration. For any Holder which is a partnership or corporation, the
partners, retired partners and shareholders of such Holder, or the estates and
family members of any such partners and retired partners and any trusts for the
benefit of any of the foregoing person shall be deemed to be a single "Holder,"
and any pro rata reduction with respect to such "Holder" shall be based upon the
aggregate amount of shares carrying registration rights owned by all entities
and individuals included in such "Holder," as defined in this sentence.
(b) RIGHT TO TERMINATE REGISTRATION. The Company shall have
the right to terminate or withdraw any registration initiated by it under this
Section 2.3 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration. The Registration
Expenses of such withdrawn registration shall be borne by the Company in
accordance with Section 2.5 hereof.
2.4 FORM S-3 REGISTRATION. In case the Company shall receive from any
Holder or Holders of Registrable Securities a written request or requests that
the Company effect a registration on Form S-3 (or any successor to Form S-3) or
any similar short-form registration statement and any related qualification or
compliance with respect to all or a part of the Registrable Securities owned by
such Holder or Holders, the Company will:
(a) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Holders of Registrable
Securities; and
(b) as soon as practicable, effect such registration and all
such qualifications and compliances as may be so requested and as would permit
or facilitate the sale and distribution of all or such portion of such Holder's
or Holders' Registrable Securities as are specified in such request, together
with all or such portion of the Registrable Securities of any other Holder or
Holders joining in such request as are specified in a written request given
within fifteen (15) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section 2.4:
(i) if Form S-3 is not available for such offering by
the Holders, or
6.
<PAGE> 42
(ii) if the Holders, together with the holders of any
other securities of the Company entitled to inclusion in such registration,
propose to sell Registrable Securities and such other securities (if any) at an
aggregate price to the public of less than one million dollars ($1,000,000), or
(iii) if within thirty (30) days of receipt of a
written request from any Holder or Holders pursuant to this Section 2.4, the
Company gives notice to such Holder or Holders of the Company's intention to
make a public offering within ninety (90) days, other than pursuant to a Special
Registration Statement;
(iv) if the Company shall furnish to the Holders a
certificate signed by the Chairman of the Board of Directors of the Company
stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its shareholders
for such Form S-3 registration to be effected at such time, in which event the
Company shall have the right to defer the filing of the Form S-3 registration
statement for a period of not more than ninety (90) days after receipt of the
request of the Holder or Holders under this Section 2.4; provided, that such
right to delay a request shall be exercised by the Company not more than once in
any twelve (12) month period, or
(v) if the Company has, within the twelve (12) month
period preceding the date of such request, already effected two (2)
registrations on Form S-3 for the Holders pursuant to this Section 2.4, or
(vi) in any particular jurisdiction in which the
Company would be required to qualify to do business or to execute a general
consent to service of process in effecting such registration, qualification or
compliance.
(c) Subject to the foregoing, the Company shall file a Form
S-3 registration statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable after receipt of
the request or requests of the Holders. Registrations effected pursuant to this
Section 2.4 shall not be counted as demands for registration or registrations
effected pursuant to Sections 2.2 or 2.3, respectively.
2.5 EXPENSES OF REGISTRATION. Except as specifically provided herein,
all Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Section 2.2 or any registration under
Section 2.3 or Section 2.4 herein shall be borne by the Company. All Selling
Expenses incurred in connection with any registrations hereunder, shall be borne
by the holders of the securities so registered pro rata on the basis of the
number of shares so registered. The Company shall not, however, be required to
pay for expenses of any registration proceeding begun pursuant to Section 2.2 or
2.4, the request of which has been subsequently withdrawn by the Initiating
Holders unless (a) the withdrawal is based upon material adverse information
concerning the Company of which the Initiating Holders were not aware at the
time of such request or (b) the Holders of a majority of Registrable Securities
agree to forfeit their right to one requested registration pursuant to Section
2.2 or Section 2.4, as applicable, in which event such right shall be forfeited
by all Holders). If the Holders are required to pay the Registration Expenses,
such expenses shall be borne by the holders of securities (including Registrable
Securities) requesting such registration in proportion to the
7.
<PAGE> 43
number of shares for which registration was requested. If the Company is
required to pay the Registration Expenses of a withdrawn offering pursuant to
clause (a) above, then the Holders shall not forfeit their rights pursuant to
Section 2.2 or Section 2.4 to a demand registration.
2.6 OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use all reasonable efforts to
cause such registration statement to become effective, and, upon the request of
the Holders of a majority of the Registrable Securities registered thereunder,
keep such registration statement effective for up to thirty (30) days or, if
earlier, until the Holder or Holders have completed the distribution related
thereto. The Company shall not be required to file, cause to become effective or
maintain the effectiveness of any registration statement that contemplates a
distribution of securities on a delayed or continuous basis pursuant to Rule 415
under the Securities Act.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement for the period set forth in
paragraph (a) above.
(c) Furnish to the Holders such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
(d) Use its reasonable efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders; provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing. The Company will use reasonable efforts to amend or supplement such
prospectus in order to cause such prospectus not to include any untrue statement
of a material fact or omit to state a material fact required to be stated
8.
<PAGE> 44
therein or necessary to make the statements therein not misleading in the light
of the circumstances then existing.
(g) Use its reasonable efforts to furnish, on the date that
such Registrable Securities are delivered to the underwriters for sale, if such
securities are being sold through underwriters, (i) an opinion, dated as of such
date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and (ii)
a letter dated as of such date, from the independent certified public
accountants of the Company, in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering addressed to the underwriters.
2.7 TERMINATION OF REGISTRATION RIGHTS. With respect to a given Holder,
all registration rights granted under this Section 2 shall terminate and be of
no further force and effect upon the earlier to occur of (i) five (5) years
after the date of the Company's Initial Offering, or (ii) the date upon which
all Registrable Securities held by and issuable to such Holder (and its
affiliates, partners, former partners, members and former members) may be sold
under Rule 144 during any ninety (90) day period.
2.8 DELAY OF REGISTRATION; FURNISHING INFORMATION.
(a) No Holder shall have any right to obtain or seek an
injunction restraining or otherwise delaying any such registration as the result
of any controversy that might arise with respect to the interpretation or
implementation of this Section 2.
(b) It shall be a condition precedent to the obligations of
the Company to take any action pursuant to Section 2.2, 2.3 or 2.4 that the
selling Holders shall furnish to the Company such information regarding
themselves, the Registrable Securities held by them and the intended method of
disposition of such securities as shall be required to effect the registration
of their Registrable Securities.
(c) The Company shall have no obligation with respect to any
registration requested pursuant to Section 2.2 or Section 2.4 if, due to the
operation of subsection 2.2(b), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company's obligation
to initiate such registration as specified in Section 2.2 or Section 2.4,
whichever is applicable.
2.9 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under Sections 2.2, 2.3 or 2.4:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, the partners, officers and directors of each
Holder, any underwriter (as defined in the Securities Act) for such Holder and
each person, if any, who controls such Holder or underwriter within the meaning
of the Securities Act or the Exchange Act, against any losses, claims, damages,
or liabilities (joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any of the
9.
