<PAGE>
As filed with the Securities and Exchange Commission on June 14, 1999
Registration No. 333-77701
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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AMENDMENT NO. 1 TO
FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
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BIOMARIN PHARMACEUTICAL INC.
(Exact name of Registrant as specified in its charter)
Delaware 2834 68-0397820
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification Number)
incorporation or Classification Code
organization) Number)
371 Bel Marin Keys Boulevard, Suite 210
Novato, CA 94949
(415) 884-6700
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
---------------
Raymond W. Anderson
Chief Financial Officer
BioMarin Pharmaceutical Inc.
371 Bel Marin Keys Boulevard, Suite 210
Novato, CA 94949
(415) 884-6700
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------
Copies to:
Francis S. Currie, Esq. Patrick A. Pohlen, Esq. William Hinman, Esq.
Donna M. Petkanics, Esq. Cooley Godward LLP Shearman & Sterling
Wilson Sonsini Goodrich Five Palo Alto Square 1550 El Camino Real
& Rosati 3000 El Camino Real
Professional Corporation Palo Alto, CA 94306 Menlo Park, CA 94025
650 Page Mill Road
(650) 843-5000 (650) 330-2200
Palo Alto, CA 94304
(650) 493-9300
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Proposed Maximum
Title of Each Class of Securities Aggregate Offering Amount of
to be Registered Price(2) Registration Fee
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<S> <C> <C>
Common Stock, $0.001 par value(1)...... $67,275,000 $18,703(3)
</TABLE>
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(1) The shares of Common Stock being registered hereby consist of shares
initially being offered in the United States, and any shares initially
offered or sold outside the United States that are thereafter sold or
resold in the United States in transactions not exempt from registration
under Section 4(1) or 4(3) of the Securities Act of 1933, as amended.
Offers and sales outside of the United States are being made pursuant to
the exemption afforded by Rule 901 of Regulation S under the Securities
Act, and this Registration Statement shall not be deemed effective with
respect to such offers and sales.
(2) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(o) under the Securities Act of 1933.
(3) $16,263 previously paid at the time the Registration Statement was
initially filed on May 4, 1999. An additional $2,440 is being paid in
connection with the filing of this Amendment No. 1 thereto.
---------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the Securities and Exchange Commission +
+declares our registration statement effective. This prospectus is not an +
+offer to sell these securities and is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to completion, dated June 14, 1999
4,500,000 Shares
BIOMARIN PHARMACEUTICAL INC.
Common Stock
$ per share [LOGO]
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<TABLE>
<S> <C>
. BioMarin . This is a firm
Pharmaceutical Inc. is commitment initial
offering 4,500,000 public offering and no
shares. public market
currently exists for
. We anticipate that the our shares.
initial public
offering price will be . Proposed trading
between $11.00 and symbol: Nasdaq
$13.00 per share. National Market and
Swiss Exchange-- BMRN.
. Genzyme has agreed to
purchase $10.0 million
of stock at the
initial public
offering price in a
private placement
concurrent with this
offering.
</TABLE>
---------------------
This investment involves risk. See "Risk Factors" beginning on page 6.
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<TABLE>
<CAPTION>
Per Share Total
--------- ------------
<S> <C> <C>
Public offering price................................... $x.xx $xxx,xxx,xxx
Underwriting discounts.................................. $x.xx $ x,xxx,xxx
Proceeds to BioMarin Pharmaceutical Inc................. $x.xx $xxx,xxx,xxx
</TABLE>
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The underwriters have a 30-day option to purchase up to 675,000 additional
shares of common stock from us to cover over-allotments, if any.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
U.S. Bancorp Piper Jaffray
Bank J. Vontobel & Co AG
Schroders & Co. Inc.
Leerink Swann & Company
The date of this prospectus is , 1999.
<PAGE>
INSIDE FRONT COVER
Picture of face of 12 year-old
MPS-I child
Computer-generated image of enzyme
LEGEND:
Children with MPS-I exhibit
rapid deterioration of growth
and development and
usually die before the age of
10
Picture of face of 1 year-old child
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary............................................................... 3
Risk Factors.......................................................... 6
History of Our Company................................................ 18
Use of Proceeds....................................................... 19
Dividend Policy....................................................... 19
Forward-Looking Statements............................................ 20
Capitalization........................................................ 21
Dilution.............................................................. 22
Selected Consolidated Financial Data.................................. 23
Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................ 25
Business.............................................................. 33
Management............................................................ 54
Certain Transactions.................................................. 65
Principal Stockholders................................................ 68
Description of Capital Stock.......................................... 70
Shares Eligible for Future Sale....................................... 72
Underwriting.......................................................... 74
Legal Matters......................................................... 77
Experts............................................................... 77
Where You Can Find More Information................................... 77
Index to Financial Statements ........................................ F-1
</TABLE>
-------------------------------
You should rely only on the information contained in this prospectus. We have
not, and the underwriters have not, authorized any other person to provide you
with different information. The prospectus is not an offer to sell, nor is it
seeking an offer to buy, these securities in any state where the offer or sale
is not permitted. The information in this prospectus is complete and accurate
as of the date of the front cover, but the information may have changed since
that date.
2
<PAGE>
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SUMMARY
The items in the following summary are described in more detail later in this
prospectus. This summary provides an overview of selected information and does
not contain all the information you should consider. Therefore, you should also
read the more detailed information set out in this prospectus, including the
financial statements. Except as set forth in the consolidated financial
statements or as otherwise specified in this prospectus, all information in
this prospectus: (1) assumes no exercise of the underwriters' over-allotment
option and (2) reflects the issuance of 2,600,000 shares of common stock,
excluding shares issuable upon conversion of accrued interest, upon the
automatic conversion of the convertible promissory notes upon the completion of
this offering.
Business of BioMarin
BioMarin Pharmaceutical Inc. is a developer of carbohydrate enzyme therapies
for debilitating, life-threatening, chronic genetic disorders and other
diseases and conditions. In October 1998, we completed the evaluation of
patients being treated with BioMarin's lead product, BM101, for the treatment
of mucopolysaccharidosis-I, or MPS-I. Patients were treated with BM101 as part
of a pivotal clinical trial completed to determine the safety and efficacy of
the drug in humans. Based on the data from this clinical trial, we intend to
complete the filing of a biologics license application with the Food and Drug
Administration, or FDA, in the second half of 1999. We established a joint
venture with Genzyme Corporation for the worldwide development and
commercialization of BM101.
MPS-I is a life-threatening genetic disorder caused by a deficiency of the
enzyme alpha-L-iduronidase. MPS-I affects about 3,400 patients in developed
countries, including approximately 1,000 in the United States and Canada.
Patients with MPS-I have multiple debilitating symptoms resulting from the
buildup of carbohydrates in all tissues in the body. These symptoms include
delayed physical and mental growth, enlarged livers and spleens, skeletal and
joint deformities, airway obstruction, heart disease and impaired hearing and
vision. Most children with MPS-I will die from complications associated with
the disease before adulthood. BM101 is a specific form of alpha-L-iduronidase
that is intended to replace a deficiency of alpha-L-iduronidase in MPS-I
patients.
In the clinical trial for BM101, ten patients with MPS-I were treated for a
period of six months at five medical centers in the United States and evaluated
as to the achievement of two primary endpoints. Primary endpoints are the
specific clinical effects on patients which demonstrate whether a drug
effectively treats the disease for which it is being tested. All ten patients
met one of the primary endpoints for BM101. Eight of the ten patients met the
other primary endpoint. We believe this clinical trial for BM101 constitutes a
pivotal clinical trial. A pivotal clinical trial produces data from human
patients sufficient to enable the FDA to determine whether to approve a product
for sale. We received notice from the FDA that our biologics license
application for BM101 has been designated for accelerated review for the
treatment of the more severe forms of MPS-I, which account for approximately
60% of all cases. The FDA refers to the accelerated review designation as fast
track designation. The FDA has granted us exclusive rights to market BM101 to
treat MPS-I for seven years from the date of FDA approval if BM101 is the first
alpha-L-iduronidase drug to be approved by the FDA for the treatment of MPS-I.
Drug products which have been granted these exclusivity rights are said to have
received orphan drug designation.
Under the terms of our BM101 joint venture with Genzyme, we will share equally
with Genzyme the expenses and profits from the joint venture. Genzyme invested
$8.0 million upon signing the joint venture agreement and has agreed to
purchase $10.0 million of common stock at the initial public offering price in
a private placement concurrent with this offering. Genzyme has committed to pay
us an additional $12.1 million upon approval of the biologics license
application for BM101.
3
<PAGE>
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We are also developing enzyme replacement therapies for other life-threatening
genetic diseases. We are developing BM102 for the treatment of MPS-VI, another
mucopolysaccharide disease. We received an orphan drug designation for BM102 to
treat MPS-VI and intend to file an investigational new drug application for
BM102 in the fourth quarter of 1999. We are also developing carbohydrate
enzymes intended to improve the burn healing process and to act as
anti-fungals. Through a wholly-owned subsidiary, Glyko, Inc., we provide
products and services for carbohydrate analysis and medical diagnosis to
research institutions and commercial laboratories.
Office Location
Our principal executive offices are located at 371 Bel Marin Keys Boulevard,
Suite 210, Novato, CA 94949 and our telephone number is (415) 884-6700.
The Offering
<TABLE>
<C> <S>
Common stock offered by us.................. 4,500,000 shares. Of these
shares [.] are being offered in
the United States and Canada and
[.] shares are being offered
outside the United States and
Canada. The final allocation may
vary.
Common stock issued to Genzyme in the
concurrent private placement............... 833,333 shares, assuming a
$12.00 per share offering price.
Common stock outstanding after this 34,109,513 shares. This number
offering................................... excludes 3,773,226 shares of
common stock issuable upon
exercise of options outstanding
at May 31, 1999, with a weighted
average exercise price of $4.68
per share and warrants to
purchase 801,500 shares of
common stock with an exercise
price of $1.00 per share.
Offering price.............................. $[.] per share
Use of proceeds............................. To fund our 50% share of the
expenses of the joint venture
with Genzyme for the worldwide
development and
commercialization for BM101, to
fund additional product
programs, including BM102 and
other enzyme therapies, to fund
process development, clinical
and commercial manufacturing
facilities and general corporate
purposes. See "Use of Proceeds."
Proposed Nasdaq National Market and Swiss
Exchange symbol............................ BMRN
</TABLE>
Certain Information
We were incorporated in Delaware in October 1996 and began operations on March
21, 1997. We acquired Glyko, Inc. in October 1998. Unless otherwise specified,
the terms "us" and "we" refer to both BioMarin and Glyko, Inc.
This prospectus contains our trademarks. Each trademark, trade name or service
mark of any other company appearing in this prospectus belongs to its holder.
4
<PAGE>
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Summary Consolidated Financial Data
(in thousands, except per share data)
<TABLE>
<CAPTION>
Period from
March 21, 1997 Three Months Period from
(Inception) to Year Ended Ended March 31, March 21, 1997
December 31, December 31, ---------------- (Inception) to
Consolidated Statements of 1997 1998 1998 1999 March 31, 1999
Operations Data (1): -------------- ------------ ------- ------- --------------
<S> <C> <C> <C> <C> <C>
Revenues.................. $ -- $ 1,190 $ -- $ 1,104 $ 2,295
Operating costs and
expenses:
Cost of goods sold...... -- 108 -- 103 211
Research and
development............ 1,914 10,502 1,108 3,820 16,237
General and
administrative......... 914 3,531 303 1,549 5,994
------- -------- ------- ------- --------
Loss from operations...... (2,828) (12,951) (1,411) (4,367) (20,147)
Interest income........... 65 684 92 154 904
Equity in loss of joint
venture.................. -- (47) -- (180) (227)
------- -------- ------- ------- --------
Net loss.................. $(2,763) $(12,314) $(1,319) $(4,394) $(19,470)
======= ======== ======= ======= ========
Net loss per common share,
basic and diluted........ $ (0.34) $ (0.55) $ (0.06) $ (0.17) $ (1.12)
======= ======== ======= ======= ========
Weighted average common
shares outstanding....... 8,136 22,488 20,567 26,176 (/2/) 17,441
</TABLE>
<TABLE>
<CAPTION>
As of March 31,
As of December 31, As of March 31, 1999 1999
1998 ---------------------- Pro Forma
Consolidated Balance Actual Actual Pro Forma (/3/) As Adjusted (/4/)
Sheet Data: ------------------ ------ --------------- -----------------
<S> <C> <C> <C> <C>
Cash, cash equivalents
and short-term
investments............ $11,389 $3,829 $28,724 $87,444
Total current assets.... 12,819 5,526 30,421 89,141
Total assets............ 31,509 26,778 52,778 110,393
Long-term liabilities... 110 103 26,103 103
Total stockholders'
equity................. 29,395 25,045 25,045 108,660
</TABLE>
- ------------------------------
(/1/) BioMarin's acquisition of Glyko, Inc. was accounted for as a purchase.
As a result, the consolidated statements of operations data of BioMarin
include the operations of Glyko, Inc. from October 7, 1998, the date of
its acquisition by BioMarin, through March 31, 1999. Financial
information for Glyko, Inc. for the years ended December 31, 1994, 1995,
1996, 1997 and the period ended October 7, 1998 is included in the
Selected Consolidated Financial Data and financial statements for Glyko,
Inc. for the year ended December 31, 1997 and the period ended October
7, 1998 are included in the Financial Statements elsewhere in the
prospectus.
(/2/) Weighted average common shares outstanding as of March 31, 1999 excludes
3,553,526 shares of common stock issuable upon exercise of outstanding
options at March 31, 1999 with a weighted average exercise price of
$4.51 per share and warrants to purchase 801,500 shares of common stock
with an exercise price of $1.00 per share. See "Capitalization,"
"Management--Stock Plans," "Underwriting" and Notes 3, 5, 9 and 11 of
Notes to Consolidated Financial Statements of BioMarin.
(/3/) Reflects the sale on April 13, 1999 of $26.0 million of convertible
promissory notes, net of issuance costs of $1.1 million.
(/4/) As adjusted for (1) the sale of 4,500,000 shares of common stock by
BioMarin at an assumed initial public offering price of $12.00 per share
net of estimated issuance costs of $5.3 million; (2) the sale of $10.0
million of common stock to Genzyme at the initial public offering price
in a private placement concurrent with this offering; and (3) the
issuance of 2,600,000 shares of common stock, excluding shares issuable
upon conversion of accrued interest, upon the automatic conversion of
the convertible promissory notes on the date of the final prospectus for
this offering, after deducting underwriting discounts and commissions
and estimated offering expenses. See "Use of Proceeds," "Capitalization"
and "Underwriting."
5
<PAGE>
RISK FACTORS
You should carefully consider the following risk factors before you decide to
buy our common stock. You should also consider the other information in this
prospectus as well as the other documents incorporated by reference. In
addition, the risks and uncertainties described below are not the only ones
facing BioMarin because we are also subject to additional risks and
uncertainties not presently known to us. If any of these risks actually occur,
our business, financial condition, operating results or cash flows, could be
materially adversely affected. This could cause the trading price of our common
stock to decline, and you may lose part or all of your investment.
Risks Related To The Company
If We Continue To Incur Operating Losses For A Period Longer Than Anticipated,
The Value of Your Investment Will Be At Risk.
We are in an early stage of development and have operated at a net loss since
we were formed. Since we began operations in March 1997, we have been engaged
primarily in research and development. We have no sales revenues from any of
our drug products. We have a limited operating history on which to base an
evaluation of our business and prospects. As of March 31, 1999, we had an
accumulated deficit of approximately $19.5 million. Our future profitability
depends on our receiving regulatory approval of our drug candidates and our
ability to successfully manufacture and market any approved drugs, either by
ourselves or jointly with others. The extent of our future losses and the
timing of profitability are highly uncertain. If we fail to become profitable
in line with investors' expectations, the value of your investment will be at
risk.
Because of the relative small size and scale of our wholly-owned subsidiary,
Glyko, Inc., profits from products and services offered by it are expected to
be insufficient to offset the expenses associated with our pharmaceutical
business. As a result, we expect that operating losses will continue and
increase for the foreseeable future.
If We Fail To Obtain The Capital Necessary To Fund Our Operations We Will Be
Unable To Complete Our Product Development Programs.
In the future, we may need to raise substantial additional capital to fund
operations. We cannot be certain that any financing will be available when
needed. If we fail to raise additional financing as we need it, we will have to
delay or terminate our product development programs.
We expect to continue to spend substantial amounts of capital for our
operations for the foreseeable future. Activities which will require additional
expenditures include:
. research and development programs
. preclinical studies and clinical trials
. regulatory processes
. establishment of commercial scale manufacturing capabilities and
. expansion of sales and marketing activities.
The amount of capital we may need depends on many factors, including:
. The progress, timing and scope of our research and development
programs
. The progress, timing and scope of our preclinical studies and
clinical trials
. The time and cost necessary to obtain regulatory approvals
6
<PAGE>
. The time and cost necessary to install, validate and complete process
qualification of manufacturing capacity
. The time and cost necessary to respond to technological and market
developments
. Any changes made or new developments in our existing collaborative,
licensing and other commercial relationships
. Any new collaborative, licensing and other commercial relationships
that we may establish
Moreover, our fixed expenses such as rent, license payments and other
contractual commitments are substantial and will increase in the future. These
fixed expenses will increase because we may enter into:
. additional leases for new facilities and capital equipment
. additional licenses and collaborative agreements
. additional contracts for consulting, maintenance and administrative
services
. additional expenses associated with being a public company.
We believe that the net proceeds of this offering, together with our available
cash, cash equivalents, short-term investment securities and investment income,
will be sufficient to meet our operating and capital requirements through at
least the next 12 months. This estimate is based on assumptions which may prove
to be wrong. As a result, we may need additional financing prior to that time.
If We Fail To Obtain Regulatory Approval To Commercially Manufacture Or Sell
Any Of Our Future Drug Products, Or If Approval Is Delayed, We Will Be Unable
To Generate Revenue From The Sale Of Our Products.
We must obtain regulatory approval to market our products in the U.S. and
foreign jurisdictions.
We must obtain regulatory approval before marketing or selling our future drug
products. In the United States, we must obtain FDA approval for each drug that
we intend to commercialize. The FDA approval process is typically lengthy and
expensive, and approval is never certain. Products distributed abroad are also
subject to foreign government regulation. None of our drug products has
received regulatory approval to be commercially marketed and sold. If we fail
to obtain regulatory approval we will be unable to market and sell our future
drug products. We have several drug products in various stages of preclinical
and clinical development. BM101, our first drug product, is not expected to be
commercially available until at least 2000. Our other drug product will not be
commercially available for at least several more years. Because of the risks
and uncertainties in biopharmaceutical development, our drug candidates could
take a significantly longer time to gain regulatory approval than we expect or
may never gain approval. If regulatory approval is delayed our management's
credibility, the value of our company and our operating results may be
adversely affected.
To obtain regulatory approval to market our products, preclinical studies and
costly and lengthy clinical trials may be required and the results of the
studies and trials are highly uncertain.
As part of the FDA approval process, we must conduct, at our own expense,
preclinical studies on animals and clinical trials on humans on each drug
candidate. We expect the number of preclinical studies and clinical trials that
the FDA will require will vary depending on the drug product, the disease or
condition the drug is being developed to address and regulations applicable to
the particular drug. We may need to perform multiple preclinical studies using
various doses and formulations before we can begin clinical trials, which could
result in delays in our ability to market any of our drug products.
Furthermore, even if we obtain favorable results in preclinical studies on
animals, the results in humans may be different.
7
<PAGE>
After we have conducted preclinical studies in animals we must demonstrate that
our drug products are safe and effective for use on the target human patients
in order to receive regulatory approval for commercial sale. Adverse or
inconclusive clinical results would stop us from filing for regulatory approval
of our products. Additional factors that can cause delay or termination of our
clinical trials include:
. Slow patient enrollment
. Longer treatment time required to demonstrate efficacy
. Lack of sufficient supplies of the drug candidate
. Adverse medical events or side effects in treated patients
. Lack of effectiveness of the drug candidate being tested
Typically, if a drug product is intended to treat a chronic disease safety and
efficacy data must be gathered over an extended period of time which ranges
from six months to three years. In addition, clinical trials on humans are
typically conducted in three phases. The FDA generally requires two pivotal
clinical trials that demonstrate substantial evidence of safety and efficacy
and appropriate dosing in a broad patient population at multiple sites to
support an application for regulatory approval. If a drug is intended for the
treatment of a serious or life-threatening condition and the drug demonstrates
the potential to address unmet medical needs for this condition, a single trial
may be sufficient to prove safety and efficacy under the FDA's Modernization
Act of 1997.
Our strategy to conduct only one clinical trial on a small number of patients
for products developed to treat genetic disorders may not be sufficient to
obtain regulatory approval.
We believe that our enzyme drug products will be regulated by the FDA as
biologics rather than drugs because they are manufactured by biological
processes. Our strategy for the development of therapeutics for genetic
disorders is to conduct only one clinical trial on a small number of patients,
which would then be the basis for our submission of a biologics license
application to the FDA. For example, at the end of October 1998, we completed
one clinical trial with ten patients on our first drug candidate BM101 to
support our biologics license application. The FDA may request additional
trials to be conducted. If we have to conduct further clinical trials, whether
for BM101 or other products we develop in the future, it would significantly
increase our expenses and delay marketing of our product. Also, the results of
initial smaller clinical trials could differ from the results obtained from
subsequent more extensive testing and long-term trials.
The fast track designation for BM101 may not actually lead to a faster review
process.
Although BM101 has obtained a fast track designation, we cannot guarantee a
faster review process or faster approval compared to the normal FDA procedures.
If BM101 is approved, we will be required to conduct a study after we obtain
approval of BM101 to demonstrate that the primary endpoints used in our single
study are reasonably likely to predict clinical benefits to the patients. If
this post-approval study fails to verify the clinical benefit of BM101 or
demonstrates that BM101 is not safe or effective, our FDA approval can be
withdrawn on an expedited basis. Furthermore, if adverse effects are identified
after marketing, FDA approval may be rapidly revoked and we could not market
the drug.
We will not be able to sell our products if we fail to comply with
manufacturing regulations.
Before we can begin commercially manufacturing our products we must obtain
regulatory approval of our manufacturing facility and process. In addition,
manufacture of our drug products must comply
8
<PAGE>
with the FDA's current Good Manufacturing Processes regulations, commonly known
as cGMP. The cGMP regulations govern quality control and documentation policies
and procedures. Our manufacturing facilities are continuously subject to
inspection by the FDA, the State of California and foreign regulatory
authorities, before and after product approval. Because we are currently in the
process of developing the manufacturing site and process for commercial
manufacture of BM101, our facility has not yet been inspected by any
governmental entity. We cannot guarantee that BioMarin, or any potential third-
party manufacturer of our drug products, will be able to comply with cGMP
regulations. Material changes to the manufacturing processes after approvals
have been granted are also subject to review and approval by the FDA or other
regulatory agencies.
We currently have a contract with Harbor-UCLA Research and Education Institute
to manufacture BM101 in limited quantities for use in preclinical studies and
clinical trials. In order to produce initial commercial requirements for BM101
in our facility we will have to prove that the product manufactured at our
facility is comparable to the clinical trial product produced in the Harbor-
UCLA facility. This may require clinical testing. We must pass FDA and state
inspections and manufacture three process qualification batches to final
specifications under cGMP controls before the BM101 BLA can be approved. We
cannot assure you that we will pass the inspections in a timely manner, if at
all.
If We Fail To Obtain Orphan Drug Exclusivity For Our Products, Our Competitors
May Sell Products To Treat The Same Conditions And Our Revenues May Be Reduced.
As part of our business strategy, we intend to develop drugs that may be
eligible for FDA orphan drug designation. Under the Orphan Drug Act, the FDA
may designate a product as an orphan drug if it is a drug intended to treat a
rare disease or condition, defined as a patient population of less than
200,000. The company that obtains the first FDA approval for a designated
orphan drug for a given rare disease receives marketing exclusivity for use of
that drug for the stated condition for a period of seven years. However,
different drugs can be approved for the same condition.
Because the extent and scope of patent protection for our drug candidates is
limited, orphan drug designation is particularly important for our products
that are eligible for orphan drug designation. We plan to rely on the
exclusivity period under the orphan drug designation to maintain a competitive
position. If we do not obtain orphan drug exclusivity for any one of our drug
products, our competitors may then sell the same drug to treat the same
condition.
We received orphan drug designation from the FDA for BM101 in September 1997.
In February 1999, we received orphan drug designation from the FDA for BM102.
Even if we obtain orphan drug designation, we cannot guarantee that we will be
the first to obtain marketing approval for any orphan indication or that
exclusivity would effectively protect the product from competition. Orphan drug
designation does not shorten the development or FDA review time of a drug so
designated nor give the drug any advantage in the FDA review or approval
process.
Because The Target Patient Populations For Our Products Are Small We Must
Achieve Significant Market Share And Realize High Per Patient Prices To Achieve
Our Business Objectives.
Our initial drug candidates target disorders with small patient populations. As
a result, our prices must be high enough to recover our development costs and
realize acceptable returns for our investors. For example, two of our initial
drug products in genetic disorders, BM101 and BM102, target patients with MPS-I
and MPS-VI, respectively. We estimate that there are approximately 3,400
patients with MPS-I and 1,100 patients with MPS-VI in the developed world. We
believe that we will need to market worldwide to achieve significant market
share. In addition, we are developing other drug candidates to treat
conditions, such as other genetic diseases and serious burns, with small
patient populations. We cannot be certain that we will be able to obtain
sufficient market share for our drug products at a price high enough to justify
our product development efforts.
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If We Fail To Obtain An Adequate Level of Reimbursement For Our Drug Products
By Third-Party Payors There Would Be No Commercially Viable Markets For Our
Products.
The course of treatment for patients with MPS-I using BM101 is expected to be
expensive. We expect patients to need treatment throughout their lifetimes. We
expect that families of patients will not be capable of paying for this
treatment themselves. There will be no commercially viable market for BM101
without reimbursement from third-party payors.
Third-party payors, such as government or private health care insurers,
carefully review and increasingly challenge the price charged for drugs.
Reimbursement rates from private companies vary depending on the third-party
payor, the insurance plan and other factors. Reimbursement systems in
international markets vary significantly by country and by region, and
reimbursement approvals must be obtained on a country-by-country basis. We
cannot be certain that third-party payors will pay for the costs of our drugs
and the courses of treatment. Even if we are able to obtain reimbursement from
third-party payors, we cannot be certain that reimbursement rates will be
enough to allow us to profit from sales of our drugs.
We currently have no expertise obtaining reimbursement. We expect to rely on
the expertise of our partner Genzyme to obtain reimbursement for BM101. We
cannot predict what the reimbursement rates will be. In addition, we will need
to develop our own reimbursement expertise for future drug candidates unless we
enter into collaborations with other companies with the necessary expertise.
We expect that in the future reimbursement will be increasingly restricted both
in the United States and internationally. The escalating cost of health care
has led to increased pressure on the health care industry to reduce costs.
Governmental and private third-party payors have proposed health care reforms
and cost reductions. A number of federal and state proposals to control the
cost of health care, including the cost of drug treatments have been made in
the United States. In some foreign markets, the government controls the pricing
which would affect the profitability of drugs. Current government regulations
and possible future legislation regarding health care may affect our future
revenues from sales of our drugs and may adversely affect our business and
prospects.
If We Are Unable To Protect Our Proprietary Technology We May Not Be Able To
Compete As Effectively.
Where appropriate, we seek patent protection for certain aspects of our
technology. Meaningful patent protection may not be available for some of the
enzymes we are developing, including BM101 and BM102. If we must spend
significant time and money protecting our patents, designing around patents
held by others or licensing, for excessively large fees, patents or other
proprietary rights held by others, our business and prospects may be harmed.
The patent positions of biotechnology companies are extremely complex and
uncertain. The scope and extent of patent protection for some of our products
are particularly uncertain because key information on some of the enzymes we
are developing has existed in the public domain for many years. Other parties
have published the structure of the enzyme, the methods for purifying or
producing the enzyme or the methods of treatment. The composition and genetic
sequences of many of our enzymes, including those for BM101, BM102, have been
published and are in the public domain. The composition and genetic sequences
of other MPS enzymes which we intend to develop as products have also been
published. Publication of this information has prevented us from obtaining
composition of matter patents, which are generally believed to offer the
strongest patent protection. For enzymes with no prospect of composition of
matter patents, we will depend on orphan drug status.
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<PAGE>
In addition, our owned and licensed patents and patent applications do not
ensure the protection of our intellectual property for a number of other
reasons:
. We do not know whether our patent applications will result in actual
patents. For example, we may not have developed a method for treating
a disease before others developed similar methods.
. Competitors may interfere with our patent process in a variety of
ways. Competitors may claim that they invented the claimed invention
prior to us. Competitors may also claim that we are infringing on
their patents and therefore cannot practice our technology as claimed
under our patent. Competitors may also contest our patents by showing
the patent examiner that the invention was not original, novel or was
obvious. As a Company, we have no meaningful experience with
competitors interfering with our patents or patent applications.
. Even if we receive a patent, it may not provide much practical
protection. If we receive a patent with a narrow scope, then it will
be easier for competitors to design products that do not infringe on
our patent.
. Enforcing patents is expensive and may absorb significant time by our
management. In litigation, a competitor could claim that our issued
patents are not valid for a number of reasons. If the court agrees,
we would lose that patent.
In addition, competitors also seek patent protection for their technology.
There are many patents in our field of technology, and we cannot guarantee that
we do not infringe on those patents or that we will not infringe on patents
granted in the future. If a patent holder believes our product infringes on
their patent, the patent holder may sue us even if we have received patent
protection for our technology. If someone else claims we infringe on their
technology, we would face a number of issues, including:
. Defending a lawsuit takes significant time and can be very expensive.
. If the court decides that our product infringes on the competitor's
patent, we may have to pay substantial damages for past infringement.
. The court may prohibit us from selling or licensing the product
unless the patent holder licenses the patent to us. The patent holder
is not required to grant us a license. If a license is available, we
may have to pay substantial royalties or grant cross-licenses to our
patents.
. Redesigning our product so it does not infringe may not be possible
and could require substantial funds and time.
It is also unclear whether our trade secrets will provide useful protection.
While we use reasonable efforts to protect our trade secrets, our employees or
consultants may unintentionally or willfully disclose our information to
competitors. Enforcing a claim that someone else illegally obtained and is
using our trade secrets, like patent litigation, is expensive and time
consuming, and the outcome is unpredictable. In addition, courts outside the
United States are sometimes less willing to protect trade secrets. Our
competitors may independently develop equivalent knowledge, methods and know-
how.
We may also support and collaborate in research conducted by government
organizations or by universities. We cannot guarantee that we will be able to
acquire any exclusive rights to technology or products derived from these
collaborations. If we do not obtain required licenses or rights, we could
encounter delays in product development while we attempt to design around other
patents or even be prohibited from developing, manufacturing or selling
products requiring these licenses. There is also a risk that disputes may arise
as to the rights to technology or products developed in collaboration with
other parties.
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If Our Joint Venture With Genzyme Were Terminated, Our Ability To Commercialize
BM101 Would Be Delayed.
We are relying on Genzyme to apply the expertise it has developed through the
launch and sale of Ceredase(R) and Cerezyme(R) enzymes for Gaucher disease, a
rare genetic disorder, to the marketing of our initial drug product, BM101. We
have no experience selling, marketing or obtaining reimbursement for
pharmaceutical products. In addition, without Genzyme we would be required to
pursue foreign regulatory approvals. We have no experience in seeking foreign
regulatory approvals. Termination of our joint venture with Genzyme would
seriously hamper our ability to commercialize BM101.
We cannot guarantee that Genzyme will devote the resources necessary to
successfully market BM101. In addition, either party may terminate the joint
venture for any reason. If Genzyme were to terminate the joint venture, we
would be required to undertake Genzyme's responsibilities ourselves.
Termination of the joint venture could cause significant delays in product
launch in the United States, difficulties in obtaining third-party
reimbursement and delays or failure to obtain foreign regulatory approval, any
of which could hurt our business and results of operations. Since Genzyme funds
50% of the joint venture's operating expenses, the termination of the joint
venture would double our financial burden and reduce the funds available to us
for other product programs.
If We Are Unable To Manufacture Our Drug Products In Sufficient Quantities And
At Acceptable Cost, We May Be Unable To Meet Demand For Our Products And Lose
Potential Revenues.
We have no experience manufacturing drug products in volumes that will be
necessary to support commercial sales. Our unproven manufacturing process may
not meet initial expectations as to schedule, reproducibility, yields, purity,
costs, quality, and other measurements of performance. Improvements in
manufacturing processes typically are very difficult to achieve and are often
very expensive. We cannot know with any certainty how long it might take to
make improvements if it became necessary to do so. If we contract for
manufacturing services with an unproven process, our contractor is subject to
the same uncertainties, high standards and regulatory controls.
If we are unable to establish and maintain commercial scale manufacturing
within our planned time and cost parameters, sales of our products and our
financial performance will be adversely affected. Scale-up problems could
result in significant delays and cost over-runs before completion.
We may encounter problems with any of the following if we attempt to increase
the scale or size of manufacturing:
. Design, construction and qualification of manufacturing facilities
that meet regulatory requirements
. Production yields
. Purity
. Quality control and assurance
. Shortages of qualified personnel
. Compliance with FDA regulations
We are developing a total of 31,000 square feet of space at two facilities, one
in Novato and one in Torrance, for the manufacture of BM101. The construction
and qualification of these facilities may take longer than planned and the
actual construction costs of these facilities may be higher than those which we
have budgeted. We expect that the manufacturing process of all of our new
products, including BM102, will also require lengthy development time before we
can begin manufacturing them in commercial quantity. Even if we can establish
this capacity, we cannot be certain that manufacturing costs will be
commercially reasonable, especially if reimbursement is substantially lower
than expected.
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In order to achieve our product cost targets we must develop efficient
manufacturing processes either by
. improving the colonies of cells which have a common genetic make-up,
or cell lines,
. improving the processes licensed from others, or
. developing a recombinant cell line and production processes.
A recombinant cell line is a cell line with foreign DNA inserted which is used
to produce a protein that it would not have otherwise produced and related
purification. The development of a stable, high production cell line for any
given enzyme is risky, expensive and unpredictable and may not yield adequate
results. In addition, the development of protein purification processes is
difficult and may not produce the high purity required with acceptable yield
and costs. If we are not able to develop efficient manufacturing processes, the
investment in manufacturing capacity sufficient to satisfy market demand will
be much greater and will place heavy financial demands upon us. If we do not
achieve our manufacturing cost targets, we will have lower margins and reduced
profitability in commercial production and greater losses in manufacturing
start-up phases.
If We Are Unable To Effectively Sell And Market Our Products, Our Ability to
Generate Revenues Will Be Diminished.
If we cannot increase our marketing capabilities either by developing our sales
and marketing organization or by entering into agreements with others, we may
be unable to successfully sell our products. If we are unable to effectively
sell our drug products, our ability to generate revenues will be diminished.
To increase our distribution and marketing for both our drug candidates and our
Glyko, Inc. products, we will have to increase our current sales force and/or
enter into third-party marketing and distribution agreements. We cannot
guarantee that we will be able to hire in a timely manner, the qualified sales
and marketing personnel we need if at all. Nor can we guarantee that we will be
able to enter into any marketing or distribution agreements on acceptable
terms, if at all. If we cannot increase our marketing capabilities as we
intend, either by increasing our sales force or entering into agreements with
third parties, sales of our products may be adversely affected.
We have recently entered into a joint venture with Genzyme where Genzyme will
be responsible for marketing and distributing BM101. We cannot guarantee that
we will be able to establish sales and distribution capabilities or that
BioMarin, the joint venture or any future collaborators will successfully sell
any of our drug candidates.
If We Fail To Compete Successfully, Our Revenues And Operating Results Will Be
Adversely Affected.
Our competitors may develop, manufacture and market products that are more
effective or less expensive than ours. They may also obtain regulatory
approvals for their products faster than we can obtain them, including orphan
drug designation, or commercialize their products before we do. These companies
also compete with us to attract qualified personnel and parties for
acquisitions, joint ventures or other collaborations. They also compete with us
to attract academic research institutions as partners and to license these
institution's proprietary technology. Several pharmaceutical and biotechnology
companies have already established themselves in the field of enzyme
therapeutics, including Genzyme, our joint venture partner.
Universities and public and private research institutions are also competitors.
While these organizations primarily have educational objectives, they may
develop proprietary technology and acquire patents that we may need for the
development of our drug products. We will attempt to license this proprietary
technology, if available. These licenses may not be available to us on
acceptable terms, if at all. We
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also directly compete with a number of these organizations to recruit
personnel, especially scientists and technicians.
We believe that established technologies provided by other companies, such as
laboratory and testing services firms compete with Glyko Inc.'s products and
services. For example, Glyko, Inc.'s FACE Imaging System competes with
alternative carbohydrate analytical technologies, including capillary
electrophoresis, high-pressure liquid chromatography, mass spectrometry and
nuclear magnetic resonance spectrometry. These competitive technologies have
established customer bases and are more widely used and accepted by scientific
and technical personnel because they can be used for non-carbohydrate
applications. Companies competing with Glyko, Inc. may have greater financial,
manufacturing and marketing resources and experience.
If We Fail To Manage Our Growth Or Fail To Recruit And Retain Personnel We May
Fail To Meet Our Business Objectives.
Our rapid growth has strained our managerial, operational, financial and other
resources. We expect this growth to continue. We recently entered into a joint
venture with Genzyme. If we receive FDA approval to market BM101, the joint
venture will be required to devote additional resources to support the
commercialization of BM101.
To manage expansion effectively, we need to continue to develop and improve our
operating and financial systems, sales and marketing capabilities. We cannot
guarantee that our systems, procedures or controls will be adequate to support
our operations or that our management will be able to manage successfully
future market opportunities or our relationships with customers and other third
parties.
Our future growth and success depend on our ability to recruit, retain, manage
and motivate our employees. The loss of key scientific, technical and
managerial personnel may delay our product development programs. Any harm to
our research and development programs would harm our business and prospects.
Because of the specialized scientific nature of our business, we rely heavily
on our ability to attract and retain qualified scientific, technical and
managerial personnel. In particular, the loss of Grant W. Denison, Jr.,
Chairman and Chief Executive Officer, John C. Klock, M.D., President and
Secretary or Christopher M. Starr, Ph.D., Vice President for Research and
Development would be detrimental to us. While each of these individuals is
party to an employment agreement with us, which includes financial incentives
for each of them to remain employed with us, these agreements each terminate in
June 2000 and we cannot guarantee that any of them will remain employed with us
beyond that time. In addition, these agreements do not restrict their ability
to compete with us after their employment is terminated. The competition for
qualified personnel in the biopharmaceutical field is intense. We cannot be
certain that we will continue to attract and retain qualified personnel
necessary for the development of our business.
If Lawsuits Are Successfully Brought Against Us, We May Incur Substantial
Liabilities.
We are exposed to the potential product liability risks inherent in the
testing, manufacturing and marketing of human drug treatments. We currently do
not maintain insurance against product liability lawsuits. Although we intend
to obtain product liability insurance within the next three months for our
clinical trials of BM102 and shortly before initiating clinical trials for our
other products, we cannot be certain that we will be able to obtain adequate
insurance coverage. In addition, we may be subject to claims in connection with
our current clinical trials for BM101 for which we have no insurance coverage.
We cannot be certain that if BM101 receives FDA approval, the product liability
insurance we will need to obtain in connection with the commercial sales of
BM101 will be available at a reasonable cost. In addition, we cannot be certain
that we can successfully defend any product liability
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<PAGE>
lawsuit brought against us. If we are the subject of a successful product
liability claim which exceeds the limits of any insurance coverage we may
obtain, we may incur substantial liabilities which would adversely affect our
earnings and financial condition.
If We Experience Any Problems With Year 2000 Compliance Our Operations May Be
Disrupted.
The following is intended to constitute "Year 2000 Readiness Disclosure" under
the Year 2000 Information and Readiness Disclosure Act of 1998.
Beginning in the year 2000, the date fields coded in certain software products
and computer systems will need to accept four digit entries in order to
distinguish 21st century dates from 20th century dates (commonly known as the
year 2000 problem). It is not clear what potential problems may arise as the
biopharmaceutical industry, and other industries, try to resolve this year 2000
problem.
It is possible that our currently installed computer systems, software products
or other business systems, or those of our suppliers or service providers,
working either alone or in conjunction with other software or systems, will not
accept input of, store, manipulate and output dates for the years 1999, 2000 or
subsequent years without error or interruption. We have formed a team to review
and resolve those aspects of the year 2000 problem that are within our direct
control and adjust to or influence those aspects that are not within our direct
control. The team has reviewed our software products, including those under
development, and determined that our software products do not use date data and
are year 2000 compliant. Our biopharmaceutical products do not have any year
2000 exposure. Based on representations from our vendors, the team has reviewed
the year 2000 compliance status of our major internal information technology
programs and systems used for administrative requirements and determined that
they are year 2000 compliant.
Some risks associated with the year 2000 problem are beyond our ability to
control, including the extent to which our suppliers and service providers can
address the year 2000 problem. The failure by a third party to adequately
address the year 2000 issue could have an adverse effect on their operations,
which could have an adverse effect on us. We are assessing the possible effects
on our operations of the possible failure of our key suppliers and providers,
contractors and collaborators to identify and remedy potential year 2000
problems.