<PAGE> 45
following statements, omissions or violations (collectively a "Violation") by
the Company: (i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading, or (iii) any violation or alleged violation by the
Company of the Securities Act, the Exchange Act, any state securities law or any
rule or regulation promulgated under the Securities Act, the Exchange Act or any
state securities law in connection with the offering covered by such
registration statement; and the Company will pay as incurred to each such
Holder, partner, officer, director, underwriter or 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;
provided, however, that the indemnity agreement contained in this Section 2.9(a)
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company, which consent shall not be unreasonably withheld, nor shall the Company
be liable in any such case for any such loss, claim, damage, liability or action
to the extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by such Holder, partner, officer,
director, underwriter or controlling person of such Holder.
(b) To the extent permitted by law, each Holder will, if
Registrable Securities held by such Holder are included in the securities as to
which such registration qualifications or compliance is being effected,
indemnify and hold harmless the Company, each of its directors, its officers and
each person, if any, who controls the Company within the meaning of the
Securities Act, any underwriter and any other Holder selling securities under
such registration statement or any of such other Holder's partners, directors or
officers or any person who controls such Holder, against any losses, claims,
damages or liabilities (joint or several) to which the Company or any such
director, officer, controlling person, underwriter or other such Holder, or
partner, director, officer or controlling person of such other Holder may become
subject under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by such Holder under an
instrument duly executed by such Holder and stated to be specifically for use in
connection with such registration; and each such Holder will pay as incurred any
legal or other expenses reasonably incurred by the Company or any such director,
officer, controlling person, underwriter or other Holder, or partner, officer,
director or controlling person of such other Holder in connection with
investigating or defending any such loss, claim, damage, liability or action if
it is judicially determined that there was such a Violation; provided, however,
that the indemnity agreement contained in this Section 2.9(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld; provided further, that in no event shall any
indemnity under this Section 2.9 exceed the net proceeds from the offering
received by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 2.9 of notice of the commencement of any action (including any
governmental action), such
10.
<PAGE> 46
indemnified party will, if a claim in respect thereof is to be made against any
indemnifying party under this Section 2.9, deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel mutually satisfactory to the parties; provided,
however, that an indemnified party shall have the right to retain its own
counsel, with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if materially prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 2.9, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 2.9.
(a) If the indemnification provided for in this Section 2.9 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any losses, claims, damages or liabilities referred to
herein, the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the Violation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission; provided, that in no event shall any contribution by a
Holder hereunder exceed the net proceeds from the offering received by such
Holder.
(e) The obligations of the Company and Holders under this
Section 2.9 shall survive completion of any offering of Registrable Securities
in a registration statement and the termination of this agreement. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation.
2.10 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company
to register Registrable Securities pursuant to this Section 2 may be assigned by
a Holder to a transferee or assignee of Registrable Securities which (a) is a
subsidiary, parent, general partner, limited partner, retired partner, member or
retired member of a Holder, (b) is a Holder's family member or trust for the
benefit of an individual Holder, or (c) acquires at least fifty thousand
(50,000) shares of Registrable Securities (as adjusted for stock splits and
combinations); provided, however, (i) the transferor shall, within ten (10) days
after such transfer, furnish to the Company
11.
<PAGE> 47
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
(ii) such transferee shall agree to be subject to all restrictions set forth in
this Agreement.
2.11 AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Section 2
may be amended and the observance thereof 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 Holders of at least a majority of the
Registrable Securities then outstanding. Any amendment or waiver effected in
accordance with this Section 2.11 shall be binding upon each Holder and the
Company. By acceptance of any benefits under this Section 2, Holders of
Registrable Securities hereby agree to be bound by the provisions hereunder.
2.12 LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS. Other than as
provided in Section 5.11, after the date of this Agreement, the Company shall
not, without the prior written consent of the Holders of at least a majority of
the Registrable Securities then outstanding, enter into any agreement with any
holder or prospective holder of any securities of the Company that would grant
such holder registration rights senior to those granted to the Holders
hereunder.
2.13 "MARKET STAND-OFF" AGREEMENT; AGREEMENT TO FURNISH INFORMATION.
Each Holder hereby agrees that such Holder shall not sell, transfer, make any
short sale of, grant any option for the purchase of, or enter into any hedging
or similar transaction with the same economic effect as a sale, any Common Stock
(or other securities) of the Company held by such Holder (other than those
included in the registration) for a period specified by the representative of
the underwriters of Common Stock (or other securities) of the Company not to
exceed one hundred eighty (180) days following the effective date of a
registration statement of the Company filed under the Securities Act; provided
that:
(i) such agreement shall apply only to the Company's
Initial Offering; and, for so long as such Holder beneficially owns at least one
percent (1%) of the Company's voting securities, any subsequent public offering;
and
(ii) all officers and directors of the Company and
holders of at least one percent (1%) of the Company's voting securities enter
into similar agreements.
Each Holder agrees to execute and deliver such other agreements as may
be reasonably requested by the Company or the underwriter which are consistent
with the foregoing or which are necessary to give further effect thereto. In
addition, if requested by the Company or the representative of the underwriters
of Common Stock (or other securities) of the Company, each Holder shall provide,
within ten (10) days of such request, such information as may be required by the
Company or such representative in connection with the completion of any public
offering of the Company's securities pursuant to a registration statement filed
under the Securities Act. The obligations described in this Section 2.13 shall
not apply to a registration relating solely to employee benefit plans on Form
S-1 or Form S-8 or similar forms that may be promulgated in the future, or a
registration relating solely to a Commission Rule 145 transaction on Form S-4 or
similar forms that may be promulgated in the future. The Company may impose
stop-transfer instructions with respect to the shares of Common Stock (or other
securities) subject to the foregoing restriction until the end of said one
hundred eighty (180) day period. Each Holder
12.
<PAGE> 48
agrees that any transferee of any shares of Registrable Securities shall be
bound by this Section 2.13.
2.14 RULE 144 REPORTING. With a view to making available to the Holders
the benefits of certain rules and regulations of the SEC which may permit the
sale of the Registrable Securities to the public without registration, the
Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms
are understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act, at all times after the effective date of
the first registration filed by the Company for an offering of its securities to
the general public;
(b) File with the SEC, in a timely manner, all reports and
other documents required of the Company under the Exchange Act; and
(c) So long as a Holder owns any Registrable Securities,
furnish to such Holder forthwith upon request: a written statement by the
Company as to its compliance with the reporting requirements of said Rule 144 of
the Securities Act, and of the Exchange Act (at any time after it has become
subject to such reporting requirements); a copy of the most recent annual or
quarterly report of the Company; and such other reports and documents as a
Holder may reasonably request in availing itself of any rule or regulation of
the SEC allowing it to sell any such securities without registration.
SECTION 3. COVENANTS OF THE COMPANY.
3.1 BASIC FINANCIAL INFORMATION AND REPORTING.
(a) The Company will maintain true books and records of
account in which full and correct entries will be made of all its business
transactions pursuant to a system of accounting established and administered in
accordance with generally accepted accounting principles consistently applied,
and will set aside on its books all such proper accruals and reserves as shall
be required under generally accepted accounting principles consistently applied.