Our Stock Price May Be Volatile And Your Investment In Our Stock Could Suffer A
Decline In Value.
Prior to this offering there has been no public market for our common stock.
The initial public offering price will be negotiated among the underwriters and
us and may not be indicative of prices that will prevail in the trading markets
after the offering. Accordingly, the initial public offering price will be
determined through negotiations between BioMarin and the underwriters. Our
valuation and the initial public offering stock price have no meaningful
relationship to current or historical earnings, asset values, book value or any
other criteria of value. The market price of the common stock after this
offering will fluctuate and may be higher or lower than the initial public
offering price due to factors including:
. Progress of BM101 and our other lead drug candidates through the
regulatory process, especially BM101 regulatory actions in the United
States
. Results of clinical trials, announcements of technological
innovations or new products by us or our competitors
. Government regulatory action affecting our drug candidates or our
competitors' drug candidates in both the United States and foreign
countries
. Developments or disputes concerning patent or proprietary rights
. General market conditions for emerging growth and biopharmaceutical
companies
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. Economic conditions in the United States or abroad
. Actual or anticipated fluctuations in our operating results
. Broad market fluctuations may cause the market price of our common
stock to fluctuate
. Changes in financial estimates by securities analysts
In addition, the value of our common stock may fluctuate because it is listed
on both the Nasdaq National Market and the Swiss Exchange.
In the past, following periods of large price declines in the public market
price of a company's securities, securities class action litigation has often
been initiated against that company. Such litigation could result in
substantial costs and diversion of management's attention and resources, which
would hurt our business. Any adverse determination in such litigation could
also subject us to significant liabilities.
If Our Officers, Directors And Largest Stockholder Elect To Act Together They
May Be Able To Control Our Management And Operations Because Together They
Control A Large Portion Of Our Common Stock.
After this offering, our directors and officers will control approximately
11.0% of the outstanding shares of our common stock. If the underwriters
exercise their over-allotment option in its entirety then the officers and
directors will own approximately 10.8%. Glyko Biomedical will own 33.3% of the
outstanding shares of capital stock after this offering. Three of six Glyko
Biomedical directors are officers or directors of BioMarin. As a result, after
this offering, due to their concentration of stock ownership, directors and
officers, together with Glyko Biomedical if they act together, may be able to
otherwise control our management and operations, and may be able to prevail on
all matters requiring a stockholder vote including:
. The election of all directors
. The amendment of charter documents or the approval of a merger, sale
of assets or other major corporate transactions
. The defeat of any non-negotiated takeover attempt that might
otherwise benefit the public stockholders
If Another Company Attempts To Acquire Us, Anti-Takeover Provisions In Our
Charter Documents And Under Delaware Law May Make The Attempt More Difficult.
Some provisions of our certificate of incorporation and bylaws and of Delaware
law could delay or make more difficult a merger, tender offer or proxy contest
involving us. Our board of directors will have after the closing of this
offering the authority to issue 1,000,000 shares of preferred stock and to
determine the terms of those shares of stock without any further action by the
stockholders. The rights of holders of our common stock are subject to the
rights of the holders of any such preferred stock that may be issued. The
issuance of preferred stock, while providing desirable flexibility in
connection with possible acquisitions and to the corporate purposes, could make
it more difficult for a third party to acquire a majority of the outstanding
voting stock of BioMarin.
BioMarin is incorporated in Delaware. Certain anti-takeover provisions of
Delaware law and our charter documents as in effect at the time of the closing
may make a change in control of BioMarin more difficult, even if a change in
control would be beneficial to the stockholders. Our anti-takeover provisions
include provisions in the certificate of incorporation providing that
stockholders' meetings may only be called by the board of directors and a
provision in the bylaws providing that the stockholders may not take action by
written consent. The board of directors may use these provisions to prevent
changes in the management and control of our company. Under applicable Delaware
law, our board of directors may adopt additional anti-takeover measures in the
future.
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Risks Related To This Offering
Shares Eligible For Future Sale: The Sale Of A Substantial Number Of Shares Of
Common Stock Could Cause The Market Price Of Our Common Stock To Decline.
After this offering, we will have a total of 34,109,513 shares of common stock
outstanding. If the underwriters exercise their entire over-allotment option we
will have 34,784,513 shares outstanding. The sale by our company or the resale
by stockholders of shares of our common stock in the public market after the
offering could cause the market price of the common stock to decline. The
federal securities laws impose restrictions on the ability of stockholders to
resell their shares of common stock. In addition, all of our stockholders prior
to this offering have agreed not to sell their shares for 180 days following
the offering. The 34,109,513 shares of common stock outstanding after this
offering will be available for resale on The Nasdaq National Market as follows:
<TABLE>
<CAPTION>
Number of Shares Date Available for Resale
---------------- -------------------------
<C> <S>
4,500,000 Immediately
1,973 181 days following the offering without volume limitations
23,674,207 181 days following the offering with volume and other
limitations
5,933,333 Various dates beginning 181 days following the offering
with volume limitations
</TABLE>
Beginning 181 days after the date of this prospectus all 29,609,513 shares of
common stock held by existing stockholders shall be eligible for sale on the
Swiss Exchange. Sales of these shares on the Swiss Exchange, however, will
still be subject to U.S. securities laws including Regulation S or Rule 144
which may, as applicable to each stockholder, restrict such sales.
After this offering, holders of 29,607,540 shares of the common stock may
require us to register their shares for resale under federal securities laws.
Registration of such shares would allow these stockholders to immediately
resell their shares on The Nasdaq National Market or the Swiss Exchange. The
market price of the common stock could decline if any of these sales were made
or even anticipated.
We also intend to file a registration statement following the offering to
permit the sale of approximately 5,450,000 shares of common stock under our
stock plans beginning 181 days after the offering. As of May 31, 1999, options
to purchase 3,773,226, shares of BioMarin common stock upon exercise of options
with a weighted average exercise price per share of $4.68 were outstanding.
Many of these shares are subject to vesting that generally occurs over a period
of four years following the date of grant however. All vested options are
subject to agreements with the underwriters not to sell such shares for 180
days after the offering.
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HISTORY OF OUR COMPANY
We were incorporated as a wholly-owned subsidiary of Glyko Biomedical in
October 1996. We began operations in March 1997 and were initially funded by
Glyko Biomedical. In June 1997, Glyko Biomedical licensed to BioMarin important
intellectual property for use in therapeutic applications.
Glyko Biomedical's original 100% ownership position in our company has been
reduced to 41.7% of the total shares of common stock outstanding before this
offering due to the following transactions:
. In October 1997, we sold 2,500,000 shares of our common stock to three
founders.
. In December 1997 and June and August 1998, we completed two private
placements of our common stock to independent investors and Glyko
Biomedical.
. In September 1998, we entered into a joint venture with Genzyme to
develop and commercialize BM101. As part of that transaction, Genzyme
purchased 1,333,333 shares of our common stock and committed to purchase
an additional $10.0 million of our common stock concurrent with this
offering.
. In October 1998, we purchased Glyko Biomedical's analytical and
diagnostic subsidiary, Glyko, Inc., by issuing 2,259,039 shares of our
common stock and assuming responsibility for employee stock options.
. In April 1999, we raised $26.0 million from the sale of convertible
notes in a private placement. Glyko Biomedical purchased $4.3 million in
principal amount of these convertible notes.
Upon the automatic conversion of the convertible notes at the completion of
this offering, the issuance of common stock to Genzyme concurrent with this
offering and the issuance of shares in this offering, Glyko Biomedical's
ownership interest will be reduced to 33.3%. Glyko Biomedical is currently, and
after completion of these transactions, will remain our largest stockholder.
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USE OF PROCEEDS
The net proceeds to us from the sale of 4,500,000 shares of common stock in
this offering at an assumed public offering price of $12.00 per share and the
sale of $10.0 million of common stock to Genzyme at the initial public offering
price in a private placement concurrent with this offering, are estimated to be
$58.7 million after deducting underwriting discounts and commissions and
estimated offering expenses payable by us. The net proceeds to us are estimated
to be $66.3 million if the underwriters' over-allotment option is exercised in
full.
We intend to use the net proceeds of this offering over the 12 months following
this offering for the following purposes:
. To fund our share of costs associated with the development and
commercialization of BM101. We estimate that this use will require
approximately $10.0 million.
. To fund research and development including clinical trials,
regulatory processes and process development, scale-up and start-up
of manufacturing activities for our other pharmaceutical product
programs. We estimate that this use will require approximately
$22.0 million.
. For research, development, clinical and commercial manufacturing
facilities, including related equipment. We estimate that this use
will require $26.0 million.
. General corporate purposes, including working capital. We estimate
that this use will consume the remaining proceeds.
A portion of the proceeds may also be used to acquire or invest in
complementary businesses or products or to obtain rights to use complementary
technologies.
We may require additional funds in the 12-month period following this offering
to accelerate product programs or to undertake new initiatives or enter into
collaborative arrangements.
The amounts and timing of our actual expenditures for each of these purposes
may vary significantly depending upon numerous factors, including the status of
our product development efforts, regulatory approvals, competition, sales and
marketing activities and market acceptance of our products. Pending use for
these or other purposes, we intend to invest the net proceeds of this offering
in short-term, investment-grade, interest-bearing securities. See "Risk
Factors--If We Fail To Obtain The Capital Necessary To Fund Our Operations We
Will Be Unable To Complete Our Product Development Programs."
DIVIDEND POLICY
We have never paid cash dividends on our common stock. We currently intend to
retain all of our future earnings to finance the growth and development of our
business. We do not intend to pay cash dividends on our common stock in the
foreseeable future.
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FORWARD-LOOKING STATEMENTS
This prospectus contains "forward-looking statements" as defined under
securities laws. These statements can be identified by the use of terminology
such as "believes," "expects," "anticipates," "plans," "may," "will,"
"projects," "continues," "estimates," "potential," "opportunity" and so on.
These forward-looking statements may be found in the "Summary," "Risk Factors,"
"Business," and other sections of this prospectus. Our actual results or
experience could differ significantly from the forward-looking statements.
Factors that could cause or contribute to these differences include those
discussed in "Risk Factors," as well as those discussed elsewhere in this
prospectus. You should carefully consider that information before you make an
investment decision.
You should not place undue reliance on these statements, which speak only as of
the date that they were made. These cautionary statements should be considered
in connection with any written or oral forward-looking statements that we may
issue in the future. We do not undertake any obligation to release publicly any
revisions to these forward-looking statements after completion of the offering
to reflect later events or circumstances or to reflect the occurrence of
unanticipated events.
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CAPITALIZATION
The following table sets forth our actual capitalization at March 31, 1999. The
pro forma capitalization gives effect to the sale of $26.0 million of
convertible promissory notes, net of issuance costs of $1.1 million. The as
adjusted data reflects (1) the sale of 4,500,000 shares of common stock by
BioMarin at an assumed initial public offering price of $12.00 per share; (2)
the sale of $10.0 million of common stock to Genzyme at the initial public
offering price in a private placement concurrent with the offering; and (3) the
issuance of 2,600,000 shares of common stock, excluding shares issuable upon
conversion of accrued interest, upon the automatic conversion of the
convertible promissory notes on the date of the final prospectus for this
offering, after deducting underwriting discounts and commissions and estimated
offering expenses:
<TABLE>
<CAPTION>
As of March 31, 1999,
----------------------------
Pro As
Actual Forma Adjusted
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Cash, cash equivalents and investments........... $ 3,829 $ 28,724 $ 87,444
======== ======== ========
Long-term liabilities (/1/)...................... $ 103 $ 26,103 $ 103
Stockholders' equity:
Common stock, $0.001 par value; 50,000,000
shares authorized, actual; 50,000,000 shares
authorized, pro forma; 75,000,000 shares
authorized, as adjusted; 26,176,180 shares
issued and outstanding, actual and pro forma;
34,109,513 shares issued and outstanding, as
adjusted (/2/)................................ 26 26 34
Preferred stock, $0.001 par value; no shares
authorized, actual and pro forma; 1,000,000
shares authorized, as adjusted; no shares
issued and outstanding actual, pro forma and
as adjusted................................... -- -- --
Additional paid-in capital..................... 48,358 48,358 131,965
Warrants....................................... 128 128 128
Notes receivable from stockholders............. (2,525) (2,525) (2,525)
Deferred compensation.......................... (1,472) (1,472) (1,472)
Accumulated deficit............................ (19,470) (19,470) (19,470)
-------- -------- --------
Total stockholders' equity................... 25,045 25,045 108,660
-------- -------- --------
Total capitalization....................... $ 25,148 $ 51,148 $108,763
======== ======== ========
</TABLE>
- -------------------------------
(/1/) See Notes 3 and 12 of Notes to BioMarin's Financial Statements.
(/2/) Excludes (1) 3,553,526 shares of common stock issuable upon exercise of
outstanding options at March 31, 1999 with a weighted average exercise
price of $4.51 per share, and (2) 801,500 shares of common stock
issuable upon exercise of outstanding warrants at an exercise price of
$1.00 per share.
21
<PAGE>
DILUTION
Our net tangible book value as of March 31, 1999, was $13,612,968 or $0.52 per
share of common stock. Pro forma net tangible book value per share represents
the amount of BioMarin's pro forma stockholders' equity, less intangible
assets, divided by the pro forma number of shares of common stock outstanding
as of March 31, 1999 after giving effect to:
. The application of the net proceeds from the sale on April 13, 1999
of $26.0 million of convertible promissory notes and the issuance of
2,600,000 shares of common stock, excluding shares issuable upon
conversion of accrued interest, upon the automatic conversion of the
convertible promissory notes on the date of the final prospectus for
this offering
. The application of the net proceeds from the sale of 4,500,000 shares
of common stock by BioMarin at an assumed initial public offering
price of $12.00 per share
. The sale of $10.0 million of common stock to Genzyme at the initial
public offering price in a private placement concurrent with this
offering
As of March 31, 1999, after giving effect to the items above, the pro forma net
tangible book value of BioMarin would have been $97,227,968 million or $2.85
per share.
This represents an immediate increase in net tangible book value to existing
stockholders of $2.33 per share and an immediate dilution to new investors of
$9.15 per share. The following table illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.................... $12.00
Net tangible book value per share as of March 31, 1999........... 0.52
Increase in net tangible book value per share attributable to new
investors....................................................... 2.33
----
Pro forma net tangible book value per share after the offering..... 2.85
------
Dilution per share to new investors................................ $ 9.15
======
</TABLE>
The following table enumerates the number of shares of common stock purchased,
the total consideration paid and the average price per share paid by our
existing stockholders. The following table also enumerates the number of shares
of common stock purchased and the total consideration paid, calculated before
deduction of underwriting discounts and commissions and estimated offering
expenses, and the average price per share paid by the new investors in this
offering.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average
------------------ -------------------- Price
Number Percent Amount Percent Per Share
---------- ------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders....... 29,609,513 86.8% $ 68,270,981 55.8% $2.31
New investors in this
offering................... 4,500,000 13.2 54,000,000 44.2 12.00
---------- ---- ------------ ---- -----
Total................... 34,109,513 100% $122,270,981 100% $3.58
========== ==== ============ ==== =====
</TABLE>
The table above is calculated on a pro forma basis as of March 31, 1999,
assuming the issuance of 2,600,000 shares of common stock upon conversion of
outstanding convertible promissory notes, excluding shares issuable upon
conversion of interest accrued on the notes.
The table above assumes no exercise of the underwriters over-allotment option
and no exercise of stock options outstanding at March 31, 1999. As of March 31,
1999, there were options outstanding to purchase a total of 3,553,526 shares,
at a weighted average exercise price of $4.51 per share. As of March 31, 1999,
there were warrants outstanding to purchase 801,500 shares of common stock at
an exercise price of $1.00 per share. See "Capitalization," "Management--
Compensation of Directors," "--Executive Compensation" and Notes 3 and 12 of
Notes to BioMarin's Consolidated Financial Statements.
22
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands, except per share data)
The selected consolidated balance sheet data of BioMarin Pharmaceutical Inc. as
of December 31, 1997 and 1998 and the statements of operations data for the
period from March 21, 1997 (inception) and the year ended December 31, 1998
presented below are derived from the consolidated financial statements of
BioMarin Pharmaceutical Inc. and subsidiaries, including Glyko, Inc. from
October 7, 1998, the date on which it was acquired by BioMarin. These
consolidated financial statements of BioMarin and subsidiaries have been
audited by Arthur Andersen LLP, independent public accountants. The
consolidated balance sheets as of December 31, 1997 and 1998, and the related
consolidated statements of operations for the period from March 21, 1997
(inception) to December 31, 1997, and the year ended December 31, 1998, and the
related report, are included elsewhere in this prospectus.
The selected financial data of Glyko, Inc. presented below are derived from the
financial statements of Glyko, Inc. These financial statements have been
audited by Arthur Andersen LLP, independent public accountants. The balance
sheets as of December 31, 1997 and October 7, 1998 and the statements of
operations for the years ended December 31, 1996 and 1997 and for the period
ended October 7, 1998, and the related report, are included elsewhere in this
prospectus. The balance sheets as of December 31, 1994, 1995 and 1996 and the
statements of operations for the years ended December 31, 1994 and 1995, are
not included in this prospectus.
The selected financial data set forth below as of March 31, 1999 and for the
three months ended March 31, 1998 and 1999 and the period from March 21, 1997
(inception) to March 31, 1999 are derived from the Company's unaudited
financial statements which are included elsewhere in this prospectus and which
include, in the opinion of the Company, all adjustments, consisting of normal
recurring adjustments, that are necessary for a fair presentation of its
financial position and the results of operations for those periods. Operating
results for the three months ended March 31, 1999 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1999.
The selected consolidated financial data set forth below contain only a portion
of BioMarin's and Glyko, Inc.'s financial statement information and should be
read in conjunction with the Consolidated Financial Statements of BioMarin
Pharmaceutical Inc. and the Financial Statements of Glyko, Inc. and related
Notes and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this prospectus.
<TABLE>
<CAPTION>
Period from Period from
March 21, 1997 Three Months Ended March 21, 1997
(Inception) to Year ended March 31, (Inception) to
December 31, December 31, ----------------------- March 31,
1997 1998 1998 1999 1999
-------------- ------------ ----------- ----------- --------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
BioMarin's Consolidated
Statements of
Operations Data:
Revenues................ $ -- $ 1,190 $ -- $ 1,104 $ 2,295
Operating costs and
expenses:
Cost of goods sold.... -- 108 -- 103 211
Research and
development.......... 1,914 10,502 1,108 3,820 16,237
General and
administrative....... 914 3,531 303 1,549 5,994
------- -------- ------- -------- --------
Loss from operations.... (2,828) (12,951) (1,411) (4,367) (20,147)
Interest income......... 65 684 92 154 904
Equity in loss of joint
venture................ -- (47) -- (180) (227)
------- -------- ------- -------- --------
Net loss................ $(2,763) $(12,314) $(1,319) $ (4,394) $(19,470)
======= ======== ======= ======== ========
Net loss per common
share, basic and
diluted................ $ (0.34) $ (0.55) $ (0.06) $ (0.17) $ (1.12)
======= ======== ======= ======== ========
Weighted average
common shares
outstanding.......... 8,136 22,488 20,567 26,176 17,441
======= ======== ======= ======== ========
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
As of December
31, As of
-------------- March 31,
BioMarin's Consolidated 1997 1998 1999
Balance Sheet Data: ------ ------- ----------
<S> <C> <C> <C> <C>
Cash, cash equivalents
and short-term
investments............ $6,888 $11,389 $3,829
Total current assets.... 7,507 12,819 5,526
Total assets............ 7,653 31,509 26,778
Long-term liabilities... -- 110 103
Total stockholders'
equity................. 7,380 29,395 25,045
</TABLE>
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------- Period From January 1
Glyko, Inc.'s Statements 1994 1995 1996 1997 to October 7, 1998
of Operations Data: ------- ------- ------- ------ ---------------------
<S> <C> <C> <C> <C> <C>
Revenues................ $ 883 $ 1,569 $ 1,331 $2,064 $1,160
Operating costs and
expenses:
Cost of products and
services............. 320 512 509 483 285
Research and
development.......... 1,141 1,096 1,015 633 613
Selling, general and
administrative....... 1,695 1,640 1,490 563 521
Other................. -- -- -- -- (166)
------- ------- ------- ------ ------
Income (loss) from
operations............. (2,273) (1,679) (1,683) 385 (93)
Other income (loss)..... (1) -- 87 (2) (1)
Interest income......... 18 30 18 12 28
------- ------- ------- ------ ------
Income (loss) before
income taxes........... (2,256) (1,649) (1,578) 395 (66)
Provision for income
taxes.................. -- -- -- -- --
------- ------- ------- ------ ------
Net income (loss)....... $(2,256) $(1,649) $(1,578) $ 395 $ (66)
======= ======= ======= ====== ======
</TABLE>
<TABLE>
<CAPTION>
As of December 31, As of
------------------------------ October 7,
1994 1995 1996 1997 1998
Glyko, Inc.'s Balance Sheet Data: ----- ------ ------- ------- ----------
<S> <C> <C> <C> <C> <C>
Cash, cash equivalents and short-
term investments.................. $ 79 $ 621 $ 211 $ 528 $ 24
Total current assets............... 438 1,098 478 867 407
Total assets....................... 619 1,212 588 988 503
Long-term liabilities.............. 93 77 3,652 3,804 --
Total stockholders' equity
(deficit)......................... (485) 449 (3,712) (3,316) 298
</TABLE>
24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the financial condition and results of operations
should be read in conjunction with our consolidated financial statements and
the financial statements of Glyko, Inc. and their notes appearing elsewhere in
this prospectus.
Overview
We are a developer of carbohydrate enzyme therapies for debilitating, life-
threatening, chronic genetic disorders and other diseases or conditions. Since
our inception on March 21, 1997, we have been engaged in research and
development activities, including preclinical studies, clinical trials and
clinical manufacturing, the establishment of laboratory and manufacturing
facilities, and administrative activities. BioMarin was incorporated in October
1996 as a wholly-owned subsidiary of Glyko Biomedical. BioMarin was funded by
Glyko Biomedical and began operations on March 21, 1997, the date of inception.
We have incurred net losses since inception and had an accumulated deficit
through March 31, 1999 of $19.5 million. Our losses have resulted primarily
from research and development activities and related administrative expenses.
We expect to continue to incur operating losses through at least the year 2000.
To date, we have not generated revenues from the sale of our drug candidates.
Our financial results may vary depending on many factors, including:
. The progress of BM101 in the regulatory processes and initial sales
activities
. The investment in manufacturing process development and in
manufacturing capacity for BM101 and other product candidates
. The acceleration of our other pharmaceutical candidates into
preclinical studies and clinical trials
. The progress of our additional research and development efforts
In September 1998, we established a joint venture with Genzyme for the
worldwide development and commercialization of BM101 for the treatment of MPS-
I. Under the agreement, our company and Genzyme are each required to make
capital contributions to the joint venture equal to 50% of the expenses
associated with the development and commercialization of BM101. We will share
equally in any profits generated from the sales of BM101.
On April 13, 1999, we issued $26.0 million of convertible promissory notes. The
notes will convert into 2,600,000 shares of our common stock, excluding shares
issuable upon conversion of interest, on the date of the final prospectus for
this offering at an initial conversion price, subject to adjustment, of $10.00
per share.
Acquisition of Glyko, Inc.
In October 1998, we acquired Glyko, Inc., a wholly-owned subsidiary of Glyko
Biomedical in a transaction valued at $14.5 million. Glyko, Inc. provides
products and services that perform carbohydrate analysis and medical diagnosis
to research institutions and commercial laboratories. As consideration for the
acquisition of all of the outstanding shares of Glyko, Inc., we: (1) issued
2,259,039 shares of common stock to Glyko Biomedical, (2) assumed the stock
options of Glyko, Inc. employees exercisable for 255,540 shares of our common
stock and (3) paid $500 in cash.
25
<PAGE>
Historical Results of Operations--BioMarin
Quarters ended March 31, 1998 and 1999
Revenue. BioMarin generated revenues of $1.1 million for the quarter ended
March 31, 1999 consisting primarily of $746,000 of revenues from the
BioMarin/Genzyme LLC joint venture. These revenues were derived from services
performed by BioMarin for the joint venture, $202,000 from the sale of Glyko,
Inc. products, $47,000 from the sale of Glyko, Inc. services and $109,000 of
other revenues. The $109,000 of other revenues were derived from grants
received from the federal government to fund various research projects. Glyko,
Inc. sells products and services to BioMarin at a 27% distributor discount.
BioMarin had no revenues in the quarter ended March 31, 1998. For further
explanation of the expenses incurred by BioMarin in connection with the joint
venture see note 1 to the consolidated financial statements.
Cost of Sales. In the quarter ended March 31, 1999, BioMarin recorded cost of
sales of $103,000 from the sale of Glyko, Inc. products and services. In the
comparable 1998 period, BioMarin had no sales and, consequently, no cost of
sales.
Research and Development. Research and development expenses were $3.8 million
in the quarter ended March 31, 1999, compared to $1.1 million in the comparable
1998 period. The increase was due primarily to the significant expansion of our
product programs, staff and facilities in the second half of 1998 and the first
quarter of 1999 in contrast to limited start-up research and development
activities in the first quarter of 1998. The increase includes a significant
increase in research and development salaries and benefits, a significant
increase in leased laboratory space and related facilities expenses and a
significant increase in technical materials and technical consulting expenses
related to our research programs. We expect to substantially increase our
research and development expenditures in future quarters to support the
continued development of BM101 and our other drug products.
General and Administrative. General and administrative expenses were $1.5
million in the quarter ended March 31, 1999 compared to $303,000 in the
comparable 1998 period. General and administrative expenses increased in the
first quarter of 1999 to support the significantly expanded scale of operations
in the second half of 1998 and the first quarter of 1999 compared to the
smaller administrative requirements in the comparable 1998 period. The increase
included a significant increase in salaries and benefits for administrative
staff, a significant increase in the facilities costs and an increase in
professional service fees. We expect to substantially increase our general and
administrative expenses, primarily administrative staffing and related
expenses, to support our increased scale of operations.
Interest Income. Interest income in the quarter ended March 31, 1999 was
$154,000 while interest income totaled $92,000 in the comparable 1998 period.
The higher interest income in the first quarter ended March 31, 1999 resulted
from higher cash balances available for investment in 1999 as a result of the
second private placement in mid 1998 and the Genzyme investment in the third
quarter of 1998.
Equity in Loss of Joint Venture. Equity in loss of joint venture was $180,000
in the quarter ended March 31, 1999. Because the joint venture did not begin
operations until September 4, 1998, there was no equity in loss of joint
venture for the comparable 1998 period. See note 1 to the consolidated
financial statements of BioMarin for details of accounting for the joint
venture.
Deferred Compensation. We record deferred compensation representing the
difference between the exercise price of options granted and the deemed fair
market value of the common stock at the time of grant. We recorded deferred
compensation of approximately $500,000 for the quarter ended March 31, 1999,
related to the grant of options. We will recognize deferred compensation as an
expense over the related four-year vesting period of the options. No deferred
compensation was recorded for the quarter ended March 31, 1998.
26
<PAGE>
The Period From March 21, 1997 (Inception) to December 31, 1997 and the Year
Ended December 31, 1998
In October 1998, we acquired Glyko, Inc. from Glyko Biomedical. The acquisition
was accounted for as a purchase. As a result, our consolidated statements of
operations data include the operations of Glyko, Inc. from October 7, 1998, the
date of the acquisition, through December 31, 1998.
Revenue. BioMarin generated revenues of $1.2 million in 1998 consisting
primarily of $837,000 of revenues from the BioMarin/Genzyme LLC joint venture
representing services performed by BioMarin for the joint venture, $138,000
from the sale of Glyko, Inc. products since its acquisition on October 8, 1998,
$112,000 from the sale of Glyko, Inc. services since its acquisition on October
8, 1998 and $103,000 of other revenues representing grants received from the
federal government to fund various research projects. Glyko, Inc. sells
products and services to BioMarin at a 27% distributor discount.There were no
revenues in the 1997 period. For further explanation of BioMarin's revenues see
note 1 to the consolidated financial statements.
Cost of Goods Sold. In 1998, BioMarin had cost of goods sold of $108,000 as a
result of the sale of Glyko, Inc. products. In the 1997 period, BioMarin had no
sales and, consequently, no cost of goods sold.
Research and Development. Research and development expenses were $10.5 million
in 1998, compared to $1.9 million in the 1997 period. The increase was due
primarily to a full year of BM101 expenses including 12 months of clinical
trials in 1998, compared to only one month of clinical trials in the 1997
period. In addition, we expanded significantly our product programs, staff and
facilities in 1998 in contrast to limited start-up research and development
activities in the 1997 period.
General and Administrative. General and administrative expenses were $3.5
million in 1998 compared to $914,000 in the 1997 period. General and
administrative expenses increased in 1998 to support the significantly expanded
scale of operations in 1998 compared to the smaller administrative requirements
in the shorter, start-up 1997 period. These increased administrative expenses
included significant increases in salaries and benefits for administrative
staff, an increase in facilities costs and an increase in professional service
fees.
Interest Income. Interest income in 1998 was $685,000 while interest income
totaled $65,000 in the 1997 period. The higher interest income in 1998 resulted
from higher cash balances available for investment in 1998 as a result of the
first private placement late in 1997, a second private placement in mid-year
1998 and the Genzyme investment in the third quarter of 1998.
Equity in Loss of Joint Venture. BioMarin entered the BM101 joint venture in
September 1998 and recorded a net loss of $47,000 for 1998. See note 1 to the
consolidated financial statements of BioMarin for details of accounting for the
joint venture.
Deferred Compensation. We recorded deferred compensation representing the
difference between the exercise price of options granted and the deemed fair
market value of the common stock at the time of grant. We recorded deferred
compensation of approximately $1.0 million for the year ended December 31, 1998
related to the grant of options. We will recognize deferred compensation as an
expense over the related four-year vesting period of the options.
In 1997 we recorded deferred compensation of $200,000. This $200,000
represented interest imputed at 9% on notes receivable of $2.5 million from
three executive officers, Grant W. Denison Jr., Dr. John Klock and Dr.
Christopher Starr. The executive officers used the principal of the notes to
purchase 2.5 million shares of BioMarin's common stock. The notes bear an
interest rate of 6% per year, expire on July 31, 2000, and are secured by the
underlying stock. Deferred compensation is amortized over the life of the
notes.
27
<PAGE>
Historical Results of Operations--Glyko, Inc.
Period from January 1, 1998 to the Date of Acquisition by BioMarin, October 7,
1998,
and Year Ended December 31, 1997
During most of 1997, Glyko, Inc. and BioMarin were commonly owned by Glyko
Biomedical. During this period, Glyko, Inc. and BioMarin shared facilities and
personnel for which expenses were accounted for separately by each company. The
year ended December 31, 1998, only includes Glyko, Inc.'s operations for the
nine month and seven day period from January 1, 1998 through October 7, 1998,
the date of Glyko, Inc.'s acquisition by BioMarin. The comparisons below, as
they relate to Glyko, Inc., are for twelve months of 1997 versus nine months
seven days of 1998.
Revenue. Revenues in the 1998 period were $1.2 million and consisted of sales
of products of $750,000, sales of services of $115,000 and other revenues
representing development fees of $25,000 and grant revenues of $270,000. Sales
of products include sales of chemical analysis kits and imaging systems and
sales of services include custom analytic services. The decline in product
revenues in 1998 was due to a decrease in sales volume and due to the sale of
Glyko, Inc. to BioMarin in October 1998. The decrease in other revenues was due
to development, technology and licensing fees received in 1997 that did not
recur in 1998.
Revenues in 1997 were $2.1 million and consisted of sales of products of $1.0
million, and sales of services of $186,000, other revenues of $704,000 and
grant revenues of $157,000. Other revenues include $25,000 in development fees
for the development of a heparin analyzer prototype, $429,000 in licensing fees
from a domestic distributor and $250,000 in diagnostic product distribution
fees from a foreign distributor.
Product revenues are recognized upon shipment of products. Service revenues are
recognized upon completion of services as evidenced by the transmission of
reports to customers. Other revenues, principally licensing, distribution and
development fees are recognized upon completion of contractual obligations,
such as, signing of contract, milestone payments and anniversaries from the
effective date.
Cost of Products and Services. Glyko, Inc.'s cost of products and services was
$285,000 in the 1998 period compared to $483,000 in 1997. The decrease in cost
of products and services was primarily due to lower sales resulting from the
shorter sales period of nine months in 1998 compared to 12 months in 1997. In
addition, lower manufacturing overhead costs due to the sharing of facilities
and related expenses with BioMarin, reduced the cost of products.
Research and Development. Glyko, Inc.'s research and development expenses in
the 1998 period were $613,000 compared to $633,000 in 1997. Even though the
absolute expenses decreased, the rate of spending was higher in the 1998 period
due to increased laboratory expenses related to new diagnostic products.
Selling, General and Administrative. Glyko, Inc.'s selling, general and
administrative expenses were $521,000 in the 1998 period compared to $563,000
in 1997. The decrease was due to the shorter period in 1998. Selling, general
and administrative expenses increased on an annualized basis due to a reversal
in 1997 of prior years' expenses accrued in Glyko Biomedical's statements of
operations which reduced these expenses in 1997 by $20,000 and a small increase
in advertising and sales travel in 1998.
Other Operating Expenses. At December 31, 1997, we had recorded an amount
payable to stockholder of $366,000 representing the amount claimed by the
stockholder relating to a facilities dispute with us. We had a cross-claim for
royalty income which would reduce the stockholder's claim. Glyko, Inc.'s other
operating expenses in the 1998 period represents the settlement of the claim at
a gain of $166,000. As of April 1998, the claimant no longer was a stockholder
of Glyko Biomedical.
Interest Income. Glyko, Inc.'s interest income in 1998 and 1997 of $28,000 and
$13,000, respectively, reflected earnings on cash invested in short term
interest bearing accounts. The increase in interest income in the 1998 period
resulted from higher cash balances available for investment compared to 1997.
Interest expense in 1998 and 1997 was immaterial.
28
<PAGE>
Years Ended December 31, 1997 and 1996
Revenue. Revenues in 1997 were $2.1 million and consisted of sales of products
of $1.0 million, and sales of services of $186,000, other revenues of $704,000
and grant revenues of $157,000. Sales of products include sales of chemical
analysis kits and imaging systems and sales of services include custom analytic
services. Other revenues include $25,000 in development fees for the
development of a heparin analyzer prototype, $429,000 in licensing fees from a
domestic distributor and $250,000 in diagnostic product distribution fees from
a foreign distributor.
Revenues in 1996 were $1.3 million and consisted of sales of products of $1.1
million, and sales of services of $211,000 and other revenues representing
grant revenues of $34,000.
The decline in product revenues in 1997 was due principally to the relocation
of Glyko, Inc.'s California facilities in February 1997 which caused delays in
fulfilling orders. Glyko, Inc.'s inability to fulfill orders immediately
before, during and immediately after the move prompted customers to place
orders with competing companies. Glyko, Inc. was unable to re-establish
relations with some of these former customers. The increase in other revenues
was due to new or revised development, technology and licensing agreements
negotiated in 1997.
Cost of Products and Services. Glyko, Inc.'s cost of products and services was
approximately $483,000 in 1997 compared to $509,000 in 1996. The decrease in
1997 was primarily due to reduced sales of products and services in 1997. Cost
of products and services as a percent of sales of 40% in 1997 was slightly
higher than the same percentage in 1996, which was 39%. This increase was due
to changes in the nature of the products Glyko, Inc. sold. In 1996 more FACE
imagers and systems were sold which yield a significantly higher profit margin
than chemical kits and services.
Research and Development. Glyko, Inc.'s research and development expenses in
1997 were $633,000 compared to approximately $1.0 million in 1996. The decrease
was due, in part, to the transfer of lab personnel in 1997 to BioMarin
programs. The decrease was also due, in part, to the reduction of salary and
benefits allocated to Glyko, Inc. for Dr. Christopher Starr, Vice President of
Research and Development, whose time allocated to Glyko, Inc. went from 100% in
1996 to 30% in 1997. One other full-time Ph.D. was shifted 100% to BioMarin in
1997. The reallocation of human resources during this period from Glyko, Inc.
to BioMarin was in response to changing staffing needs in both companies. Also,
in October 1996, Glyko, Inc. reduced its workforce, which included one full-
time lab technician, in an effort to reduce expenditures to offset declining
revenues.
Selling, General and Administrative. Glyko, Inc.'s selling, general and
administrative expenses were $563,000 in 1997, compared to $1.5 million in
1996. Marketing and promotional expenses were lower in 1997 due to the cut-back
of two full-time marketing positions in October 1996 in an effort to reduce
expenditures. General and administrative expenses were reduced due to the
reduction of rent expense resulting from Glyko, Inc.'s relocation to a smaller
facility in 1997 and due to the sublease rental income from BioMarin in 1997.
Rent expense in 1996 was offset by a write-off of the deferred rent balance of
$62,538 at December 31, 1996 related to a lease abandonment. For more detail
regarding this lease abandonment, see note 5 of the financial statements of
Glyko, Inc. General and administrative expenses were also reduced due to the
cut-back of administrative staff in October 1996 in an effort to reduce
expenditures plus the reduction of salary and benefits allocated to Glyko, Inc.
for Dr. John Klock, President, whose time allocated to Glyko, Inc. went from
100% in 1996 to 30% in 1997.
Interest Income. Glyko, Inc.'s interest income in 1997 and 1996 was $13,000 and
$18,000, respectively, as a result of interest earned on cash balances
available for short-term investment. Interest expense in 1997 and 1996 was
immaterial.
Liquidity and Capital Resources
We have financed our operations since our inception by the issuance of common
stock and convertible notes and the related interest income earned on cash
balances available for short-term investment. Since
29
<PAGE>
inception, we have raised aggregate net proceeds of $54.7 million. We were
initially funded by Glyko Biomedical with a $1.5 million investment. We have
since raised additional capital from the sale of common stock in private
placements, the sale of promissory notes convertible, according to their terms,
into common stock and an investment of $8.0 million by Genzyme as part of our
joint venture with them.
Our combined cash, cash equivalents and short-term investments totaled $3.8
million at March 31, 1999, a decrease of $7.6 million from December 31, 1998.
The primary use of cash during the quarter ended March 31, 1999 was to finance
operations and to purchase property and equipment. For the quarter ended March
31, 1999, operations used $4.1 million, we purchased $2.8 million of property,
equipment and leasehold improvements and invested $641,000 in the joint
venture.
From our inception through March 31, 1999, we have purchased approximately $9.3
million of property, equipment and leasehold improvements. We expect that our
investment in property, equipment and leasehold improvements will increase
significantly during the next two years because we will provide facilities and
equipment for an increased number of staff and increase manufacturing capacity.
Glyko, Inc. plans to expand its analytic product line by developing new enzymes
and enhancements of its FACE system. Glyko, Inc. anticipates that it will spend
$1.1 million over the next 12 months to complete these analytical product
development projects currently in process.
Glyko, Inc. also plans to expand its diagnostic product line by developing new
tests using its carbohydrate analytic technologies. Glyko, Inc. anticipates
that it will spend $1.2 million over three years to complete the diagnostic
product development projects currently in process.
We have made and plan to make substantial commitments to capital projects,
including the BM101 manufacturing facility in Torrance, California, a
manufacturing facility in Novato, and new research and development facilities
in Novato. If all product programs proceed on schedule these current capital
commitments and plans for future capital requirements combined will require
approximately $32.0 million in the 18 month period beginning in January 1999.
In September 1998, we established a joint venture with Genzyme for the
worldwide development and commercialization of BM101 for the treatment of MPS-
I. We will share expenses and profits from the joint venture equally with
Genzyme. Genzyme invested $8.0 million upon signing the agreement and has
agreed to purchase $10.0 million of common stock at the initial public offering
price in a private placement concurrent with this offering. Genzyme has
committed to pay us an additional $12.1 million upon approval of the biologics
license application for BM101.
On October 7, 1998, we purchased Glyko, Inc. from Glyko Biomedical for an
aggregate purchase price of $14.5 million. The purchase price was paid for with
2,259,039 shares of our common stock, our assumption of certain stock options
held by Glyko, Inc. employees which were exercisable into a maximum of 255,540
shares of our common stock and $500 in cash.
On April 13, 1999, we sold a total of $26.0 million of convertible promissory
notes. The notes are convertible into our common stock at an initial conversion
price of $10.00 per share, subject to proportional adjustment in the event of
stock splits or adjustments, reverse stock splits or redemption of any shares
of our common stock. These notes bear an interest rate of 10% annually. These
notes also have weighted average anti-dilution protection for subsequent
private placements of equity securities of BioMarin made after the date of
issuance of the notes but before their conversion, subject to limited
exemptions.
In May 1999, Glyko, Inc. acquired key assets of the Biochemical Research
Reagent Division of Oxford GlycoSciences Plc. The acquisition was made to
increase Glyko, Inc.'s product offerings and was valued from $1.5 million to
$2.1 million, depending on the future sales of the acquired products.
We expect our current funds including the proceeds of this offering to last for
a period of approximately 12 months following this offering.
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Until we can generate sufficient levels of cash from our operations, we expect
to continue to finance future cash needs through:
. The sale of equity securities
. Equipment-based financing
. Collaborative agreements with corporate partners
We do not expect to generate positive internal cash flow for at least the next
two years because we expect to increase operational expenses and manufacturing
investment for the joint venture and to increase research and development
activities, including:
. Preclinical studies, clinical trials and regulatory review
. Commercialization of our drug candidates
. Development of manufacturing operations
. Process development
. Scale-up of manufacturing facilities
. Sales and marketing activities
We anticipate a need for additional financing to fund the future operations of
its business, including the commercialization of our drug candidates currently
under development. We cannot assure you that additional financing will be
obtained or, if obtained, will be available on reasonable terms.
Our future capital requirements will depend on many factors, including, but not
limited to:
. The progress of its research and development programs
. The progress of preclinical studies and clinical trials
. The time and cost involved obtaining regulatory approvals
. Scaling up, installing and validating manufacturing capacity
. Competing technological and market developments
. Changes and developments in collaborative, licensing and other
relationships
. The development of commercialization activities and arrangements
. The leasing and build-out of additional facilities
. The purchase of additional capital equipment
We plan to continue our policy of investing available funds in government
securities and investment grade, interest-bearing securities, primarily with
maturities of one year or less. We do not invest in derivative financial
instruments, as defined by Statement of Financial Accounting Standards No. 119.
At December 31, 1998, we had tax net operating loss carryforwards of
approximately $24.1 million for federal income tax purposes and $12.4 million
for California income tax purposes. At December 31, 1998, we had research tax
credits of approximately $1.8 million for federal purposes and $580,000 for
California, which will begin to expire in the year 2012. The Tax Reform Act of
1986 contains provisions that may limit the net operating loss carryforwards
and research and development credit available in any given year should certain
events occur, including sale of equity securities and other changes in
ownership. Based on the $14.5 million purchase price of Glyko, Inc., the
amounts available may be limited to approximately $730,000 per year. The
acquisition of Glyko, Inc. and the related issuance of stock represented a
change of ownership under these provisions. In addition, the net operating loss
carryforwards and research tax credits related to Glyko, Inc. can only be used
to offset future taxable income and tax, respectively, if any, of Glyko, Inc.
The net operating
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losses and research tax credits related to Glyko, Inc. at December 31, 1998
were approximately $4.6 million and $701,000 respectively. We cannot assure you
that we will be able to use our net operating loss carryforwards and credits
before expiration.
Impact of Year 2000
The following constitutes "Year 2000 Readiness Disclosure" under the Year 2000
Information and Readiness Disclosure Act of 1998.
We are aware of the potential problems associated with computer programs and
systems that use only two digits to identify the year in the date field.
Application and system programs may be unable correctly to process date
information for dates after December 31, 1999. This year 2000 defect could
cause the disruption or failure of computer systems. The year 2000 defect could
affect both our internal information technology systems and other functional
systems that use embedded computer programs for control or other purposes. The
defect could also affect the information technology and other functional
systems of suppliers of products and services to us. The defect could affect
the overall economy and have a significant impact on us.
We have formed a team to review and resolve those aspects of the year 2000
problem which are within our direct control and adjust to or influence those
aspects which are not within our direct control. The team has reviewed our
software products (including those under development) and determined that our
software products do not use date data and are year 2000 compliant. Our
biopharmaceutical products do not have any year 2000 exposure. The team has
reviewed the year 2000 compliance status of our major internal information
technology programs and systems used for administrative requirements and
determined that such systems are year 2000 compliant. We have reviewed the
computer systems used to control our analytical instruments and production
equipment. Due to the recent design of our equipment, the embedded computers
are year 2000 compliant. We believe that the expense of repairing or replacing
any undetected year 2000 defects will not be material. We believe that we can
resolve our significant internal year 2000 compliance issues before the year
2000 with expenditures that are currently estimated not to be material. If we
do not achieve on a timely basis year 2000 compliance for our internal systems,
our operations and business could be adversely affected.
With respect to our suppliers, we do not currently process orders, payments and
other business communications electronically from computer to computer.
However, if our suppliers' and ultimate customers' own systems are not yet year
2000 compliant, their disruptions could have a significant direct or indirect
impact on our operations and business. The following consequences of the year
2000 problem could disrupt our business:
. Financial institutions may not be able to process checks, accept
deposits, provide records, process wire transfers, provide stock
ownership and transfer records or facilitate many other financial
transactions and services.
. Suppliers may not be able to process orders, manufacture products,
deliver in accordance with production schedules, or in general
provide the current level of timely products and services.
. Voice and data communication systems used by us and our customers and
suppliers might be disrupted.
. Health care suppliers and third-party payors may be unable to process
patient records, add to or modify the content of their pharmacy
authorizations, accept or make payments, and handle the many other
data requirements of the modern health care system. The added costs
for back-up systems, for temporary or emergency fixes and the ongoing
requirements to handle critical functions on a timely basis combined
with the resultant managerial distractions may delay the review and
delay our introduction of new drugs and therapeutic practices.
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BUSINESS
Overview
BioMarin is a leading developer of carbohydrate enzyme therapies for
debilitating, life-threatening, chronic genetic disorders and other diseases
and conditions. In October 1998, we completed the primary evaluation for the
pivotal clinical trial of our lead drug product, BM101, for the treatment of
mucopolysaccharidosis-I or MPS-I. Based on the data from that trial, we intend
to complete the filing of a biologics license application with the FDA in the
second half of 1999. We established a joint venture with Genzyme for the
worldwide development and commercialization of BM101.
MPS-I is a life-threatening genetic disorder caused by the lack of a sufficient
quantity of the enzyme alpha-L-iduronidase, which affects about 3,400 patients
in developed countries, including approximately 1,000 in the United States and
Canada. Patients with MPS-I have multiple debilitating symptoms resulting from
the buildup of carbohydrates in all tissues in the body. These symptoms include
delayed physical and mental growth, enlarged livers and spleens, skeletal and
joint deformities, airway obstruction, heart disease and impaired hearing and
vision. Most children with MPS-I will die from complications associated with
the disease before adulthood.
BM101 is a specific form of alpha-L-iduronidase that is intended to replace a
deficiency of alpha-L-iduronidase in MPS-I patients. In October 1998, we
completed the primary evaluation period for our pivotal clinical trial for
BM101. This clinical trial treated ten patients with MPS-I for a period of six
months at five medical centers in the United States. BM101 met the primary
endpoints in its pivotal trial, reducing liver or spleen sizes in eight of ten
patients and lowering urinary carbohydrate levels in all ten patients. In
addition, BM101 met various secondary endpoints in each of the patients.
Secondary endpoints are measurements intended to determine whether primary
endpoints are reasonably likely to predict clinical benefit. We received notice
from the FDA that our BM101 will receive fast track designation for the
treatment of the more severe forms of MPS-I, which account for approximately
60% of all cases. The FDA has granted BM101 an orphan drug designation giving
us exclusive rights to market BM101 to treat MPS-I for seven years from the
date of FDA approval if BM101 is the first drug to be approved by the FDA for
the treatment of MPS-I.
Carbohydrate-active Enzyme Therapeutics
Carbohydrates are a fundamental class of biological molecules that play diverse
and critical roles in maintaining the health and functional integrity of all
cells and tissues. Enzymes are proteins that act as catalysts for many vital
biological reactions. Enzymes that act on carbohydrates, called carbohydrate-
active enzymes, cleave, construct or otherwise modify carbohydrates to regulate
their production, maintenance and degradation. These carbohydrate-active
enzymes are critical to a wide range of functions within the body, including
cell proliferation, digestion, blood clotting, immune response, wound healing,
conception and control of infection and inflammation. The body, when
functioning normally, produces appropriate quantities of carbohydrate-active
enzymes to perform these functions. Carbohydrate-active enzymes have the
potential to play an important therapeutic role in certain diseases or
disorders by either replacing deficient enzymes or supplementing the enzymes
that are naturally present in the body.
Role of Carbohydrate-active Enzymes in Genetic Diseases
We believe that there are more than 70 genetic diseases that are known to be
caused by the deficiency of a single enzyme. In these genetic diseases the body
fails to produce sufficient or functional quantities of certain enzymes. Most
of these genetic diseases are rare, affecting only a few hundred to a few
thousand people in the United States. Examples of such genetic diseases include
Gaucher disease, hemophilia and MPS disorders.
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Currently, only eight genetic diseases have effective treatments, and five of
these eight are treated through enzyme replacement. Historically, enzyme
replacement therapy has been limited by the inability of manufacturers to
produce the correct form of enzymes with sufficient quantities. Production of
sufficient quantities to support a therapeutic program has now become possible
with advancements in recombinant production methods. Recombinant production
methods apply foreign DNA to cells to produce enzymes the cells would not
naturally produce. In 1998, the worldwide sales of pharmaceuticals used to
treat genetic diseases by enzyme replacement were approximately $2.7 billion.
Genzyme's treatment for Gaucher disease is an example of a treatment using
enzyme replacement therapy. Gaucher disease, which afflicts approximately 5,000
people in the developed world, is caused by a deficiency in the enzyme
glucocerebrosidase. In April 1991, following a single clinical trial involving
13 patients, Genzyme's treatment for Gaucher disease was approved for marketing
by the FDA. Approximately 2,400 patients worldwide are using Genzyme's
treatment for Gaucher disease. Sales of Genzyme's treatments for Gaucher
disease, Cerezyme(R) enzyme and Ceredase(R) enzyme, generated total revenue of
$411.1 million in 1998.
Other Therapeutic Roles for Carbohydrate-active Enzymes
Carbohydrate-active enzymes can also treat conditions other than those caused
by genetic diseases, such as burns and infections. Supplementing the amount of
enzymes naturally present in a patient's body or adding a new enzyme can enable
or enhance the body's ability to respond to certain conditions and accelerate
the healing process. For example, using a topical enzymatic formulation to
supplement naturally occurring enzymes may speed the healing process of burns
by removing dead tissue. Adding or increasing the concentration of an enzyme
that selectively targets and kills microbes may help the body fight infection.
Business Strategy
Our business strategy is to develop therapeutic products to treat a variety of
diseases and conditions involving carbohydrates. We use our proprietary
carbohydrate-active enzyme technology to develop these products. The principal
elements of this strategy are:
. Focus on Drug Candidates with Known Biology and Low Technical
Risk. We identify potential products that treat serious diseases or
conditions where the biological role of carbohydrate-active enzymes
is well understood and the method of treatment is straightforward. As
part of this strategy, we are initially focusing on treating genetic
diseases which are caused by the deficiency of a single enzyme such
as MPS-I and MPS-VI. We believe that the clinical trial we must
perform in order to obtain approval for our products from the FDA
will be of short duration. The clinical trial patient evaluation
period for MPS-I was six months, although the patients will continue
to be monitored for an additional 18 months.
. Select Products that We Believe May Be Developed and Approved
Quickly. We are initially developing therapeutic products for serious
diseases or conditions that we believe will require limited time and
capital to conduct preclinical studies and small numbers of patients
for clinical trials. Because many of our potential drug products are
intended for serious or life-threatening conditions and may address
unmet medical needs for these conditions, we believe that they will
qualify for fast track designation by the FDA. In September 1998, we
received from the FDA fast track designation for BM101 for the
treatment of Hurler and Hurler-Scheie syndromes, which are the more
severe syndromes within MPS-I.
. Pursue Well-defined, Niche Markets. We develop potential drug
products to treat small patient populations for diseases for which
there are currently no effective therapies.
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Additionally, we focus on niche markets in which we believe we will
be reimbursed for our products at favorable rates. We believe we will
receive orphan drug designation from the FDA for many of our
products, providing us with market exclusivity for our drug
formulation for seven years if we are first to gain product approval
to treat the specific disease.
. Develop Direct Sales and Marketing Organization for Select
Markets. We will be able to directly market some of our potential
drug products because the conditions they treat have small patient
populations, for which the treatments are often concentrated in
specialized institutions, and because of the existence of patient
support groups for many of our initial disease targets. We may
develop a small sales and marketing organization to target markets
where we believe we can effectively reach the targeted patient and
physician groups. Alternatively, we may pursue strategic
collaborations with biopharmaceutical or other companies to develop
products targeted at markets with larger patient populations.
. Enhance Enzymatic Expertise through Glyko, Inc. Glyko, Inc.
contributes its technical knowledge and expertise in cloning enzymes
to our technology base. Glyko, Inc. provides access to cloning
assets, including cell lines, which are colonies of cells with a
common genetic make-up. In addition, Glyko, Inc.'s research and
development in glycobiology, the study of carbohydrates in living
organisms, provides us with a strategic opportunity to keep current
with new developments and opportunities in that field.
Products Under Development
Mucopolysaccharidosis Disorders
MPS disorders are a group of seriously debilitating genetic disorders
characterized by the accumulation in the body of mucopolysaccharides, which are
also known as glycosaminoglycans or GAGs. GAGs are complex carbohydrates
synthesized by all cells in the body. At least ten enzymes are required for the
complete breakdown of GAGs. The normal breakdown of GAGs is blocked if any one
of these enzymes is not present in sufficient quantity.
Ten possible enzyme deficiencies cause ten distinct disorders. Patients with
MPS are usually diagnosed by six to 24 months of age. MPS disorders are
progressive diseases that frequently lead to early death. During the course of
the disease, the build-up of GAGs in all cells of the body results in one or
more of the following symptoms:
. Inhibited growth
. Delayed mental or physical development
. Enlarged liver and spleen
. Skeletal deformities
. Coarse facial features
. Upper airway obstruction
. Joint deformities and reduced range of motion
. Heart disease
. Impaired vision and hearing
. Sleep disorders
. Malaise and reduced endurance
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MPS-I. MPS-I is a genetic disorder caused by the deficiency of the enzyme
alpha-L-iduronidase. About 3,400 patients in developed countries have MPS-I,
including about 1,000 in the United States and Canada. If untreated, almost
all children diagnosed with the more severe forms of MPS-I will die before
reaching adulthood. Patients with milder forms of MPS-I still exhibit many of
the symptoms described above. Currently, the only available treatment for MPS-
I is a bone marrow transplant. However, few patients find an appropriate bone
marrow donor. Of the patients that find appropriate donors, many choose not to
receive the therapy because of its serious side effects.
BM101. We are developing a specific form of alpha-L-iduronidase, designated
BM101, for the treatment of MPS-I. BM101 treats MPS-I by replacing a deficiency
in alpha-L-iduronidase. In September 1998, we established a joint venture with
Genzyme for the worldwide development and commercialization of BM101. Until now,
enzyme replacement therapy for MPS-I has been impractical because no one has
been able to manufacture adequate supplies of alpha-L-iduronidase with the
proper structure. The proper structure is essential to ensure a therapeutic
effect at relatively low doses. Using production and purification processes
licensed by us, we are able to produce sufficient quantities of BM101 with the
proper structure.
In 1994, preclinical studies of BM101 were conducted using dogs with canine
MPS-I. Dogs with canine MPS-I have symptoms similar to those exhibited by
humans with MPS-I. BM101 diminished canine MPS-I symptoms in the dogs. Stored
carbohydrate material was cleared from the dogs' major organs, including their
brains. This scientific research, which we have licensed, was performed at
Harbor-UCLA Research and Education Institute.
In October 1998, we completed the primary evaluation period for what we believe
is our pivotal clinical trial for BM101. Initiated in December 1997, this
clinical trial treated ten patients with MPS-I for a period of six months at
five medical centers in the United States. Patients were treated with a slow
intravenous infusion of BM101 once a week at a dose of 125,000 units per
kilogram of patient weight.
The primary endpoints of the trial were a reduction in liver or spleen size and
a reduction in urinary GAG levels. Eight of the ten patients achieved the
primary endpoint goal of a 20% reduction of liver size within the six-month
evaluation period. Of the two patients who did not achieve the targeted liver
reduction, one patient achieved a liver size in the normal range and the second
patient, who had hepatitis at the end of the six-month period, achieved the 20%
reduction after the six-month period. Five of the ten patients achieved a 20%
reduction in spleen size. All of the ten patients achieved the primary endpoint
goal of at least a 50% reduction in urinary GAG levels. We believe that these
clinical results achieved the primary endpoints of the clinical trial.
Each patient with MPS-I presents us with a different mix of clinical symptoms.
We tested each patient at intervals throughout the six-month evaluation period
measuring a variety of secondary endpoints to determine whether the primary
endpoints are reasonably likely to predict clinical benefit. The secondary
endpoints we used included joint disease, eye disease and cardiac function.
Additional measures of efficacy included sleep apnea and airway evaluations,
central nervous system abnormalities, endurance and fatigue, and evaluations of
bone. Except for the evaluations of the patient's bones, where no improvement
was expected due to the short duration of the trial, most patients who
exhibited physical symptoms of the disease achieved improvement in those
symptoms during the course of the evaluation period for each of the secondary
endpoints and additional clinical measures of efficacy. We believe that the
clinical results on secondary endpoints and additional measures of efficacy
demonstrate adequately that the primary endpoints were valid measures of the
clinical benefit of BM101.
During the six-month evaluation period, four of the ten patients experienced
immune responses to the enzyme, with one patient exhibiting symptoms of the
immune response. No long term effects of these immune responses have been
observed at this time. A few patients experienced side effects, primarily
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hives in five patients, which may have been related to BM101. No patients had
life-threatening allergic reactions. Of the events that probably were related
to BM101, the symptoms occurred during the infusions only, were manageable with
medications, and did not impact the health or well-being of the patient outside
the administration setting. Neither clinical nor laboratory evaluations showed
any harmful effect of BM101 therapy.
On behalf of the joint venture, we intend to complete the filing of our
biologics license application with the FDA in the second half of 1999. We
believe that data from our recently completed pivotal clinical trial of BM101
forms sufficient basis for us to file a biologics license application for
BM101. We also believe that this biologics license application will be approved
based on that data. We base our belief on the fact that the clinical trial
satisfied the primary endpoints. In order to deem the primary endpoints met,
six of ten patients must satisfy the endpoint. In the trial, ten of ten
achieved the endpoint for urinary GAG reduction and eight of ten achieved the
endpoint for organ size reduction. In addition, improvements by the patients
with regard to the secondary endpoints indicated that the primary endpoints
were reasonably likely to predict clinical benefits and treatment efficacy of
BM101. However, the FDA may require additional clinical trials and BM101 may
not be approved for marketing.
Assuming approval, the joint venture plans to complete the validation of the
primary endpoints from the pivotal clinical trial by the long-term monitoring
of the original trial patients and the continuing assessment of the efficacy of
treatment with BM101. The ten original trial patients will be treated and
monitored for an additional 18 months. The parameters for this follow-on
clinical study are expected to include:
. Patient growth in height and weight
. Cardiac function
. Pulmonary hypertension
. Corneal clouding
. Visual acuity
. Joint range of motion
. Airway function
. Endurance and fatigue
We received orphan drug designation for BM101 from the FDA. This orphan drug
designation gives us exclusive rights to market a product using alpha-L-
iduronidase to treat MPS-I in the United States for seven years if we receive
FDA approval of BM101 before any other company receives approval of alpha-L-
iduronidase to treat MPS-I. In addition, we received notice from the FDA that
our BLA for BM101 for the treatment of Hurler and Hurler-Scheie syndromes, which
are the two more severe MPS-I disorders and account for approximately 60% of
MPS-I patients, will receive fast track designation. Drugs that show a
potential to address an unmet medical need for a serious or life threatening
disease may be eligible to receive fast track designation. Fast track
designation does not guarantee a faster approval. The FDA may still require
additional studies or data regarding BM101 which may delay approval and
subsequent commercial sales. See "Risk Factors--If We Fail To Obtain Regulatory
Approval To Commercially Manufacture Or Sell Any Of Our Future Drug Products, Or
If Approval Is Delayed, We Will Be Unable To Generate Revenue From The Sale Of
Our Products--If Our Joint Venture With Genzyme Were Terminated, Our Ability To
Commercialize BM101 Would Be Delayed."
At the request of the FDA, the joint venture will conduct a clinical trial to
investigate the effect of BM101 on the prevention or stabilization of the
progressive mental dysfunction experienced by patients with Hurler Syndrome,
the most severe form of MPS-I. The trial, which will enroll six patients and
will
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last two years, is expected to begin in the fourth quarter of 1999. This Hurler
trial for mental dysfunction is independent of the pivotal trial that is
intended to support the biologics license application submission for BM101. At
the end of October 1998, we presented summary data of this clinical trial at
the American Society for Human Genetics.
MPS-VI. MPS-VI, also known as Maroteaux-Lamy syndrome, is a genetic disorder
caused by a deficiency of the enzyme N-acetylgalactosamine 4-sulfatase, which
is designated BM102. Of approximately 1,100 patients suffering with MPS-VI in
the developed world, about 340 are in the United States and Canada. Patients
with MPS-VI have symptoms similar to those for MPS-I. However, MPS-VI patients
do not suffer mental retardation. If untreated, the average life span of MPS-VI
patients is estimated to be between ten years in the severe form to 30 years in
the mild form. MPS-VI has been treated by bone marrow transplants. However, few
patients find an appropriate bone marrow donor. Of the patients who find an
appropriate donor, many choose not to receive a bone marrow transplant because
of its serious side effects.
BM102. We are developing BM102 for the treatment of MPS-VI. BM102 may treat
MPS-VI by replacing a deficiency in the enzyme N-acetylgalactosamine 4-
sulfatase.
During 1994 through 1996, preclinical studies of BM102 were conducted on cats
with feline MPS-VI. Cats with MPS-VI have physiological characteristics and
clinical symptoms similar to those exhibited by humans with MPS-VI. We are
conducting additional studies in cats using alternative dosing regimens to
better match the likely dosing regimen in humans. We believe that preclinical
studies conducted on over 50 afflicted cats treated with BM102 will provide a
sufficient basis to support an investigational new drug application for BM102.
We must receive approval of our investigational new drug application before
beginning clinical trials.
In August 1998, we licensed rights to use data on feline MPS-VI and a cell line
for BM102 from Women's and Children's Hospital in Adelaide, Australia. We are
developing improved production and purification processes for BM102, first in
clinical and then in commercial processes. We received an orphan drug
designation for BM102 in February 1999 to treat MPS-VI and intend to file an
investigational new drug application for the use of BM102 to treat MPS-VI in
the fourth quarter of 1999. We cannot assure you that the FDA will allow
clinical trials based on the limited testing on cats conducted to date. We will
make a request to the FDA that a single clinical trial with a small number of
MPS-VI patients is sufficient to support a biologics license application.
However, the FDA may require additional preclinical testing, clinical trials or
additional patients or trial duration before approving BM102 if it is ever
approved.
Enzyme Replacement Therapy in Other Genetic Diseases
We intend to develop additional enzyme replacement therapies for other genetic
diseases. We have identified genetic diseases that we believe will respond well
to enzyme replacement therapy. We are only developing enzyme replacement
therapies that we believe qualify for orphan drug designation. We are in the
process of cloning and producing enzymes for additional potential genetic
diseases. Due to the small patient populations for these other genetic diseases
and the known biologic mechanism of proposed enzyme replacement therapies, we
believe that the size and scope of our human clinical trials for future genetic
diseases may be similar in size and scope to those for MPS-I.
Other Diseases And Conditions
Burns
In 1997, approximately 65,000 patients in the United States were admitted to
hospitals with burns. Approximately 20% of these patients had very severe burns
that destroyed all layers of the skin, referred to as full-thickness or third-
degree burns. Full-thickness burns require major skin grafts. This
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typically requires admission to one of approximately 150 major burn centers in
the United States. Full-thickness burns are treated by removing unhealthy and
dead tissue, a process called debridement, to prevent infection and to prepare
the burned site for skin grafting or other therapy. Currently, full-thickness
burns are debrided by multiple surgical procedures that are complicated by loss
of blood, loss of healthy tissue, continued trauma and pain and scarring. In
many instances, surgery must be delayed in severely compromised patients.
Additionally, certain parts of the body, such as the hands and face, are
difficult to treat by this method.
A limited number of topical debridement products are available as an
alternative to surgery. Topical enzymatic products, however, have not been
widely accepted by physicians because they are ineffective and often cause the
patient pain and cause the patient to bleed.
A significant part of human skin is made up of carbohydrates and proteins. We
believe that there is an opportunity for more selective enzyme debridement
products that have greater specificity at digesting carbohydrates or proteins
in dead tissue. We currently have two products under preclinical development
for the treatment of full-thickness burns. We intend to file an investigational
new drug application for one of these products in the second half of 1999. We
will determine which of the products we will file the investigational new drug
application for based on the activity and safety profiles obtained in
preclinical studies that are in progress.
Based on discussions with general wound specialists, we believe that if the
products successfully debride full-thickness burns, they will effectively
debride other types of wounds as well.
BM201. BM201 is a carbohydrate-specific enzyme therapeutic which we developed
in mice in a model developed at the University of California at San Diego, or
UCSD. BM201 accelerated the rate of debridement of burn wounds without signs of
topical or systemic toxicity. In addition, BM201 significantly reduced the
total time in which grafts were successfully made and wounds closed when
compared to phosphate buffered saline, which was used as a control, and to
selected topical enzymatic products. The total time required for the
debridement using BM102 and graft take was significantly less than the total
time for debridement using standard surgical debridement techniques. The enzyme
is now being evaluated for its ability to debride wounds and influence graft
acceptance in a more stringent model of full-thickness burn treatment in pigs
at Vanderbilt Medical Center.
BM202. BM202 is an enzyme that acts on proteins discovered by W.R. Grace & Co.
Upon review of the data from preclinical studies that were conducted by W.R.
Grace, we obtained a three-year option in May of 1998 to obtain an exclusive
license to BM202. In preclinical studies supported by W.R. Grace, BM202 was
shown to safely debride full-thickness burns in pigs, and accelerate wound
healing in less severe lesions. In studies sponsored by us and conducted at
UCSD, BM202 debrided wounds and allowed graft acceptance in mice with full-
thickness burns. BM202 is now being assessed for its compatibility to allow for
graft acceptance in a pig burn model at Vanderbilt Medical Center.
Anti-fungal Enzymes
We are developing two naturally occurring enzymes to combat infection by
Aspergillus spp. Aspergillus is one of the most common fungi in the
environment. Although aspergillus is not usually harmful to people with healthy
immune systems, it can pose a life-threatening risk to those with compromised
immune systems, such as cancer patients undergoing chemotherapy, organ and bone
marrow transplant recipients and people with late-stage AIDS. Aspergillosis, a
fungal infection caused by aspergillus, begins as an upper airway infection and
can become a systemic fungal infection in immuno-compromised patients. It is
difficult to diagnose, currently has no adequate treatment and often proves
fatal.
We believe that an effective drug for systemic aspergillosis may be used as a
preventative measure for immuno-compromised patients. By the year 2000 experts
estimate that over 85,000 patients in the United States may be at risk for
contracting systemic aspergillosis. We believe that a carbohydrate-
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active enzyme that breaks down the carbohydrates in the cell walls of
aspergillus will kill the fungi and treat the infection.
BM301 and BM302. We are conducting preclinical research on the use of BM301 and
BM302, recombinant forms of two naturally occurring enzymes, to treat
aspergillosis. In BioMarin-sponsored preclinical studies on mice conducted at
Boston University Medical Center demonstrated that BM301 and BM302 effectively
treated aspergillosis. Approximately 20% of the mice treated with BM301 or
BM302 died. For comparison, all of the untreated, infected mice died. No
toxicity or other adverse side effects were observed in these animal studies.
We intend to apply for FDA orphan drug designation for these anti-fungal
enzymes.
Clinical trials may not show that our products are safe or effective. We may
fail to develop products that can be marketed. See "Risk Factors--If We
Continue To Incur Operating Losses For A Period Longer Than Anticipated, The
Value of Your Investment Will Be At Risk--If We Fail To Obtain Regulatory
Approval To Commercially Manufacture Or Sell Any Of Our Future Drug Products,
Or If Approval Is Delayed, We Will Be Unable To Generate Revenue From The Sale
Of Our Products--If We Fail To Obtain Orphan Drug Exclusivity For Our Products,
Our Competitors May Sell Products To Treat The Same Conditions And Our Revenues
May Be Reduced."
Other Research and Development
We are also focusing a portion of our research and development on carbohydrate-
active enzymes that we believe can treat certain inflammatory conditions. We
have initiated a research program to develop a carbohydrate-active enzyme to
treat psoriasis, an inflammatory skin condition. We have identified and
produced sufficient amounts of product to conduct preclinical studies. We
initiated these studies in the third quarter of 1998 at Brigham and Women's
Hospital in Boston.
We have also initiated a research program to develop a carbohydrate-based
product to increase movement and vitality of sperm. Carbohydrate-active enzymes
can break down mucosal carbohydrates in cervical and seminal fluids. This break
down allows sperm to move more easily through these fluids.
Carbohydrate Analysis, Products and Services
Glyko, Inc., our wholly-owned subsidiary, sells carbohydrate analysis products
and services. These products and services provide sophisticated carbohydrate
analysis to research institutions and commercial laboratories. Commercial
laboratories use carbohydrate analysis to determine carbohydrate structure,
sequence and quantity. Glyko, Inc.'s key technology, Fluorphore Assisted
Carbohydrate Electrophoresis, also known as FACE(R), is a rapid and relatively
inexpensive method of analyzing complex carbohydrates. In a typical
application, FACE will rapidly processes a sample of unknown composition. It
will then identify the carbohydrate structures present, quantify their
abundance and prepare a detailed report.
Glyko, Inc.'s primary product is the FACE Imaging System, an electrophoretic
system that includes an imager and software designed to separate, identify and
quantify carbohydrates. Glyko, Inc. also sells the consumable products required
for the system's operation, including four specialized gels, 13 types of kits
and the consumable reagents necessary for carbohydrate analysis.
In addition, Glyko, Inc. provides:
. Reagents used in carbohydrate chemistry, including carbohydrate-
active enzymes
. Custom analytical services for profiling and sequencing complex
carbohydrates
. Research services on carbohydrate related problems
. Diagnostic methods and services for lysosomal storage diseases,
diseases in which residues build up in lysosomes because of
deficiencies in enzymes.
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Glyko, Inc. also markets the only urinary screening test cleared by the FDA for
lysosomal storage diseases. Glyko, Inc. also provides a lysosomal storage
diseases screening service using its test and related diagnostic technology.
Glyko, Inc.'s diagnostics line includes software for the automated diagnosis of
oligosaccharidoses, a subclass of lysosomal storage diseases. Glyko, Inc. is
developing similar software for MPS disorders. Glyko, Inc. is expanding its
ability to measure GAGs in urine. In addition to MPS-I, elevated or reduced
levels of GAGs in urine may serve as early, non-invasive indicators for a
number of diseases, including osteoporosis, degenerative joint diseases, kidney
diseases as well as lysosomal storage diseases. In addition, Glyko, Inc.
provides analysis of plasma heparin, a type of GAG, and is developing an
automated analyzer for heparin in whole blood. The direct analysis of heparin
concentration in blood or plasma allows for close monitoring of patients on
heparin-based anti-coagulation therapy. Over-or under-dosing of heparin can
result in serious adverse side effects.
Corporate Collaborations
Joint Venture with Genzyme Corporation
In September 1998, we established a joint venture with Genzyme for the
worldwide development and commercialization of BM101 for the treatment of MPS-
I. Our responsibilities within the joint venture include:
. Obtaining the necessary U.S. regulatory approvals
. Manufacturing BM101 for clinical and commercial purposes
Genzyme is responsible for:
. Obtaining the necessary international regulatory approvals
. Providing pricing and reimbursement requirements
. Providing overall sales and marketing
Under the agreement, BioMarin and Genzyme are each required to make capital
contributions to the joint venture equal to 50% of the costs and expenses
associated with the development and commercialization of BM101. BioMarin and
Genzyme will share equally in any profits generated from sales of BM101.
Genzyme purchased $8.0 million of our common stock in a private placement in
September 1998. Genzyme has agreed to purchase an additional $10.0 million of
our common stock at the initial public offering price in a private placement
concurrent with this offering. Genzyme has also committed to pay us $12.1
million in cash upon approval of the BLA for BM101. We have licensed to the
joint venture certain of our intellectual property rights related to BM101.
If either party fails to fund its 50% share of costs and expenses, then the
other party may buy out the party that breaches, otherwise, the profit sharing
interests and the future funding obligations of the parties will be adjusted to
correspond to the cumulative amount of capital contributions made by each
party.
The joint venture may be terminated in the event one party declares bankruptcy,
experiences a change of control or commits a material breach of the agreement.
Without a breach, the joint venture may be terminated by either party only
after the terminating party has given the other party one year prior written
notice. Notice of termination may be given at any time after the earlier of
approval of the biologics license application for BM101 or December 31, 2000.
Upon termination of the collaboration agreement, the terminating party's share
of the joint venture may be bought out by the other party. The non-terminating
party or the party not in material breach, as applicable, has the right to
obtain a license to all intellectual property assigned to or subsequently
developed by the joint venture.
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Grant Agreements and Licenses
We have entered into research and development collaboration agreements with
various academic and research institutions. Under these agreements, we fund
research and development by these institutions. Some of the agreements also
provide for the grant to us of exclusive, royalty-bearing licenses or rights of
first negotiation regarding licenses to intellectual property and other subject
matter developed by these institutions in the course of this research.
Typically, these agreements are terminable for cause by either party upon 90-
days written notice.
In April 1997, we entered into the Grant Terms and Conditions Agreement with
Harbor-UCLA. Under this agreement, we funded a two-year research program
related to alpha-L-iduronidase and obtained an exclusive, worldwide license to
certain cell lines and methods related to the production and purification of
the enzyme and intellectual property and materials developed by Harbor-UCLA.
This license is perpetual, subject to our obligation to pay ongoing license
fees. In exchange for the license, we pay Harbor-UCLA an annual licensing fee
and certain royalties. This agreement may be terminated by either party for
breach upon 90 days prior written notice. In connection with Dr. Kakkis' prior
employment with Harbor-UCLA, he will receive a portion of the royalties paid to
Harbor-UCLA by BioMarin.
In May 1998, we entered into an agreement with W.R. Grace regarding BM202, an
enzyme that breaks down proteins, which may be used for the debridement of
burns. Under this agreement, we have obtained an option to acquire from W.R.
Grace an exclusive license, with the right to grant and authorize sublicenses
for certain patents related to BM202. We may exercise our option at any time
until May 2001 so long as we have made certain payments to W.R. Grace. Under
the terms of the agreement, we would pay W.R. Grace certain milestone payments
and annual licensing fees. We must pay W.R. Grace the greater of (1) annual
royalties based on net annual sales of BM202, or (2) a minimum annual royalty
stipulated in the agreement. If we cannot reach agreement with W.R. Grace on
the additional terms and conditions of the license within six months of the
exercise of our option, then we may initiate binding arbitration proceedings to
establish the other terms of the license. The agreement also requires us to use
our best efforts to produce material toxicology studies on BM202 between May 1,
1999, and May 1, 2000, and to begin clinical testing of products based on
BM202. We will bear the cost of both toxicology studies and the clinical
testing. See "Risk Factors--If Our Joint Venture With Genzyme Were Terminated,
Our Ability To Commercialize BM101 Would Be Delayed."
In August 1998, we entered into a license agreement with Women's and Children's
Hospital of Adelaide, Australia under which Women's and Children's Hospital of
Adelaide granted us a worldwide, exclusive, perpetual license to certain
technology and products for use in enzyme replacement therapy for MPS-VI. The
licensed technology includes the feline MPS-VI preclinical data and a host cell
line that expresses this enzyme. We paid Women's and Children's Hospital of
Adelaide an initial license fee and will continue to pay royalties based on net
sales with a minimum annual royalty. The royalty rate is reduced if a product
competitive with MPS-VI enters the market. The terms of the license agreement
require that both parties reach agreement on the design of the MPS-VI clinical
trials within a specified period. The license agreement further requires us to
file an investigational new drug application with the FDA or equivalent
regulatory authority in another country and to begin clinical trials within
specified time periods. The term of the agreement is ten years and we have an
option to renew the agreement for two one-year periods.
Manufacturing
Pharmaceutical Manufacturing. The drug candidates we are currently developing
require the manufacture of recombinant enzymes. For our genetic disease
programs, we expect to manufacture the carbohydrate-active enzymes. We believe
that we will be able to manufacture sufficient quantities of our genetic
disease drug products for clinical trials and commercial sale in part because
relatively low doses are required for treatment and because the targeted
patient populations are small.
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Under the agreement with Harbor-UCLA, Harbor-UCLA produces BM101 for MPS-I
clinical trials and will continue to do so into the second quarter of 1999. We
are developing an 8,000 square foot facility in Torrance, California, dedicated
to the production of BM101. We are required by the FDA to demonstrate
compliance with cGMP in our new facility. Because clinical supplies of BM101
were produced in a different facility and at a smaller scale, we will be
required to demonstrate comparability between batches of BM101 produced at the
two sites. The FDA may also require that we conduct additional studies or
clinical trials in order to demonstrate equivalence with the drugs used in the
clinical trial. Genzyme will package the bulk BM101 in its final dosage form at
its Massachusetts facilities.
We are currently developing a 23,000 square foot cGMP production facility in
Novato, California. This facility has utility systems and support laboratories
and offices sufficient to support an additional manufacturing suite of
approximately 10,000 square feet in a second phase of development. Following
the first phase we will have the capacity to conduct process development and
commercial production of BM101.
We have a 1,200 square foot cGMP laboratory designed for clinical production of
enzymes for our genetic disease programs. This laboratory has the capability
for cell culture production, purification and filling of small-scale production
lots. Initially, this facility will be used to produce BM102 in sufficient
quantity to support a clinical trial of MPS-VI.
We have also developed a 1,000 square foot bacterial fermentation facility for
preclinical studies and clinical trial requirements for burn and anti-fungal
drug candidates. We use third-party contract manufacturers to produce clinical
trial material made in bacterial or fungal cells.
Additionally, we have leased a 36,000 square foot shell that is expected to be
completed in the third quarter of 1999. This facility may be used for
additional manufacturing capacity if needed.
We are developing the manufacturing capacity to support commercial sales of
BM101 and eventually BM102. We cannot assure you that we will be able to do so
in a timely manner or that this capacity will be sufficient to supply the
market demand if sales exceed projections. As a company, we have no experience
manufacturing BM101 or other enzymes in commercial quantity, although we have
hired and are in the process of hiring additional experienced personnel who do
have experience manufacturing commercial quantities of drug products.
Because our manufacturing facilities are in the process of construction,
validation, and process qualification, we have yet to be subject to
governmental inspection for compliance with cGMP. We will have to register our
manufacturing facilities with the FDA, the State of California and other
foreign regulatory agencies. These facilities, and those of any third-party
manufacturers, will be subject to periodic inspections confirming compliance
with applicable law. Our facilities must be cGMP certified before we can
manufacture our drugs for commercial sales. Failure to comply with these
requirements could result in the shutdown of our facilities, fines or other
penalties. A shutdown or fine could have a serious effect on our business
financial condition and results of operations. See "Risk Factors--If We Are
Unable To Manufacture Our Drug Products In Sufficient Quantities And At
Acceptable Cost, We May Be Unable To Meet Demand For Our Products And Lose
Potential Revenues--If We Fail To Obtain Regulatory Approval To Commercially
Manufacture Or Sell Any Of Our Future Drug Products, Or If Approval Is Delayed,
We Will Be Unable To Generate Revenue From The Sale Of Our Products."
Carbohydrate Analysis Products Manufacturing. Glyko, Inc. assembles its FACE
Imaging System and kits from standard components readily available from
multiple commercial sources. A key component of the FACE Imaging System is the
operating and interpretative software, which Glyko, Inc. writes and tests
itself. Glyko, Inc. mixes and casts its gels using proprietary and patented
formulations best suited for carbohydrate applications. Glyko, Inc. also
manufactures its carbohydrate-active enzymes. Glyko,
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Inc. believes that it has adequate manufacturing capacity to produce much
larger quantities of its products than are currently required.
Sales and Marketing
Pharmaceutical Sales and Marketing. We have no experience marketing or selling
pharmaceutical products. To commercially market our products once the necessary
regulatory approvals are obtained, we must either develop our own sales and
marketing force or enter into arrangements with third parties. We established a
joint venture with Genzyme for the worldwide development and commercialization
of BM101 for the treatment of MPS-I. Under the joint venture, Genzyme will be
responsible for marketing, distribution, sales and reimbursement of BM101
worldwide.
In the future, we may develop the capability to market and sell our drug
products that are targeted at small or concentrated patient populations. We
believe that these patient populations are typically well-informed and well-
connected to the medical community. We believe that direct marketing to these
patients would be effective. We may also market our products through
distributors or other collaborators, particularly those products targeted at
larger patient populations.
We cannot guarantee that Genzyme will devote the resources necessary to
successfully market BM101. In addition, either party may terminate the joint
venture for any reason. If Genzyme were to terminate the joint venture, we
would be required to undertake Genzyme's responsibilities ourselves. We have no
experience in marketing, selling or obtaining reimbursement for pharmaceutical
products. In addition, we would be required to pursue foreign regulatory
approvals. As a result, termination of the joint venture by Genzyme may delay
the launch of BM101.
Sales and Marketing of Carbohydrate Analysis Products and Services. Glyko, Inc.
sells its products and services primarily to distributors of research products,
quality control laboratories and research laboratories. Glyko, Inc. has a sales
staff of two, who cover the United States and Canada. Direct sales efforts
accounted for approximately 40% of Glyko, Inc.'s revenues in 1998. Glyko, Inc.
has established a network of distributors to expand its reach in the analytical
products market. Glyko, Inc. has relationships with three major research
products distributors worldwide and with one distributor for North America.