(b) As soon as practicable after the end of each fiscal year
of the Company, and in any event within ninety (90) days thereafter, the Company
will furnish each Investor a balance sheet of the Company, as at the end of such
fiscal year, and a statement of income and a statement of cash flows of the
Company, for such year, all prepared in accordance with generally accepted
accounting principles consistently applied and setting forth in each case in
comparative form the figures for the previous fiscal year, all in reasonable
detail. Such financial statements shall be accompanied by a report and opinion
thereon by independent public accountants of national standing selected by the
Company's Board of Directors.
(c) The Company will furnish each Investor, as soon as
practicable after the end of the first, second and third quarterly accounting
periods in each fiscal year of the Company, and in any event within forty-five
(45) days thereafter, a balance sheet of the Company as of the end of each such
quarterly period, and a statement of income and a statement of cash flows of the
Company for such period and for the current fiscal year to date, prepared in
13.
<PAGE> 49
accordance with generally accepted accounting principles, with the exception
that no notes need be attached to such statements and year-end audit adjustments
may not have been made.
(d) So long as an Investor (with its affiliates) shall own not
less than one hundred thousand (100,000) shares of Registrable Securities (as
adjusted for stock splits and combinations) (a "Major Investor"), the Company
will furnish each such Major Investor at least thirty (30) days prior to the
beginning of each fiscal year an annual budget and operating plans for such
fiscal year (and as soon as available, any subsequent revisions thereto).
3.2 INSPECTION RIGHTS. Each Major Investor shall have the right to
visit and inspect any of the properties of the Company or any of its
subsidiaries, and to discuss the affairs, finances and accounts of the Company
or any of its subsidiaries with its officers, and to review such information as
is reasonably requested all at such reasonable times and as often as may be
reasonably requested; provided, however, that the Company shall not be obligated
under this Section 3.2 with respect to a competitor of the Company or with
respect to information which the Board of Directors determines in good faith is
confidential and should not, therefore, be disclosed.
3.3 CONFIDENTIALITY OF RECORDS. Each Investor agrees to use, and to use
its best efforts to insure that its authorized representatives use, the same
degree of care as such Investor uses to protect its own confidential information
to keep confidential any information furnished to it which the Company
identifies as being confidential or proprietary (so long as such information is
not in the public domain), except that such Investor may disclose such
proprietary or confidential information to any partner, subsidiary or parent of
such Investor for the purpose of evaluating its investment in the Company as
long as such partner, subsidiary or parent is advised of the confidentiality
provisions of this Section 3.3.
3.4 RESERVATION OF COMMON STOCK. The Company will at all times reserve
and keep available, solely for issuance and delivery upon the conversion of the
Preferred Stock, all Common Stock issuable from time to time upon such
conversion.
3.5 KEY MAN INSURANCE. Subject to the approval of the Board of
Directors, the Company will use its best efforts to obtain and maintain in full
force and effect term life insurance in the amount of at least five million
dollars ($5,000,000) on the life of Karl K. Johe naming the Company as
beneficiary.
3.6 VISITATION RIGHTS. So long as Gene Logic Inc. or its successor or
assign ("Gene Logic") is a Major Investor, the Company shall allow one
representative designated by the Gene Logic to attend all meetings of the
Company's Board of Directors in a nonvoting capacity, and in connection
therewith, the Company shall give such representative copies of all notices,
minutes, consents and other materials, financial or otherwise, which the Company
provides to its Board of Directors; provided, however, that the Company reserves
the right to exclude such representative from access to any material or meeting
or portion thereof if the Company believes upon advice of counsel that such
exclusion is reasonably necessary to preserve the attorney-client privilege, to
protect highly confidential proprietary information or for other similar
reasons.
14.
<PAGE> 50
3.7 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT. The Company shall
require all employees and consultants to execute and deliver a Proprietary
Information and Inventions Agreement in the form approved by the Board of
Directors.
3.8 ASSIGNMENT OF RIGHT OF FIRST REFUSAL. In the event the Company
elects not to exercise any right of first refusal or right of first offer the
Company may have on a proposed transfer of any of the Company's outstanding
capital stock pursuant to the Company's charter documents, by contract or
otherwise, the Company shall, to the extent it may do so, assign such right of
first refusal or right of first offer to each Major Investor. In the event of
such assignment, each Major Investor shall have a right to purchase its pro rata
portion (as defined in Section 4.1) of the capital stock proposed to be
transferred.
3.9 TERMINATION OF COVENANTS. All covenants of the Company contained in
Section 3 of this Agreement shall expire and terminate as to each Investor upon
the earlier of (i) the effective date of the registration statement pertaining
to the Initial Offering or (ii) upon (a) the sale, lease or other disposition of
all or substantially all of the assets of the Company or (b) an acquisition of
the Company by another corporation or entity by consolidation, merger or other
reorganization in which the holders of the Company's outstanding voting stock
immediately prior to such transaction own, immediately after such transaction,
securities representing less than fifty percent (50%) of the voting power of the
corporation or other entity surviving such transaction, provided that this
Section 3.9(ii)(b) shall not apply to a merger effected exclusively for the
purpose of changing the domicile of the Company (a "Change in Control").
SECTION 4. RIGHTS OF FIRST REFUSAL.
4.1 SUBSEQUENT OFFERINGS. Each Major Investor shall have a right of
first refusal to purchase its pro rata share of all Equity Securities, as
defined below, that the Company may, from time to time, propose to sell and
issue after the date of this Agreement, other than the Equity Securities
excluded by Section 4.6 hereof. Each Investor's pro rata share is equal to the
ratio of (a) the number of shares of the Company's Common Stock (including all
shares of Common Stock issued or issuable upon conversion of the Shares) which
such Investor is deemed to be a holder immediately prior to the issuance of such
Equity Securities to (b) the total number of shares of the Company's outstanding
Common Stock (including all shares of Common Stock issued or issuable upon
conversion of the Shares or upon the exercise of any outstanding warrants or
options) immediately prior to the issuance of the Equity Securities. The term
"Equity Securities" shall mean (i) any Common Stock, Preferred Stock or other
security of the Company, (ii) any security convertible, with or without
consideration, into any Common Stock, Preferred Stock or other security
(including any option to purchase such a convertible security), (iii) any
security carrying any warrant or right to subscribe to or purchase any Common
Stock, Preferred Stock or other security or (iv) any such warrant or right.
4.2 EXERCISE OF RIGHTS. If the Company proposes to issue any Equity
Securities, it shall give each Major Investor written notice of its intention,
describing the Equity Securities, the price and the terms and conditions upon
which the Company proposes to issue the same. Each Major Investor shall have
fifteen (15) days from the giving of such notice to agree to purchase its pro
rata share of the Equity Securities for the price and upon the terms and
conditions specified in the notice by giving written notice to the Company and
stating therein the quantity of Equity
15.
<PAGE> 51
Securities to be purchased. Notwithstanding the foregoing, the Company shall not
be required to offer or sell such Equity Securities to any Major Investor who
would cause the Company to be in violation of applicable federal securities laws
by virtue of such offer or sale.