These distribution agreements allow these companies to sell Glyko, Inc.
manufactured products under the distributor's own name. Glyko, Inc. also has
distribution agreements with third parties covering Asia, Australia, Europe and
Mexico. Sales by distributors accounted for approximately 22% of Glyko, Inc.'s
revenues in 1998. The remaining 38% of Glyko, Inc.'s revenues are from sales of
contract services, including services sold to us, and government grants.
Services provided to us accounted for approximately 5% of Glyko, Inc.'s overall
revenue in 1998. See "Risk Factors--If Our Joint Venture With Genzyme Were
Terminated, Our Ability To Commercialize BM101 Would Be Delayed--If We Are
Unable To Effectively Sell And Market Our Products, Our Ability to Generate
Revenues Will Be Diminished--If We Fail To Compete Successfully, Our Revenues
And Operating Results Will Be Adversely Affected."
Patents and Proprietary Rights
Our success depends in part on our ability to:
. Obtain patents
. Protect trade secrets
. Operate without infringing the proprietary rights of others
. Prevent others from infringing on our proprietary rights
We may obtain licenses to patents and patent applications from others.
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We have five patent applications presently pending in the United States Patent
and Trademark Office. We have filed one foreign counterpart application and
expect to file foreign counterparts to the other four pending U.S. patent
applications at the proper times.
Glyko, Inc. owns seven issued U.S. patents and two pending applications, one of
which has been allowed. In addition, Glyko, Inc. has licensed four U.S. patents
and their foreign counterparts from AstroMed Ltd. and its successor Astroscan
Ltd. on an exclusive, worldwide, perpetual and royalty-free basis. Glyko, Inc.
has also licensed seven U.S. patents from Glycomed Incorporated on an
exclusive, worldwide, perpetual and royalty-free basis. These patents are all
related to Glyko, Inc.'s products and services.
We primarily protect our proprietary information by filing U.S. and foreign
patent applications related to our proprietary technology, inventions and
improvements. Proprietary rights relating to our technologies will be protected
from unauthorized use by third parties only to the extent that they are covered
by valid and enforceable patents or are effectively maintained as trade
secrets. The patent positions of biotechnology companies are extremely complex
and uncertain. The scope and extent of our patent protections for some of our
products, including BM101 and BM102, are particularly uncertain because some of
the enzymes we are developing have existed in the public domain for many years.
Other parties have published the structure of the enzyme, the methods for
purifying or producing the enzyme and the methods of treatment or use. The
publication of this information limits the scope of our patents and may prevent
us from obtaining any meaningful patent protection. We cannot assure you that
any patents owned by, or licensed to, us will afford protection against
competitors. Nor can we assure you that any patent applications will result in
patents being issued.
In addition, the laws of certain foreign countries do not protect our
intellectual property rights to the same extent as do the laws of the United
States. The patent position of biopharmaceutical companies involves complex
legal and factual questions. We cannot predict whether the intellectual
property laws of foreign countries will be enforceable. We cannot assure you
that any of our patents or patent applications, if issued, will not be
challenged, invalidated or designed around. Nor can we assure you that the
patents will provide proprietary protection or competitive advantages to us.
Furthermore, we cannot assure you that others will not independently develop
similar technologies or duplicate any technology developed by us.
Our commercial success depends significantly on our ability to operate without
infringing the patents and other proprietary rights of third parties. We cannot
assure you that our technologies do not and will not infringe the patents or
violate other proprietary rights of third parties. In the event any of our
technologies are found to infringe or violate the intellectual property rights
of others, we and our corporate partners may be prevented from pursuing
research, development or commercialization of our products.
There has been extensive litigation regarding patents and other intellectual
property rights in the biotechnology and pharmaceutical industries. The defense
and prosecution of intellectual property suits and related legal and
administrative proceedings in the United States and abroad involve complex
legal and factual questions. These proceedings are costly and time-consuming to
pursue and their outcome is uncertain. Litigation may be necessary to enforce
patents issued to or licensed by us, to protect trade secrets or know-how owned
or licensed by us and to determine the enforceability, scope and validity of
the proprietary rights of others.
We will incur substantial expense and be forced to divert significant effort
and resources of our technical and management personnel in the event we must
prosecute or defend any litigation or other administrative proceeding. If an
adverse determination were made, we could incur significant liabilities to
third parties or be required to seek licenses which may not be available from
third parties or may be prevented from selling our products in certain markets,
if at all. Although patent and intellectual
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property disputes are often settled through licensing or similar arrangements,
costs associated with these arrangements may be substantial and could include
ongoing royalties. Furthermore, we cannot assure you that the necessary
licenses would be available to us on satisfactory terms, if at all.
In addition to patents, we rely on trade secrets and proprietary know-how,
which we seek to protect, in part, through confidentiality agreements with our
employees. We cannot assure you that these confidentiality or proprietary
information agreements will meaningfully protect our technology or provide us
with adequate remedies in the event of unauthorized use or disclosure of this
information. Nor can we assure you that the parties to such agreements will not
breach these agreements or that our trade secrets will not otherwise become
known to or be independently developed by competitors. See "Risk Factors--If We
Are Unable To Protect Our Proprietary Technology We May Not Be Able To Compete
As Effectively--If We Fail To Compete Successfully, Our Revenues And Operating
Results Will Be Adversely Affected."
Government Regulation
Our pharmaceutical products are subject to extensive government regulation in
the United States. If we distribute our products abroad, these products will
also be subject to extensive foreign government regulation. In the United
States, pharmaceutical and biological products are regulated by the FDA. FDA
regulations govern the testing, manufacturing, advertising, promotion,
labeling, sale and distribution of our products. Currently, we believe that
BM101 and other enzyme drug products that we may develop will be regulated by
the FDA as biologics rather than as drugs because they are manufactured by
biological processes.
The FDA approval process for a biologic includes:
. Preclinical studies
. Submission of an investigational new drug application for clinical
trials
. Adequate and well-controlled human clinical trials to establish the
safety and effectiveness of the product
. Submission of a biologics license application
. Review of the biologics license application
. Inspection of the facilities used in the manufacturing of the
biologic to assess compliance with the Current Good Manufacturing
Processes, or cGMP regulations
The biologics license application includes comprehensive, complete descriptions
of the pre-clinical testing, clinical trials, and the chemical, manufacturing
and control requirements of a drug which enable the FDA to determine the drug's
safety and efficacy. A biologics license application must be filed and then
approved by the FDA before a biologic can be marketed commercially.
The FDA testing and approval process requires substantial time, effort and
money. We cannot assure you that any approval will ever be granted.
Preclinical studies include laboratory evaluation of the product, as well as
animal studies to assess the potential safety and effectiveness of the product.
These studies must be performed according to good laboratory practices. The
results of the preclinical studies, together with manufacturing information and
analytical data, are submitted to the FDA as part of the investigational new
drug application. Clinical trials may begin 30 days after the investigational
new drug application is received, unless the FDA raises concerns or questions
about the conduct of the clinical trials. If such concerns or questions are
raised, the investigational new drug application sponsor and the FDA must
resolve any outstanding concerns before clinical trials can proceed. We cannot
assure you that submission of an investigational new drug application will
result in authorization to commence clinical trials. Nor can we assure you that
if clinical trials are approved, that data from such trials will result in
marketing approval.
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Clinical trials involve the administration of the product that is the subject
of the trial to volunteers or patients under the supervision of a qualified
principal investigator. Furthermore, each clinical trial must be reviewed and
approved by an independent institutional review board at each institution at
which the study will be conducted. The institutional review board will
consider, among other things, ethical factors, the safety of human subjects and
the possible liability of the institution. Also, clinical trials must be
performed according to good clinical practices. Good clinical practices are
enumerated in FDA regulations and guidance documents.
Clinical trials typically are conducted in three sequential phases, Phases I,
II and III, with Phase IV studies conducted after approval and generally
required for fast track designated drugs. These phases may overlap. In Phase I
clinical trials, the drug is usually tested on healthy volunteers to determine:
. Safety
. Any adverse effects
. Dosage tolerance
. Absorption
. Metabolism
. Distribution
. Excretion
. Pharmaco-dynamics
In Phase II clinical trials, the drug is usually tested on a limited number of
afflicted patients to:
. Evaluate the efficacy of the drug for specific, targeted indications
. Determine dosage tolerance and optimal dosage
. Identify possible adverse effects and safety risks
In Phase III clinical trials, the drug is usually tested on a larger number of
afflicted patients, an expanded patient population and at multiple clinical
sites. The FDA may require that we suspend clinical trials at any time on
various grounds, including a finding that the subjects are being exposed to an
unacceptable health risk. In addition, FDA approval may be conditioned and
limit the indicated uses for our products.
In Phase IV clinical trials, after a drug has received FDA approval, additional
studies are conducted to gain experience from the treatment of afflicted
patients in the intended therapeutic indication. Additional studies are also
conducted to document a clinical benefit where drugs are approved under fast
track designation and based on surrogate endpoints. In clinical trials,
surrogate endpoints are alternative measurements of the symptoms of a disease
or condition, often by biochemical or other tests, that are substituted for
measurements of observable clinical symptoms. Failure to promptly conduct Phase
IV clinical trials could result in expedited withdrawal of approval for
products approved under fast track designation.
Our regulatory strategy is to conduct only one clinical trial to support a
biologics license application for each drug product treating genetic diseases.
This sole clinical trial would be, in each instance, intended to satisfy the
requirements of Phase I, Phase II and Phase III clinical trials. We believe
that we can obtain regulatory approval with one clinical trial despite the fact
that multiple clinical trials are normally required because our target patient
populations are so small. In addition, Genzyme obtained FDA approval of
Ceredase(R)/Cerezyme(R) after one clinical trial. The FDA may require us to
conduct additional clinical trials or expand the scope of our existing trial
for BM101. Regulatory approval would be delayed if we were required to
undertake additional clinical trials or expand the existing trial to include
more patients.
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We expect that for each product for which a single clinical trial is
authorized, that we will be required to conduct extended Phase IV clinical
trials to monitor the long-term effects of the therapy and assure the FDA that
the primary endpoints were reasonable predictors of the drug product's clinical
benefits. For example, we are conducting an additional 18 month trial of
patients from the original BM101 pivotal clinical trial to monitor their health
and the effects of the therapy.
We will also be subject to a variety of foreign regulations governing clinical
trials, manufacture and sales of our products. Whether or not FDA approval has
been obtained, approval of a product by the comparable regulatory authorities
of foreign countries must still be obtained prior to marketing in those
countries. The approval process varies from country to country and the time
needed to secure approval may be longer or shorter than that required for FDA
approval.
Food and Drug Administration Modernization Act of 1997. The Food and Drug
Administration Modernization Act of 1997 was enacted, in part, to ensure the
availability of safe and effective drugs, biologics and medical devices by
expediting the FDA review process for new products. The Modernization Act
establishes a statutory program for the approval of fast track products,
including biologics. The fast track provisions essentially codify the FDA's
accelerated approval regulations for drugs and biologics. A fast track product
is defined as a new drug or biologic intended for the treatment of a serious or
life-threatening condition that demonstrates the potential to address unmet
medical needs for such a condition. Under the new fast track program, the
sponsor of a new drug or biologic may request the FDA to designate the drug or
biologic as a fast track product at any time during the clinical development of
the product.
The Modernization Act specifies that the FDA must determine if the product
qualifies for fast track designation within 60 days of receipt of the sponsor's
request. Approval of an application for fast track designation for a product
can be based on an effect on a clinical endpoint or on a surrogate endpoint
that is reasonably likely to predict clinical benefit. Approval of an
application for fast track designation will be subject to:
. Post-approval studies to validate the surrogate endpoint or confirm
the effect on the clinical endpoint
. Prior review of all promotional materials
If a preliminary review of the clinical data suggests that the product is
effective, the FDA may initiate review of sections of an application for fast
track designation for a product before the application is complete. This
rolling review is available if the applicant provides a schedule for submission
of remaining information and pays applicable user fees. However, the time
period specified in the Prescription Drug User Fees Act, which governs the time
period goals the FDA has committed to reviewing an application, does not begin
until the complete application is submitted.
In September 1998, the FDA granted our application for fast track designation
for BM101 for the more severe forms of MPS-I. We cannot predict the ultimate
impact, if any, of the fast track process on the timing or likelihood of FDA
approval of BM101 or any of our other potential products.
Orphan Drug Designation. In September 1997, BM101 received orphan drug
designation from the FDA. In February 1999, BM102 received orphan drug
designation from the FDA. Orphan drug designation is granted by the FDA to
drugs intended to treat a rare disease or condition. A rare disease or
condition is one which generally affects fewer than 200,000 individuals in the
United States. Orphan drug designation must be requested before submitting a
biologics license application. After the FDA grants orphan drug designation,
the generic identity of the therapeutic agent and its potential orphan use are
disclosed publicly by the FDA.
48
<PAGE>
Orphan drug designation does not shorten the FDA regulatory review and approval
process for an orphan drug, nor does it give that drug any advantage in the FDA
regulatory review and approval process. If an orphan drug later receives FDA
approval for the indication for which it has such designation, the FDA may not
approve any other applications to market the same drug for the same indication,
except in very limited circumstances, for seven years. Although obtaining FDA
approval to market a product with orphan drug exclusivity may be advantageous,
we cannot be certain that we will be the first to obtain FDA approval for any
drug for which we obtain orphan drug designation. Nor can we be certain that
orphan drug designation will result in any commercial advantage or reduce
competition. Nor can we be certain that the limited exceptions to this
exclusivity will not be invoked by the FDA.
Regulation of Glyko, Inc.'s Diagnostic Tests as Medical Devices. Our
subsidiary, Glyko, Inc., develops diagnostic tests that screen for diseases
such as lysosomal storage diseases. The FDA regulates these tests as medical
devices. The FDA requires companies that desire to market new medical devices
to obtain either 510(k) clearance or approval of a Pre-market Approval
Application, or PMA, before they are sold. Regulation under a PMA can be
significantly more costly and time consuming than clearance under a 510(k)
notification. Glyko, Inc. has received 510(k) clearance from the FDA for a
urinary carbohydrate analysis test and is developing other diagnostic tests,
which we believe qualify for 510(k) clearance.
Glyko, Inc.'s diagnostic tests may be regulated as medical devices by the FDA
as Class I, Class II or Class III devices. The degree of regulation, as well as
the cost and time required to obtain regulatory approvals or clearances,
generally increases from Class I to Class III. Most diagnostic tests are
regulated as Class I or Class II devices. Glyko, Inc.'s diagnostic test for
urinary carbohydrate analysis has been classified as a Class I device. Under
the Food and Drug Administration Modernization Act of 1997, most Class I
devices are exempt from the 510(k) clearance requirement. Based on the advice
of our regulatory consultants and the experience with our first test, we expect
that all of our currently planned diagnostic tests will require a 510(k)
notification and clearance process.
A 510(k) notification is sufficient for a device that is "substantially
equivalent" to a legally marketed Class I or Class II device, or a Class III
"predicate" device for which the FDA has not yet required submission of PMAs.
Following submission of a 510(k) notification, a company may not market the
device for clinical use until the FDA finds that product is substantially
equivalent to a legally marketed predicate device. It generally takes four to
12 months from the date of submission of a 510(k) to obtain the FDA's
determination, but it may take longer. The FDA may determine that the device is
not substantially equivalent and require submission and approval of a PMA.
Alternatively, the FDA may require further information before making a
determination regarding substantial equivalence. The FDA requires a new 510(k)
submission and a separate FDA determination of substantial equivalence for any
devices cleared through the 510(k) process that have had modifications or
enhancements that could significantly affect their safety or effectiveness, or
that change their intended use.
If a device does not qualify for the 510(k) premarket notification procedure, a
company must file a PMA application. The PMA review and approval process can be
expensive, uncertain and lengthy. A PMA application must be supported by
extensive data, including laboratory and clinical trial data establishing the
safety and effectiveness of the device, as well as extensive manufacturing
information. After a preliminary review, the FDA makes an initial determination
about whether a PMA application is sufficiently complete to permit a
substantive review. If the FDA finds the PMA application sufficiently complete,
the FDA accepts the application for filing. Once the PMA application is
accepted for filing, the FDA begins a more in-depth review, which likely
includes review by a scientific advisory panel. During the PMA review process,
the FDA will conduct an inspection of the manufacturer's facilities to ensure
compliance with the applicable Quality System Regulation or QSR requirements.
The FDA may determine that additional clinical data is necessary or request
other information, which may delay the regulatory review process.
49
<PAGE>
Modifications to a device that is the subject of an approved PMA, its labeling,
manufacturing or clinical use may require approval by the FDA of PMA
supplements or new PMAs. PMA supplements often require submission of the same
type of information required for the initial PMA except that the supplement
generally is limited to that data needed to support the proposed changes.
Regulatory approval, if granted, may limit the uses for which the device may be
marketed. Approvals, once granted, may be withdrawn if problems occur after
initial marketing.
Sales of medical devices outside of the United States are subject to regulatory
requirements that vary from country to country. The time required to obtain
international regulatory clearance or approval for international sales may be
longer or shorter than that required for FDA clearance approval. The
requirements may differ as well. We cannot assure you that we will be able to
obtain the required regulatory approval in a timely manner, if at all.
Regulation of Glyko, Inc.'s Manufacturing. Glyko, Inc. is required to comply
with the FDA's quality system regulation requirements when manufacturing its
diagnostic tests. The quality system regulation requirements incorporate the
FDA's former current Good Manufacturing Processes into medical devices
regulations. Quality system regulation requirements address the design,
controls, methods, facilities and quality assurance controls used in
manufacturing, packing, storing and installing medical devices. In addition,
certain international markets have quality assurance and manufacturing
requirements that may be more or less rigorous than those in the United States.
A failure by us to comply with quality system regulation requirements or other
requirements could have a serious impact on our business and services.
Regulation of Clinical Laboratories. Laboratories using Glyko, Inc.'s
diagnostic tests for clinical use in the United States are regulated under
Clinical Laboratory Improvement Amendments of 1998, or CLIA. CLIA establishes
requirements for laboratories and laboratory personnel governing:
. Administration of laboratories
. Participation and proficiency testing
. Patient test management
. Quality control
. Personnel
. Quality assurance
. Inspection
The complexity of the tests being performed by the laboratory will determine
which CLIA requirements apply. Under CLIA regulations, all laboratories
performing moderately complex or highly complex tests will be required to
obtain either a registration certificate or certificate of accreditation from
the Health Care Financing Administration. A laboratory using our diagnostic
tests is required to be qualified to perform moderately or highly complex
tests. All of the laboratories known to us that are performing the diagnostic
procedures which might use our test are qualified at the appropriate levels.
However if patterns of use change and these tests are performed in the future
at less qualified laboratories, the CLIA requirements may prevent some clinical
laboratories from using certain of Glyko, Inc.'s diagnostic tests. The
development of a simpler test will have a near-term negative impact on our
results of operations but we believe that it will not affect our long term
financial condition. CLIA regulations may impact our results of operations by
limiting the potential market for Glyko, Inc.'s products until we can develop a
simpler test. Glyko, Inc. has CLIA certification and a California state
laboratory license to perform urinary carbohydrate analysis tests. The
California laboratory license only allows testing for patients in California.
We may be required to obtain other licenses to perform our laboratory services
in other states or to provide services to patients or health care professionals
who reside or practice medicine in other states.
50
<PAGE>
See "Risk Factors--If We Fail To Obtain Regulatory Approval To Commercially
Manufacture Or Sell Any Of Our Future Drug Products, Or If Approval Is Delayed,
We Will Be Unable To Generate Revenue From The Sale Of Our Products."
Competition
Pharmaceutical Products. The biopharmaceutical industry is rapidly evolving and
highly competitive. We face significant competition from biotechnology and
pharmaceutical companies. Many of these companies have significantly greater
financial, manufacturing, marketing and product research resources and
experience than we have. Large pharmaceutical companies in particular have
extensive experience in clinical testing and in obtaining regulatory approvals,
including orphan drug designations. Accordingly, competitors may obtain
regulatory approvals for and commercialize their products faster than we will.
In addition, these companies will compete with us to attract qualified
personnel, and to attract parties for acquisitions, joint ventures or other
collaborations. Several pharmaceutical and biotechnology companies have
established themselves in the field of enzyme therapeutics, including Genzyme,
our joint venture partner.
Many colleges, universities and public and private research organizations are
also active in the human health care field. While these entities focus on
education, they may develop proprietary technology and acquire patents that we
may require for the development of our products. We may attempt to obtain
licenses to such proprietary technology. We cannot assure you, though, that we
will be able to obtain these licenses. We also compete with a number of these
organizations to recruit scientists and technicians.
We believe that the primary competitive factors in the market for biological
drug products are:
. Product safety
. Effectiveness of such products
. Ability to obtain orphan drug exclusivity
. Distribution channels
. Price
. Time required to develop new products
. Time required to obtain regulatory and reimbursement approval
. Ability to respond quickly to medical and technological changes
. Ability to develop new products
We believe, based on our progress developing BM101, that we can compete
successfully with regard to those competitive factors requiring timely
execution. With regard to other competitive factors including those regarding
distribution channels and low prices, we are at a competitive disadvantage. We
do not yet have established distribution channels and because our target
patient populations are small we expect that our drug products will be
relatively expensive. We do not intend to compete with others who have already
established successful treatments for specific genetic disorders, which should
ameliorate some of our competitive disadvantages.
Carbohydrate Analysis Products and Services. The FACE Imaging System's primary
competitors are alternative carbohydrate analytical technologies including:
. Capillary electrophoresis
. High pressure liquid chromatography
. Mass spectrometry
. Nuclear magnetic resonance spectrometry
51
<PAGE>
The major advantages of FACE are:
. Low cost
. Quantification of carbohydrates present
. Easy application to samples of unknown composition
. User friendly procedures and software
. Provides versatility for other non-carbohydrate applications
The major disadvantages of FACE are:
. FACE requires single-use specialized gels which give FACE systems a
higher disposable cost than some competitive products which have
reusable components.
. Some competitive products may provide a more precise measurement of
the molecular weight of a sample.
. One competitive technology can provide more complete structural
information about the sample.
The competition in the carbohydrate-active enzymes business is comprised
primarily of distributors of broad lines of research products and supplies,
particularly fine chemicals and reagents. Glyko, Inc. competes on the basis of
the catalog of products it offers and the number of carbohydrate-active enzymes
it offers and their proprietary nature. Glyko, Inc. believes that it also
provides superior service because it provides customers with sales information
and assistance based on scientific understanding of carbohydrate chemistry and
function. However, it does not offer as many products as some of its
competitors. Glyko, Inc. plans to expand its enzyme product offerings over the
next several years to compete with the broadest product lines offered today by
competitors. However, neither we nor Glyko, Inc. can assure you that Glyko,
Inc. will successfully broaden its product offerings or will otherwise compete
successfully.
Glyko, Inc.'s diagnostic product line competes primarily with alternative
technologies and laboratory services. Glyko, Inc. believes that its diagnostic
approaches are novel. Glyko, Inc. has the only urinary screening test cleared
by the FDA for certain lysosomal storage diseases. Glyko, Inc. believes that
the test may be used as a screening tool for early detection of a number of
lysosomal storage diseases and that success of the product will depend on
whether it becomes widely adopted. See "Risk Factors--If We Fail To Compete
Successfully, Our Revenues And Operating Results Will Be Adversely Affected."
Facilities
We currently have operations in a total of six buildings. Five of our buildings
are located in Novato, California, each within a half-mile radius. The five
buildings, each named for the streets on which they are located, are:
. Bel Marin Keys facility
. Galli Drive facility
. Pimentel Court facility
. Digital Drive facility
. Digital Drive sublease facility
The sixth building, the Carson Street facility, is located in Torrance,
California.
The Bel Marin Keys facility houses administrative staff and a clinical
production laboratory. It consists of approximately 13,400 square feet. The
lease expires in May 2001. We have an option to extend the lease for up to two
additional three-year periods.
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<PAGE>
The Galli Drive facility consists of a total of approximately 31,000 square
feet and currently houses 6,700 square feet of modular laboratory space used
for research and development. We are currently developing an additional 23,400
square feet for a manufacturing facility, including core utility and support
functions sufficient for the entire building once fully developed. This
development will also create approximately 3,000 square feet of additional
mezzanine office space. This development is scheduled to be completed in the
third quarter of 1999. The lease expires in August 2003. We have an option to
extend the lease for one additional five-year period.
The Pimentel Court facility houses the administrative staff and research and
manufacturing operations of Glyko, Inc. It consists of approximately 11,000
square feet. The lease expires in March 2000. We have subleased a portion of
this facility to a third party.
The Digital Drive facility, when completed, is intended to house either a
research or a manufacturing facility. It is currently under construction. When
completed, it will consist of approximately 35,000 square feet. Construction of
the shell of the building is scheduled to be completed in the third quarter of
1999. The lease expires ten years and sixty days after the shell of the
building is completed.
The Digital Drive sublease facility houses a chemistry laboratory. It consists
of approximately 1,200 square feet. The facility has been subleased from a
third party. The sublease expires in January 2000.
The Carson Street facility houses our initial commercial manufacturing facility
for BM101 and consists of approximately 8,000 square feet. The lease expires in
June 2001. We have an option to extend the lease until April 2003.
In general, we believe that our facilities are well-suited for the specific
functions and objectives for which they were leased, designed and developed.
Our administrative office space is expected to be adequate for approximately
the next 18 months. We should have adequate space for research and development
activities in our Digital Drive facility into 2001. Our BM101 production
facilities' capacity may have to be supplemented beginning in 2001 if the MPS-I
market penetration rates are higher than currently expected. Based on the
timelines for other genetic disorders such as MPS-VI, productive capacity for
these products will have to be developed for larger scale commercial production
which may begin as early as 2001.
Employees
As of May 31, 1999, we had 80 full-time employees, 37 of whom are in research
and development, 30 of whom are in manufacturing, two of whom are in sales and
marketing and 11 of whom are in administration.
We consider our employee relations to be good. Our employees are not covered by
a collective bargaining agreement. We have not experienced employment related
work stoppages. We cannot assure you that we will be able to continue
attracting qualified personnel in sufficient numbers to meet our needs.
Legal Proceedings
We have no material legal proceedings pending.
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MANAGEMENT
Executive Officers, Directors and Key Employees
Set forth below is certain information regarding our executive officers,
directors and key employees:
<TABLE>
<CAPTION>
Name Age Position with BioMarin
---- --- ----------------------
<C> <C> <S>
Grant W. Denison, Jr................ 49 Chief Executive Officer and
Chairman of the Board
John C. Klock, M.D.................. 54 President, Secretary and Director
Raymond W. Anderson................. 57 Chief Financial Officer, and Vice
President, Finance and
Administration
Christopher M. Starr, Ph.D.......... 46 Vice President, Research and
Development
Emil D. Kakkis, M.D., Ph.D.......... 38 Vice President of BioMarin and
President, BioMarin Genetics,
a division of BioMarin
Stuart J. Swiedler, M.D., Ph.D...... 43 Vice President, Scientific and
Clinical Affairs
Brian K. Brandley, Ph.D............. 42 Vice President of BioMarin and
Managing Director, Glyko, Inc.,
a wholly-owned subsidiary of
BioMarin
Ansbert S. Gadicke, M.D.(/1/)(/2/).. 41 Director
Erich Sager(/1/).................... 41 Director
Gwynn R. Williams(/1/)(/2/)......... 65 Director
</TABLE>
-------------------------------
(/1/) Member of the Compensation Committee.
(/2/) Member of the Audit Committee.
Each director will hold office until the next annual meeting of stockholders
and until his successor is elected and qualified or until his earlier
resignation or removal. Each officer serves at the discretion of the Board of
Directors.
Grant W. Denison, Jr. has served as a director and Chief Executive Officer of
BioMarin since its inception and as Chairman of the Board since April 1997.
From July 1993 to April 1997, Mr. Denison served as President, Consumer
Products and Corporate Senior Vice President, Business Development at Searle, a
pharmaceutical company. From April 1986 to June 1993, Mr. Denison served as
Vice President Corporate Planning and President, U.S. Operations at Monsanto
Company, a diversified life sciences company. From 1985 to 1986, Mr. Denison
served as Vice President, International Operations at Squibb Medical Systems, a
medical devices company. From 1980 to 1985, Mr. Denison served as Vice
President, Planning and Business Development at Pfizer, Inc., a pharmaceutical
company. Mr. Denison serves as a director of Nastech Pharmaceutical Company
Inc., Dentalview, Inc. and Clubb BioCapital. Mr. Denison received an A.B. in
Mathematical Economics from Colgate University and an M.B.A. from Harvard
Graduate School of Business Administration.
John C. Klock, M.D. has served as the President and Secretary of BioMarin and
served as a director since its inception. Dr. Klock has served as the President
of Glyko, Inc. since October 1989. Dr. Klock was a founder of Glyko Biomedical
Ltd. and has served as a director since December 1992. Dr. Klock was a founder
of Glycomed Incorporated, a biotechnology company, at which he served as Vice
President, Medical Affairs from July 1987 to July 1990. Dr. Klock was a
scientific director at the Institute of Cancer Research at California Pacific
Medical Center from July 1981 to July 1987. Dr. Klock was an academic physician
and carbohydrate researcher at the University of California at San Francisco
from 1982 to 1986. Dr. Klock received a B.S. in Zoology from Louisiana State
University and received an M.D. from Tulane University.
Raymond W. Anderson has served as Chief Financial Officer and Vice President,
Finance and Administration since June 1998. Mr. Anderson served as the Vice
President, Finance and
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Chief Financial Officer at Fusion Medical Technologies, Inc., a medical
technology company developing drug delivery systems, from July 1997 to June
1998. Mr. Anderson served as the Vice President, Finance and Chief Financial
Officer at Fidus Medical Technology, Inc., a medical technology company
specializing in cardiac arrhythmias, from October 1996 to July 1997. Mr.
Anderson served as a director of Recombinant Capital, a consulting firm, from
July 1994 to October 1996. Mr. Anderson served as the Vice President, Finance
and Chief Financial Officer of Glycomed Incorporated, a biotechnology company,
from April 1989 to July 1994. Mr. Anderson was the Chief Financial Officer at
Chiron Corporation, a biotechnology company, from 1985 to 1989. Mr. Anderson
was a Controller and Director of Financial Planning and Analysis at Syntex
Laboratories, a pharmaceutical company, from 1981 to 1985. Mr. Anderson has
served as a director of Glyko Biomedical, Ltd. and its predecessor, Glyko,
Inc., since October 1989. Mr. Anderson received a B.S. in Engineering from the
United States Military Academy, an M.S. in Administration from George
Washington University and an M.B.A. from the Harvard Graduate School of
Business Administration.
Christopher M. Starr, Ph.D. has served as the Vice President, Research and
Development of BioMarin since its inception. From July 1991 to April 1998, Dr.
Starr has served as the Vice President, Research and Development for Glyko,
Inc., a carbohydrate analytical and diagnostic company. Dr. Starr held the
position as National Research Associate at the National Institutes of Health in
Bethesda, Maryland from August 1986 to June 1991. Dr. Starr received a B.S. in
Biology from Syracuse University and a Ph.D. in Biochemistry and Molecular
Biology from the State University of New York, Health Science Center, Syracuse,
NY.
Emil D. Kakkis, M.D., Ph.D. has served as Vice President of BioMarin and
President of BioMarin Genetics, a division of BioMarin, since September 1998.
From July 1994 to August 1998, Dr. Kakkis was a Physician Specialist at the
Department of Pediatrics at Harbor-UCLA Medical Center. From July 1991 to June
1994, Dr. Kakkis completed a Fellowship in Genetics at the UCLA Intercampus
Medical Genetics Training Program. Dr. Kakkis received a B.A. in Biology from
Pomona College and received a Ph.D. in Biological Chemistry from UCLA. Dr.
Kakkis received an M.D. from UCLA.
Stuart J. Swiedler, M.D., Ph.D. has served as Vice President of Scientific and
Clinical Affairs of BioMarin since June 1998. From November 1997 to June 1998,
Dr. Swiedler was as an independent biotechnology consultant. From February 1993
to November 1997, Dr. Swiedler has served, in chronological order, with
Glycomed Incorporated, a biotechnology company, as Assistant Vice President,
Biology from February 1993 to July 1994, as Assistant Vice President, Research
from July 1994 to May 1995, and as Vice President, Research from May 1995 to
November 1997. Dr. Swiedler received a B.S. in Biology from the State
University of New York at Albany. Dr. Swiedler received an M.D. and a Ph.D. in
Biochemistry from the Johns Hopkins University School of Medicine.
Brian K. Brandley, Ph.D. has served as Vice President of BioMarin since October
1998. Dr. Brandley has served as the Managing Director of Glyko, Inc., a
carbohydrate analytical and diagnostic company, since April 1998. He was an
Assistant Professor at Rush University from July 1995 to April 1998, and was
the Senior Scientist, Head of Cell Biology at Glycomed Incorporated, a
biotechnology company, from July 1988 to July 1995. Dr. Brandley received a
B.S. and an M.S. in Biology from the University of Miami. Dr. Brandley received
a Ph.D. in Biology from the University of Sydney, Australia.
Ansbert S. Gadicke, M.D. has served as a director of BioMarin since December
1997. Since July 1992, Dr. Gadicke has served as the Chairman of the Board and
Managing Director of MPM Capital, L.P., an investment company specializing in
the healthcare industry. From 1989 to 1992, Dr. Gadicke was a consultant with
Boston Consulting Group. Dr. Gadicke currently serves on the boards of MediGene
AG, Genome Pharmaceuticals Corporation AG, t.Breeders Inc., Idea and Novirio
Pharmaceuticals, Ltd. Dr. Gadicke received a Ph.D. and an M.D. from J.W. Goethe
Universitat, Frankfurt, Germany.
Erich Sager has served as a director of BioMarin since November 1997. Since
September 1996, Mr. Sager has served as the Chairman of LaMont Asset Management
S.A., a private investment
55
<PAGE>
management firm. From April 1994 to August 1996, Mr. Sager served as Senior
Vice President, Head of Private Banking for Dresdner Bank (Switzerland) Ltd.
From September 1991 to March 1994, Mr. Sager served as Vice President, Private
Banking-Head German Desk for Deutsche Bank (Switzerland) Ltd. From 1981 to
1989, Mr. Sager held various positions at a number of banks in Switzerland.
Mr. Sager serves as a director of BioNebraska, Inc., Comptec Industries Ltd.,
Dentalview, Inc., LaMont Asset Management, S.A., and Sermont Asset Management.
Mr. Sager received a Business Degree from the School of Economics and Business
Administration in Zurich, Switzerland.
Gwynn R. Williams has served as a director of BioMarin since its inception.
Mr. Williams founded AstroMed Limited and Astroscan Limited, UK manufacturers
of scientific equipment, in March 1984, which entities, in December 1997,
merged into Life Science Resources Ltd. Previously, Mr. Williams was a partner
in Arthur Andersen & Co., a mathematician with General Motors Research, and a
mathematician with British Steel. Mr. Williams was a founder of
Glyko Biomedical Ltd. and its predecessor Glyko, Inc. Mr. Williams received a
B.S. in Theoretical Physics from the University of Wales.
Board Committees
The board has established an Audit Committee and a Compensation Committee. The
Audit Committee, which consists of Dr. Gadicke and Mr. Williams, reviews
BioMarin's financial statements and accounting practices, makes
recommendations to the board regarding the selection of independent auditors
and reviews the results and scope of the audit and other services provided by
BioMarin's independent auditors.
The Compensation Committee, which consists of Dr. Gadicke, Mr. Sager and Mr.
Williams, sets general compensation policy for BioMarin and has final approval
power over compensation to executive officers. The Compensation Committee also
has final approval power over guidelines and criteria for employees' bonuses
and administers the 1997 Stock Plan and 1998 Director Option Plan.
Director Compensation
Directors do not receive cash compensation for their services as directors of
BioMarin but are reimbursed for their reasonable expenses in attending
meetings of the board and while performing services for BioMarin. Prior to the
effectiveness of the 1998 Director Option Plan, BioMarin had granted each non-
employee director an option to purchase 20,000 shares of BioMarin common stock
with an exercise price set at the fair market value on the dates of grant,
$1.00, upon their election to the board as consideration for their willingness
to sit on the board. In March 1999, BioMarin also issued to each such non-
employee director, for services performed as a director, an additional option
to purchase 15,000 shares of common stock with an exercise price set at the
fair market value on the date of grant, $7.00, as consideration for their
ongoing services to BioMarin as directors. In March 1999, Mr. Sager and Mr.
Gadicke were each also issued an option to purchase an additional 20,000
shares of common stock of BioMarin at an exercise price set at the fair market
value on the date of grant, $7.00, as consideration for services rendered by
them to BioMarin in connection with this offering.
1998 Director Option Plan
The 1998 Director Option Plan was adopted by the board in December 1998. It
was approved by the stockholders as of January 15, 1999. The plan provides for
the grant of nonstatutory stock options to non-employee directors. A total of
200,000 shares of BioMarin common stock has been reserved for issuance under
the plan. The plan also provides for an annual increase in this number of
shares equal to the lesser of: (1) 0.5% of BioMarin's outstanding capital
stock, (2) 200,000 shares, or (3) a lesser amount determined by the board.
56
<PAGE>
As of December 1998, no options had been granted under the 1998 Director Option
Plan. In March 1999, options to purchase 45,000 shares of common stock had been
granted under the 1998 Director Plan.
The 1998 Director Option Plan provides that each non-employee director shall
automatically be granted an option to purchase 20,000 shares of BioMarin common
stock on the date which such person first becomes a non-employee director. This
option shall have a term of ten years. The shares subject to this initial
option shall vest over one year. Each non-employee director shall thereafter
also be automatically granted an option to purchase 15,000 shares of BioMarin
common stock on the anniversary of the date of their respective initial
appointments to the board and each anniversary thereafter, provided that he or
she retains their board seat on such anniversary date. The shares subject to
this annual option shall vest in full one year from the date of grant and shall
have a term of ten years. These options shall continue to vest only while the
director serves. The exercise price of each of these options shall be 100% of
the fair market value of a share of BioMarin common stock at the date of the
option.
In the event of a merger or the sale of substantially all of the assets of
BioMarin, each option may be assumed or substituted by the successor
corporation. If an option is assumed or substituted, it shall continue to vest
as provided in the plan. However, if a non-employee director's status as a
director of BioMarin or the successor corporation, as applicable, is
terminated, other than upon a voluntary resignation by the non-employee
director, the option shall immediately become fully vested and exercisable. If
the successor corporation does not agree to assume or substitute for the
option, each option shall become fully vested and exercisable for a period of
30 days from the date the board notifies the optionee of the option's full
exercisability, after which period the option shall terminate.
Options granted under the plan must be exercised within three months of the end
of the optionee's tenure as a director, or within 12 months after such
director's termination by death or disability, but in no event later than the
expiration of the option's ten-year term. No option granted under the plan is
transferable by the optionee other than by will or the laws of descent or
distribution. Each option is exercisable, during the lifetime of the optionee,
only by such optionee. Unless sooner terminated by the board, the plan will
terminate automatically ten years from the effective date of the plan.
57
<PAGE>
Executive Compensation
Summary Compensation Table. The following table sets forth all compensation
awarded to, earned by, or paid for services rendered to BioMarin in all
capacities during the year ended December 31, 1998, by (1) BioMarin's chief
executive officer and (2) the other four most highly compensated executive
officers other than the chief executive officer who were serving as executive
officers as of December 31, 1998, collectively, the "Named Executive Officers".
Fiscal 1998 Summary Compensation Table
<TABLE>
<CAPTION>
1998 Annual Compensation Long-Term Compensation
---------------------------------- ------------------------
Number of
Name and Principal All Other Shares Underlying
Position Salary($) Bonus($) Compensation($) Options Granted(#) (/1/)
- ------------------ --------- -------- --------------- ------------------------
<S> <C> <C> <C> <C>
Grant W. Denison, Jr.... 202,500 87,550 -- 400,000
Chief Executive Officer
John C. Klock, M.D...... 222,450 87,550 2,142 300,000
President
Christopher M. Starr,
Ph.D................... 139,560 87,550 876 200,000
Vice President,
Research and
Development
Emil D. Kakkis, M.D.,
Ph.D................... 75,000 50,000 18 200,000
Vice President of
BioMarin, President of
BioMarin Genetics, a
division of the Company
Brian K. Brandley,
Ph.D................... 101,620 -- 348 --
Vice President of
BioMarin, Managing
Director of Glyko,
Inc., a wholly-owned
subsidiary of BioMarin
</TABLE>
- -------------------------------
(/1/) In connection with BioMarin's acquisition of Glyko, Inc. on October 7,
1998, the following individuals executed Share Exchange Agreements under
which they agreed that, upon exercise of certain of their options to
purchase common shares of Glyko Biomedical granted in connection with
services previously rendered by each of them to Glyko, Inc., they would
receive the following number of shares of BioMarin common stock in lieu
of common shares of Glyko Biomedical, to John C. Klock: 66,246 shares; to
Christopher M. Starr: 40,275 shares; and to Brian K. Brandley: 65,415
shares. These shares are not reflected in this column because they are
not issuable upon the exercise of options to purchase BioMarin common
stock granted for services rendered to BioMarin.
For the year ended December 31, 1997, Dr. Klock was paid $146,914 in salary as
compensation for services rendered by him in his capacity as President of
BioMarin.
Until October 1998, Mr. Denison devoted 70% of his time to BioMarin.
Subsequently, Mr. Denison has devoted 100% of his time to BioMarin. Since
October 1998 Mr. Denison's annual salary has been $257,000. Until April 1998,
Dr. Klock and Dr. Starr devoted, respectively, 70% of their time to BioMarin
and 30% to Glyko, Inc. Since April 1998, Dr. Klock and Dr. Starr have devoted
100% of their time to BioMarin. In 1998, Dr. Klock's annual salary was $250,000
and Dr. Starr's annual salary was $150,000. Dr. Kakkis' employment began in
September 1998 as Vice President of BioMarin and as President of BioMarin
Genetics, a division of BioMarin. His starting annual salary was $225,000.
Dr. Brandley began employment with Glyko, Inc. in April 1998. His starting
annual salary was $135,000.
As of April 20, 1999, the board has granted options to purchase the following
number of shares of BioMarin common stock: 100,000 shares to Grant W. Denison,
Jr., 75,000 shares to John C. Klock, 50,000 shares to Christopher M. Starr,
20,375 shares to Emil D. Kakkis and 17,270 shares to Brian K. Brandley.
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<PAGE>
Stock Option Grants Table. The following table sets forth further information
regarding options granted to each of the Named Executive Officers during 1998.
Fiscal 1998 Stock Option Grants
<TABLE>
<CAPTION>
Option Term
-------------------------
Potential Realizable
Value at Assumed
Number of Percent of Annual Rates of Stock
Securities Total Options Price Appreciation
Underlying Granted to Exercise Price for Option Term (/4/)
Options Employees Per Expiration ---------------------
Name Granted (/1/) in 1998 (/2/) Share($) (/3/) Date 5% 10%
---- ------------- ------------- -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Grant W. Denison, Jr.... 400,000 18% $4.00 6/08 $5,846,375 $9,718,149
John C. Klock, M.D...... 300,000 13% $4.00 6/08 $4,384,782 $7,288,612
Christopher M. Starr,
Ph.D................... 200,000 9% $4.00 6/08 $2,923,188 $4,859,074
Emil D. Kakkis, M.D.,
Ph.D................... 200,000 9% $4.00 6/08 $2,923,188 $4,859,074
Brian K. Brandley,
Ph.D................... -- -- -- -- -- --
</TABLE>
- -------------------------------
(/1/) These options are incentive stock options that vest over four years as
follows: (1) for Mr. Denison, Dr. Klock and Dr. Starr, 2/3 of such total
shares subject to such options shall vest at a rate of 1/48 of this
subtotal per month, with the remaining 1/3 of such total to vest upon
the completion of this offering or upon completion of four years of
continued employment, and (2) for Dr. Kakkis, 12.5% of the total shares
subject to such options vest six months after the vesting commencement
date and 1/48 of such total shall vest monthly thereafter. In connection
with BioMarin's acquisition of Glyko, Inc. on October 7, 1998, the
following individuals executed Share Exchange Agreements under which
they agreed that, upon exercise of certain of their options to purchase
common shares of Glyko Biomedical granted in connection with services
previously rendered by each of them to Glyko, Inc., they would receive
the following number of shares of BioMarin common stock in lieu of
common shares of Glyko Biomedical: to John C. Klock: 66,246 shares; to
Christopher M. Starr: 40,275 shares; and to Brian K. Brandley: 65,415
shares. These shares are not reflected in this column because they are
not issuable upon the exercise of options to purchase BioMarin common
stock granted for services rendered to BioMarin.
(/2/) Based on an aggregate of 2,252,120 shares subject to options granted by
BioMarin during 1998 to employees, consultants and the Named Executive
Officers.
(/3/) Options were granted at an exercise price equal to the fair market value
of the common stock, as determined by the Board of Directors, on the
date of grant.
(/4/) The 5% and 10% assumed annual rates of compounded stock price
appreciation are mandated by rules of the Securities and Exchange
Commission. BioMarin cannot assure any executive officer or any other
holder of its securities that the actual stock price appreciation over
the option term will be at the assumed 5% and 10% levels or at any other
defined level. Unless the market price of its common stock appreciates
over the option term, no value will be realized from the option grants
made to the executive officers. The potential realizable value is
calculated by assuming that the initial public offering price of $12.00
per share appreciates at the indicated rate for the entire term of the
option and that the option is exercised at the exercise price and sold
on the last day of its term at the appreciated price. The potential
realizable value computation is net of the applicable exercise price,
but does not take into account applicable federal or state income tax
consequences and other expenses of option exercises or sales of
appreciated stock. The values shown do not consider non-transferability
or termination of the options upon termination of such employee's
employment with BioMarin.
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<PAGE>
Fiscal Year-End Option Value Table. The following table sets forth the number
of shares covered by both exercisable and unexercisable stock options held by
each of the Named Executive Officers at December 31, 1998. No shares were
acquired upon the exercise of stock options during 1998.
Aggregate 1998 Fiscal Year-End Option Value Table
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at Year-End (/1/) at Year-End (/2/)
------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Grant W. Denison, Jr...... 50,000 350,000 $400,000 $2,800,000
John C. Klock, M.D........ 37,500 262,500 $300,000 $2,100,000
Christopher M. Starr,
Ph.D..................... 25,000 175,000 $200,000 $1,400,000
Emil D. Kakkis, M.D.,
Ph.D..................... 25,000 175,000 $200,000 $1,400,000
Brian K. Brandley, Ph.D... -- -- $ -- $ --
</TABLE>
- -------------------------------
(/1/)These options are incentive stock options that vest over four years as
follows: (1) for Mr. Denison Dr. Klock and Dr. Starr, 2/3 of such total
shares subject to such options shall vest at a rate of 1/48 of this
subtotal per month, with the remaining 1/3 of such total to vest upon the
completion of this offering or upon four years of service, and (2) for
Dr. Kakkis, at a rate of 12.5% of the total shares subject to such options
vest six months from vesting commencement date and 1/48 of such total
shall vest monthly thereafter. In connection with BioMarin's acquisition
of Glyko, Inc. on October 7, 1998, the following individuals executed
Share Exchange Agreements under which they agreed that, upon exercise of
certain of their options to purchase common shares of Glyko Biomedical
granted in connection with services previously rendered by each of them to
Glyko, Inc., they would receive the following number of shares of BioMarin
common stock in lieu of common shares of Glyko Biomedical: to John C.
Klock: 66,246 shares; to Christopher M. Starr: 40,275 shares; and to Brian
K. Brandley: 65,415 shares. These shares are not reflected in this column
because they are not issuable upon the exercise of options to purchase
BioMarin common stock granted for services rendered to BioMarin. See
"Employee Benefits Plans" for a description of the material terms of these
options.
(/2/)Based on the assumed public offering price of $12.00 per share, less the
exercise price.
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<PAGE>
Employment Agreements
We are party to employment agreements with the executive officers and on the
terms enumerated on the chart below:
<TABLE>
<CAPTION>
1998
Name of Annual Initial Grant of Right
Executive Salary to Purchase Agreement
Officer Rate Annual Bonus Equity Securities Termination Date
--------- ------ ------------ ---------------------- ----------------
<S> <C> <C> <C> <C>
Grant W. $257,000 Based upon BioMarin's 1,300,000 shares June 26, 2000(/2/)
Denison, market capitalization of BioMarin's
Jr. stock at purchase
price of $1.00 per
share.(/1/)
John C. $250,000 Based upon Biomarin's 800,000 shares of June 26, 2000(/2/)
Klock, market capitalization BioMarin's stock at
M.D. purchase price
of $1.00 per share.(/1/)
Christopher $150,000 Based upon BioMarin's 400,000 shares of June 26, 2000(/2/)
M. Starr, market capitalization BioMarin's stock at
Ph.D. purchase price
of $1.00 per share.(/1/)
Brian K. $135,000 Annual bonus, payable option to purchase None(/2/)
Brandley, in cash or stock, up to 150,000
Ph.D.(/3/) customarily between shares of Glyko
10-15% of his Biomedical's common
annual salary. stock. Now exercisable
for 65,415 shares of
our common stock.
Raymond W. $185,000 Eligible to Option to purchase None(/2/)
Anderson receive a cash 200,000 shares of
bonus. common stock.
Emil $225,000 Contingent Option to purchase None(/2/)
Kakkis, upon regulatory 200,000 shares of
M.D., filings and approvals. common stock.
Ph.D.
Stuart $150,000 Annual bonus, payable Option to purchase None(/2/)
Swiedler, in cash or stock, 150,000 shares of
M.D., customarily between common stock.
Ph.D. 10-15% of his
annual salary.
</TABLE>
- -------------------------------
(/1/) We provided a three-year loan to him for the purchase. The loan bears
interest at a rate of 6%. If his employment is terminated by us for any
reason, he has the right to sell any or all of these shares of common
stock to us at a price per share equal to the lesser of the then-current
per share market price of such shares or the original per share purchase
price, $1.00. In the event he ceases employment with us for any reason,
we also have the right, but not the obligation, to repurchase the
unvested portion of the shares at their original per share purchase
price, $1.00. Fifty percent of the shares vested after one year from the
date of his employment, with the remainder vesting at a rate of 1/24 per
month thereafter.
(/2/) This employment agreement is terminable without cause by BioMarin upon
six months prior written notice, or by him upon three months prior
written notice to BioMarin. BioMarin is obligated to pay his salary and
benefits until such termination. In the event that he is involuntarily
terminated within one year of a change of control of BioMarin he is
entitled to: (1) a severance payment equal to six months of his then-
current annual salary, (2) 50% of the annual bonus that he would
otherwise be entitled to, and (3) 50% of the unvested portion of his
outstanding options to purchase BioMarin capital stock shall immediately
vest.
(/3/) Dr. Brandley's employment agreement was with Glyko, Inc. but was assigned
to us in connection with our acquisition of Glyko, Inc.
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<PAGE>
The founder's annual cash bonus for each of Mr. Denison, Dr. Klock and Dr.
Starr is based on the difference between a minimum market capitalization and
BioMarin's quarterly market capitalization. The annual cash bonus is calculated
as follows:
The board of directors established a minimum market capitalization of $20.0
million for the first quarter of 1998. The minimum market capitalization
increases by $1.0 million per quarter until the end of the agreement in the
second quarter of 2000. Our quarterly market capitalization is calculated at
the end of each calendar quarter by multiplying the number of our common shares
outstanding times the average closing price of our common stock for the last
ten trading days of the quarter. If our common stock is not publicly traded the
quarterly market capitalization is determined by multiplying the shares of our
common stock outstanding by the price at which of our common stock was sold in
the latest significant investment by an independent third-party investor. For
each full $5.0 million that the quarterly market capitalization exceeds the
minimum market capitalization, the founders each receive a cash bonus of $1,200
in the first calendar quarter, $1,250 in the second and third calendar
quarters, and $1,300 in the fourth calendar quarter. Each founder's annual cash
bonus is the sum of all the four quarterly bonuses.
Each founder's total annual cash bonus may not exceed 100% of base salary in
any year. Additional amounts beyond the cash limit that may be earned in the
year will be paid in stock options using the Black-Scholes option pricing model
to calculate the value of the stock option based on year-end parameters.
This offering will increase the bonuses paid to the founders because it will
increase our market capitalization. Assuming that the offering is for the base
number of shares, the underwriters do not exercise the over allotment option,
and the per share price in this offering is in the midpoint of the pricing
range, this bonus increase would be $130,000 per founder for the second half of
1999. There are no adjustments in the founders' annual salaries that result
from increases in market capitalization.
In December 1998, the board approved a form of indemnification agreement to be
entered into between us and each of our officers and directors. This
indemnification agreement requires us, among other things, to indemnify
officers and directors against liabilities that may arise by reasons of their
status or performance of their duties as officers or directors and to advance
their expenses incurred as a result of any proceeding against them as to which
they could be indemnified.
For a description of other transactions between BioMarin and affiliates of
BioMarin, see "--Management; and --Compensation Committee Interlocks and
Insider Participation."
Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee of the board has at any time since our
formation been an officer or employee of BioMarin. Other than Dr. Klock and Mr.
Anderson, who are each directors of Glyko Biomedical, no executive officer of
BioMarin serves as a member of the board of directors or compensation committee
of any entity that has one or more executive officers serving on the Board or
the Compensation Committee of the Board. Mr. Anderson also serves on the
Compensation Committee of Glyko Biomedical.
Employee Benefit Plans
1997 Stock Plan. On November 14, 1997, the board adopted the 1997 Stock Plan
and approved the reservation of a total of 3,000,000 shares of common stock for
issuance under the 1997 Stock Plan. The stockholders approved the 1997 Stock
Plan in April 1998. In December 1998, the board approved an amendment to the
1997 Stock Plan. The stockholders approved the amendment as of January 15,
1999. The amendment increases the number of shares reserved for issuance under
the 1997 Stock Plan
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<PAGE>
to an aggregate of 5,000,000. The amendment also added an "evergreen provision"
providing for an annual increase in the number of shares that may be optioned
or sold under the 1997 Stock Plan without need for additional board or
stockholder actions, which increase shall be the lesser of: (1) 4% of the then-
outstanding capital stock of BioMarin, (2) 2,000,000 shares, or (3) a lower
amount set by the board. The 1997 Stock Plan provides for the grant of stock
options and the issuance of restricted stock by BioMarin to its employees,
officers, directors and consultants. The 1997 Stock Plan permits the grant of
options that are either incentive stock options, or ISOs, as defined in Section
422 of the Internal Revenue Code of 1986, as amended, or nonqualified stock
options, or NSOs, on terms, including the exercise price, which may not be less
than 85% of the fair market value of our common stock for NSOs, and the vesting
schedule, determined by the board, subject to certain statutory limitations and
other limitations in the 1997 Stock Plan.
Options granted under the 1997 Stock Plan are generally not transferable by the
optionee. Options granted under the 1997 Stock Plan must generally be exercised
within three months after the end of the optionee's status as an employee,
director or consultant of BioMarin, or within twelve months after such
optionee's termination by death or disability, but in no event later than the
expiration of the option's term.
The exercise price of all incentive stock options granted under the 1997 Stock
Plan must be at least equal to the fair market value of BioMarin common stock
on the date of grant. The exercise price of NSOs granted under the 1997 Stock
Plan is determined by the board at an exercise price not less than 85% of fair
market value. With respect to nonstatutory stock options intended to qualify as
"performance-based compensation" within the meaning of Section 162(m) of the
Internal Revenue Code, the exercise price must be at least equal to the fair
market value of BioMarin common stock on the date of grant. With respect to any
participant who owns stock possessing more than 10% of voting power of all
classes of BioMarin's outstanding capital stock, the exercise price of any
incentive stock option granted must be at least equal to 110% of the fair
market value on the grant date and the term of such incentive stock option must
not exceed five years. The term of all other options granted under the 1997
Stock Plan may not exceed ten years.
The 1997 Stock Plan provides that in the event of a merger of BioMarin with or
into another corporation, or a sale of substantially all of BioMarin's assets,
each option may be assumed or an equivalent option substituted for by the
successor corporation. If the outstanding options are not assumed or
substituted, the administrator shall provide for the optionee to have the right
to exercise the option as to all of the optioned stock, including shares as to
which it would not otherwise be exercisable.
1998 Employee Stock Purchase Plan. In December 1998, the board adopted, and as
of January 15, 1999, the stockholders approved, the 1998 Employee Stock
Purchase Plan. A total of 250,000 shares of BioMarin common stock has been
reserved for issuance under the 1998 Employee Stock Purchase Plan. The plan
also contains an "evergreen provision" providing for an annual increase in the
number of shares which may be sold under the plan equal to the lesser of (1)
0.5% of the then-outstanding BioMarin capital stock, (2) 200,000 shares, or (3)
a lesser amount set by the board.
As of December 31, 1998, no shares have been issued under the 1998 Employee
Stock Purchase Plan. This plan will become effective upon the completion of
this offering.
The 1998 Employee Stock Purchase Plan is intended to qualify under Section 423
of the Internal Revenue Code and contains consecutive, overlapping, 24 month
offering periods. Each offering period includes four six-month purchase
periods. The offering periods generally start on the first trading day on or
after May 1 and November 1 of each year, except for the first such offering
period that commences on the first trading day on or after the effective date
of this offering and ends on the last trading day on or before October 31,
2000.
63
<PAGE>
Employees are eligible to participate if they are customarily employed by
BioMarin or a participating subsidiary for at least 20 hours per week and more
than five months in any calendar year. However, any employee who either: (1)
immediately after grant owns stock possessing 5% or more of the total combined
voting power or value of all classes of BioMarin capital stock, or (2) whose
rights to purchase stock under all of BioMarin's employee stock purchase plans
accrue at a rate which exceeds $25,000 worth of stock for each calendar year,
may not be granted an option to purchase stock under the 1998 Employee Stock
Purchase Plan. The 1998 Employee Stock Purchase Plan permits employees to
purchase common stock through payroll deduction of up to 10% of the employee's
compensation that is base earnings and commissions, excluding overtime, shift
premium, incentive payments and bonuses. The maximum number of shares an
employee may purchase during a single purchase period is 5,000 shares.
The price of stock purchased under the 1998 Employee Stock Purchase Plan is
generally 85% of the lower of the fair market value of the common stock: (1) at
the beginning of the offering period or (2) at the end of the purchase period.
In the event the fair market value at the end of a purchase period is less than
the fair market value at the beginning of the offering period, the employees
will be withdrawn from the current offering period following exercise and
automatically re-enrolled in a new offering period. The new offering period
will use the lower fair market value as of the first date of the new offering
period to determine the purchase price for future purchase periods. Employees
may end their participation at any time during an offering period, and they
will be paid their payroll deductions to date. Participation ends automatically
upon termination of employment with BioMarin.
Rights granted under the 1998 Employee Stock Purchase Plan are generally not
transferable by an employee other than by will or the laws of descent and
distribution. In the event of a merger of BioMarin with or into another
corporation or a sale of substantially all of BioMarin's assets, each
outstanding option under the 1998 Employee Stock Purchase Plan may be assumed
or substituted for by the successor corporation. If the successor corporation
refuses to assume or substitute for the outstanding options, the offering
period then in progress will be shortened and a new exercise date will be set.
The board of directors has the authority to terminate or amend the 1998
Employee Stock Purchase Plan to the extent necessary to avoid unfavorable
financial accounting consequences by altering the purchase price for any
offering period, shortening any offering period or allocating remaining shares
among the participants. The 1998 Employee Stock Purchase plan will terminate
automatically ten years from the effective date of this offering unless it is
terminated sooner by the board.
401(k) Plan. BioMarin sponsors the Glyko Retirement Savings Plan or the 401(k)
Plan. Employees are eligible to participate immediately following the start of
their employment, on the earlier of the next occurring January 1 or July 1.
Participants may contribute up to approximately 15% of their current
compensation, up to a statutorily prescribed annual limit, to the 401(k) Plan.
Each participant is fully vested in his or her salary reduction contributions.
Participant contributions are held in trust as required by law. Individual
participants may direct the trustee to invest their accounts in authorized
investment alternatives. BioMarin pays the direct expenses of the 401(k) Plan
but does not currently match or make contributions to employee accounts. The
401(k) Plan is intended to qualify under Section 401(a) of the Internal Revenue
Code so that contributions to the 401(k) Plan, and income earned on such
contributions, are not taxable to participants until withdrawn or distributed
from the 401(k) Plan.
64
<PAGE>
CERTAIN TRANSACTIONS
On April 19, 1997, BioMarin sold to Glyko Biomedical, 1,500,000 shares of
BioMarin's common stock for aggregate consideration of $1.5 million. Dr. John
Klock, who is the President and Secretary of BioMarin, as well as a director,
is also the President, Chief Executive Officer and Chief Financial Officer of
Glyko Biomedical, as well as a director thereof. On June 26, 1997, BioMarin
entered into a license agreement with Glyko Biomedical pursuant to which
BioMarin was granted an exclusive, worldwide, perpetual royalty-free license to
certain technology for therapeutic uses. On September 24, 1997, BioMarin issued
7,000,000 shares of our common stock to Glyko Biomedical as consideration for
the license granted to it under the Glyko Biomedical license agreement.
BioMarin entered into a pre-emptive rights agreement, dated June 26, 1997, with
Glyko Biomedical, pursuant to which Glyko Biomedical was granted the right to
purchase a pro rata share of new issuances of securities by BioMarin, subject
to limited exemptions. This agreement terminates immediately prior to the
initial public offering.
On April 18, 1997, Gwynn Williams was appointed one of the three initial
directors of BioMarin. Mr. Williams is a holder of 11% of the outstanding
capital stock of Glyko Biomedical.
On October 1, 1997, BioMarin sold 800,000 shares of common stock to Dr. Klock
in exchange for a full recourse, three-year promissory note secured by such
shares in the principal amount of $800,000. On October 1, 1997, BioMarin sold
1,300,000 shares of common stock to Mr. Denison in exchange for a full
recourse, three-year promissory note secured by such shares in the principal
amount of $1.3 million. On October 1, 1997, BioMarin sold 400,000 shares of
common stock to Dr. Starr in exchange for a full recourse, three-year
promissory note secured by such shares in the principal amount of $400,000.
These loans bear interest at a rate of 6%. If their respective employments are
terminated by BioMarin for any reason, each of Mr. Denison, Dr. Klock and Dr.
Starr has the right to sell any or all of these shares to BioMarin at a per
share price equal to the lesser of the then-current per share market price of
such shares or the original per share purchase price of $1.00. In the event any
of these officers ceases to be an employee for any reason, BioMarin has the
right, but not the obligation, to repurchase the unvested portion of the shares
at their original purchase price. Fifty percent of the shares vested after one
year from their date of employment with the remainder vesting at a rate of
1/24 per month thereafter.
On November 14, 1997, Erich Sager, Chairman of LaMont Asset Management S.A., a
holder of 13% of the outstanding capital stock of Glyko Biomedical, was
appointed to the board of BioMarin. Since November 14, 1997, BioMarin has sold
675,000 common shares at $1.00 per share, 260,000 common shares at $6.00 per
share and $9.7 million of convertible notes to LaMont Asset Management S.A.
BioMarin entered into an Agency Agreement dated August 5, 1997 with Clubb
Capital Ltd., or Clubb, an entity with which Mr. Denison is affiliated through
his directorship of Clubb Biocapital, an entity affiliated with Clubb, pursuant
to which BioMarin was to pay Clubb a placement agent's commission in connection
with a proposed $8.5 million private placement financing. Between October 1,
1997 and December 30, 1997, as part of an approximately $8.8 million private
placement financing, BioMarin issued as a commission 801,500 shares of common
stock and warrants to purchase an aggregate of 801,500 shares of Common Stock
to Clubb under the terms of the Agency Agreement dated August 5, 1997. These
warrants have an exercise price of $1.00 per share and a three year term. These
warrants contain an optional net exercise provision.
On December 30, 1997, BioMarin entered into a preemptive rights agreement with
BB BioVentures L.P., or BBB, in connection with its purchase on such date of
5,000,000 shares of common stock of BioMarin, pursuant to which BBB was granted
the right to purchase a pro rata share of new issuances of securities by
BioMarin, subject to limited exemptions. This agreement terminates immediately
prior to the initial public offering. Also in connection with such investment
by BBB, Dr. Gadicke, an affiliate
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<PAGE>
of BBB, was appointed to the board of BioMarin. Also in connection with such
investment, BioMarin, Dr. Klock, Mr. Denison, Dr. Starr and Glyko Biomedical
entered into a voting agreement pursuant to which each party agreed to vote all
shares of BioMarin's outstanding capital stock held by such party in favor of a
BBB nominee to BioMarin's board, so long as BBB held at least 5% of the
outstanding capital stock of BioMarin, which agreement shall terminate upon the
initial public offering of BioMarin's capital stock, in a firm commitment
underwriting with aggregate gross proceeds to BioMarin of at least $5.0
million. As long as BBB holds a board position in BioMarin, BBB has a right to
participate in the management of BioMarin. In the event that BBB does not
retain a board position in BioMarin, BBB is entitled to certain board
observation rights which terminate upon the offering.
On November 14, 1997, for their services as directors, the board approved the
grant to each of Mr. Sager and Mr. Williams of an option to purchase 20,000
shares of common stock at an exercise price of $1.00 per share.
On January 22, 1998, for his services as a director, the board approved a grant
to Dr. Gadicke of an option to purchase 20,000 shares of common stock at an
exercise price of $1.00 per share.
On June 15, 1998, the board approved the following option grants, each at an
exercise price of $4.00 per share, to officers of BioMarin:
. to Mr. Denison of an option to purchase 400,000 shares
. to Dr. Klock of an option to purchase 300,000 shares
. to Dr. Starr of an option to purchase 200,000 shares
. to Mr. Anderson of an option to purchase 200,000 shares
. to Dr. Kakkis of an option to purchase 200,000 shares
. to Dr. Swiedler to purchase 150,000 shares
BioMarin entered into a second Agency Agreement with Clubb, dated June 26,
1998, pursuant to which BioMarin was to pay Clubb placement agent's commission
in connection with an $11.5 million private placement financing. Between June
30, 1998 and August 3, 1998, BioMarin issued, as a commission, 98,000 shares of
BioMarin's common stock to Clubb or its affiliates.
Under the pre-emptive rights agreement, on June 30, 1998, BioMarin sold an
additional 166,667 shares of BioMarin's common stock to Glyko Biomedical for
aggregate consideration of $1.0 million.
On July 14, 1998, BioMarin sold to BBB, a holder of greater than 10% of
BioMarin's outstanding Capital Stock, MPM BioVentures Parallel Fund L.P. and
MPM Asset Management Investors 1998 L.L.C., the latter two entities being
affiliated with BBB, a total of 416,667 shares of common stock for an aggregate
consideration of $2.5 million. MPM BioVentures Parallel Fund L.P. and MPM Asset
Management Investors 1998 L.L.C. are each managed by MPM Capital, L.P. of which
Dr. Gadicke is the Chairman of the Board and Managing Director.
On September 4, 1998, BioMarin received $8.0 million from Genzyme upon
execution of a joint venture agreement in which we issued 1,333,333 shares of
common stock to Genzyme. As a result of this joint venture agreement, BioMarin
has a 50% interest in the income or loss of the joint venture, BioMarin/Genzyme
LLC.
On October 7, 1998, BioMarin purchased Glyko, Inc., a wholly-owned subsidiary
of Glyko Biomedical, from Glyko Biomedical, for an aggregate purchase price of
$14.5 million. Such purchase price was paid for with 2,259,039 shares of common
stock of BioMarin, valued at $6.00 per share, the assumption by BioMarin of
certain stock options held by Glyko, Inc. employees which were exercisable into
a maximum of 255,540 shares of common stock of BioMarin at an average exercise
price of $2.30 per share, and $500 in cash. Included in the assumed stock
options was an option granted to Dr. Brandley,
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which is exercisable for 65,415 shares of BioMarin's common stock at an
exercise price of $5.27 per share, when fully vested, and options granted to
Dr. Klock exercisable for a total of 66,246 shares of BioMarin's common stock
at a weighted average exercise price of $1.02 per share when fully vested and
options to Dr. Starr exercisable for a total of 40,275 shares of our common
stock at a weighted average exercise price of $1.02 per share when fully
vested.
BioMarin had contractual agreements for office space and administrative,
research, and development functions with Glyko, Inc. prior to the acquisition
date of October 7, 1998. BioMarin reimbursed Glyko, Inc. for rent, salaries and
related benefits, and other administrative costs. Glyko, Inc. also reimbursed
BioMarin for salaries and related benefits. BioMarin reimbursed Glyko, Inc. for
a net $240,848, $101,888, and $342,736 for the period from March 21, 1997
(inception) to December 31, 1997, the year ended December 31, 1998, and the
period from March 21, 1997 (inception) to October 7, 1998.
On December 22, 1998, the board approved indemnification agreements with each
officer and each director of BioMarin.
On January 15, 1999, the board approved the following option grants, each at an
exercise price of $7.00 per share, to officers of BioMarin:
. to Mr. Denison an option to purchase 100,000 shares
. to Dr. Klock an option to purchase 75,000 shares
. to Dr. Starr an option to purchase 50,000 shares
. to Mr. Anderson an option to purchase 25,000 shares
. to Dr. Kakkis an option to purchase 16,667 shares
. to Dr. Swiedler an option to purchase 23,438 shares
. to Dr. Brandley an option to purchase 12,265 shares
On March 22, 1999, options were granted to Dr. Gadicke, Mr. Sager and Mr.
Williams to purchase 15,000 shares each at an exercise price of $7.00 per share
as compensation for their services as directors under the 1998 Director Option
Plan.
On March 22, 1999, the board approved option grants to Dr. Gadicke and Mr.
Sager to purchase 20,000 shares each at an exercise price of $7.00 per share as
compensation for services provided to the management of BioMarin in regards to
the offering.
Also on March 22, 1999, the board approved the following option grants, each at
an exercise price of $7.00 per share, to officers of BioMarin:
. to Mr. Anderson an option to purchase 4,573 shares
. to Dr. Kakkis an option to purchase 3,708 shares
. to Dr. Swiedler an option to purchase 4,634 shares
. to Dr. Brandley an option to purchase 5,005 shares.
On April 12, 1999, BioMarin sold a total of $26.0 million worth of three-year
promissory notes convertible, according to their terms, into BioMarin common
stock, at an initial conversion price, subject to adjustment, of $10.00 per
share. Glyko Biomedical purchased $4.3 million worth of such notes and LaMont
Asset Management S.A. purchased $9.7 million worth of such notes. In connection
with this transaction, BioMarin also entered into an agency agreement with
LaMont Asset Management S.A., pursuant to which BioMarin agreed to pay LaMont
Asset Management S.A. a cash commission of $1.1 million on sales of notes to
certain European purchasers introduced to BioMarin by LaMont Asset Management
S.A.
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of our common stock as of May 31, 1999, and as adjusted to
reflect the sale of 4,500,000 shares of common stock in this offering, by:
. each person, or group of affiliated persons, who is known by us to
own beneficially more than 5% of the common stock
. each of our directors
. each of our Named Executive Officers
. all of our directors and current executive officers as a group
Except as otherwise noted, the persons or entities in this table have sole
voting and investing power with respect to all the shares of common stock
beneficially owned by them subject to community property laws, where
applicable.
The "Number of Shares Beneficially Owned" column below is based on 26,176,180
shares of common stock outstanding at May 31, 1999, and 34,109,513 shares of
common stock outstanding after the offering. Shares of common stock subject to
options or warrants that are currently exercisable or exercisable within 60
days of May 31, 1999 are deemed to be outstanding and to be beneficially owned
by the person holding such options or warrants for the purpose of computing the
percentage ownership of such person but are not treated as outstanding for the
purpose of computing the percentage ownership of any other person.
The "Percentage of Shares Beneficially Owned After Offering" column below is
calculated after giving effect to the sale to Genzyme of $10.0 million worth of
common stock at an assumed purchase price of $12.00 per share, the conversion
of outstanding convertible promissory notes into 2,600,000 shares of common
stock, assuming no interest on these notes is converted into shares of common
stock, and the sale and issuance of 4,500,000 shares of common stock in this
offering.
<TABLE>
<CAPTION>
Percentage of
Shares
Beneficially
Number of Owned
Shares -----------------
Beneficially Before After
Name of Beneficial Owner Owned Offering Offering
- ------------------------ ------------ -------- --------
<S> <C> <C> <C>
Glyko Biomedical Ltd........................... 10,925,706 41.7% 33.3%
371 Bel Marin Keys Blvd., Suite 210
Novato, CA 94949
BB BioVentures, L.P.(/1/)...................... 5,416,667 20.7% 15.9%
One Cambridge Center, 9th Floor
Cambridge, MA 02142
Genzyme Corporation............................ 1,333,333 5.1% 6.4%
One Kendall Square
Cambridge, MA 02139
LaMont Asset Management S.A.................... 935,000 3.6% 7.1%
Baarerstrasse 10
P.O. Box 4639
6304 Zug, Switzerland
Grant W. Denison, Jr.(/2/)..................... 1,536,806 5.8% 4.5%
John C. Klock, M.D.(/3/)....................... 1,043,850 4.0% 3.0%
Christopher M. Starr, Ph.D.(/4/)............... 558,679 2.1% 1.6%
Emil D. Kakkis, M.D., Ph.D.(/5/)............... 60,305 * *
Brian K. Brandley, Ph.D.(/6/).................. 28,599 * *
Ansbert S. Gadicke(/7/)........................ 47,500 * *
Erich Sager(/8/)............................... 312,500 1.2% *
Gwynn R. Williams(/9/)......................... 27,500 * *
All current executive officers and directors as
a group (10 persons)(/10/).................... 3,775,412 14.3% 11.0%
</TABLE>
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<PAGE>
- -------------------------------
* Represents less than 1% of the Company's outstanding common stock.
(/1/) Includes shares held by MPM Asset Management 1998 Investors L.L.C. and
MPM BioVentures Parallel Fund L.P., both of which are affiliated with
BB BioVentures L.P.
(/2/) Includes 103,472 shares subject to options currently exercisable or
exercisable within 60 days of May 31, 1999 and 133,333 shares which
will become exercisable upon the completion of the offering.
(/3/) Includes 143,850 shares subject to options currently exercisable or
exercisable within 60 days of May 31, 1999 of which 66,246 are issuable
upon exercise of options assumed in connection with the acquisition of
Glyko, Inc. and 100,000 shares which will become exercisable upon the
completion of the offering.
(/4/) Includes 92,012 shares subject to options currently exercisable or
exercisable within 60 days of May 31, 1999 of which 40,275 shares are
issuable upon exercise of options assumed in connection with the
acquisition of Glyko, Inc. and 66,667 shares which will become
exercisable upon the completion of the offering.
(/5/) Includes 60,305 shares subject to options currently exercisable or
exercisable within 60 days of May 31, 1999.
(/6/) Includes 28,599 shares subject to options currently exercisable or
exercisable within 60 days of May 31, 1999 of which 21,805 shares are
issuable upon exercise of options assumed in connection with the
acquisition of Glyko, Inc.
(/7/) Includes 27,500 shares subject to options currently exercisable or
exercisable within 60 days of May 31, 1999 and 20,000 shares which will
become exercisable (with certain criteria) upon the completion of the
offering.
(/8/) Includes 27,500 shares subject to options currently exercisable or
exercisable within 60 days of May 31, 1999 and 20,000 shares which will
become exercisable (with certain criteria) upon the completion of the
offering. Mr. Sager claims beneficial ownership of 265,000 shares of
common stock currently held by LaMont Asset Management, S.A., of which
Mr. Sager is an affiliate.
(/9/) Includes 27,500 shares subject to options currently exercisable or
exercisable within 60 days of May 31, 1999.
(/10/) See footnotes 2 through 9. Includes 603,745 shares subject to options
currently exercisable or exercisable within 60 days of May 31, 1999 and
406,667 shares that will become exercisable upon the completion of the
offering.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
Immediately following the closing of this offering, the authorized capital
stock of BioMarin will consist of 75,000,000 shares of common stock, $0.001 par
value per share, and 1,000,000 shares of preferred stock, $0.001 par value per
share. As of May 31, 1999, there were outstanding 26,176,180 shares of common
stock held of record by 48 stockholders, warrants to purchase 801,500 shares of
common stock and options to purchase 3,773,286 shares of common stock.
Common Stock
Subject to preferences that may apply to shares of preferred stock outstanding
at the time, the holders of outstanding shares of common stock are entitled to
receive dividends out of assets legally available therefore at such times and
in such amounts as the board may from time to time determine. Each stockholder
is entitled to one vote for each share of common stock held on all matters
submitted to a vote of stockholders. Cumulative voting for the election of
directors is not provided for in BioMarin's certificate of incorporation, which
means that the holders of a majority of the shares voted can elect all of the
directors then standing for election. The common stock is not entitled to
preemptive rights and is not subject to conversion or redemption. Each
outstanding share of common stock is, and all shares of common stock to be
outstanding upon completion of this offering will be, fully paid and
nonassessable.
Preferred Stock
Immediately following the closing of this offering, pursuant to BioMarin's
amended and restated certificate of incorporation, the board of directors will
have the authority, without further action by the stockholders, to issue up to
1,000,000 shares of preferred stock in one or more series and to fix the
designations, powers, preferences, privileges, and relative participating,
optional or special rights as well as the qualifications, limitations or
restrictions of those shares, including dividend rights, conversion rights,
voting rights, terms of redemption and liquidation preferences, any or all of
which may be greater than the rights of the common stock. The board of
directors, without stockholder approval, will be able to issue preferred stock
with voting, conversion or other rights that could adversely affect the voting
power and other rights of the holders of common stock. Preferred stock could
thus be issued quickly with terms calculated to delay or prevent a change in
control of BioMarin or make removal of management more difficult. Additionally,
the issuance of preferred stock may have the effect of decreasing the market
price of the common stock, and may adversely affect the voting and other rights
of the holders of common stock. At present, there are no shares of preferred
stock outstanding.
Anti-Takeover Provisions
Delaware Law
Section 203 of the Delaware General Corporation Law is applicable to corporate
takeovers of Delaware corporations. Subject to certain exceptions enumerated in
Section 203, Section 203 provides that a corporation shall not engage in any
business combination with any "interested stockholder" for a three-year period
following the date that the stockholder becomes an interested stockholder
unless:
. prior to that date, the board of directors of the corporation
approved either the business combination or the transaction that
resulted in the stockholder becoming an interested stockholder,
. upon consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned
at least 85% of the voting stock of the corporation outstanding at
the time the transaction commenced, though some shares may be
excluded from the calculation,
. on or subsequent to that date, the business combination is approved
by the board of directors of the corporation and by the affirmative
votes of holders of at least two-thirds of the outstanding voting
stock that is not owned by the interested stockholder. Except as
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<PAGE>
specified in Section 203, an interested stockholder is generally
defined to include any person who, together with any affiliates or
associates of that person, beneficially owns, directly or indirectly,
15% or more of the outstanding voting stock of the corporation, or is
an affiliate or associate of the corporation and was the owner of 15%
or more of the outstanding voting stock of the corporation, any time
within three years immediately prior to the relevant date. Under
certain circumstances, Section 203 makes it more difficult for an
interested stockholder to effect various business combinations with a
corporation for a three-year period, although the stockholders may
elect not to be governed by this section, by adopting an amendment to
our certificate of incorporation or bylaws, effective 12 months after
adoption. BioMarin's certificate of incorporation and its bylaws do
not exclude BioMarin from the restrictions imposed under Section 203.
It is anticipated that the provisions of Section 203 may encourage
companies interested in acquiring BioMarin to negotiate in advance
with the board since the stockholder approval requirement would be
avoided if a majority of the directors then in office excluding an
interested stockholder approve either the business combination or the
transaction that resulted in the stockholder becoming an interested
stockholder. These provisions may have the effect of deterring
hostile takeovers or delaying changes in control of BioMarin, which
could depress the market price of the common stock and which could
deprive stockholders of opportunities to realize a premium on shares
of the common stock held by them.
Charter and Bylaw Provisions
Immediately following the closing of this offering, BioMarin's amended and
restated certificate of incorporation and Bylaws will contain provisions that
could discourage potential takeover attempts and make more difficult attempts
by stockholders to change management. BioMarin's amended and restated
certificate of incorporation will provide that stockholders may not take action
by written consent but may only act at a stockholders' meeting, and that
special meetings of the stockholders of BioMarin may only be called by the
Chairman of the Board or a majority of the board.
Registration Rights
Beginning six months after the effective date of the registration statement,
the holders of 29,607,540 shares of common stock, the registrable securities,
will have rights with respect to the registration of those shares under the
Act. If holders of at least 30% of the registrable securities request that
BioMarin register at least 30% of the registrable securities, BioMarin must
file a registration statement to register those securities. In addition, if
BioMarin proposes to register any of its shares of common stock under the
Securities Act other than in connection with a BioMarin employee benefit plan
or certain corporate acquisitions, mergers or reorganizations, the holders of
the registrable securities may require BioMarin to include all or a portion of
their shares in such registration, subject to certain rights of the managing
underwriter of a public offering of such shares to limit the number of shares
in any such offering.
Further, the holders of registrable securities may require BioMarin to register
all or any portion of their registrable securities on Form S-3 when that form
becomes available to BioMarin, as long as the aggregate offering price of would
exceed $2.5 million, subject to other conditions and limitations.
All expenses incurred in connection with such registrations (other than
underwriters' discounts and commissions) will be borne by BioMarin. No holder
of registrable securities will be entitled to registration rights at such time
as such holder can sell registrable securities in compliance with Rule 144 of
the Securities Act during any two successive three month periods.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is ChaseMellon
Shareholder Services LLC, 85 Challenger Road, Ridgefield Park, NJ 07660.
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for the common stock and we
cannot assure you that a liquid trading market for the common stock will
develop or be sustained after this offering. Future sales of substantial
amounts of common stock, including shares issued upon exercise of outstanding
options and warrants, in the public market after this offering or the
anticipation thereof could adversely affect market prices prevailing from time
to time and could impair BioMarin's ability to raise capital through sales of
its equity securities. As described below, no shares currently outstanding will
be available for sale immediately after this offering due to contractual
restrictions on resale of such shares. Sales of substantial amounts of common
stock of BioMarin in the public market after these restrictions lapse or the
anticipation thereof could adversely affect the prevailing market price of the
common stock and the ability of BioMarin to raise equity capital in the future.