4.3 ISSUANCE OF EQUITY SECURITIES TO OTHER PERSONS. If not all of the
Major Investors elect to purchase their pro rata share of the Equity Securities,
then the Company shall promptly notify in writing the Major Investors who do so
elect and shall offer such Major Investors the right to acquire such
unsubscribed shares. The Major Investors shall have five (5) days after receipt
of such notice to notify the Company of its election to purchase all or a
portion thereof of the unsubscribed shares. If the Major Investors fail to
exercise in full the rights of first refusal, the Company shall have ninety (90)
days thereafter to sell the Equity Securities in respect of which the Major
Investor's rights were not exercised, at a price and upon general terms and
conditions materially no more favorable to the purchasers thereof than specified
in the Company's notice to the Major Investors pursuant to Section 4.2 hereof.
If the Company has not sold such Equity Securities within ninety (90) days of
the notice provided pursuant to Section 4.2, the Company shall not thereafter
issue or sell any Equity Securities, without first offering such securities to
the Major Investors in the manner provided above.
4.4 TERMINATION AND WAIVER OF RIGHTS OF FIRST REFUSAL.
(a) The rights of first refusal established by this Section 4
shall not apply to, and shall terminate upon, the earlier of (i) effective date
of the registration statement pertaining to the Company's Initial Offering or
(ii) a Change in Control.
(b) In addition to, and not in lieu of, the provisions of
Section 4.4(a), with respect only to Gene Logic, the rights of first refusal
established by this Section 4 shall terminate as to Gene Logic upon the
expiration or, if earlier, the termination of the GeneExpress Product Access
Agreement between Gene Logic and the Company of even date herewith.
(c) The rights of first refusal established by this Section 4
may be amended, or any provision waived with the written consent of Major
Investors holding a majority of the Registrable Securities held by all Major
Investors, or as permitted by Section 5.6.
4.5 TRANSFER OF RIGHTS OF FIRST REFUSAL. The rights of first refusal of
each Major Investor under this Section 4 may be transferred to the same parties,
subject to the same restrictions as any transfer of registration rights pursuant
to Section 2.10.
4.6 EXCLUDED SECURITIES. The rights of first refusal established by
this Section 4 shall have no application to any of the following Equity
Securities:
(a) shares of Common Stock (and/or options, warrants or other
Common Stock purchase rights issued pursuant to such options, warrants or other
rights) issued or to be issued after the Original Issue Date (as defined in the
Company's Certificates of Incorporation to employees, officers or directors of,
or consultants or advisors to the Company or any subsidiary, pursuant to stock
purchase or stock option plans or other arrangements that are approved by the
Board of Directors;
16.
<PAGE> 52
(b) stock issued pursuant to any rights or agreements
outstanding as of the date of this Agreement, options and warrants outstanding
as of the date of this Agreement; and stock issued pursuant to any such rights
or agreements granted after the date of this Agreement; provided that the rights
of first refusal established by this Section 4 applied with respect to the
initial sale or grant by the Company of such rights or agreements;
(c) any Equity Securities issued for consideration other than
cash pursuant to a merger, consolidation, acquisition or similar business
combination approved by the Board of Directors;
(d) shares of Common Stock issued in connection with any stock
split, stock dividend or recapitalization by the Company;
(e) shares of Common Stock issued upon conversion of the
Shares;
(f) any Equity Securities issued pursuant to any equipment
leasing or loan arrangement, or debt financing from a bank or similar financial
or lending institution approved by the Board of Directors;
(g) any Equity Securities that are issued by the Company
pursuant to a registration statement filed under the Securities Act; and
(h) any Equity Securities issued in connection with strategic
transactions involving the Company and other entities, including (i) joint
ventures, manufacturing, marketing or distribution arrangements or (ii)
technology transfer or development arrangements; provided that such strategic
transactions and the issuance of shares therein, has been approved by the Board
of Directors.
SECTION 5. MISCELLANEOUS.
5.1 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Maryland as applied to agreements among Maryland
residents entered into and to be performed entirely within Maryland.
5.2 SURVIVAL. The representations, warranties, covenants, and
agreements made herein shall survive any investigation made by any Holder and
the closing of the transactions contemplated hereby. All statements as to
factual matters contained in any certificate or other instrument delivered by or
on behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.
5.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of Registrable Securities from time to time;
provided, however, that prior to the receipt by the Company of adequate written
notice of the transfer of any Registrable Securities specifying the full name
and address of the transferee, the Company may deem and treat the person listed
as the holder of such shares in its records as the
17.
<PAGE> 53
absolute owner and holder of such shares for all purposes, including the payment
of dividends or any redemption price.
5.4 ENTIRE AGREEMENT. This Agreement, the Exhibits and Schedules
hereto, the Purchase Agreement and the other documents delivered pursuant
thereto constitute the full and entire understanding and agreement between the
parties with regard to the subjects hereof and no party shall be liable or bound
to any other in any manner by any representations, warranties, covenants and
agreements except as specifically set forth herein and therein.
5.5 SEVERABILITY. In the event one or more of the provisions of this
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
5.6 AMENDMENT AND WAIVER.
(a) Except as otherwise expressly provided, this Agreement may
be amended or modified only upon the written consent of the Company and the
holders of at least a majority of the Registrable Securities.
(b) Except as otherwise expressly provided, the obligations of
the Company and the rights of the Holders under this Agreement may be waived
only with the written consent of the holders of at least a majority of the
Registrable Securities.
(c) For the purposes of determining the number of Holder or
Investors entitled to vote or exercise any rights hereunder, the Company shall
be entitled to rely solely on the list of record holders of its stock as
maintained by or on behalf of the Company.
5.7 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to any Holder, upon any breach,
default or noncompliance of the Company under this Agreement shall impair any
such right, power, or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of any
similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent, or approval of any kind or character on
any Holder's part of any breach, default or noncompliance under the Agreement or
any waiver on such Holder's part of any provisions or conditions of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, by law, or otherwise afforded to Holders, shall be cumulative and not
alternative.
5.8 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified, (b) when sent by confirmed electronic mail or facsimile if
sent during normal business hours of the recipient; if not, then on the next
business day, (c) five (5) days after having been sent by registered or
certified mail, return receipt requested, postage prepaid, or (d) one (1) day
after deposit with a nationally recognized overnight courier, specifying next
day delivery, with written verification of receipt. All communications shall be
sent to the party to be notified at the address as set forth on
18.
<PAGE> 54
the signature pages hereof or Exhibit A hereto or at such other address as such
party may designate by ten (10) days advance written notice to the other parties
hereto.
5.9 ATTORNEYS' FEES. In the event that any suit or action is instituted
to enforce any provision in this Agreement, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
5.10 TITLES AND SUBTITLES. The titles of the sections and subsections
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
5.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
IN WITNESS WHEREOF, the parties hereto have executed this INVESTOR
RIGHTS AGREEMENT as of the date set forth in the first paragraph hereof.
COMPANY: INVESTOR:
NEURALSTEM GENE LOGIC INC.
BIOPHARMACEUTICALS, LTD.
By: /s/ I. Richard Garr By: /s/ Philip L. Rohrer, Jr.
------------------------------ -------------------------------------
Title: President and CEO Title: Chief Financial Officer
--------------------------- ----------------------------------
19.
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EXHIBIT A
SCHEDULE OF INVESTORS
NAME AND ADDRESS SHARES
GENE LOGIC INC. [***]
708 Quince Orchard Road
Gaithersburg, Maryland 20878
Attn: Mark D. Gessler
A-1
*CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 56
EXHIBIT C
NEURALSTEM BIOPHARMACEUTICALS, LTD.
CO-SALE AGREEMENT
THIS CO-SALE AGREEMENT (the "Agreement") is made and entered into as of
this 20th day of April, 2000, by and among NEURALSTEM BIOPHARMACEUTICALS, LTD.,
a Maryland corporation (the "Company"), each of the persons and entities listed
on Exhibit A hereto (the "Investors"), and each of the persons listed on Exhibit
B hereto (each referred to herein as a "Founder" and collectively as the
"Founders").
RECITALS
WHEREAS, the Founders are the beneficial owners of an aggregate of
[***] shares of Common Stock of the Company;
WHEREAS, Investors are purchasing shares of the Company's Series A
Preferred Stock (the "Preferred Stock") pursuant to that certain Series A
Preferred Stock Purchase Agreement (the "Purchase Agreement") of even date
herewith (the "Financing");
WHEREAS, the obligations in the Purchase Agreement are conditioned upon
the execution and delivery of this Agreement; and
WHEREAS, in connection with the consummation of the Financing, the
parties desire to enter into this Agreement in order to grant rights of co-sale
to each Investor.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree hereto as follows:
1. DEFINITIONS.
(a) "Co-Sale Stock" shall mean shares of the Company's Common
Stock now owned or subsequently acquired by the Founders by gift, purchase,
dividend, option exercise or any other means whether or not such securities are
only registered in a Founder's name or beneficially or legally owned by such
Founder, including any interest of a spouse in any of the Co-Sale Stock, whether
that interest is asserted pursuant to marital property laws or otherwise. The
number of shares of Co-Sale Stock owned by the Founders as of the date hereof
are set forth on Exhibit B, which Exhibit may be amended from time to time by
the Company to reflect changes in the number of shares owned by the Founders,
but the failure to so amend shall have no effect on such Co-Sale Stock being
subject to this Agreement.
(b) "Common Stock" shall mean the Company's Common Stock and
shares of Common Stock issued or issuable upon conversion of the Company's
outstanding Preferred Stock or exercise of any option, warrant or other security
or right of any kind convertible into or exchangeable for Common Stock.
1.
*CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 57
(c) For the purpose of this Agreement, the term "Transfer"
shall include any sale, assignment, encumbrance, hypothecation, pledge,
conveyance in trust, gift, transfer by request, devise or descent, or other
transfer or disposition of any kind, including, but not limited to, transfers to
receivers, levying creditors, trustees or receivers in bankruptcy proceedings or
general assignees for the benefit of creditors, whether voluntary or by
operation of law, directly or indirectly, of any of the Co-Sale Stock.
2. TRANSFERS BY A FOUNDER.
(a) If a Founder proposes to Transfer any shares of Co-Sale
Stock then the Founder shall promptly give written notice (the "Notice")
simultaneously to the Company and to each of the Investors at least thirty (30)
days prior to the closing of such Transfer. The Notice shall describe in
reasonable detail the proposed Transfer including, without limitation, the
number of shares of Co-Sale Stock to be transferred, the nature of such
Transfer, the consideration to be paid, and the name and address of each
prospective purchaser or transferee. In the event that the Transfer is being
made pursuant to the provisions of Section 3(a), the Notice shall state under
which section the Transfer is being made.
(b) Each Investor shall have the right, exercisable upon
written notice to such Founder within fifteen (15) days after the Notice, to
participate in such Transfer of Co-Sale Stock on the same terms and conditions.
Such notice shall indicate the number of shares of Common Stock such Investor
wishes to sell under his or her right to participate. To the extent one or more
of the Investors exercise such right of participation in accordance with the
terms and conditions set forth below, the number of shares of Co-Sale Stock that
such Founder may sell in the transaction shall be correspondingly reduced.
(c) Each Investor may sell all or any part of that number of
shares equal to the product obtained by multiplying (i) the aggregate number of
shares of Co-Sale Stock covered by the Notice by (ii) a fraction the numerator
of which is the number of shares of Common Stock owned by such Investor at the
time of the Transfer and the denominator of which is the total number of shares
of Common Stock owned by such Founder and the Investors at the time of the
Transfer. If not all of the Investors elect to sell their share of the Co-Sale
Stock proposed to be transferred within said fifteen (15) day period, then the
Founder shall promptly notify in writing the Investors who do so elect and shall
offer such Investors the additional right to participate in the sale of such
additional shares of Co-Sale Stock proposed to be transferred on the same
percentage basis as set forth above in this Section 2(c). The Investors shall
have five (5) days after receipt of such notice to notify the Founder of its
election to sell all or a portion thereof of the unsubscribed shares.
(d) Each Investor who elects to participate in the Transfer
pursuant to this Section 2 (a "Participant") shall effect its participation in
the Transfer by promptly delivering to such Founder for transfer to the
prospective purchaser one or more certificates, properly endorsed for transfer,
which represent:
(i) the type and number of shares of Common Stock
which such Participant elects to sell; or
2.
<PAGE> 58
(ii) that number of shares of Preferred Stock which
is at such time convertible into the number of shares of Common Stock which such
Participant elects to sell; provided, however, that if the prospective purchaser
objects to the delivery of Preferred Stock in lieu of Common Stock, such
Participant shall convert such Preferred Stock into Common Stock and deliver
Common Stock as provided in Section 2(d)(i) above. The Company agrees to make
any such conversion concurrent with the actual transfer of such shares to the
purchaser.
(e) The stock certificate or certificates that the
Participant delivers to such Founder pursuant to Section 2(d) shall be
transferred to the prospective purchaser in consummation of the sale of the
Common Stock pursuant to the terms and conditions specified in the Notice, and
the Founder shall concurrently therewith remit to such Participant that portion
of the sale proceeds to which such Participant is entitled by reason of its
participation in such sale. To the extent that any prospective purchaser or
purchasers prohibits such assignment or otherwise refuses to purchase shares or
other securities from a Participant exercising its rights of co-sale hereunder,
such Founder shall not sell to such prospective purchaser or purchasers any
Co-Sale Stock unless and until, simultaneously with such sale, such Founder
shall purchase such shares or other securities from such Participant on the same
terms and conditions specified in the Notice.
(f) The exercise or non-exercise of the rights of the
Investors hereunder to participate in one or more Transfers of Co-Sale Stock
made by such Founder shall not adversely affect their rights to participate in
subsequent Transfers of Co-Sale Stock subject to this Section 2.