Upon completion of this offering, BioMarin will have outstanding 34,109,513
shares of common stock, assuming no exercise of the Underwriters' over-
allotment option and no exercise of outstanding options or warrants. Of these
shares, the shares sold in this offering will be freely tradable without
restriction under the Securities Act unless purchased by "affiliates" of
BioMarin as that term is defined in Rule 144 under the Securities Act. The
remaining 29,609,513 restricted shares held by existing stockholders, are
subject to various lock-up agreements providing that, with limited exceptions,
the stockholder will not offer, sell, contract to sell, grant an option to
purchase, effect a short sale or otherwise dispose of or engage in any hedging
or other transaction that is designed or reasonably expected to lead to a
disposition of any shares of common stock or any option to purchase common
stock or any securities exchangeable for or convertible into common stock for a
period of 180 days after the date of this prospectus. Though these shares may
be eligible for earlier sale under the provisions of Rules 144, 144(k) and 701
under the Securities Act, none of these shares will be saleable until 181 days
after the date of this prospectus as a result of these lock-up agreements.
Beginning 181 days after the date of this prospectus, 23,676,180 restricted
shares will be eligible for sale in the U.S. public market, although all but
1,973 shares will be subject to volume limitations. Thereafter, 5,933,333
shares will become eligible for sale in the U.S. public market after the end of
the lock-up period. Beginning 181 days after the date of this prospectus all
29,607,540 restricted shares held by existing stockholders shall be eligible
for sale on the Swiss Exchange. Sales of restricted securities on the Swiss
Exchange, however, will still be subject to U.S. securities laws including
Regulation S or Rule 144 which may, as applicable to each stockholder, restrict
such sales. In addition, as of April 20, 1999, there were outstanding options
to purchase 3,706,476 shares of common stock, none of which options are
expected to be exercised prior to the closing of the offering. All of the
shares issued upon such exercises will be subject to lock-up agreements.
In general, under Rule 144 as currently in effect, beginning 90 days after the
date of this prospectus, a person, or persons whose shares are aggregated, who
has beneficially owned restricted shares for at least one year is entitled to
sell within any three-month period up to that number of shares that does not
exceed the greater of: (1) 1% of the number of shares of common stock then
outstanding, which is approximately 341,095 shares, or (2) the average weekly
trading volume of the common stock during the four calendar weeks preceding the
filing of a Form 144 with respect to such sale. Sales under Rule 144 are also
subject to certain "manner of sale" provisions and notice requirements and to
the requirement that current public information about BioMarin be available.
Under Rule 144(k), a person who is not deemed to have been an affiliate of
BioMarin at any time during the three months preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years,
including the holding period of any prior owner except an affiliate, is
entitled to sell those shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144.
Rule 701 permits resales of qualified shares held by some affiliates in
reliance upon Rule 144 but without compliance with some restrictions, including
the holding period requirement, of Rule 144. Any
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<PAGE>
employee, officer or director of or consultant to BioMarin who purchased his or
her shares pursuant to a written compensatory plan or contract may be entitled
to rely on the resale provisions of Rule 701. Rule 701 further provides that
non-affiliates may sell shares in reliance on Rule 144 without having to comply
with the holding period, public information, volume limitation or notice
provisions of Rule 144. All holders of Rule 701 shares of common stock are
required to wait until 90 days after the date of this prospectus before selling
shares. However, all shares issued pursuant to Rule 701 are subject to lock-up
agreements and will only become eligible for sale at the earlier of the
expiration of the 180-day lock-up.
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<PAGE>
UNDERWRITING
The U.S. underwriters named below, acting through their global coordinators,
U.S. Bancorp Piper Jaffray Inc. and Bank J. Vontobel & Co AG, have severally
agreed, subject to the terms and conditions of a U.S. underwriting agreement
with us to purchase from us the number of shares of BioMarin common stock set
forth opposite their respective names below.
<TABLE>
<CAPTION>
Number
of
U.S. Underwriters Shares
----------------- ------
<S> <C>
U.S. Bancorp Piper Jaffray Inc...........................................
Bank J. Vontobel & Co AG.................................................
Schroders & Co. Inc......................................................
Leerink Swann & Company..................................................
..................................................................
..................................................................
..................................................................
..................................................................
..................................................................
..................................................................
..................................................................
..................................................................
..................................................................
..................................................................
------
</TABLE>
<TABLE>
<S> <C>
Total..................................................................
======
</TABLE>
The U.S. underwriters have agreed, subject to the terms and conditions set
forth in the U.S. underwriting agreement, to purchase all of the shares of
BioMarin common stock being sold pursuant to the U.S. underwriting agreement if
any of the shares of BioMarin common stock being sold pursuant to the U.S.
underwriting agreement are purchased. Sales by Bank J. Vontobel & Co AG in the
United States will be made by Vontobel Securities Ltd., a U.S. broker-dealer
affiliate of Bank J. Vontobel & Co AG. No dealer shall make any sales of
BioMarin common stock in any jurisdiction unless it is duly registered to do so
or an exemption from the registered dealer requirements of such jurisdiction is
available.
We have entered into an international underwriting agreement with the managers
of the international offering providing for the concurrent sale of [ . ] shares
of BioMarin common stock in Switzerland and elsewhere outside the United States
and Canada. The closing of the international offering is a condition to the
closing of the U.S. offering and vice versa.
We have granted the U.S. underwriters and the international managers an option,
exercisable by the global coordinators for 30 days after the date of this
prospectus, to purchase up to an additional 675,000 shares of BioMarin common
stock to cover over-allotments, if any, at the public offering price, less the
underwriting discount. To the extent that such option is exercised, each of the
underwriters will have a firm commitment, subject to certain conditions, to
purchase approximately the same percentage of the option shares that the number
of shares to be purchased initially by that underwriter is of the number of
shares of BioMarin common stock initially purchased by the underwriters.
The global coordinators have advised us that the U.S. underwriters propose to
offer the shares of BioMarin common stock offered hereby to the public in the
United States and on a private placement basis in Canada initially at the
public offering price set forth on the cover page of this prospectus, and to
certain dealers at such price less a concession not in excess of $[ . ] per
share. The U.S.
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<PAGE>
underwriters may allow, and such dealers may reallow, a discount not in excess
of $[ . ] per share on sales to certain other dealers. After the public
offering of the BioMarin common stock, the public offering price, concession
and discount may be changed. The public offering price, the underwriting
discounts and concession and discount to dealers for the international offering
are the same as for the U.S. offering.
The prospectus is intended for use only in connection with offers and sales of
BioMarin common stock in the U.S. offering and any shares initially offered in
the international offering that are thereafter sold or resold in the United
States by underwriters or, for a period of 25 days after the date of this
prospectus, by dealers (as such terms are defined in the Securities Act). The
initial offers and sales of BioMarin common stock in the international offering
are not being registered under the Securities Act and this prospectus is not to
be sent or given to any person outside the United States and Canada.
The company has been informed that the U.S. underwriters and the international
managers have entered into an intersyndicate agreement dated the date hereof
which provides for the coordination of their activities. Under the terms of the
intersyndicate agreement, the U.S. underwriters and the international managers
are permitted to sell shares of BioMarin common stock to each other.
[ . ] shares of BioMarin common stock are initially being offered in the U.S.
offering in the United States and Canada and [ . ] shares are initially being
concurrently offered in the international offering in Switzerland and elsewhere
outside the United States and Canada. The final allocation of BioMarin common
stock between the U.S. offering and the international offering may differ from
these amounts. Pursuant to the intersyndicate agreement, sales may be made
between the U.S. underwriters and the international managers and, to the extent
such sales are made, the number of shares of BioMarin common stock initially
available for sale by the U.S. underwriters or by the international managers
may be more or less than the above amounts.
Pursuant to the intersyndicate agreement, each of the U.S. underwriters has
agreed that, as part of the distribution of shares of BioMarin common stock in
the U.S. offering, it has not offered or sold, and will not offer or sell,
directly or indirectly, any shares of BioMarin common stock or distribute any
prospectus relating to the BioMarin common stock outside the United States or
Canada or to any dealer who does not so agree. Each international manager has
agreed that, as part of the distribution of shares of BioMarin common stock in
the international offering it has not offered or sold, and will not offer or
sell, directly or indirectly, any shares of BioMarin common stock or distribute
any prospectus relating to the BioMarin common stock in the United States or
Canada or to any dealer who does not so agree. The foregoing limitations do not
apply to transactions between the international managers and the U.S.
underwriters pursuant to the intersyndicate agreement. As used herein, "United
States" means the United States of America (including the States and the
District of Columbia), its territories, possessions and other areas subject to
its jurisdiction, "Canada" means Canada, its provinces, territories,
possessions and other areas subject to its jurisdiction, and an offer or sale
shall be deemed made in the United States or Canada if it is made to (1) any
individual resident in the United States or Canada or (2) any corporation,
partnership, pension, profit-sharing or other trust or other entity (including
any such entity acting as an investment adviser with discretionary authority)
whose office most directly involved with the purchase is located in the United
States or Canada.
BioMarin has applied to have its common stock approved for quotation on The
Nasdaq National Market and the Swiss Exchange under the symbol BMRN.
We have agreed to indemnify the underwriters against certain liabilities which
may be incurred in connection with the offering of the BioMarin common stock
and the exercise of the over-allotment options, including liabilities under the
Securities Act and other applicable securities laws.
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<PAGE>
The underwriters have informed us that they do not expect to confirm sales of
BioMarin common stock offered hereby to any accounts over which they exercise
discretionary authority.
Prior to this offering, there has been no public market for the BioMarin common
stock. Accordingly, the initial public offering price for the shares will be
determined by negotiation among us and the global coordinators. In determining
such price, consideration will be given to various factors, including market
conditions for initial public offerings, the history of and prospects for our
business, our past and present operations, the present state of our
development, certain of our financial information, an assessment of our
management, the market for securities of companies in businesses similar to
ours, the general condition of the securities markets and other factors deemed
relevant. There can be no assurance that the initial public offering price will
correspond to the price at which the BioMarin common stock will trade in the
public market subsequent to the offering or that an active trading market for
the BioMarin common stock will develop and continue after the offering.
U.S. Bancorp Piper Jaffray Inc. and Bank J. Vontobel & Co AG, on behalf of the
underwriters, may engage in over-allotment, stabilizing transactions, syndicate
covering transactions and penalty bids. Over-allotment involves syndicate sales
in excess of the offering size, which creates a syndicate short position.
Stabilizing transactions permit bids to purchase the underlying security so
long as the stabilizing bids do not exceed a specified maximum. Syndicate
covering transactions involve purchases of the BioMarin common stock in the
open market after the distribution has been completed in order to cover
syndicate short positions. Penalty bids permit the underwriters to reclaim a
selling concession from a syndicate member when the BioMarin common stock
originally sold by such syndicate member is purchased in a syndicate covering
transaction to cover syndicate short positions. Such stabilizing transactions,
syndicate covering transactions and penalty bids may cause the price of the
BioMarin common stock to be higher than it would otherwise be in the absence of
such transactions. These transactions may be effected on The Nasdaq National
Market and the Swiss Exchange or otherwise and, if commenced, may be
discontinued at any time.
We and our executive officers and directors and other existing stockholders
have agreed that we will not, for a period of 180 days following the date of
the final prospectus directly or indirectly, offer to sell, grant any option
for the sale of, or otherwise dispose of, any shares of BioMarin common stock
or any securities convertible into or exchangeable or exercisable for any such
shares, subject to certain limited exceptions. All such securities held by such
other stockholders will be released from the foregoing restrictions at the end
of such 180-day period.
76
<PAGE>
LEGAL MATTERS
The validity of the common stock offered by this prospectus will be passed upon
for BioMarin by Wilson Sonsini Goodrich & Rosati, Professional Corporation,
Palo Alto, California. Certain legal matters in connection with this offering
will be passed upon for the underwriters by Cooley Godward LLP, Palo Alto,
California.
EXPERTS
The financial statements included in this prospectus and elsewhere in this
registration statement, to the extent and for the periods indicated in their
reports, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
giving said reports.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-1 with the SEC for the stock
we are offering by this prospectus. This prospectus does not include all of the
information contained in the registration statement. You should refer to the
registration statement and its exhibits for additional information. While we
have disclosed the material terms of any of our contracts, agreements or other
documents referenced in this prospectus, you should refer to the exhibits
attached to the registration statement for copies of the actual contract,
agreement or other document. When we complete this offering, we will also be
required to file annual, quarterly and special reports, proxy statements and
other information with the SEC.
You can read our SEC filings, including the registration statement, over the
Internet at the SEC's web site at http://www.sec.gov. You may also read and
copy any document we file with the SEC at its public reference facilities at
450 Fifth Street, NW, Washington, DC 20549, 7 World Trade Center, Suite 1300,
New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511. You may also obtain copies of the documents
at prescribed rates by writing to the Public Reference Section of the SEC at
450 Fifth Street, NW, Washington, DC 20549. Please call the SEC at 1-800-SEC-
0330 for further information on the operation of the public reference
facilities. Our SEC filings are also available at the office of the Nasdaq
National Market. For further information on obtaining copies of our public
filings at the Nasdaq National Market you should call (212) 656-5060.
77
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
BioMarin Pharmaceutical Inc. Financial Statements
Report of Independent Public Accountants................................... F-2
Consolidated Balance Sheets................................................ F-3
Consolidated Statements of Operations...................................... F-4
Statement of Changes in Stockholders' Equity............................... F-5
Consolidated Statements of Cash Flows...................................... F-7
Notes to Consolidated Financial Statements................................. F-8
Glyko, Inc. Financial Statements
Report of Independent Public Accountants................................... F-23
Balance Sheets............................................................. F-24
Statements of Operations................................................... F-25
Statements of Changes in Stockholders' Equity (Deficit).................... F-26
Statements of Cash Flows................................................... F-27
Notes to Financial Statements.............................................. F-28
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of
BioMarin Pharmaceutical Inc.:
We have audited the consolidated balance sheets of BioMarin Pharmaceutical Inc.
(a Delaware corporation in the development stage) and subsidiaries as of
December 31, 1997 and 1998, and the related consolidated statements of
operations, changes in stockholders' equity, and cash flows for the period from
March 21, 1997 (inception) to December 31, 1997, the year ended December 31,
1998 and the period from March 21, 1997 (inception) to December 31, 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
BioMarin Pharmaceutical Inc. and subsidiaries as of December 31, 1997 and 1998,
and the results of its operations and its cash flows for the period from March
21, 1997 (inception) to December 31, 1997, the year ended December 31, 1998 and
the period from March 21, 1997 (inception) to December 31, 1998, in conformity
with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
San Francisco, California,
March 17, 1999
(Except for the matter discussed in
the fifth paragraph of Note 1, for
which the date is April 13, 1999)
F-2
<PAGE>
BIOMARIN PHARMACEUTICAL INC. AND SUBSIDIARIES
(a development-stage company)
Consolidated Balance Sheets
As of December 31, 1997 and 1998, and March 31, 1999
<TABLE>
<CAPTION>
December 31,
------------------------- March 31,
1997 1998 1999
----------- ------------ -----------
ASSETS (unaudited)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents.... $ 5,987,433 $ 9,413,662 $ 3,574,697
Short-term investments....... 900,827 1,975,800 254,000
Accounts receivable, net..... -- 148,396 183,980
Due from Glyko Biomedical,
Ltd......................... 79,607 114,005 119,165
Due from BioMarin/Genzyme
LLC......................... -- 418,712 628,444
Inventories.................. -- 71,730 59,486
Prepaid expenses............. 539,445 676,214 706,018
----------- ------------ -----------
Total current assets....... 7,507,312 12,818,519 5,525,790
PROPERTY AND EQUIPMENT, net.... 145,683 6,223,058 8,584,212
GOODWILL AND OTHER INTANGIBLE
ASSETS........................ -- 11,703,726 11,432,452
INVESTMENT IN BIOMARIN/GENZYME
LLC........................... -- 684,657 1,146,337
DEPOSITS....................... -- 79,142 88,843
----------- ------------ -----------
Total assets............... $ 7,652,995 $ 31,509,102 $26,777,634
=========== ============ ===========
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES:
Accounts payable............. $ 168,062 $ 1,340,355 780,300
Accrued liabilities.......... 43,395 640,016 823,663
Due to Glyko, Inc............ 61,072 -- --
Notes payable short-term..... -- 24,366 24,803
----------- ------------ -----------
Total current liabilities.. 272,529 2,004,737 1,628,766
LONG-TERM LIABILITIES: Long-
term portion of notes
payable....................... -- 109,845 103,448
----------- ------------ -----------
Total liabilities.......... 272,529 2,114,582 1,732,214
----------- ------------ -----------
STOCKHOLDERS' EQUITY:
Common stock, $0.001 par
value: 50,000,000 shares
authorized, 20,566,500,
26,176,180 and 26,176,180
shares issued and
outstanding at December 31,
1997 and 1998, and March 31,
1999 respectively........... 20,567 26,176 26,176
Additional paid-in capital... 12,548,924 47,867,868 48,357,654
Warrants..................... 128,240 128,240 128,240
Deferred compensation........ (217,000) (1,063,845) (1,471,578)
Notes receivable from
stockholders................ (2,337,500) (2,487,500) (2,525,000)
Deficit accumulated during
the development stage....... (2,762,765) (15,076,419) (19,470,072)
----------- ------------ -----------
Total stockholders'
equity.................... 7,380,466 29,394,520 25,045,420
----------- ------------ -----------
Total liabilities and
stockholders' equity...... $ 7,652,995 $ 31,509,102 $26,777,634
=========== ============ ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
BIOMARIN PHARMACEUTICAL INC. AND SUBSIDIARIES
(a development-stage company)
Consolidated Statements of Operations
For the Period from March 21, 1997 (inception) to December 31, 1997,
the Year ended December 31, 1998, the Three Month Periods ended March 31, 1998
and 1999
and for the Period from March 21, 1997 (inception) to March 31, 1999
<TABLE>
<CAPTION>
Three months ended
March 31,
------------------------
Period from Period from
March 21, 1997 March 21, 1997
(inception), to Year ended (inception), to
December 31, December 31, March 31,
1997 1998 1998 1999 1999
--------------- ------------ ----------- ----------- ---------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Revenues:
Revenues--products..................... $ -- $ 138,162 $ -- $ 202,038 $ 340,200
Revenues--services..................... -- 112,135 -- 46,882 159,017
Revenues from BioMarin/ Genzyme LLC.... -- 837,457 -- 746,272 1,583,729
Revenues--other........................ -- 102,655 -- 109,126 211,781
----------- ------------ ----------- ----------- ------------
Total revenues......................... -- 1,190,409 -- 1,104,318 2,294,727
Operating Costs and Expenses:
Cost of sales.......................... -- 107,942 -- 102,701 210,643
Research and development............... 1,913,795 10,502,636 1,108,223 3,820,087 16,236,518
General and administrative............. 914,299 3,530,886 302,655 1,548,928 5,994,113
----------- ------------ ----------- ----------- ------------
Loss from operations................... (2,828,094) (12,951,055) (1,410,888) (4,367,398) (20,146,547)
Interest income........................ 65,329 684,572 92,393 153,611 903,512
Equity in loss of BioMarin/ Genzyme
LLC................................... -- (47,171) -- (179,866) (227,037)
----------- ------------ ----------- ----------- ------------
Net loss............................... $(2,762,765) $(12,313,654) $(1,318,495) $(4,393,653) $(19,470,072)
=========== ============ =========== =========== ============
Net loss per share, basic and diluted.. $ (0.34) $ (0.55) $ (0.06) $ (0.17) $ (1.12)
=========== ============ =========== =========== ============
Weighted average common shares
outstanding........................... 8,136,475 22,488,481 20,566,500 26,176,180 17,441,374
=========== ============ =========== =========== ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
BIOMARIN PHARMACEUTICAL INC. AND SUBSIDIARIES
(a development stage company)
Consolidated Statement of Changes in Stockholders' Equity
For the Period from March 21, 1997 (inception), to December 31, 1997,
for the Year ended December 31, 1998, for the Three Months ended March 31,
1999 and for
the Period from March 21, 1997 (inception), to March 31, 1999
<TABLE>
<CAPTION>
Deficit
Notes Accumulated
Common Stock Additional Warrants Receivable During Total
------------------ Paid-in ---------------- Deferred from Development Stockholders'
Shares Amount Capital Shares Amount Compensation Stockholders Stage Equity
---------- ------- ----------- ------- -------- ------------ ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, MARCH 21,
1997............... -- $ -- $ -- -- $ -- $ -- $ -- $ -- $ --
Issuance of common
stock to Glyko
Biomedical, Ltd.
on March 21, 1997,
for cash, $1.00
per share......... 1,500,000 1,500 1,498,500 -- -- -- -- -- 1,500,000
Issuance of common
stock to Glyko
Biomedical, Ltd.
in June 1997 in
exchange for tech-
nology, $1.00 per
share............. 7,000,000 7,000 (7,000) -- -- -- -- -- --
Issuance of common
stock in October
1997, $1.00 per
share (net of is-
suance costs of
$439,720, includ-
ing the issuance
of 299,000 shares
of common stock,
$1.00 per share,
and warrants to
purchase an addi-
tional 299,000
shares of common
stock for broker-
age services)..... 4,039,000 4,039 3,595,241 299,000 47,840 -- -- -- 3,647,120
Issuance of common
stock to employees
in exchange for
notes in October
1997, $1.00 per
share............. 2,500,000 2,500 2,497,500 -- -- (200,000) (2,300,000) -- --
Issuance of common
stock and warrants
on December 31,
1997, $1.00 per
share (net of is-
suance costs of
$592,309, includ-
ing the issuance
of 502,500 shares
of common stock,
$1.00 per share,
and warrants to
purchase an addi-
tional 502,500
shares of common
stock for broker-
age services)..... 5,527,500 5,528 4,929,663 502,500 80,400 -- -- -- 5,015,591
Common stock op-
tions granted in
exchange for serv-
ices.............. -- -- 35,020 -- -- (17,000) -- -- 18,020
Interest on notes
receivable........ -- -- -- -- -- -- (37,500) -- (37,500)
Net loss for the
period from March
21, 1997 (incep-
tion), to December
31, 1997.......... -- -- -- -- -- -- -- (2,762,765) (2,762,765)
---------- ------- ----------- ------- -------- --------- ----------- ----------- -----------
BALANCE, DECEMBER
31, 1997........... 20,566,500 $20,567 $12,548,924 801,500 $128,240 $(217,000) $(2,337,500) $(2,762,765) $ 7,380,466
========== ======= =========== ======= ======== ========= =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
BIOMARIN PHARMACEUTICAL INC. AND SUBSIDIARIES
(a development stage company)
Consolidated Statement of Changes in Stockholders' Equity
For the Period from March 21, 1997 (inception), to December 31, 1997,
for the Year ended December 31, 1998, for the Three Months ended March 31,
1999 and for
the Period from March 21, 1997 (inception), to March 31, 1999
<TABLE>
<CAPTION>
Deficit
Notes Accumulated
Common Stock Additional Warrants Receivable During Total
------------------ Paid-in ---------------- Deferred from Development Stockholders'
Shares Amount Capital Shares Amount Compensation Stockholders Stage Equity
---------- ------- ----------- ------- -------- ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY
1, 1998........... 20,566,500 $20,567 $12,548,924 801,500 $128,240 $ (217,000) $(2,337,500) $ (2,762,765) $ 7,380,466
Issuance of com-
mon stock on June
30, 1998, for
cash, $6.00 per
share (net of is-
suance costs of
$263,208, includ-
ing the issuance
of 31,368 shares
of common stock,
$6.00 per share,
for brokerage
services)........ 598,535 598 3,327,404 -- -- -- -- -- 3,328,002
Issuance of com-
mon stock on July
14, 1998, for
cash, $6.00 per
share (net of is-
suance costs of
$387,474, includ-
ing the issuance
of 64,579 shares
of common stock,
$6.00 per share,
for brokerage
services)........ 1,385,414 1,386 7,923,624 -- -- -- -- -- 7,925,010
Issuance of com-
mon stock on Au-
gust 3, 1998, for
cash, $6.00 per
share (net of is-
suance costs of
$12,318, includ-
ing the issuance
of 2,053 shares
of common stock,
$6.00 per share,
for brokerage
services)........ 31,386 31 175,967 -- -- -- -- -- 175,998
Issuance of com-
mon stock to
Genzyme Corpora-
tion on September
4, 1998, for
cash, $6.00 per
share............ 1,333,333 1,333 7,998,665 -- -- -- -- -- 7,999,998
Issuance of com-
mon stock to
Glyko Biomedical,
Ltd. for the pur-
chase of Glyko,
Inc. on October
7, 1998, for com-
mon shares, $6.00
per share and the
assumption of op-
tions of Glyko,
Inc. employees
(see Note 1)..... 2,259,039 2,259 14,859,063 -- -- -- -- -- 14,861,322
Exercise of com-
mon stock op-
tions............ 1,973 2 1,971 -- -- -- -- -- 1,973
Interest on notes
receivable....... -- -- -- -- -- -- (150,000) -- (150,000)
Deferred compen-
sation on stock
options.......... -- -- 1,032,250 -- -- (1,032,250) -- -- --
Amortization of
deferred compen-
sation........... -- -- -- -- -- 185,405 - -- 185,405
Net loss......... -- -- -- -- -- -- -- (12,313,654) (12,313,654)
---------- ------- ----------- ------- -------- ----------- ----------- ------------ ------------
BALANCE, DECEMBER
31, 1998.......... 26,176,180 $26,176 $47,867,868 801,500 $128,240 $(1,063,845) $(2,487,500) $(15,076,419) $ 29,394,520
Interest on notes
receivable....... -- -- -- -- -- -- (37,500) -- (37,500)
Deferred compen-
sation on stock
options.......... -- -- 489,786 -- -- (489,786) -- -- --
Amortization of
deferred compen-
sation........... -- -- -- -- -- 82,053 - -- 82,053
Net loss......... -- -- -- -- -- -- -- (4,393,653) (4,393,653)
---------- ------- ----------- ------- -------- ----------- ----------- ------------ ------------
BALANCE, March 31,
1999 (unaudited) 26,176,180 $26,176 $48,357,654 801,500 $128,240 $(1,471,578) $(2,525,000) $(19,470,072) $ 25,045,420
========== ======= =========== ======= ======== =========== =========== ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
BIOMARIN PHARMACEUTICAL INC. AND SUBSIDIARIES
(a development-stage company)
Consolidated Statements of Cash Flows
For the Period from March 21, 1997 (inception), the Year ended
December 31, 1998, the Three Month Periods ended March 31, 1998 and 1999
and for the Period from March 21, 1997 (inception) to March 31, 1999
<TABLE>
<CAPTION>
Three months ended
March 31,
------------------------
Period from
March 21, 1997 Period from
(inception), to Year ended March 21, 1997
December 31, December 31, (inception), to
1997 1998 1998 1999 March 31, 1999
--------------- ------------ ----------- ----------- ---------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss.................................... $(2,762,765) $(12,313,654) $(1,318,495) $(4,393,653) $(19,470,072)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation................................ 4,790 307,645 14,916 420,103 732,538
Amortization of deferred compensation....... -- 185,405 -- 82,053 267,458
Amortization of goodwill.................... -- 271,274 -- 271,274 542,548
Compensation in the form of common stock and
common stock options....................... 18,020 -- -- -- 18,020
Loss from BioMarin/Genzyme LLC.............. -- 47,131 -- 179,866 226,997
Write-off of in-process technology.......... -- 2,625,000 -- -- 2,625,000
Changes in operating assets and liabilities:
Accounts receivable......................... -- (148,396) (105,178) (35,584) (183,980)
Due from Glyko Biomedical, Ltd.............. (79,607) (34,398) -- (5,160) (119,165)
Due from BioMarin/Genzyme LLC............... -- (418,712) -- (209,732) (628,444)
Inventories................................. -- (71,730) -- 12,244 (59,486)
Prepaid expenses............................ (539,445) (136,769) 89,194 (29,804) (706,018)
Deposits.................................... -- (79,142) (10,000) (9,701) (88,843)
Accounts payable............................ 168,062 1,172,293 (1,293) (560,055) 780,300
Accrued liabilities......................... 43,395 596,621 (43,395) 183,647 823,663
Due to Glyko, Inc........................... 61,072 (61,072) -- -- --
----------- ------------ ----------- ----------- ------------
Net cash used in operating activities...... (3,086,478) (8,058,504) (1,374,251) (4,094,502) (15,237,484)
----------- ------------ ----------- ----------- ------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of property and equipment.......... (150,473) (6,385,020) (136,762) (2,781,257) (9,316,750)
Investment in BioMarin/Genzyme LLC.......... -- (731,788) -- (641,546) (1,373,334)
Sale (purchase) of short-term investments... (900,827) (1,074,973) (4,071,675) 1,721,800 (254,000)
----------- ------------ ----------- ----------- ------------
Net cash used in investing activities...... (1,051,300) (8,191,781) (4,208,437) (1,701,003) (10,944,084)
----------- ------------ ----------- ----------- ------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from note payable.................. -- 134,211 -- -- 134,211
Bridge loan................................. 880,000 -- -- -- 880,000
Accrued interest on notes receivable from
stockholders............................... (37,500) (150,000) (37,500) (37,500) (225,000)
Repayment of equipment loan................. -- -- -- (5,960) (5,960)
Proceeds from sale of common stock, net of
issuance costs............................. 9,282,711 19,692,303 -- -- 28,975,014
----------- ------------ ----------- ----------- ------------
Net cash provided by financing activities.. 10,125,211 19,676,514 (37,500) (43,460) 29,758,265
----------- ------------ ----------- ----------- ------------
Net increase (decrease) equivalents........ 5,987,433 3,426,229 (5,620,188) (5,838,965) 3,574,697
CASH AND CASH EQUIVALENTS:
Beginning of period......................... -- 5,987,433 5,987,433 9,413,662 --
----------- ------------ ----------- ----------- ------------
End of period............................... $ 5,987,433 $ 9,413,662 $ 367,245 $ 3,574,697 $ 3,574,697
=========== ============ =========== =========== ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-7
<PAGE>
BIOMARIN PHARMACEUTICAL INC. AND SUBSIDIARIES
(a development-stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information with respect to the periods ended March 31, 1998 and 1999 and the
period
from March 21, 1997 (inception) to March 31, 1999 is unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Nature of Operations and Business Risks--BioMarin Pharmaceutical Inc. (BioMarin
or the Company) is a privately held biopharmaceutical company specializing in
the development of carbohydrate enzyme therapies for debilitating life-
threatening chronic genetic disorders and other diseases and conditions. With
its recent acquisition of Glyko, Inc., BioMarin added analytical and diagnostic
products and services in the area of carbohydrate biology. BioMarin was
incorporated on October 25, 1996, in the state of Delaware. BioMarin first
began business on March 21, 1997 (inception), and issued 1,500,000 shares of
common stock to Glyko Biomedical, Ltd. (GBL) for $1,500,000. Beginning in
October 1997, BioMarin issued stock to outside investors, resulting in Glyko
Biomedical's ownership of BioMarin being reduced to 41.3 percent at December
31, 1997.
Since inception, the Company has devoted substantially all of its efforts to
research and development activities, including preclinical studies and clinical
trials, the establishment of laboratory and clinical scale manufacturing
facilities, clinical manufacturing, and related administrative activities.
On September 4, 1998, the Company entered into an agreement with Genzyme
Corporation (Genzyme) to establish a joint venture dedicated to the development
and commercialization of alpha-L-iduronidase (BM101) to treat
mucopolysaccharidosis-I (MPS-I) (Note 8).
On October 7, 1998, the Company acquired Glyko, Inc., a wholly-owned subsidiary
of Glyko Biomedical, in a transaction valued at $14,500,500. The transaction
was accounted for as a purchase and resulted in Glyko, Inc. becoming a wholly
owned subsidiary of the Company. Glyko, Inc. provides products and services
that perform sophisticated carbohydrate analysis for research institutions and
commercial laboratories. As consideration for the acquisition of all of the
outstanding shares of Glyko, Inc., BioMarin issued 2,259,039 shares of common
stock to Glyko Biomedical, assumed Glyko, Inc.'s employee stock options
exercisable for 255,540 shares of BioMarin common stock, and paid $500 in cash
(see Note 11). As a result of this transaction, Glyko Biomedical's ownership of
BioMarin was increased from 36.2 percent to 41.7 percent at October 7, 1998.
Through March 31, 1999 the Company had accumulated losses during its
development stage of $19,470,072 and has continued to incur significant losses
subsequent to March 31, 1999. Management expects to incur further losses in
1999 and beyond. As further discussed in Note 12, the Company entered into a
convertible note financing in the amount of $26,000,000 on April 13, 1999.
Management believes that this financing will be sufficient to meet the
Company's minimum obligations through at least December 31, 1999. However, the
Company will seek additional financing in the near term to execute its business
strategies and meet its longer term obligations.
The Company's lead product candidate, BM101, has completed clinical trials.
There can be no assurance that the Company's research and development efforts
will be successfully completed or that its products will be shown to be safe
and effective. There can be no assurance that its products will be approved for
marketing by the U.S. Food and Drug Administration (FDA) or any equivalent
foreign government agency or that its products will be successfully
commercialized or achieve any significant degree of market acceptance.
BioMarin's core technology is based on the biological applications of
carbohydrate-active enzymes in therapeutic indications. In June 1997, rights to
certain related technology were transferred to BioMarin
F-8
<PAGE>
BIOMARIN PHARMACEUTICAL INC. AND SUBSIDIARIES
(a development-stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information with respect to the periods ended March 31, 1998 and 1999 and the
period from March 21, 1997 (inception) to March 31, 1999 is unaudited)
by Glyko Biomedical in exchange for 7,000,000 shares of BioMarin common stock
(see Note 3). Certain of the Company's products rely on proprietary technology
and patents owned by certain universities and other institutions and licensed
to BioMarin. These universities also provide research and development services.
Cessation of relationships with these universities could significantly affect
the Company's future operations.
In order to grow significantly, the Company must expand its efforts to develop
new products in pharmaceutical applications. The Company will also need to
establish manufacturing capabilities and to develop marketing capabilities
and/or enter into collaborative arrangements with third parties having the
capacity for such manufacturing or marketing.
BioMarin's product candidates require regulatory approval by government
agencies. This includes preclinical and clinical testing and approval processes
in the United States and other countries. Approvals can take several years and
can require substantial expenditures. There can be no assurance that
difficulties or excessive costs will not be encountered by the Company in this
process, which could delay or preclude the Company's marketing of its products.
There can be no assurance that any of BioMarin's current or future product
candidates will be successfully developed, prove to be effective in clinical
trials, receive required regulatory approvals, be capable of being produced in
commercial quantities at reasonable costs, gain reasonable reimbursement
levels, or be successfully marketed.
In addition, the Company is subject to a number of risks, including the need
for additional financing, dependence on key personnel, small patient
population, patent protection, significant competition from larger
organizations, dependence on corporate partners and collaborators, and expected
increased restrictions on reimbursement, as well as other changes in the
healthcare industry.
Basis of Presentation--These consolidated financial statements include the
accounts of BioMarin, Glyko, Inc., a wholly-owned subsidiary of BioMarin (since
October 7, 1998), and BioMarin Genetics, Inc., a wholly-owned subsidiary of
BioMarin formed for the purpose of the joint venture discussed in Note 8. All
significant intercompany transactions have been eliminated.
The accompanying financial statements as of March 31, 1999 and for the quarters
ended March 31, 1998 and 1999 are unaudited, but in the opinion of management,
include all adjustments consisting of normal recurring adjustments necessary
for a fair presentation of results for the interim periods. Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted,
although the Company believes that the disclosures included are adequate to
make the information presented not misleading. Results for the quarter ended
March 31, 1999 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1999.
Concentration of Credit Risk--Financial instruments that may potentially
subject the Company to concentration of credit risk consist principally of
cash, cash equivalents, and short-term investments. All cash, cash equivalents,
and short-term investments are placed in financial institutions with strong
credit ratings, which minimizes the risk of loss due to nonpayment. The Company
has not experienced any losses due to credit impairment or other factors
related to its financial instruments.
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make certain
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the dates
F-9
<PAGE>
BIOMARIN PHARMACEUTICAL INC. AND SUBSIDIARIES
(a development-stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information with respect to the periods ended March 31, 1998 and 1999 and the
period from March 21, 1997 (inception) to March 31, 1999 is unaudited)
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Significant estimates made by management include determination of progress to
date under research and development contracts and the amortization period of
goodwill and other intangibles (see Notes 6 and 8).
Cash and Cash Equivalents--For the statements of cash flows, the Company treats
liquid investments with original maturities of less than three months as cash
and cash equivalents.
Available-for-Sale Securities--The Company records its investment securities as
available-for-sale because the sale of such securities may be required prior to
maturity.
Inventories--Inventories consist of analytic kits, and instrument-based systems
held for sale. Inventories are stated at the lower of cost (first-in, first-out
method) or estimated market value. All inventories at December 31, 1998 and
March 31, 1999 belong to Glyko, Inc.
Investment in BioMarin/Genzyme LLC and Related Revenue--Under the terms of the
Company's joint venture agreement with Genzyme (Note 7 and 8), the Company and
Genzyme have each agreed to provide 50 percent of the funding for the joint
venture. All research and development, sales and marketing, and other
activities performed by Genzyme and the Company on behalf of the joint venture
are billed to the joint venture at cost. Any profits of the joint venture will
be shared equally by the two parties. Losses of the joint venture ($1,769,257
for the year ended December 31, 1998 and $1,852,276 for the three months ended
March 31, 1999) are allocated in proportion to the funding provided by each
joint venture partner. Through March 31, 1999, each joint venture partner had
provided $2,957,103 of funding to the joint venture.
During the year ended December 31, 1998 and quarter ended March 31, 1999, the
Company billed $1,674,915 and $1,444,953, respectively, under the agreement, of
which $837,457 and $746,272, respectively, or 50 percent, was recognized as
revenue in accordance with the Company's policy of recognizing revenue to the
extent that research and development costs billed have been funded by Genzyme.
At December 31, 1998 and March 31, 1999 the Company had receivables of $418,712
and $628,444, respectively, related to these billings.
The Company accounts for its investment in the joint venture on the equity
method. Accordingly, the Company recorded a reduction in its investment in the
joint venture of $884,628 during the year ended December 31, 1998 and $926,138
during the quarter ended March 31, 1999 representing its 50 percent share of
the loss of the joint venture. The percentage of the research and development
costs billed to the joint venture that was funded by the Company (50 percent,
or $837,457 for the year ended December 31, 1998 and $746,272 for the quarter
ended March 31, 1999) was recorded as a credit to the Company's equity in the
loss of the joint venture.
At December 31, 1998 the summarized assets and liabilities of the joint venture
and its results of operations from inception to December 31, 1998 are as
follows:
<TABLE>
<S> <C>
Cash 1,691,054
=========
Liabilities 444,707
Venturer's capital 1,246,346
---------
1,691,054
=========
Net loss 1,769,257
=========
</TABLE>
F-10
<PAGE>
BIOMARIN PHARMACEUTICAL INC. AND SUBSIDIARIES
(a development-stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information with respect to the periods ended March 31, 1998 and 1999 and the
period from March 21, 1997 (inception) to March 31, 1999 is unaudited)
Research and Development--Research and development expenses include the
expenses associated with contract research and development provided to third
parties, research and development provided in connection with the joint venture
including clinical and regulatory costs, and internal research and development
costs. All research and development costs discussed above are expensed as
incurred.
Property and Equipment--Property and equipment are stated at cost. Depreciation
is computed using the straight-line method. Leasehold improvements are
amortized over the life of the asset or the term of the lease, whichever is
shorter. Significant additions and improvements are capitalized, while repairs
and maintenance are charged to expense as incurred.
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
December 31
--------------------
1997 1998 Estimated Useful Lives
-------- ---------- ------------------------
<S> <C> <C> <C>
Computer hardware and
software................... $ 27,688 $ 161,994 3 years
Office furniture and
equipment.................. -- 372,037 5 years
Laboratory equipment........ 119,002 3,468,978 5 years
Shorter of life of asset
Leasehold improvements...... 3,783 2,532,484 or lease term
-------- ----------
150,473 6,535,493
Less: Accumulated
depreciation............... (4,790) (312,435)
-------- ----------
Total, net.............. $145,683 $6,223,058
======== ==========
</TABLE>
Depreciation expense for the period from March 21, 1997 (inception) to December
31, 1997, the year ended December 31, 1998 and for the period from March 21,
1997 (inception) to December 31, 1998, was $4,790, $307,645, and $312,435,
respectively.
Goodwill and Other Intangible Assets--In connection with the acquisition of
Glyko, Inc., the Company acquired certain intangible assets including developed
technology, customer relationships and goodwill.
The purchase price of $14,500,500 was allocated to the net tangible and
intangible assets acquired, based on the relative fair value of these assets.