(g) If none of the Investors elect to participate in the sale
of the Co-Sale Stock subject to the Notice, such Founder may, not later than
sixty (60) days following delivery to the Company of the Notice, enter into an
agreement providing for the closing of the Transfer of the Co-Sale Stock covered
by the Notice within thirty (30) days of such agreement on terms and conditions
not more materially favorable to the transferor than those described in the
Notice. Any proposed transfer on terms and conditions materially more favorable
than those described in the Notice, as well as any subsequent proposed transfer
of any of the Co-Sale Stock by a Founder, shall again be subject to the co-sale
rights of the Investors and shall require compliance by a Founder with the
procedures described in this Section 2.
3. EXEMPT TRANSFERS.
(a) Notwithstanding the foregoing, the co-sale rights of the
Investors shall not apply to (i) any transfer or transfers by a Founder which in
the aggregate, over the term of this Agreement, amount to no more than ten
percent (10%) of the shares of Co-Sale Stock held by a Founder as of the date
hereof (as adjusted for stock splits, dividends and the like), (ii) any transfer
to the ancestors, descendants or spouse or to trusts for the benefit of such
persons or the Founder, (iii) any transfer or transfers by a Founder to another
Founder (the "Transferee-Founder") so long as the Transferee-Founder is, at the
time of the transfer, employed by or acting as a consultant or director of the
Company, or (iv) any bona fide gift; provided that in the event of any transfer
made pursuant to one of the exemptions provided by clauses (ii), (iii) and (iv),
(A) the Founder shall inform the Investors of such transfer or gift prior to
effecting it and (B) the transferee or donee shall furnish the Investors with a
written agreement to be bound by and
3.
<PAGE> 59
comply with all provisions of Section 2. Except with respect to Co-Sale Stock
transferred under clause (i) above (which Co-Sale Stock shall no longer be
subject to the co-sale rights of the Investors), such transferred Co-Sale Stock
shall remain "Co-Sale Stock" hereunder, and such transferee or donee shall be
treated as the "Founder" for purposes of this Agreement.
(b) Notwithstanding the foregoing, the provisions of Section 2
shall not apply to the sale of any Co-Sale Stock to the public pursuant to a
registration statement filed with, and declared effective by, the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the
"Securities Act").
(c) This Agreement is subject to, and shall in no manner limit
the right which the Company may have to repurchase securities from the Founder
pursuant to (i) a stock restriction agreement or other agreement between the
Company and the Founder and (ii) any right of first refusal set forth in the
Bylaws of the Company.
4. PROHIBITED TRANSFERS.
(a) In the event that a Founder should Transfer any Co-Sale
Stock in contravention of the co-sale rights of each Investor under this
Agreement (a "Prohibited Transfer"), each Investor, in addition to such other
remedies as may be available at law, in equity or hereunder, shall have the put
option provided below, and such Founder shall be bound by the applicable
provisions of such option.
(b) In the event of a Prohibited Transfer, each Investor shall
have the right to sell to such Founder the type and number of shares of Common
Stock equal to the number of shares each Investor would have been entitled to
transfer to the purchaser under Section 2(c) hereof had the Prohibited Transfer
been effected pursuant to and in compliance with the terms hereof. Such sale
shall be made on the following terms and conditions:
(i) The price per share at which the shares are to be
sold to the Founder shall be equal to the price per share paid by the purchaser
to such Founder in such Prohibited Transfer. The Founder shall also reimburse
each Investor for any and all fees and expenses, including legal fees and
expenses, incurred pursuant to the exercise or the attempted exercise of the
Investor's rights under Section 2.
(ii) Within ninety (90) days after the date on which
an Investor received notice of the Prohibited Transfer or otherwise became aware
of the Prohibited Transfer, such Investor shall, if exercising the option
created hereby, deliver to the Founder the certificate or certificates
representing shares to be sold, each certificate to be properly endorsed for
transfer.
(iii) Such Founder shall, upon receipt of the
certificate or certificates for the shares to be sold by an Investor, pursuant
to this Section 4(b), pay the aggregate purchase price therefor and the amount
of reimbursable fees and expenses, as specified in Section 4(b)(i), in cash or
by other means acceptable to the Investor.
(iv) Notwithstanding the foregoing, any attempt by a
Founder to transfer Co-Sale Stock in violation of Section 2 hereof shall be
voidable at the option of a majority in interest of the Investors if a majority
in interest of the Investors do not elect to
4.
<PAGE> 60
exercise the put option set forth in this Section 4, and the Company agrees it
will not effect such a transfer nor will it treat any alleged transferee as the
holder of such shares without the written consent of a majority in interest of
the Investors.
5. LEGEND.
(a) Each certificate representing shares of Co-Sale Stock now
or hereafter owned by the Founder or issued to any person in connection with a
transfer pursuant to Section 3(a) hereof shall be endorsed with the following
legend:
"THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND
CONDITIONS OF A CERTAIN CO-SALE AGREEMENT BY AND BETWEEN THE
SHAREHOLDER, THE COMPANY AND CERTAIN HOLDERS OF STOCK OF THE
COMPANY. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN
REQUEST TO THE SECRETARY OF THE COMPANY."
(b) The Founders agree that the Company may instruct its
transfer agent to impose transfer restrictions on the shares represented by
certificates bearing the legend referred to in Section 5(a) above to enforce the
provisions of this Agreement and the Company agrees to promptly do so. The
legend shall be removed upon termination of this Agreement.
6. MISCELLANEOUS.
(a) CONDITIONS TO EXERCISE OF RIGHTS. Exercise of the
Investors' rights under this Agreement shall be subject to and conditioned upon,
and the Founders and the Company shall use their best efforts to assist each
Investor in, compliance with applicable laws.
(b) GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of Maryland as applied to agreements among
Maryland residents entered into and to be performed entirely within Maryland.
(c) AMENDMENT. Any provision of this Agreement may be amended
and the observance thereof may be waived (either generally or in a particular
instance and either retroactively or prospectively), only by the written consent
of (i) as to the Company, only the Company, (ii) as to the Investors, persons
holding more than a majority in interest of the Common Stock held by the
Investors and their assignees, pursuant to Section 6(d) hereof, and (iii) as to
the Founders, only the Founders; provided, that no consent of any Founder shall
be necessary for any amendment and/or restatement which includes additional
holders of Preferred Stock or other preferred stock of the Company as
"Investors" and parties hereto. Any amendment or waiver effected in accordance
with clauses (i), (ii), and (iii) of this Section 6(c) shall be binding upon
each Investor, its successors and assigns, the Company and the Founders.
(d) ASSIGNMENT OF RIGHTS. This Agreement constitutes the
entire agreement between the parties relative to the specific subject matter
hereof. Any previous agreement among the parties relative to the specific
subject matter hereof is superseded by this Agreement.
5.
<PAGE> 61
This Agreement and the rights and obligations of the parties hereunder shall
inure to the benefit of, and be binding upon, their respective successors,
assigns and legal representatives.