In connection with this allocation $2,625,000 was expensed as a charge for the
purchase of in-process research and development. Of the $11,736,000 designated
as intangible assets (after the write-off of in process research and
development), $1,233,000 was allocated to developed technology and amortized
over six years, $73,000 was allocated to assembled work force and amortized
over seven years, and $10,430,000 was allocated to goodwill (customer
relationships, trade name, pure business goodwill) and amortized over twelve
years. In performing this allocation, the Company considered, among other
factors, Glyko, Inc.'s technology research and development projects in-process
at the date of acquisition. With regard to the in-process research and
development projects, the Company considered factors such as the stage of
development of the technology at the time of acquisition, the importance of
each project to the overall development plan, alternative future use of the
technology and the projected incremental cash flows from the projects when
completed and any associated risks.
Total amortization expense from October 7, 1998 (date of acquisition), to
December 31, 1998, was $271,274.
F-11
<PAGE>
BIOMARIN PHARMACEUTICAL INC. AND SUBSIDIARIES
(a development-stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information with respect to the periods ended March 31, 1998 and 1999 and the
period from March 21, 1997 (inception) to March 31, 1999 is unaudited)
Impairment of Long-Lived Assets--The Company regularly reviews long-lived
assets and identifiable intangibles. Whenever events or circumstances indicate
that the carrying amount of such assets may not be fully recoverable. The
Company evaluates the recoverability of long lived assets by measuring the
carrying amount of the assets against the estimated undiscounted future cash
flows associated with them. At the time such evaluations indicate that the
future undiscounted cash flows of certain long-lived assets are not sufficient
to recover its carrying value of such assets, the assets are adjusted to their
fair values (based on discounted cash flows). No such adjustments have been
made during any period presented.
Accrued Liabilities--Accrued liabilities consisted of the following:
<TABLE>
<CAPTION>
December 31
----------------
1997 1998
------- --------
<S> <C> <C>
Vacation.................................................... $25,579 $123,274
Other....................................................... 17,816 516,742
------- --------
Total................................................... $43,395 $640,016
======= ========
</TABLE>
Revenue Recognition--The Company recognizes product revenues and related cost
of sales upon shipment of products. Service revenues are recognized upon
completion of services as evidenced by the transmission of reports to
customers. Other revenues, principally licensing, distribution and development
fees, are recognized upon our satisfaction of our contractual obligations such
as 1) execution of contract; 2) certain milestones; and 3) certain anniversary
dates from the effective date of the contract.
Revenue from the joint venture is recognized to the extent that research and
development costs billed by the Company have been funded by Genzyme.
Net Income (Loss) per Share--Basic net income (loss) per share is calculated by
dividing net income (loss) by the weighted average common shares outstanding
during the period. Diluted net income per share is calculated by dividing net
income by the weighted average of common stock outstanding and potential common
shares during the period. Potential common shares include dilutive shares
issuable upon the exercise of outstanding common stock options, warrants, and
contingent issuances of common stock. For periods in which the Company has
losses, such potential common shares are excluded from the computation of
diluted net loss per share, as their effect is antidilutive.
Potentially dilutive securities include:
<TABLE>
<CAPTION>
December 31
------------------- March 31,
1997 1998 1999
--------- --------- -----------
(unaudited)
<S> <C> <C> <C>
Options to purchase common stock............. 297,000 2,801,240 3,553,526
Warrants to purchase common stock............ 801,500 801,500 801,500
--------- --------- ---------
Total.................................... 1,098,500 3,602,740 4,355,026
========= ========= =========
</TABLE>
Segment Reporting--For the year ended December 31, 1998, the Company adopted
the provisions of SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information". The Company operates two segments. The Analytic and
Diagnostic segment represents the operations of Glyko, Inc. which involve the
manufacture and sale of analytic and diagnostic products. The Pharmaceutical
F-12
<PAGE>
BIOMARIN PHARMACEUTICAL INC. AND SUBSIDIARIES
(a development-stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information with respect to the periods ended March 31, 1998 and 1999 and the
period from March 21, 1997 (inception) to March 31, 1999 is unaudited)
segment represents the research and development activities related to the
development and commercialization of carbohydrate enzyme therapeutics.
Management of the Company has concluded that the operations of the Analytic and
Diagnostic segment are, and will continue to be, immaterial with respect to the
Company's overall activities and, thus, disclosure of segment information is
not required.
New Accounting Standards--In June 1998, the FASB issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 is
not expected to have a material impact on the Company's financial position or
results of operations.
2. BRIDGE LOANS:
In the third quarter of 1997, the Company drew upon a bridge loan from certain
stockholders in the amount of $880,000. This bridge loan was converted into
880,000 shares of common stock in the fourth quarter of 1997.
3. STOCKHOLDERS' EQUITY:
Common Stock and Warrants--On March 21, 1997, BioMarin's parent company, GBL,
provided initial equity funding by purchasing 1,500,000 shares of common stock
for $1,500,000.
BioMarin and GBL have entered into a License Agreement dated June 26, 1997,
pursuant to which GBL granted BioMarin an exclusive, worldwide, perpetual,
irrevocable, royalty-free right and license to certain of its worldwide
patents, trade secrets, copyrights, and other proprietary rights to all know-
how, processes, formulae, concepts, data, and other such intellectual property,
whether patented or not, owned or licensed by GBL and its subsidiaries as of
the date of the license agreement for application in therapeutic uses,
including without limitation, drug discovery and genomics. As consideration for
this license, BioMarin issued to GBL 7,000,000 shares of BioMarin common stock.
Under the same License Agreement, BioMarin granted GBL an exclusive, worldwide,
perpetual, irrevocable, royalty-free cross-license to all improvements BioMarin
may make upon the licensed intellectual property.
As disclosed in the accompanying statements of stockholders' equity, the
Company closed a number of private placements in 1997 and 1998. In connection
with these placements, an entity with which the chief executive officer and
chairman of the board is affiliated (see Note 7) was issued a total of 899,500
shares (valued at $1,389,500) and warrants (valued at $128,240) to purchase an
additional 801,500 shares of common stock at an exercise price of $1 per share.
These issuances were made for brokerage services rendered in connection with
these placements and were accounted for as a cost of raising capital. The
warrants expire on various dates in 2001.
In addition, 880,000 shares were issued to stockholders to retire an $880,000
bridge loan.
Notes Receivable from Stockholders--Notes receivable from stockholders relate
to 2,500,000 shares of common stock issued in October 1997 to three executive
officers under the terms of the Founder's Stock Purchase Agreement (the
Agreement). These notes bear interest at 6 percent per annum, and are due on
July 31, 2000, or on the date of the employee's termination, whichever is
earlier. The notes are secured by the underlying stock and are with full
recourse. Interest was imputed at nine percent, resulting in an interest
discount and related deferred compensation of $200,000, which is being
amortized over the life of the notes. Amortization expense for the period from
March 21, 1997 (inception) to December 31, 1997, the year ended December 31,
1998 and for the period from March 21, 1997 (inception), to
F-13
<PAGE>
BIOMARIN PHARMACEUTICAL INC. AND SUBSIDIARIES
(a development-stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information with respect to the periods ended March 31, 1998 and 1999 and the
period from March 21, 1997 (inception) to March 31, 1999 is unaudited)
December 31, 1998, was $0, $66,667, and $66,667, respectively. In the event
that their employment is terminated by the Company, the Company has the
obligation, if requested by the officer, to repurchase any or all of the shares
issued under the Agreement at the lower of the original purchase price or the
current market value of the shares. In the event one of these officers ceases
to be an employee, the Company has the right, but not the obligation, to
repurchase the unvested portion of the shares at their original purchase price.
Pursuant to the terms of the Agreement, 50% of the shares vest after one year
from the date of employment, with the remainder vesting at a rate of 1/24 per
month thereafter.
Deferred Compensation--In connection with certain stock option grants during
the year ended December 31, 1998 and for the quarter ended March 31, 1999 the
Company recognized deferred compensation totaling $1,032,250 and $489,786,
respectively, which is being amortized over the four-year estimated service
periods of the grantees. Amortization expense recognized during the year ended
December 31, 1998, and during the quarter ended March 31, 1999, was $193,547
and $82,053, respectively.
4. INCOME TAXES:
The significant components of net deferred tax assets and liabilities are as
follows:
<TABLE>
<CAPTION>
December 31
-------------------------
1997 1998
----------- ------------
<S> <C> <C>
Net operating loss carryforwards................. $ 1,052,000 $ 9,792,000
Research and development credit carryforwards.... 210,000 1,760,000
Research and development capitalized............. 0 50,000
Other............................................ (255,000) (160,000)
Valuation allowance.............................. (1,007,000) (11,442,000)
----------- ------------
Net deferred tax asset........................... $ -- $ --
=========== ============
</TABLE>
The net operating loss carryforwards and research and development credit
carryforwards at December 31, 1998 include the net operating loss carryforwards
($4,567,000) and research and development credits carryforwards ($701,000) and
related valuation allowances ($5,269,000) of Glyko, Inc.
The reconciliation of the effective tax rate is as follows:
<TABLE>
<CAPTION>
Period from
March 21, Period from
1997 March 21, 1997
(Inception) Year ended (Inception), to
to December December 31, December 31,
31, 1997 1998 1998
-------------- ---------------- ----------------
Amount % Amount % Amount %
--------- --- ----------- --- ----------- ---
<S> <C> <C> <C> <C> <C> <C>
U.S. statutory tax rate... $(821,000) (34) $(4,164,000) (34) $(4,985,000) (33)
State taxes, net of
federal income tax
benefit.................. (145,000) (6) (735,000) (6) (880,000) (6)
Research and development
tax credit............... (142,000) (5) (634,000) (5) (776,000) (5)
Other..................... 149,000 5 656,000 5 805,000 5
Change in valuation
allowance................ 959,000 40 4,877,000 40 5,836,000 39
--------- --- ----------- --- ----------- ---
Provision for income
taxes.................... $ -- -- $ -- -- $ -- --
========= === =========== === =========== ===
</TABLE>
F-14
<PAGE>
BIOMARIN PHARMACEUTICAL INC. AND SUBSIDIARIES
(a development-stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information with respect to the periods ended March 31, 1998 and 1999 and the
period from March 21, 1997 (inception) to March 31, 1999 is unaudited)
As of December 31, 1998, net operating loss carryforwards are approximately
$24.1 million and $12.4 million for federal and California income tax purposes,
respectively. These federal and state carryforwards expire beginning in the
year 2011 and 2004, respectively.
The Company also has research and development credits available to reduce
future federal and California income taxes, if any, of approximately $1,760,000
and $580,000, respectively, at December 31, 1998. These federal and state
carryforwards expire beginning in 2012 and 2013, respectively.
The net operating loss carryforwards and research and development credits
related to Glyko, Inc. as of October 7, 1998, can only be utilized to offset
future taxable income and tax, respectively, if any, of Glyko, Inc. In
addition, the Tax Reform Act of 1986 contains provisions that may limit the net
operating loss carryforwards and research and development credits available to
be used in any given year should certain events occur, including sale of equity
securities and other changes in ownership. The acquisition of Glyko, Inc. and
the related issuance of stock represented a change of ownership under these
provisions. There can be no assurance that the Company will be able to utilize
net operating loss carryforwards and credits before expiration.
Deferred income taxes are recorded to reflect the tax consequences on future
years of differences between the tax basis of assets and liabilities and their
financial reporting amounts at each period-end. The Company has a cumulative
net operating loss carryforward since inception, resulting in net deferred tax
assets. A valuation allowance is placed on the net deferred tax assets to
reduce them to an assumed net realizable value of zero.
5. STOCK OPTION PLANS:
The Company's 1997 Stock Option Plan (the Plan) provides for the grant of
incentive common stock options and nonstatutory common stock options to
employees, directors, and consultants of the Company. The maximum aggregate
number of shares that may be optioned and sold under the Plan is 5,000,000
shares. Options currently outstanding generally have vesting schedules of up to
four years and options terminate after five to ten years.
Had compensation cost for the Plan been determined consistent with SFAS No. 123
for option grants to employees, the effect on the Company's net loss would have
been as follows:
<TABLE>
<CAPTION>
Period from Period from
March 21, 1997 March 21, 1997
(Inception), Year ended (Inception),
to December December 31, to December
31, 1997 1998 31, 1998
-------------- ------------ --------------
<S> <C> <C> <C>
Net loss as reported.............. $(2,762,765) $(12,313,654) $(15,076,419)
Pro forma effect of SFAS No. 123.. (1,640) (468,000) (469,640)
----------- ------------ ------------
Pro forma net loss................ $(2,764,405) $(12,781,654) $(15,546,059)
=========== ============ ============
Net loss per common share as
reported......................... (0.34) (0.55) (0.93)
=========== ============ ============
Pro forma loss per common share... (0.34) (0.57) (0.96)
=========== ============ ============
</TABLE>
F-15
<PAGE>
BIOMARIN PHARMACEUTICAL INC. AND SUBSIDIARIES
(a development-stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information with respect to the periods ended March 31, 1998 and 1999 and the
period from March 21, 1997 (inception) to March 31, 1999 is unaudited)
A summary of the status of the Company's stock option plan is as follows:
<TABLE>
<CAPTION>
Weighted Weighted
Average Exercisable Average Fair
Option Exercise at End of Value of Options
Shares Price Year Granted
--------- -------- ----------- ----------------
<S> <C> <C> <C> <C>
Outstanding at March 21,
1997..................... -- $ --
Granted................. 297,000 1.00 $0.22
Exercised............... -- --
Canceled................ -- --
---------
Outstanding at December
31, 1997................. 297,000 1.00 232,000
=======
Granted................. 2,507,660 4.18 $2.40
Exercised............... (1,973) 1.00
Canceled................ (1,447) 1.00
---------
Outstanding at December
31, 1998................. 2,801,240 $3.85 761,609
--------- =======
Granted................. 789,774 6.91 $1.92
Canceled................ (37,488) 5.81
--------- -----
Outstanding at March 31,
1999..................... 3,553,526 $4.51 815,740
========= =======
</TABLE>
There are 2,198,760 and 1,446,474 options available for grant under the Plan at
December 31, 1998 and March 31, 1999, respectively. The average remaining
contractual life of the options outstanding at December 31, 1998, is four
years.
As of March 31, 1999, the 3,553,526 options outstanding consist of the
following:
<TABLE>
<CAPTION>
Number of Options Exercise Weighted Average Number of Options
Outstanding Price Contractual Life Exercisable
----------------- -------- ---------------- -----------------
<S> <C> <C> <C>
396,850 $1.00 3.88 347,333
255,222 2.30 3.11 180,846
1,548,000 4.00 9.03 202,875
631,680 6.00 4.69 30,555
721,774 7.00 4.96 54,131
--------- -------
3,553,526 815,740
========= =======
</TABLE>
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions used for
grants in 1997 and 1998: risk-free interest rates ranging from 5.2 to 6.2
percent; expected dividend yield of 0 percent; expected life of four years for
the Plan's options; and expected volatility of 0 percent.
F-16
<PAGE>
BIOMARIN PHARMACEUTICAL INC. AND SUBSIDIARIES
(a development-stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information with respect to the periods ended March 31, 1998 and 1999 and the
period from March 21, 1997 (inception) to March 31, 1999 is unaudited)
6. COMMITMENTS AND CONTINGENCIES:
Lease Commitments--The Company leases office space and research and testing
laboratory space in various facilities under operating agreements expiring at
various dates through 2009. Future minimum lease payments for the year ended
December 31 are as follows:
<TABLE>
<S> <C>
1999........................................................... $1,336,910
2000........................................................... 1,173,573
2001........................................................... 1,019,827
2002........................................................... 1,014,837
2003........................................................... 866,405
Thereafter..................................................... 2,820,662
----------
Total...................................................... $8,232,214
==========
</TABLE>
Rent expense for the period from March 21, 1997 (inception) to December 31,
1997, the year ended December 31, 1998 and for the period from March 21, 1997
(inception), to December 31, 1998, was $34,613, $380,1873, and $414,800,
respectively.
Research and Development Funding and Technology Licenses--The Company uses
experts and laboratories at universities and other institutions to perform
research and development activities. Funding commitments to these institutions
for the year ended December 31 are as follows:
<TABLE>
<S> <C>
1999........................................................... $1,076,335
2000........................................................... 305,900
2001........................................................... 50,000
2002........................................................... 50,000
2003........................................................... 50,000
----------
Total...................................................... $1,532,235
==========
</TABLE>
The Company has also licensed technology from certain institutions, for which
it is required to pay a royalty upon future sales, subject to certain minimums.
Consulting Agreements--BioMarin had agreements with two consultants whereby the
consultants were paid cash and granted common stock options in exchange for
services. Options for 206,000 shares of common stock were granted in
satisfaction for these services. These options were valued at $35,020 and were
expensed during the period from March 21, 1997 (inception), through December
31, 1997.
Product Liability and Lack of Insurance--The Company is subject to the risk of
exposure to product liability claims in the event that the use of its
technology results in adverse effects during testing or commercial sale. The
Company currently does not maintain product liability insurance. There can be
no assurance that the Company will be able to obtain product liability
insurance coverage at economically reasonable rates or that such insurance will
provide adequate coverage against all possible claims.
F-17
<PAGE>
BIOMARIN PHARMACEUTICAL INC. AND SUBSIDIARIES
(a development-stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information with respect to the periods ended March 31, 1998 and 1999 and the
period from March 21, 1997 (inception) to March 31, 1999 is unaudited)
7. RELATED-PARTY TRANSACTIONS:
BioMarin had contractual agreements for office space and certain
administrative, research, and development functions with Glyko, Inc. prior to
the acquisition date of October 7, 1998. BioMarin reimbursed Glyko, Inc. for
rent, salaries and related benefits, and other administrative costs. Glyko,
Inc. also reimbursed BioMarin for salaries and related benefits.
Reimbursement of expenses:
<TABLE>
<CAPTION>
Paid
from
Glyko, Paid from
Inc. to BioMarin to
BioMarin Glyko, Inc. Net
-------- ----------- --------
<S> <C> <C> <C>
March 21, 1997 (inception) to December 31,
1997....................................... $133,000 $373,848 $240,848
Year ended December 31, 1998................ 75,073 298,491 223,418
Quarter ended March 31, 1999................ 46,544 158,146 111,602
-------- -------- --------
March 21, 1997 (inception) to March 31,
1999....................................... $254,617 $830,485 $575,868
======== ======== ========
</TABLE>
BioMarin also purchased products and services from Glyko, Inc. at a 27%
discount. This is the same discount that Glyko grants to any other company that
it treats as a distributor. Purchases of products and services from Glyko, Inc.
from March 21, 1997 (inception) to October 8, 1998 were $160,455.
In the fourth quarter of 1998 and the first quarter of 1999, BioMarin loaned to
Glyko, Inc. $200,000 and $160,000, respectively, to fund its operations. As of
March 31, 1999, Glyko, Inc. owes $449,116 to BioMarin and BioMarin owes $23,873
to Glyko, Inc. These amounts have been eliminated upon consolidation.
As discussed in Note 3, during August 1997, the Company entered into an agency
agreement with an entity with which the chief executive officer and chairman of
the board is affiliated. During June 1998, the Company entered into a second
agency agreement. The Company issued a total of 899,500 shares of common stock
and warrants to purchase another 801,500 shares of common stock to this entity
and its affiliates for brokerage services pursuant to the terms of these
agreements, also discussed in Note 3.
As further discussed in Note 12, on April 13, 1999, the Company entered into a
convertible note financing agreement in the amount of $26,000,000. Of this
amount GBL purchased $4,300,000 worth of such notes and LaMont Asset Management
("LAM") purchased $9,700,000. A director of the Company is also the chairman of
LAM. The Company also entered into an agency agreement with LAM pursuant to
which the Company agreed to pay LAM a 5 percent cash commission on sales to
certain note purchasers.
F-18
<PAGE>
BIOMARIN PHARMACEUTICAL INC. AND SUBSIDIARIES
(a development-stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information with respect to the periods ended March 31, 1998 and 1999 and the
period from March 21, 1997 (inception) to March 31, 1999 is unaudited)
Since October 8, 1998, Glyko Biomedical Ltd. has agreed to pay BioMarin a
monthly management fee for its services to Glyko Biomedical Ltd. primarily
relating to management, accounting, finance and government reporting. BioMarin
has accrued a receivable from Glyko Biomedical Ltd. of $27,152 and $23,312 for
the year ended December 31, 1998 and the quarter ended March 31, 1999,
respectively.
Due to the terms of the collaborative agreement with Genzyme outlined in Note
8, Genzyme is considered a related party. See also Notes 1 and 8 for Genzyme
related party transactions.
At December 31, 1997 and 1998 and March 31, 1999, the Company had recorded
amounts due from GBL of $79,607, $114,005 and $119,165 respectively (including
the amounts discussed above.)
8. COLLABORATIVE AGREEMENTS:
Genzyme--Effective September 4, 1998, the Company entered into an agreement
(the Collaboration Agreement) with Genzyme to establish a joint venture
dedicated to the worldwide development and
commercialization of BM101 to treat MPS-I. In conjunction with the formation of
the joint venture, the Company established a wholly owned subsidiary, BioMarin
Genetics, Inc. The Company has a 49 percent interest in the joint venture,
BioMarin Genetics, Inc. has a 1 percent interest, and Genzyme has the remaining
50 percent interest.
Under the Collaboration Agreement, BioMarin and Genzyme are each required to
make capital contributions to the joint venture in an amount equal to 50
percent of costs and expenses associated with the development and
commercialization of BM101. The parties also agree to share the profits equally
from such commercialization. In addition, Genzyme purchased 1,333,333 shares of
BioMarin common stock at $6.00 per share for total proceeds of $7,999,998 in a
private placement and is obligated to purchase an additional $10,000,000 of
common stock at the initial public offering price in a private placement
concurrent with the initial public offering of the Company's stock. Genzyme has
also agreed to pay BioMarin $12,100,000 in cash upon FDA approval of the BLA
for BM101.
Other Agreements--The Company is engaged in research and development
collaborations with various academic institutions, commercial research groups,
and other entities. The agreements provide for sponsorship of research and
development by the Company and may also provide for exclusive royalty-bearing
intellectual property licenses or rights of first negotiation regarding
licenses to intellectual property development under the collaborations.
Typically, these agreements are terminable for cause by either party upon 90
days' written notice.
9. COMPENSATION PLANS:
Employment Agreements--The Company has entered into employment agreements with
seven officers of the Company. All of these agreements are terminable without
cause by the Company upon six months' prior notice, or by the officer upon
three months' prior written notice to the Company, with the Company obligated
to pay salary and benefits hereunder until such termination. The annual
salaries committed to under these agreements total approximately $1,000,000. In
addition, three of the agreements provide for the payment of an annual cash
bonus of up to 100 percent of the base annual salary of the three officers
based upon the Company's market capitalization. At December 31, 1998 and for
the quarter ended March 31, 1999, the Company has accrued compensation expense
of $112,650 and $0, respectively, under these bonus provisions.
F-19
<PAGE>
BIOMARIN PHARMACEUTICAL INC. AND SUBSIDIARIES
(a development-stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information with respect to the periods ended March 31, 1998 and 1999 and the
period from March 21, 1997 (inception) to March 31, 1999 is unaudited)
401(k) Plan--The Company participates in the Glyko Retirement Savings Plan (the
401(k) Plan). Most employees (the Participants) are eligible to participate
following the start of their employment, on the earlier of the next occurring
January 1 or July 1. Participants may contribute up to 15 percent of their
current compensation to the 401(k) Plan or an amount up to a statutorily
prescribed annual limit. The Company pays the direct expenses of the 401(k)
Plan but does not currently match or make contributions to employee accounts.
1997 Stock Plan--In November 1997, the Board adopted, and in April 1998, the
stockholders approved, the 1997 Stock Plan (the 1997 Plan), which provided for
the reservation of a total of 3,000,000 shares of common stock for issuance
under the 1997 Plan. In December 1998, the Board adopted, and in January 1999,
the stockholders approved, an amendment to the 1997 Plan to increase the number
of shares reserved for issuance under it to an aggregate of 5,000,000 and to
add an "evergreen provision" providing for an annual increase in the number of
shares which may be optioned or sold under the 1997 Plan without need for
additional Board or stockholder action to approve such increase (which increase
shall be the lesser of 4 percent of the then-outstanding capital stock,
2,000,000 shares, or a lower amount set by the Board). The 1997 Plan provides
for the grant of stock options and the issuance of restricted stock by the
Company to its employees, officers, directors, and consultants.
1998 Employee Stock Purchase Plan--In December 1998 the Board adopted, and in
January 1999 the stockholders approved, the 1998 Employee Stock Purchase Plan
(the 1998 Purchase Plan). A total of 250,000 shares of Company common stock has
been reserved for issuance under the 1998 Purchase Plan, plus annual increases
equal to the lesser of 0.5 percent of the outstanding capital stock, 200,000
shares, or a lesser amount set by the Board. As of December 31, 1998, no shares
have been issued under the 1998 Purchase Plan. The implementation of this plan
is contingent on the completion of an initial public offering.
1998 Director Option Plan--The 1998 Director Option Plan (the Director Plan)
was adopted by the Board of Directors in December 1998 and approved by the
stockholders in January 1999. The Director Plan provides for the grant of
nonstatutory stock options to nonemployee directors. A total of 200,000 shares
of Company common stock, plus an annual increase equal to the number of shares
needed to restore the maximum aggregate number of shares available for sale
under the Director Plan or the lesser of 0.5 percent of the outstanding capital
stock, 200,000 shares, or a lesser amount set by the Board, have been reserved
for issuance under the Director Plan. As of December 1998, no options were
granted under the Director Plan.
During the first quarter of 1999, the Board granted 789,774 stock options under
the 1997 Plan to employees and directors of the Company at an average exercise
price of $6.91 per share. The Company's management estimates that these stock
option prices reflect current fair value.
F-20
<PAGE>
BIOMARIN PHARMACEUTICAL INC. AND SUBSIDIARIES
(a development-stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information with respect to the periods ended March 31, 1998 and 1999 and the
period from March 21, 1997 (inception) to March 31, 1999 is unaudited)
10. SUPPLEMENTAL CASH FLOW INFORMATION:
The following noncash transactions took place for the periods presented:
<TABLE>
<CAPTION>
Period from Period from
March 21, 1997 March 21, 1997
(Inception), Year ended (Inception),
to December December 31, to December
31, 1997 1998 31, 1998
-------------- ------------ --------------
<S> <C> <C> <C>
Common stock issued in exchange
for notes....................... $2,500,000 $ -- $2,500,000
Compensation in the form of
common stock and common stock
options......................... 18,020 -- 18,020
Common stock and common stock
warrants issued in exchange for
brokerage services.............. 929,740 588,000 1,517,740
Bridge loan converted to common
stock........................... 880,000 -- 880,000
</TABLE>
11. GLYKO, INC. :
On October 7, 1998, the Company entered into an agreement to acquire all of the
outstanding stock of its affiliate, Glyko, Inc. The total consideration for the
acquisition was $14,500,500, comprising 2,259,039 shares of common stock of the
Company, valued at $6.00 per share, the assumption of options held by certain
Glyko, Inc. employees to purchase shares of GBL's common stock, which would
require 255,540 shares of the Company's common stock to be issued if fully
exercised, and $500 in cash. The acquisition was accounted for as a purchase.
The following unaudited pro forma consolidated financial information reflects
the results of operations for the year ended December 31, 1998 and for the
periods from March 21, 1997 (inception), to December 31, 1997 and 1998 as if
the acquisition had occurred on January 1, 1998 and March 21, 1997 (inception),
respectively:
<TABLE>
<CAPTION>
Period from Period from
March 21, 1997 March 21, 1997
(Inception), to Year ended (Inception), to
December 31, December 31, December 31,
1997 1998 1998
--------------- ------------ ---------------
<S> <C> <C> <C>
Revenues..................... $ 1,995,562 $ 2,530,325 $ 4,345,887
Loss from operations......... (6,027,890) (13,044,201) (17,532,186)
Net loss..................... (5,953,934) (12,379,832) (16,797,384)
Net loss per share, basic and
diluted..................... (0.57) (0.51) (0.93)
Weighted average number of
common shares outstanding... 10,464,474 24,214,135 18,133,509
</TABLE>
12. SUBSEQUENT EVENT:
On April 13, 1999, the Company entered into a convertible note financing
agreement in the amount of $26,000,000. Of this amount, GBL invested
$4,300,000. These notes bear interest at 10 percent per annum.
F-21
<PAGE>
BIOMARIN PHARMACEUTICAL INC. AND SUBSIDIARIES
(a development-stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information with respect to the periods ended March 31, 1998 and 1999 and the
period from March 21, 1997 (inception) to March 31, 1999 is unaudited)
All unpaid principal, together with all unpaid interest, shall be due and
payable upon the earlier of (a) April 2002 (the "Maturity Date"), (b)
immediately prior to a sale of all of the assets of the Company
or a merger or acquisition of the Company with another entity, or (c) an
initial public offering with net proceeds to the Company of at least
$20,000,000.
On the Maturity Date, in lieu of any repayment in cash, the Company has the
right to convert the amounts owed under the notes, in whole or part, into fully
paid and nonassessable shares of common stock of the Company.
At any time prior to the Maturity Date, the notes automatically convert to
shares of common stock of the Company immediately prior to (a) any merger or
acquisition of the Company, (b) a sale of all the assets of the Company, or (c)
an initial public offering with net proceeds to the Company of at least
$20,000,000.
The price at which the notes will convert into shares of common stock is
initially set at $10.00 per share and is subject to certain adjustments for
possible future events. The convertible note agreement also contains certain
anti-dilutive provisions.
In May 1999, BioMarin's wholly-owned subsidiary, Glyko, Inc., acquired key
assets of the Biochemical Research Reagent Division of Oxford GlycoSciences
Plc. The acquisition was made to increase Glyko, Inc.'s product offerings and
was valued from $1.5 million to $2.1 million, depending on the future sales of
the acquired products.
F-22
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of
Glyko, Inc.:
We have audited the balance sheets of Glyko, Inc. as of December 31, 1997, and
October 7, 1998 (acquisition date), and the related statements of operations,
changes in stockholders' equity (deficit), and cash flows for the years ended
December 31, 1996 and 1997, and for the period from January 1, 1998 to October
7, 1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Glyko, Inc. as of December 31,
1997 and October 7, 1998, and the results of its operations and its cash flows
for the years ended December 31, 1996 and 1997, and for the period from January
1, 1998 to October 7, 1998, in conformity with generally accepted accounting
principles.
/s/ ARTHUR ANDERSEN LLP
San Francisco, California,
March 17, 1999
F-23
<PAGE>
GLYKO, INC.
BALANCE SHEETS
AS OF DECEMBER 31, 1997, AND OCTOBER 7, 1998
<TABLE>
<CAPTION>
December 31, October 7,
1997 1998
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........................ $ 528,280 $ 24,010
Accounts receivable, net of allowance for
doubtful accounts of $10,000, and $20,000,
respectively.................................... 141,744 186,340
Due from related parties......................... 86,425 108,097
Inventories...................................... 95,210 76,595
Other assets..................................... 15,178 12,478
------------ ------------
Total current assets........................... 866,837 407,520
PROPERTY AND EQUIPMENT, net........................ 118,910 93,368
OTHER ASSETS....................................... 2,206 2,206
------------ ------------
Total assets................................... $ 987,953 $ 503,094
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable................................. $ 20,380 $ 88,490
Accrued expenses................................. 96,116 102,805
Deferred rent.................................... 7,418 12,066
Deferred revenue................................. 10,675 1,525
Payable to former stockholder.................... 365,880 0
------------ ------------
Total current liabilities...................... 500,469 204,886
DUE TO GLYKO BIOMEDICAL, LTD....................... 3,803,820 0
------------ ------------
Total liabilities.............................. 4,304,289 204,886
------------ ------------
STOCKHOLDERS' EQUITY (DEFICIT):
Convertible preferred stock, $0.01 par value,
5,000 shares authorized, 2,000 shares issued and
outstanding at December 31, 1997, and October 7,
1998 (acquisition date)......................... 20 20
Common stock, $0.01 par value, 15,000 shares
authorized, 3,882 shares issued and outstanding
at December 31, 1997, and October 7, 1998
(acquisition date).............................. 39 39
Additional paid-in capital....................... 8,999,005 12,679,727
Accumulated deficit.............................. (12,315,400) (12,381,578)
------------ ------------
Total stockholders' equity (deficit)........... (3,316,336) 298,208
------------ ------------
Total liabilities and stockholders' equity
(deficit)..................................... $ 987,953 $ 503,094
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-24
<PAGE>
GLYKO, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997, AND FOR
THE PERIOD ENDED OCTOBER 7, 1998
<TABLE>
<CAPTION>
Period
from
January 1,
Year Ended Year Ended 1998, to
December December October 7,
31, 1996 31, 1997 1998
----------- ---------- ----------
<S> <C> <C> <C>
REVENUES:
Sales of products........................ $ 1,086,414 $1,016,665 $ 750,145
Sales of services........................ 210,709 186,317 115,019
Other revenues........................... 33,512 860,935 294,752
----------- ---------- ----------
Total revenues......................... 1,330,635 2,063,917 1,159,916
OPERATING COSTS AND EXPENSES:
Cost of products and services............ 509,248 482,770 284,860
Research and development................. 1,014,966 633,086 613,055
Selling general and administrative....... 1,490,244 563,231 521,060
Other.................................... 0 0 (165,880)
----------- ---------- ----------
Income (Loss) from operations.......... (1,683,823) 384,830 (93,179)
OTHER (LOSS) INCOME........................ 87,418 (2,045) (1,300)
INTEREST INCOME............................ 18,367 12,610 28,301
----------- ---------- ----------
Income (Loss) before income taxes...... (1,578,038) 395,395 (66,178)
Provision for income taxes............. -- -- --
----------- ---------- ----------
Net income (Loss)...................... $(1,578,038) $ 395,395 $ (66,178)
=========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-25
<PAGE>
GLYKO, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997, AND FOR
THE PERIOD ENDED OCTOBER 7, 1998
<TABLE>
<CAPTION>
Preferred Total
Stock Common Stock Additional Stockholders'
------------- ------------- Paid-in Accumulated Equity
Shares Amount Shares Amount Capital Deficit (Deficit)
------ ------ ------ ------ ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, January 1,
1996................... 2,000 $20 3,882 $39 $ 8,999,005 $(11,132,757) $(2,133,693)
Net loss............... 0 0 0 0 0 (1,578,038) (1,578,038)
----- --- ----- --- ----------- ------------ -----------
BALANCE, December 31,
1996................... 2,000 20 3,882 39 8,999,005 (12,710,795) (3,711,731)
Net income............. 0 0 0 0 0 395,395 395,395
----- --- ----- --- ----------- ------------ -----------
BALANCE, December 31,
1997................... 2,000 20 3,882 39 8,999,005 (12,315,400) (3,316,336)
Balance due to Glyko
Biomedical, Ltd.
converted to
additional paid-in
capital............... 0 0 0 0 3,680,722 0 3,680,722
Net loss for the period
ended October 7, 1998
(acquisition date).... 0 0 0 0 0 (66,178) (66,178)
----- --- ----- --- ----------- ------------ -----------
BALANCE, October 7,
1998................... 2,000 $20 3,882 $39 $12,679,727 $(12,381,578) $ 298,208
===== === ===== === =========== ============ ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-26
<PAGE>
GLYKO, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997, AND FOR
THE PERIOD ENDED OCTOBER 7, 1998 (ACQUISITION DATE)
<TABLE>
<CAPTION>
Period
from
January
1, 1998,
Year Ended Year Ended to
December December 31, October
31, 1996 1997 7, 1998
----------- ------------ ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income....................... $(1,578,038) $ 395,395 $ (66,178)
Adjustments to reconcile net (loss)
income to net cash (used in) provided
by operating activities:
Depreciation.......................... 61,139 58,914 34,376
Loss on disposal of fixed assets...... 4,046 1,230 0
Gain on lease abandonment............. (62,538) 0 0
Gain on settlement of claim........... 0 0 (165,880)
Changes in operating assets and
liabilities:
Accounts receivable................... 200,630 14,432 (44,596)
Inventories........................... 40,066 (26,758) 18,615
Due from related parties.............. 0 (69,898) (21,672)
Other assets.......................... (20,854) 10,841 2,701
Accounts payable...................... 52,357 (154,352) 68,110
Accrued expenses...................... (20,097) (113,195) 15,825
Deferred rent......................... 0 7,418 4,648
Deferred revenue...................... (174,386) 10,675 (9,150)
Payable to former stockholder......... 0 0 (200,000)
Payable to related parties............ 0 0 (132,235)
----------- --------- ---------
Net cash (used in) provided by
operating activities............... (1,497,675) 134,702 (495,436)
----------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment...... (61,061) (71,009) (8,834)
----------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of capital lease obligations.... (14,016) 0 0
Investment from Glyko Biomedical........ 1,163,024 253,595 0
----------- --------- ---------
Net cash provided by financing
activities......................... 1,149,008 253,595 0
----------- --------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS.............................. (409,728) 317,288 (504,270)
CASH AND CASH EQUIVALENTS:
Beginning of period..................... 620,720 210,992 528,280
----------- --------- ---------
End of period........................... $ 210,992 $ 528,280 $ 24,010
=========== ========= =========
SUPPLEMENTAL DISCLOSURE OF NONCASH
TRANSACTIONS:
Balance due to Glyko Biomedical
converted to equity.................... 0 0 3,680,722
=========== ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-27
<PAGE>
GLYKO, INC.
NOTES TO FINANCIAL STATEMENTS
1. THE COMPANY AND DESCRIPTION OF THE BUSINESS:
Glyko, Inc. (the Company) is a Delaware corporation that was incorporated in
October 1990. Until October 7, 1998, the Company had been a wholly owned
subsidiary of Glyko Biomedical, Ltd. (GBL), a Canadian company. The Company's
principal activities are the sale of chemical kits and equipment incorporating
its proprietary carbohydrate technology and the development of commercial
applications based on complex carbohydrates. The Company has developed a line
of analytic instrumentation laboratory products that include an imaging system,
analysis software, and a chemical analysis kit referred to as analytic and
diagnostic products, which are used in carbohydrate testing, including
detection, separation, and sequencing. Shipment of these products began in
December 1992. The Company's technology is called "FACE" or Fluorophore-
Assisted Carbohydrate Electrophoresis. The Company is continuing to develop
additional chemical kits for use with the imaging system and is also developing
a line of diagnostic products based on carbohydrate technology.
As further discussed in Note 10, on October 7, 1998, the Company was acquired
by its affiliate, BioMarin Pharmaceutical Inc. (BioMarin). BioMarin is a
biopharmaceutical company specializing in the discovery, development and
commercialization of carbohydrate enzyme therapeutics. As consideration for the
acquisition of all of the outstanding shares of the Company, BioMarin issued
2,259,039 shares of common stock to GBL and assumed stock options held by
certain employees of the Company to purchase shares of GBL's common stock,
which will require 255,540 shares of the Company's common stock to be issued,
if fully exercised and paid $500 in cash (see Note 10).
The accompanying financial statements include the balance sheet of the Company
as of October 7, 1998 (acquisition date), and the statements of operations,
changes in stockholders equity, and cash flows for the period from January 1,
1998, to October 7, 1998.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Use of Estimates
The preparation of the Company's financial statements in conformity with
generally accepted accounting principles requires management to make certain
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the
dates of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from those
estimates. Significant estimates made by management include allowance for
doubtful accounts receivable and certain other reserves.
Cash and Cash Equivalents
Cash and cash equivalents consist of amounts held with banks and short-term
investments with original maturities of 90 days or less.
Inventories
Inventories consist of raw materials, analytic and diagnostic kits, and
instrument-based systems held for sale. Inventories are stated at the lower of
cost (first-in, first-out method) or estimated market value. The components of
inventories are as follows:
<TABLE>
<CAPTION>
December 31, 1997 October 7, 1998
----------------- ---------------
<S> <C> <C>
Raw materials............................ $90,647 $73,845
Finished products........................ 4,563 2,750
------- -------
$95,210 $76,595
======= =======
</TABLE>
F-28
<PAGE>
GLYKO, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Property and Equipment
Property and equipment are stated at cost. The cost and accumulated
depreciation for property and equipment sold, retired, or otherwise disposed of
are relieved from the accounts, and the resulting gains or losses are reflected
in the statements of operations. Depreciation is computed using the straight-
line method over the following estimated useful lives:
<TABLE>
<S> <C>
Office furniture................................................ 5 years
Computer equipment.............................................. 3 years
Lab and production equipment.................................... 5 years
</TABLE>
Revenue Recognition
The Company recognizes product revenues and related cost of sales upon shipment
of products. Service revenues are recognized upon completion of services as
evidenced by the transmission of reports to customers. Other revenues,
principally licensing, distribution and development fees, are recognized upon
our satisfaction of our contractual obligations such as i) execution of
contract; ii) certain milestones; and iii) certain anniversary dates from the
effective date of the contract.
Payments received in advance for future product shipments or hardware
maintenance and service contracts are classified as deferred revenue on the
accompanying balance sheets. Upon shipment of products, revenue is recognized
and the corresponding liability (deferred revenue) is reduced. Revenues from
maintenance and service contracts are recognized monthly pro rata over the
period of the contract, and the corresponding liability (deferred revenue) is
reduced.
Income Taxes
The Company provides for income taxes under Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes." Under SFAS No. 109,
deferred income taxes are recorded to reflect the tax consequences on future
years of differences between the tax basis of assets and liabilities and their
financial reporting amounts at each period-end. The Company has a cumulative
net operating loss carryforward since inception, resulting in net deferred tax
assets. A valuation allowance is placed on the net deferred tax assets to
reduce them to their net realizable values.