(e) TERM. This Agreement shall continue in full force and
effect from the date hereof through the earliest of the following dates, on
which date it shall terminate in its entirety:
(i) the date of the closing of a firmly underwritten
public offering of the Common Stock pursuant to a registration statement filed
with the Securities and Exchange Commission, and declared effective under the
Securities Act of 1933, as amended;
(ii) the date of the closing of a sale, lease, or
other disposition of all or substantially all of the Company's assets or the
Company's merger into or consolidation with any other corporation or other
entity, or any other corporate reorganization, in which the holders of the
Company's outstanding voting stock immediately prior to such transaction own,
immediately after such transaction, securities representing less than fifty
percent (50%) of the voting power of the corporation or other entity surviving
such transaction, provided that this Section 6(e)(ii) shall not apply to a
merger effected exclusively for the purpose of changing the domicile of the
Company; or
(iii) the date as of which the parties hereto
terminate this Agreement by written consent of a majority in interest of the
Investors and a majority in interest of the Founders.
(f) OWNERSHIP. The Founders represent and warrant that each is
the sole legal and beneficial owner of those shares of Co-Sale Stock he or she
currently holds subject to the Agreement and that no other person has any
interest (other than a community property interest) in such shares.
(g) NOTICES. All notices required or permitted hereunder shall
be in writing and shall be deemed effectively given: (i) upon personal delivery
to the party to be notified, (ii) when sent by confirmed electronic mail or
facsimile if sent during normal business hours of the recipient; if not, then on
the next business day, (iii) five (5) days after having been sent by registered
or certified mail, return receipt requested, postage prepaid, or (iv) one (1)
day after deposit with a nationally recognized overnight courier, specifying
next day delivery, with written verification of receipt. All communications
shall be sent to the party to be notified at the address as set forth herein or
at such other address as such party may designate by ten (10) days advance
written notice to the other parties hereto.
(h) SEVERABILITY. In the event one or more of the provisions
of this Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
(i) ATTORNEYS' FEES. In the event that any suit or action is
instituted to enforce any provision in this Agreement, the prevailing party in
such dispute shall be entitled to recover from the losing party all fees, costs
and expenses of enforcing any right of such
6.
<PAGE> 62
prevailing party under or with respect to this Agreement, including without
limitation, such reasonable fees and expenses of attorneys and accountants,
which shall include, without limitation, all fees, costs and expenses of
appeals.
(j) ENTIRE AGREEMENT. This Agreement and the Exhibits hereto,
along with the Purchase Agreement and each of the Exhibits thereto, constitute
the full and entire understanding and agreement between the parties with regard
to the subjects hereof and thereof and no party shall be liable or bound to any
other in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.
(k) ADDITIONAL INVESTORS. Notwithstanding anything to the
contrary contained herein, if the Company shall issue additional shares of its
Preferred Stock pursuant to the Purchase Agreement, any purchaser of such shares
of Preferred Stock may become a party to this Agreement by executing and
delivering an additional counterpart signature page to this Agreement and shall
be deemed an "Investor" hereunder.
(l) 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.
[THIS SPACE INTENTIONALLY LEFT BLANK]
7.
<PAGE> 63
The foregoing CO-SALE AGREEMENT is hereby executed as of the date first
above written.
COMPANY: INVESTOR:
NEURALSTEM BIOPHARMACEUTICALS, GENE LOGIC INC.
LTD.
By: /s/ I. Richard Garr By: /s/ Philip L. Rohrer, Jr.
------------------------------ ---------------------------------
Name: I. Richard Garr Name: Philip L. Rohrer, Jr.
---------------------------- -------------------------------
Title: President & CEO Title: Chief Financial Officer
--------------------------- ------------------------------
FOUNDERS:
[***]
*CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 64
EXHIBIT A
LIST OF INVESTORS
Gene Logic Inc.
708 Quince Orchard Rd
Gaithersburg MD 20878
1.
<PAGE> 65
EXHIBIT B
CO-SALE STOCK OWNERSHIP
NAME AND ADDRESS OF FOUNDER CO-SALE STOCK
[***] [***]
2.
*CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 66
EXHIBIT D
NEURALSTEM BIOPHARMACEUTICALS, LTD.
STOCK SCHEDULES
AS OF MARCH 30, 2000
SCHEDULE OF ISSUED AND OUTSTANDING STOCK CERTIFICATES
[***]
-1-
*CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 67
SCHEDULE OF ISSUED AND OUTSTANDING STOCK CERTIFICATES
[***]
-2-
*CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 68
NEURALSTEM BIOPHARMACEUTICALS, LTD
STOCK SCHEDULES
AS OF MARCH 30, 2000
SCHEDULE OF STOCK SUBSCRIPTIONS
[***]
-3-
*CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 69
NEURALSTEM BIOPHARMACEUTICALS, LTD
STOCK SCHEDULES
SCHEDULE OF STOCK OPTIONS
AS OF MARCH 30, 2000
SCHEDULE OF UNEXERCISED INCENTIVE STOCK OPTIONS
[***]
-4-
*CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 70
NEURALSTEM BIOPHARMACEUTICALS, LTD
STOCK SCHEDULES
SCHEDULE OF STOCK OPTIONS
AS OF MARCH 30, 2000
SCHEDULE OF UNEXERCISED NON-QUALIFIED STOCK OPTIONS
[***]
-5-
*CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 71
NEURALSTEM BIOPHARMACEUTICALS, LTD
STOCK SCHEDULES
AS OF MARCH 30, 2000
SCHEDULE OF STOCK OPTIONS
TOTAL ISO OUTSTANDING: [***]
TOTAL NON-QUAL OUTSTANDING: [***]
TOTAL ISO AND NON-QUAL OUTSTANDING: [***]
-6-
*CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 72
NEURALSTEM BIOPHARMACEUTICALS, LTD
STOCK SCHEDULES
AS OF MARCH 30, 2000
SCHEDULE OF STOCK RESERVED
[***]
-7-
*CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 73
NEURALSTEM BIOPHARMACEUTICALS, LTD
STOCK SCHEDULES
AS OF MARCH 30, 2000
SCHEDULE OF STOCK WARRANTS
[***]
-8-
*CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 74
NEURALSTEM BIOPHARMACEUTICALS, LTD
STOCK SCHEDULES
AS OF MARCH 30, 2000
SUMMARY
[***]
-9-
*CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 75
EXHIBIT E
FORM OF LEGAL OPINION
1. The Company has been duly incorporated and is a validly existing
corporation in good standing under the laws of the State of Maryland.
2. The Company has the requisite corporate power to own its property and
assets and to conduct its business as it is currently being conducted
and, to the best of our knowledge, is not required to qualify as a
foreign corporation to do business in any jurisdiction in the United
States.
3. The Agreements have been duly and validly authorized, executed and
delivered by the Company and constitute valid and binding agreements of
the Company enforceable against the Company in accordance with its
terms, except as rights to indemnity under section 2.9 of the Investor
Rights Agreement may be limited by applicable laws and except as
enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, arrangement, moratorium or other similar laws affecting
creditors' rights, and subject to general equity principles and to
limitations on availability of equitable relief, including specific
performance.
4. The Company's authorized capital stock consists of (a) _____ (_____)
shares of Common Stock, $__________ par value, of which _____ (_____)
shares are issued and outstanding, and (b) _____ (_____) shares of
Preferred Stock, $__________ par value, of which _____ (_____) shares
have been designated Series A Preferred Stock, without par value, of
which (excluding the Shares to be issued at Closing) no shares are
issued and outstanding. The outstanding shares of Common Stock and of
Preferred Stock have been duly authorized and validly issued and are
fully paid and nonassessable. The rights, preferences and privileges of
the Series A Preferred Stock are as stated in the Certificate of
Determination of Preferences of Series A Preferred Stock. The shares
have been duly authorized, and upon issuance and delivery against
payment therefor in accordance with the terms of the Agreement, the
Shares will be validly issued, outstanding, fully paid and
nonassessable. The Shares of Common Stock issuable upon conversion of
the Shares have been duly authorized, and upon issuance and delivery
against payment therefor in accordance with the terms of the Shares,
will be validly issued, outstanding, fully paid and nonassessable. To
the best of our knowledge, there are no options, warrants, conversion
privileges, preemptive rights or other rights presently outstanding to
purchase any of the authorized but unissued capital stock of the
Company, other than the conversion privileges of the Series A Preferred
Stock, rights created in connection with the transactions contemplated
by the Agreements, _____ (______) shares reserved for issuance under
the Company's _____ Stock Option Plan, and up to an additional _____
(_____) shares of Common Stock that are reserved for issuance to key
employees and consultants of the Company.
5. The execution and delivery of the Agreements by the Company and the
issuance of the Shares pursuant thereto do not violate any provision of
the Company's Articles of Incorporation or Bylaws, and do not
constitute a material default under the provisions of
1
<PAGE> 76
any material agreement known to us to which the Company is a party or
by which it is bound, and do not violate or contravene (a) any
governmental statute, rule or regulation applicable to the Company or
(b) any order, writ, judgment, injunction, decree, determination or
award which has been entered against the Company and of which we are
aware, the violation or contravention of which would materially and
adversely affect the Company, its assets, financial condition or
operations.
6. To the best of our knowledge, there is no action, proceeding or
investigation pending or overtly threatened against the Company before
any court or administrative agency that questions the validity of the
Agreements or might result, either individually or in the aggregate, in
any material adverse change in the assets, financial condition, or
operations of the Company
7. All consents, approvals, authorizations, or orders of, and filings,
registrations, and qualifications with any regulatory authority or
governmental body in the United States required for the consummation by
the Company of the transactions contemplated by the Agreements, have
been made or obtained, except for the filing of a Form D pursuant to
Securities and Exchange Commission Regulation D and (c) (other Blue Sky
filings).
8. The offer and sale of the Shares is exempt from the registration
requirements of the Securities Act of 1933, as amended, subject to the
timely filing of a Form D pursuant to Securities and Exchange
Commission Regulation D.
2
<PAGE> 1
Exhibit 10.63
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as
of September 1, 1997 by and between GENE LOGIC INC., a Delaware corporation (the
"Company") and Victor M. Markowitz, a California resident ("Markowitz").
RECITAL:
The Company desires to secure the services of Markowitz and Markowitz
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 Markowitz as Vice President, GENE LOGIC
Bioinformatics Systems and Markowitz hereby accepts such employment and such
position. Markowitz shall devote his full time, ability, attention, knowledge
and skill to performing all duties as Vice President, GENE LOGIC Bioinformatics
Systems, as lawfully assigned or delegated to him by the Senior Vice President
and Chief Scientific Officer of GENE LOGIC INC. Markowitz will report to the
Senior Vice President and Chief Scientific Officer.
2. Base Salary. In consideration for Markowitz's services to the
Company during the term of his employment under this Agreement, Markowitz shall
receive an annual base salary of no less than $150,000. The annual base salary
will be prorated for any partial year of employment on the basis of a 365-day
fiscal 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 Options. Upon commencement of the term of employment
engaged by this Agreement, the Company shall grant to Markowitz incentive stock
options to purchase 120,000 shares of the Company's common stock at a purchase
price of $0.30 per share. These incentive stock options will be subject to
vesting at a rate of 1/48th each month for 48 months. An additional 20,000
shares of any unvested incentive stock options held by Markowitz pursuant to
this Subsection 3 shall automatically become vested when 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.
4. Additional Compensation and Benefits.
<PAGE> 2
4.1 Upfront Bonus. Upon the execution of this Agreement, the
Company shall pay to Markowitz a cash bonus in the amount of $25,000.
4.2 Annual Performance Bonus. During each calendar year while
this Agreement remains in force, commencing September 1, 1998, Markowitz shall
receive, in addition to the base salary specified in Section 2 above, a
performance bonus based upon achievement of goals mutually agreed by Markowitz
and the Senior Vice President and Chief Scientific Officer of the Company. The
amount of such bonus for 1998 shall be $30,000 in cash; thereafter any annual
bonus shall be in such amount determined by the Company.
4.3 Medical Benefits, Vacation and Sick Leave. Markowitz 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 no less than twenty
(20) days of paid vacation per year on the same basis as the Company's other
senior executives.
4.4 Pension Plan. Markowitz 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. As a condition
of this Agreement, Markowitz 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 a copy of which is attached as Exhibit
A.
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 September 1, 1997 and ending on August 31, 2001, 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 Markowitz, if at any time, in the
reasonable opinion of the Company's Board of Directors, (a) Markowitz 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 Markowitz in the event of termination of
Markowitz's employment under this Subsection 7.1 shall be limited to the payment
of Markowitz'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 Markowitz. Upon any
termination
<PAGE> 3
of this Agreement without cause by the Company, the Company shall pay to
Markowitz as severance pay in one lump sum an amount equal to three (3) months
of his then current salary in addition to such other compensation to which
Markowitz may be entitled prior to the date of termination.
7.3 By Markowitz. Markowitz reserves the right to terminate
this employment hereunder for any reason upon thirty (30) days' written notice
to the Company. The Company's total liability to Markowitz in the event of
termination of Markowitz's employment under this Subsection 7.3 shall be limited
to the payment of Markowitz'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 including Exhibit A
constitutes the entire agreement between the Company and Markowitz 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.
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:
<PAGE> 4
To the Company: GENE LOGIC INC.
10150 Old Columbia Road
Columbia, MD 20146
To Markowitz: Victor Markowitz
1016 Curtis Street
Albany, CA 94706
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
By:/s/ Keith O. Ellison By: /s/ Victor M. Markowitz
----------------------------- ------------------------------
Keith O. Elliston Victor M. Markowitz
Senior Vice President
and Chief Scientific Officer
<PAGE> 1
<TABLE>
<CAPTION>
GENE LOGIC INC.
MARCH 31, 2000
EXHIBIT 11.1
Statement Re: Computation of Per Share Loss
(In thousands, except per share amounts)
Three Months Ended
March 31,
---------------------------------------------------
2000 1999
------------------------- --------------------
BASIC AND DILUTED:
<S> <C> <C>
Weighted average common shares outstanding 23,498 19,710
Net loss $ (4,984) $ (4,949)
========================= ====================
Net loss per common share $ (0.21) $ (0.25)
========================= ====================
</TABLE>
<TABLE> <S> <C>
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