3. PROPERTY AND EQUIPMENT:
Property and equipment at December 31, 1997, and October 7, 1998 consisted of
the following:
<TABLE>
<CAPTION>
December 31, 1997 October 7, 1998
----------------- ---------------
<S> <C> <C>
Lab equipment............................ $ 229,701 $ 231,586
Computer equipment....................... 94,712 101,661
Production equipment..................... 37,164 37,164
Office furniture......................... 13,510 13,510
Leasehold improvements................... 68,343 68,343
--------- ---------
443,430 452,264
Less: Accumulated depreciation........... (324,520) (358,896)
--------- ---------
Property and equipment, net............ $ 118,910 $ 93,368
========= =========
</TABLE>
Total depreciation expense for the years ended December 31, 1996 and 1997, and
for the period from January 1, 1998 to October 7, 1998 was $61,139, $58,914,
and $34,376, respectively.
F-29
<PAGE>
GLYKO, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
4. INCOME TAXES:
The significant components of net deferred tax assets and liabilities are as
follows:
<TABLE>
<CAPTION>
December 31, 1997 October 7, 1998
----------------- ---------------
<S> <C> <C>
Net operating loss carryforwards....... $ 4,573,000 $ 4,520,000
Research and development capitalized... 60,000 782,000
Research and development credit
carryforwards......................... 595,000 668,000
Other.................................. (255,000) (249,000)
Valuation allowance.................... (4,973,000) (5,721,000)
----------- -----------
Net deferred tax asset................. $ 0 $ 0
=========== ===========
</TABLE>
The reconciliation of the effective tax rate is as follows:
<TABLE>
<CAPTION>
Year Ended December 31
------------------------------ Period Ended
1996 1997 October 7, 1998
-------------- ------------- ----------------
Amount % Amount % Amount %
--------- --- -------- --- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
U.S. statutory tax rate..... $(495,000) (34)% $ 96,000 34% $ 6,000 34%
State taxes, net of federal
income tax benefit......... (87,000) (6) 17,000 6 1,000 6
Research and development tax
credit..................... (17,000) (1) (37,000) (13) (48,000) (259)
Other....................... (155,000) (10) 4,000 2 53,000 284
Change in valuation
allowance.................. 754,000 51 (80,000) (29) (12,000) (65)
--------- --- -------- --- --------- -----
Provision for income
taxes.................... $ 0 0% $ 0 0% $ 0 0%
========= === ======== === ========= =====
</TABLE>
As of October 7, 1998, net operating loss carryforwards are approximately $11.9
million and $5.3 million for federal and California income tax purposes,
respectively. Federal operating loss carryforwards expire from 2006 to 2012,
and state operating loss carryforwards expire from 1998 to 2001.
The Company also has research and development credits available to reduce
future federal and California income taxes, if any, of approximately $452,000
and $216,000, respectively, at October 7, 1998 (acquisition date). These
federal and state carryovers expire from 2007 to 2011.
The Tax Reform Act of 1986 contains provisions that may limit, for federal and
state tax purposes, the net operating loss carryforwards and research and
development credits available to be used in any given year in certain
situations, including sale of equity securities and other significant changes
in ownership. As a result of the acquisition and the resultant change in
ownership of the Company by BioMarin, the utilization of the Company's net
operating losses will be limited and such net operating losses will only be
available to offset the taxable income, if any, of the Company.
F-30
<PAGE>
GLYKO, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
5. COMMITMENTS AND CONTINGENCIES:
Leases
The Company leases its facilities and office and other equipment under
agreements that expire at various dates through 2000. Future minimum annual
rental commitments under operating leases are as follows:
<TABLE>
<CAPTION>
Years Ending October 7
----------------------
<S> <C>
1999........................................................... $ 81,660
2000........................................................... 43,915
2001........................................................... --
2002........................................................... --
2003 and thereafter............................................ --
--------
$125,575
========
</TABLE>
Total rent expense for the years ended December 31, 1996 and 1997, and for the
period from January 1, 1998 to October 7, 1998 was $274,284, $57,950 (net of
sublease rental income) and $35,636 (net of sublease rental income),
respectively.
Product Liability and Lack of Insurance
The Company is subject to the risk of exposure to product liability claims in
the event that the use of its technology results in adverse effects during
testing or commercial sale. The Company currently does not maintain product
liability insurance. There can be no assurance that the Company will be able to
obtain product liability insurance coverage at economically reasonable rates or
that such insurance will provide adequate coverage against all possible claims.
6. CONVERTIBLE PREFERRED STOCK:
The Company has authorized 5,000 shares of convertible preferred stock with a
par value of $0.01 per share. The convertible preferred stock is entitled to a
preference of $1,000 per share plus any declared but unpaid dividends upon
voluntary or involuntary liquidation, dissolution, or winding up of the
Company. The convertible preferred stock is convertible at the option of the
holder into common stock of the Company. The number of shares of common stock
into which shares of preferred may be converted is determined by multiplying
the number of preferred shares to be converted by the conversion ratio in
effect on the date of conversion. The conversion ratio is subject to adjustment
in certain events. Holders of preferred stock are entitled to the number of
votes as is equal to the number of shares of common stock into which such
shares of preferred could be converted on the record date for the vote.
7. STOCK OPTION PLAN:
GBL has a stock option plan (the Plan) under which options to purchase common
stock in GBL may be granted by the Board of Directors to GBL's directors,
officers, and consultants at not less than fair market value, less any
permissible discounts, on the date of grant. Options granted under the Plan may
be incentive stock options (as defined under Section 422 of the U.S. Internal
Revenue Code) or nonstatutory stock options. Options are exercisable over a
number of years specified at the time of the grant, which cannot exceed ten
years. The maximum aggregate number of shares that may be granted and sold
under the Plan is 3,000,000 shares. Directors, officers, consultants, and
employees of the Company are also eligible under the Plan.
F-31
<PAGE>
GLYKO, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
The Company accounts for these option grants under APB Opinion No. 25, under
which no compensation cost has been recognized, except for options granted to
consultants, because, under the Plan, the option exercise price equals the
market value of stock on the date of grant. In general, plan options vest over
48 months, and all options expire after five years or 90 days after employee
termination.
Had compensation cost for the Plan been determined consistently with FASB
Statement No. 123, the Company's net income (loss) would have been increased to
the following pro forma amounts to reflect the compensation expense associated
with the grants to the Company's directors, officers, consultants, and
employees:
<TABLE>
<CAPTION>
Year Ended December
31
--------------------- Period Ended
1996 1997 October 7, 1998
----------- -------- ---------------
<S> <C> <C> <C>
Net income (loss):
As reported......................... $(1,578,038) $395,395 $ (66,178)
Pro forma........................... (1,646,866) 312,666 (188,379)
</TABLE>
Because the FASB Statement No. 123 method of accounting has not been applied to
options granted prior to January 1, 1995, the resulting pro forma compensation
cost may not be representative of that to be expected in future years.
The fair value of each option granted is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 1996, 1997, and 1998, respectively: risk-free
weighted average interest rates of 5.3 percent, 6.3 percent, and 5.4 percent;
expected dividend yield of zero percent; expected life of four years for the
Plan's options; expected volatility of 87 percent, 92 percent, 65 percent.
8. 401(k) PLAN:
The Company participates in the Glyko Retirement Savings Plan (the 401(k)
Plan). Most employees (Participants) are eligible to participate following the
start of their employment on the earlier of the next occurring January 1 or
July 1. Participants may contribute up to approximately 15 percent of their
current compensation, up to a statutorily prescribed annual limit, to the
401(k) Plan.
9. RELATED-PARTY TRANSACTIONS:
The Company subleases office and lab space, certain administrative functions,
and research and development functions to BioMarin. BioMarin reimburses the
Company for rent, salaries and related Company benefits, and other
administrative costs, and the Company reimburses BioMarin for salaries and
related benefits.
Reimbursement of expenses:
<TABLE>
<CAPTION>
Paid
from
Glyko, Paid from
Inc. to BioMarin to
BioMarin Glyko, Inc. Net
-------- ----------- --------
<S> <C> <C> <C>
March 21, 1997 (inception) to December 31,
1997....................................... $133,000 $373,848 $240,848
Year ended December 31, 1998................ 75,073 298,491 223,418
Quarter ended March 31, 1999................ 46,544 158,146 111,602
-------- -------- --------
March 21, 1997 (inception) to March 31,
1999....................................... $254,617 $830,485 $575,868
======== ======== ========
</TABLE>
F-32
<PAGE>
GLYKO, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
BioMarin also purchased products and services from Glyko, Inc. at a 27%
discount. This is the same discount that Glyko grants to any other company that
it treats as a distributor. Purchases of products and services from Glyko, Inc.
from BioMarin's inception (March 21, 1997) to October 8, 1998 were $160,455.
At December 31, 1997, the Company had recorded an amount payable to stockholder
of $365,880 representing the amount claimed by the stockholder relating to a
facilities dispute with the Company. The Company had a cross-claim for royalty
income which would reduce the stockholder's claim. This claim was settled
during the year ended December 31, 1998, and the Company recorded a gain of
$165,880, as the amount of the settlement was less than the amount provided for
by the Company.
10. ACQUISITION BY BIOMARIN:
On October 7, 1998, GBL entered into an agreement to sell all of the
outstanding stock of the Company to its affiliate, BioMarin. The total
consideration for the acquisition was $14,500,500, comprising 2,259,039 shares
of common stock of BioMarin, valued at $6.00 per share, the assumption of
options held by certain employees of the Company to purchase shares of GBL's
common stock, which will require 255,540 shares of BioMarin common stock to be
issued if fully exercised, and $500 in cash. The acquisition was accounted for
as a purchase. In conjunction with the sale, GBL converted $3,680,722 of its
intercompany receivable into equity in the Company. The remaining balance of
$1,212,278 was repaid to GBL in cash.
F-33
<PAGE>
Liver biopsy from MPS-I dog
Liver biopsy from MPS-1 dog treated with MB 101
Gel image of MPS material in children with various MPS diseases
Aspergillus culture
Aspergillus culture treated with BM 104
<PAGE>
4,500,000 Shares
BIOMARIN PHARMACEUTICAL INC.
Common Stock
[LOGO]
---------------------
PROSPECTUS
---------------------
Until [ . ], all dealers that effect transactions in these securities, whether
or not participating in this offering, may be required to deliver a prospectus.
This is in addition to the dealers' obligation to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
U.S. Bancorp Piper Jaffray
Bank J. Vontobel & Co AG
Schroders & Co. Inc.
Leerink Swann & Company
, 1999
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than underwriting
discounts and commissions, payable by the Registrant in connection with the
sale of Common Stock being registered. All amounts are estimates except the
registration fee and the NASD filing fee.
<TABLE>
<CAPTION>
Amount
To Be
Paid
-------
<S> <C>
Registration fee.................................................. $18,703
NASD filing fee................................................... 6,350
Nasdaq National Market listing fee................................ *
Swiss Exchange filing fees........................................ *
Printing and engraving............................................ *
Legal fees and expenses........................................... *
Accounting fees and expenses...................................... *
Blue Sky fees and expenses........................................ *
Transfer Agent fees............................................... *
Miscellaneous..................................................... *
-------
Total......................................................... $
=======
</TABLE>
- -------------------------------
*Indicates that these fees shall be filed by amendment.
Item 14. Indemnification of Directors and Officers
Reference is made to the Amended and Restated Certificate of Incorporation of
the Registrant; the Bylaws of the Registrant; Section 145 of the Delaware
General Corporation Law; and the form of indemnification agreement filed
herewith as Exhibit 10.1 which, among other things, and subject to certain
conditions, authorize the Registrant to indemnify, or indemnify by their terms,
as the case may be, the directors and officers of the Registrant against
certain liabilities and expenses incurred by such persons in connection with
claims made by reason of their being such a director or officer.
The form of the Underwriting Agreement filed as Exhibit 1.1 to this
Registration Statement provides for indemnification by the Underwriters and
their controlling persons, on the one hand of the Registrant and its
controlling persons on the other hand, for certain liabilities arising under
the Securities Act of 1933, as amended (the "Act"), the Securities Exchange Act
of 1934, as amended or otherwise.
The Registrant maintains director's and officer's insurance providing
indemnification against certain liabilities for certain of the Registrant's
directors, officers, affiliates, partners or employees.
The indemnification provisions in the Registrant's Bylaws, and the
indemnification agreements entered into between the Registrant and its
directors and executive officers, may be sufficiently broad to permit
indemnification of the Registrant's officers and directors for liabilities
arising under the Act.
Reference is made to the following documents filed as exhibits to this
Registration Statement regarding relevant indemnification provisions described
above and elsewhere herein: (1) the form of Underwriting Agreement, filed as
Exhibit 1.1; (2) the Amended and Restated Certificate of Incorporation, filed
as Exhibit 3.1B; (3) the Bylaws of the Registrant, filed as Exhibit 3.2; and
(4) the form of Indemnification Agreement entered into by the Registrant with
each of its directors and executive officers, filed as Exhibit 10.1.
II-1
<PAGE>
Item 15. Recent Sales of Unregistered Securities
Since its inception, the Registrant has issued the following unregistered
securities:
(1) On April 19, 1997, the Registrant issued and sold 1,500,000 shares
of common stock to an institutional investor for aggregate consideration
of $1,500,000.
(2) On September 24, 1997, the Registrant issued and sold 7,000,000
shares of common stock to an institutional investor in exchange for a
license valued at $7,000,000.
(3) On October 1, 1997, the Registrant issued and sold 2,500,000 shares
of common stock to three founders for aggregate consideration in the
form of promissory notes in the aggregate principal amount of
$2,500,000.
(4) On October 1, 1997, the Registrant issued and sold 3,289,000 shares
of common stock and a warrant to purchase 299,000 shares of common stock
to a group of institutional investors, individuals and venture capital
funds for aggregate consideration of $2,911,500.
(5) On October 16, 1997, the Registrant issued and sold 750,000 shares
of common stock to a group of individuals for aggregate consideration of
$750,000.
(6) On December 30, 1997, the Registrant issued and sold 5,527,500
shares of common stock and a warrant to purchase 502,500 shares of
common stock to an institutional investor and a venture capital fund for
aggregate consideration of $5,016,000.
(7) On June 30, 1998, the Registrant issued and sold 598,535 shares of
common stock to a group of institutional investors and a venture capital
fund for aggregate consideration of $3,328,000.
(8) On July 14, 1998, the Registrant issued and sold a total of
1,385,414 shares of common stock to a group of institutional investors,
individuals and venture capital funds for aggregate consideration of
$7,915,010.
(9) On August 3, 1998, the Registrant issued and sold a total of 31,386
shares of common stock to a group of institutional investors and
individuals for aggregate consideration of $175,998.
(10) On September 4, 1998, the Registrant issued and sold a total of
1,333,333 shares of common stock to an institutional investor for
aggregate consideration of $7,999,998.
(11) On October 7, 1998, the Registrant issued 2,259,039 shares of
common stock to Glyko Biomedical, valued at $13,554,234, and assumed
certain stock options which were converted into options to purchase
255,540 shares of common stock of the Registrant as consideration for
the acquisition of 100% of the voting securities of a subsidiary of
Glyko Biomedical.
(12) On April 12, 1999, the Registrant issued and sold to a group of
institutional investors $26.0 million convertible promissory notes
convertible, according to their terms, into shares of the Registrant's
common stock initially at a price of $10.00 per share, subject to
subsequent adjustment.
(13) From November 1997 to May 31, 1999, the Registrant issued and sold
1,973 shares of common stock to employees and directors of and
consultants to the Registrant upon exercise of stock options granted
pursuant to the Registrant's 1997 Stock Plan and 1998 Director Plan.
There were no underwriters employed in connection with any of the transactions
set forth in Item 15.
For additional information concerning these equity investment transactions,
reference is made to the information contained under the caption "Certain
Transactions" in the form of prospectus included herein.
II-2
<PAGE>
The issuances described in Items 15(1), 15(2), and 15(4) through 15(12) were
deemed to be exempt from registration under the Act in reliance on Section 4(2)
of the Act as transactions by an issuer not involving a public offering. In
addition, the issuances described in Items 15(3) and 15(13) were deemed exempt
from registration under the Act in reliance on Rule 701 promulgated thereunder
as transactions pursuant to compensatory benefit plans and contracts relating
to compensation. The recipients of securities in each such transaction
represented their intention to acquire the securities for investment only and
not with a view to or for sale in connection with any distribution thereof and
appropriate legends were affixed to the share certificates and other
instruments issued in such transactions. All recipients either received
adequate information about the Registrant or had access, through employment or
other relationships, to such information.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S>
1.1* Form of Underwriting Agreement.
2.1 Share Exchange Agreement with Glyko Biomedical, Ltd.
3.1A** Amended and Restated Certificate of Incorporation of BioMarin
Pharmaceutical Inc., a Delaware Corporation, as filed on March
22, 1999.
3.1B(1)* Form of Amended and Restated Certificate of Incorporation of
BioMarin Pharmaceutical Inc., a Delaware Corporation.
3.2** Amended and Restated Bylaws of BioMarin Pharmaceutical Inc., a
Delaware corporation.
4.1** Form of Amended and Restated Registration Rights Agreement, by
and among the Company and the investors named therein.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati.
10.1** Form of Indemnification Agreement for directors and officers.
10.2** 1997 Stock Plan, as amended on December 22, 1998, and forms of
agreements thereunder.
10.3** 1998 Director Option Plan and forms of agreements thereunder
10.4** 1998 Employee Stock Purchase Plan and forms of agreements
thereunder.
10.5** Amended and Restated Founder's Stock Purchase Agreement with Dr.
John C. Klock dated as of October 1, 1997 with exhibits.
10.6** Amended and Restated Founder's Stock Purchase Agreement with
Grant W. Denison, Jr. dated as of October 1, 1997 with exhibits.
10.7** Amended and Restated Founder's Stock Purchase Agreement with
Dr. Christopher M. Starr dated as of October 1, 1997 with
exhibits.
10.8 Employment Agreement with Dr. John C. Klock dated June 26, 1997,
as amended.
10.9 Employment Agreement with Grant W. Denison, Jr. dated June 26,
1997, as amended.
10.10 Employment Agreement with Dr. Christopher M. Starr dated June
26, 1997, as amended.
10.11** Employment Agreement with Raymond W. Anderson dated June 22,
1998, as amended.
10.12** Employment Agreement with Stuart J. Swiedler, M.D., Ph.D., dated
May 29, 1998, as amended.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
-------- -----------------------
<C> <S>
10.13** Employment Agreement with Emil Kakkis, M.D., Ph.D., dated June
30, 1998, as amended.
10.14** Employment Agreement between Brian K. Brandley, Ph.D and Glyko,
Inc. dated February 22, 1998, as amended.
10.15** License Agreement with Glyko Biomedical, Ltd. dated June 26,
1997 with exhibits attached.
10.16(2) Option Agreement with W.R. Grace & Co. dated as of May 1, 1998.
10.17(2) Grant Terms and Conditions Agreement with Harbor-UCLA Research
and Education Institute dated April 1, 1997, as amended.
10.18(2) License Agreement with Womens and Children's Hospital,
Adelaide, Australia dated August 14, 1998.
10.19** Lease Agreement dated May 18, 1998 for 371 Bel Marin Keys
Boulevard, as amended.
10.20** Standard NNN Lease dated June 25, 1998 for 46 Galli Drive.
10.21** Standard Industrial Commercial Single-Tenant Lease dated May
29, 1998 for 110 Digital Drive, as amended.
10.22** Sublease dated June 24, 1998 for 1123 West Carson Street.
10.23** Commercial Lease and Deposit Receipt with Glyko, Inc. for 11
Pimintel Court and 13 Pimintel Court, dated December 23, 1996.
10.24(2) Collaboration Agreement with Genzyme Corporation dated
September 4, 1998.
10.25** Purchase Agreement with Genzyme Corporation dated September 4,
1998.
10.26 Subscription Agreement with Genzyme dated September 4, 1998.
10.27 Form of Convertible Note Purchase Agreement dated as of April
12, 1999 with form of convertible promissory note.
10.28 Astro License Agreement dated December 18, 1990 among Glyko,
Inc., Astromed, Ltd., and Astroscan, Ltd.
10.29 Glycomed License Agreement dated December 18, 1990 between
Glyko, Inc., and Glycomed, Inc.
21.1** List of Subsidiaries
23.1 Consent of Independent Public Accountants.
23.2* Consent of Counsel (included in Exhibit 5.1).
24.1** Power of Attorney.
27.1 Financial Data Schedule (available in EDGAR format only).
</TABLE>
-------------------------------
* To be filed by Amendment.
** Previously filed
(1) As proposed to be filed with the Secretary of State of the State of
Delaware prior to the effectiveness of the offering.
(2) This Exhibit has been filed separately with the Commission pursuant
to an application for confidential treatment. The confidential
portions of this Exhibit have been omitted and are marked by an
asterisk.
II-4
<PAGE>
(b) Financial Statement Schedule
None.
Schedules not listed above have been omitted because the information required
to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
Item 17. Undertakings
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the provisions referenced in Item 14 of this Registration Statement
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act, and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer,
or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered
hereunder, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of such issue.
The undersigned Registrant hereby undertakes that for the purpose of
determining any liability under the Act, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new Registration
Statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
For purposes of determining any liability under the Securities Act of 1933, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
The undersigned Registrant hereby undertakes to provide to the underwriter at
the closing specified in the underwriting agreements certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
II-5
<PAGE>
SIGNATURES
Pursuant to the of the Securities Act of 1933, the Registrant has duly caused
this amended Registration Statement on Form S-1 to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Novato, State of
California, on this 14th day of June, 1999.
Biomarin Pharmaceutical Inc.
/s/ Raymond W. Anderson
By: _________________________________
Raymond W. Anderson
Chief Financial Officer and Vice
President of Finance and
Administration
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
Grant W. Denison, Jr.* Chief Executive Officer June 14, 1999
______________________________________ and Chairman of the Board
Grant W. Denison, Jr. (Principal Executive
Officer)
/s/ Raymond W. Anderson Chief Financial Officer June 14, 1999
______________________________________ and Vice President of
Raymond W. Anderson Finance and
Administration (Principal
Financial and Accounting
Officer)
Ansbert S. Gadicke* Director June 14, 1999
______________________________________
Ansbert S. Gadicke, M.D., Ph.D.
John C. Klock, M.D.* Director June 14, 1999
______________________________________
John C. Klock, M.D.
Erich Sager* Director June 14, 1999
______________________________________
Erich Sager
Gwynn R. Williams* Director June 14, 1999
______________________________________
Gwynn R. Williams
</TABLE>
/s/ Raymond W. Anderson
*By: _______________________
Raymond W. Anderson
Attorney-in-fact
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S>
1.1* Form of Underwriting Agreement.
2.1 Share Exchange Agreement with Glyko Biomedical, Ltd.
3.1A** Amended and Restated Certificate of Incorporation of BioMarin
Pharmaceutical Inc., a Delaware Corporation, as filed on March 22,
1999.
3.1B(1)* Form of Amended and Restated Certificate of Incorporation of
BioMarin Pharmaceutical Inc., a Delaware Corporation.
3.2** Amended and Restated Bylaws of BioMarin Pharmaceutical Inc., a
Delaware corporation.
4.1** Form of Amended and Restated Registration Rights Agreement, by and
among the Company and the investors named therein.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati.
10.1** Form of Indemnification Agreement for directors and officers.
10.2** 1997 Stock Plan as amended on December 22, 1998 and forms of
agreements thereunder.
10.3** 1998 Director Option Plan and forms of agreements thereunder.
10.4** 1998 Employee Stock Purchase Plan and forms of agreements
thereunder.
10.5** Amended and Restated Founder's Stock Purchase Agreement with Dr.
John C. Klock dated as of October 1, 1997, with exhibits.
10.6** Amended and Restated Founder's Stock Purchase Agreement with Grant
W. Denison, Jr. dated as of October 1, 1997, with exhibits.
10.7** Amended and Restated Founder's Stock Purchase Agreement with
Dr. Christopher M. Starr dated as of October 1, 1997, with
exhibits.
10.8 Employment Agreement with Dr. John C. Klock dated June 26, 1997,
as amended.
10.9 Employment Agreement with Grant W. Denison, Jr. dated June 26,
1997, as amended.
10.10 Employment Agreement with Dr. Christopher M. Starr dated June 26,
1997, as amended.
10.11** Employment Agreement with Raymond W. Anderson dated June 22, 1998,
as amended.
10.12** Employment Agreement with Stuart J. Swiedler, M.D., Ph.D., dated
May 29, 1998, as amended.
10.13** Employment Agreement with Emil Kakkis, M.D., Ph.D., dated June 30,
1998, as amended.
10.14** Employment Agreement between Brian K. Brandley PhD and Glyko Inc.
dated February 22, 1998, as amended.
10.15** License Agreement with Glyko Biomedical, Ltd. dated June 26, 1997
with exhibits attached.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
-------- -----------------------
<C> <S>
10.16(2) Option Agreement with W.R. Grace & Co. dated as of May 1, 1998.
10.17(2) Grant Terms and Conditions Agreement with Harbor-UCLA Research and
Education Institute dated April 1, 1997, as amended.
10.18(2) License Agreement with Womens and Children's Hospital Adelaide,
Australia dated August 14, 1998.
10.19** Lease Agreement dated May 18, 1998 for 371 Bel Marin Keys
Boulevard, as amended.
10.20** Standard NNN Lease dated June 25, 1998 for 46 Galli Drive.
10.21** Standard Industrial Commercial Single-Tenant Lease dated May 29,
1998 for 110 Digital Drive, as amended.
10.22** Sublease dated June 24, 1998 for 1123 West Carson Street.
10.23** Commercial Lease and Deposit Receipt with Glyko, Inc. for 11
Pimintel Court and 13 Pimintel Court, dated December 23, 1996.
10.24(2) Collaboration Agreement with Genzyme Corporation dated September 4,
1998.
10.25** Purchase Agreement with Genzyme Corporation dated September 4,
1998.
10.26 Subscription Agreement with Genzyme dated September 4, 1998.
10.27 Form of Convertible Note Purchase Agreement dated as of April 12,
1999 with form of convertible promissory note.
10.28 Astro License Agreement dated December 18, 1990 among Glyko, Inc.,
Astromed, Ltd., and Astroscan, Ltd.
10.29 Glycomed License Agreement dated December 18, 1990 between Glyko,
Inc., and Glycomed, Inc.
21.1** List of Subsidiaries
23.1 Consent of Independent Public Accountants.
23.2* Consent of Counsel (included in Exhibit 5.1).
24.1** Power of Attorney.
27.1 Financial Data Schedule (available in EDGAR format only).
</TABLE>
--------
* To be filed by Amendment.
** Previously filed.
(1) As proposed to be filed with the Secretary of State of the State of
Delaware prior to the effectiveness of the offering.
(2) This Exhibit has been filed separately with the Commission pursuant to
an application for confidential treatment. The confidential portions of
this Exhibit have been omitted and are marked by an asterisk.
<PAGE>
EXHIBIT 2.1
THIS SHARE EXCHANGE AGREEMENT made as of the 15th day of September,
1998.
B E T W E E N:
GLYKO BIOMEDICAL LTD.,
a corporation incorporated under the laws of Canada,
(hereinafter called the "Vendor")
OF THE FIRST PART;
- and -
BIOMARIN PHARMACEUTICAL INC.,
a corporation incorporated under the laws of the State of
Delaware,
(hereinafter called the "Purchaser")
OF THE SECOND PART.
WHEREAS the Vendor is the sole stockholder of Glyko, Inc., a Delaware
corporation, and desires to sell and to cause to be sold, and the Purchaser
desires to purchase from the Vendor all of the issued and outstanding shares of
capital stock of Glyko, Inc., upon the terms and conditions set forth in this
Agreement;
NOW THEREFORE THIS AGREEMENT WITNESSETH in consideration of the mutual
covenants and agreements herein contained, and other good and valuable
consideration, Vendor and Purchaser represent, warrant, covenant and agree as
follows:
1. INTERPRETATION
--------------
1.1 Defined Terms. Where used herein or in any amendments hereto, the
-------------
following terms shall have the following meanings:
"AGREEMENT" means this Share Exchange Agreement, all Schedules attached
hereto and all amendments made hereto or thereto by written agreement
signed by each of Vendor and Purchaser;
"BIOMARIN SHARES" means 2,259,039 shares of Purchaser's Common Stock to be
issued in the name of Vendor as partial payment of the Purchase Price
pursuant to Section 2.2 hereof;
"BUSINESS DAY" means any day, which is not a Saturday, Sunday or a
statutory holiday in the Province of Ontario or the State of California;
<PAGE>
"CLOSING" means the consummation of the Transaction as herein contemplated;
"CLOSING DATE" means October 7, 1998, or such other date as may be mutually
agreed upon by the parties hereto in writing for the closing of the
transactions contemplated by this Agreement;
"EFFECTIVE DATE" means September 15, 1998;
"EMPLOYEE OPTIONS" means the options to purchase a total of 585,969 shares
of Common Stock of the Vendor which are held by certain employees of Glyko,
Inc., which options shall be assumed by Purchaser and converted into
options to purchase 255,540 shares of Common Stock of Purchaser as
enumerated in Schedule "A" attached hereto;
------------
"ENCUMBRANCES" means any and all claims, liens, security interests,
mortgages, pledges, pre-emptive rights, charges, options, equity interests,
encumbrances, proxies, voting agreements, voting trusts or other interests
of any nature or kind whatsoever, howsoever created;
"GLYKO SHARES" means 3,882 shares of Common Stock and 2,000 shares of
Preferred Stock of Glyko, Inc., representing all of the issued and
outstanding capital stock of Glyko, Inc. as of the Closing Date;
"INTELLECTUAL PROPERTY" means all patents, patent applications and other
patent rights, trade secrets, copyrights and other proprietary rights as
listed on Schedule "B" hereto;
------------
"PERSON" includes an individual, partnership, association, unincorporated
organization, trust, corporation and a natural person acting in such
person's individual capacity or in such person's capacity as trustee,
executor, administrator, agent or other legal representative;
"PURCHASE PRICE" has the meaning attributed thereto in Section 2.2 hereof;
"TECHNOLOGY" means all know-how, processes, formulae, concepts, ideas,
data, technical and non-technical data and information, testing results,
descriptions, technologies, procedures, articles of manufacture,
compositions of matter (including pharmaceutical, chemical, biological,
genetic and biochemical compositions), designs, inventions, discoveries,
documents and works of authorship, whether or not patentable or patented,
now owned or licensed by Glyko, Inc.;
"TIME OF CLOSING" means 10:00 a.m. (San Francisco time) on the Closing
Date; and
"TRANSACTION" means the sale by the Vendor and the purchase by the
Purchaser of the Glyko Shares as contemplated herein.
1.2 Currency. Unless otherwise expressly provided, all dollar amounts referred
--------
to in this Agreement are in U.S. funds.
1.3 Gender and Number. Except where the context otherwise indicates, words
-----------------
importing the singular number only shall include the plural, and vice versa, and
words
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<PAGE>
importing the masculine gender shall include the feminine and neutral genders,
and vice versa.
1.4 Division and Headings. The division of this Agreement into Articles and
---------------------
sections and the insertion of headings are for the convenience of reference only
and shall not affect the construction or interpretation of this Agreement . The
terms "this Agreement", "hereof", "hereunder", "hereto", "herein" and similar
expressions refer to this Agreement and not to any particular Article, section
or other portion of this Agreement and include any amendment hereto. Unless
something in the subject matter or context is inconsistent therewith, references
herein to Articles and sections are to Articles and sections of this Agreement.
1.5 To the knowledge of. The term "to the knowledge of" the appropriate party
--------------------
as used herein means to the knowledge of the current officers of the appropriate
party without any special inquiry or investigation whatsoever.
2. AGREEMENT TO EXCHANGE
---------------------
2.1 Transfer. Subject to the terms and conditions hereof, on the Closing Date
--------
at the Time of Closing, the Vendor shall deliver to the Purchaser certificates
representing the Glyko Shares together with such executed documentation as is
necessary and appropriate to effect the transfer of ownership of the Glyko
Shares from Vendor to Purchaser in exchange for good and valuable consideration
enumerated in Section 2.2 below.
2.2 Payment of Purchase Price. The purchase price for the Glyko Shares shall
-------------------------
be equal to the sum of $14,500,500 (the "Purchase Price"). The Purchase Price
shall be paid and satisfied by Purchaser as follows: (i) the assumption by the
Purchaser of responsibility for the Employee Options as discussed in Section 2.3
below and as set forth on Schedule A attached hereto, having an aggregate value
----------
as enumerated therein, (ii) the delivery to the Vendor of a certificate
representing the BioMarin Shares issued in the name of Vendor, such BioMarin
Shares valued at $6.00 per share and (iii) a cash payment of $500.
2.3 Assumption of Stock Options. At the Effective Date, certain Employee
---------------------------
Options outstanding under the Vendor's Share Option Plan - 1994 (the "Option
------
Plan"), or otherwise, shall be assumed by Purchaser as follows:
- ----
(i) At the Effective Date, certain Employee Options listed on Schedule A
----------
attached hereto, whether vested or unvested, shall be, in connection with the
Transaction, assumed by Purchaser. Each Employee Option so assumed by Purchaser
under this Agreement shall continue to have, and be subject to, the same terms
and conditions set forth in the Option Plan, except that: (A) each Employee
Option shall be exercisable for that number of whole shares of Common Stock of
Purchaser equal to the product of the number of shares of Common Stock of Vendor
that were issuable upon exercise of such Employee Option immediately prior to
the Effective Date multiplied by the Conversion Ratio, as defined in
subparagraph (ii) below, rounded down to the nearest whole number of shares of
Common Stock of Purchaser and (B) the per share exercise price for the shares of
Common Stock of Purchaser issuable upon exercise of such assumed Employee Option
shall be equal to the quotient determined by dividing the exercise price per
share of Common Stock of Vendor at which such Employee Option was exercisable
immediately prior to the Effective Date by the Conversion Ratio, rounded up to
the nearest whole cent; and
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<PAGE>
(ii) For the purposes of this Section 2.3, the Conversion Ratio shall be
equal to the quotient of the fair market value of a share of Common Stock of
Vendor (converted to U.S. dollars), $2.61659, divided by the current fair market
value of a share of Common Stock of Purchaser, $6.00, which quotient is equal to
.436098.
It is the intention of the parties that the Employee Options assumed by
Purchaser qualify following the Effective Date as incentive stock options as
defined in Section 422 of the Code to the extent that the Employee Options
qualified as incentive stock options immediately prior to the Effective Date.
Promptly following the Effective Date, Purchaser will issue to each holder
of an outstanding Employee Option a document evidencing the foregoing assumption
of such Employee Option by Purchaser.
2.4 Closing. The Closing shall occur at the Time of Closing on the Closing
--------
Date at the offices of the Vendor, or at such other place or other time and date
as the Purchaser and the Vendor may agree.
Any document or instrument to be delivered by either party hereto at the
Closing shall be tabled at the Closing at the place of closing referred to above
by the party which is to deliver such document or instrument and any document or
instrument so tabled by a party hereto shall:
(a) be deemed to have been delivered by such party for the purposes of
this Agreement;
(b) be held in escrow by counsel for such party to be dealt with in
accordance with subparagraphs (c) and (d) below;
(c) be delivered to the party to which it is to be delivered pursuant to
the terms hereof, if all documents or instruments which are to be
delivered at the Closing are tabled in accordance with this section at
the Closing; and
(d) be delivered to, or in accordance with the directions of, the party
which tabled it, if subparagraph (c) does not apply.
3. REPRESENTATIONS AND WARRANTIES OF THE VENDOR
--------------------------------------------
Except as set forth in the disclosure schedule attached hereto as Schedule
--------
"C," the Vendor hereby represents and warrants to the Purchaser as follows as of
- ----
the date hereof and acknowledges and confirms that the Purchaser is relying upon
such representations and warranties in connection with the transactions
contemplated hereby:
(a) Attached hereto as Schedule "D" are Glyko, Inc.'s unaudited balance
-----------
sheet as of June 30, 1998 and the related unaudited statements of
income and cash flow for the six (6) month period ended June 30, 1998
(collectively, the "Financials"). The Financials are correct in all
----------
material respects and have been prepared in accordance with United
States generally accepted accounting principles ("GAAP") consistently
applied on a basis consistent throughout the periods indicated and
consistent with each other (except that the Financials do not contain
footnotes and other
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<PAGE>
presentation items that may be required by GAAP). The Financials
present fairly the financial condition, operating results and cash
flows of Glyko, Inc. as of the dates and during the periods indicated
therein, subject to normal year-end adjustments, which normal year-end
adjustments have not been material in amount or significance in any
individual case or in the aggregate in prior years. Glyko, Inc.'s
unaudited balance sheet as of June 30, 1998, is referred to
hereinafter as the "Current Balance Sheet."
---------------------
(b) Glyko, Inc. has no liability, indebtedness, obligation, expense,
claim, deficiency, guaranty or endorsement of any type, whether
accrued, absolute, contingent, matured, unmatured or other (whether or
not required to be reflected in financial statements in accordance
with GAAP), which individually or in the aggregate (i) has not been
reflected in the Current Balance Sheet, or (ii) has not arisen in the
ordinary course of business consistent with past practices since June
30, 1998, in either case which amounts do not exceed $50,000 in the
aggregate.
(c) Since June 30, 1998, there has not been, occurred or arisen any:
(i) transaction by Glyko, Inc. except in the ordinary course of
business as conducted on that date and consistent with past
practices;
(ii) amendments or changes to the Certificate of Incorporation or
Bylaws of Glyko, Inc.;
(iii) capital expenditure or commitment by Glyko, Inc. exceeding
$25,000 individually or $50,000 in the aggregate;
(iv) destruction of, damage to or loss of any material assets,
material business or material customer of Glyko, Inc. (whether
or not covered by insurance);
(v) claim of wrongful discharge or other unlawful labor practice or
action;
(vi) change in accounting methods or practices (including any change
in depreciation or amortization policies or rates) by Glyko,
Inc. other than required by GAAP;
(vii) revaluation by Glyko, Inc. of any of its assets which, in the
aggregate, changed such value by an amount exceeding $5,000,
either individually or in the aggregate;
(viii) declaration, setting aside or payment of a dividend or other
distribution (whether in cash, stock or property) in respect of
any capital stock of Glyko, Inc., or any split, combination or
reclassification in respect of any shares of capital stock of
Glyko, Inc., or any issuance or authorization of any issuance
of any other securities in respect of, in lieu of or in
substitution for shares of capital stock of Glyko, Inc., or any
direct or indirect repurchase, redemption, or other acquisition
by Glyko, Inc. of any shares of capital stock of Glyko, Inc.
(or options, warrants or other rights convertible into,
exercisable or exchangeable therefor), except in
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<PAGE>
accordance with the agreements evidencing option grants by
Glyko, Inc.;
(ix) except in the ordinary course of its business as conducted on
June 30, 1998, increase in the salary or other compensation
payable or to become payable by Glyko, Inc. to any of its
officers, directors, employees or advisors, or the declaration,
payment or commitment or obligation of any kind for the
payment, by Glyko, Inc., of a bonus or other additional salary
or compensation to any such person;
(x) agreement, contract, covenant, instrument, lease, license or
commitment to which Glyko, Inc. is a party or by which it or
any of its assets (including but not limited to the
Intellectual Property and intangible assets) are bound or any
termination, extension, amendment or modification the terms of
any agreement, contract, covenant, instrument, lease, license
or commitment to which Glyko, Inc. is a party or by which it or
any of its assets are bound;
(xi) sale, lease, license or other disposition of any of the
material assets or properties of Glyko, Inc. or any creation of
any security interest in such assets or properties;
(xii) loan by Glyko, Inc. to any person or entity, incurring by
Glyko, Inc. of any indebtedness, guaranteeing by Glyko, Inc. of
any indebtedness, issuance or sale of any debt securities of
Glyko, Inc. or guaranteeing of any debt securities of others,
except for advances to employees for travel and business
expenses in the ordinary course of business consistent with
past practices;
(xiii) waiver or release of any right or claim of Glyko, Inc.,
including any write-off or other compromise of any account
receivable of Glyko, Inc. which, in the aggregate, had a value
of at least $5,000;
(xiv) written notice received by Vendor or Glyko, Inc. of the
commencement or threat of any lawsuit, proceeding or other
investigation against Glyko, Inc. or its affairs, or, to the
knowledge of Vendor, the commencement, notice or threat of any
lawsuit or proceeding or other investigation against Glyko,
Inc. or its affairs;
(xv) written notice received by Vendor or Glyko, Inc. of any claim
or potential claim of ownership by any person other than Glyko,
Inc. of the Intellectual Property or of infringement by Glyko,
Inc. of any other person's intellectual property or, to the
knowledge of Vendor, notice of such in any other form other
than written documentation;
(xvi) issuance or sale, or contract to issue or sell, by Glyko, Inc.
of any shares of capital stock of Glyko, Inc. or securities
convertible into, or exercisable or exchangeable for, shares of
capital stock of Glyko, Inc., or any securities, warrants,
options or rights to purchase any of the foregoing;
(xvii) (i) sale or license of any of the Intellectual Property or
entering into of any agreement with respect to the Intellectual
Property with any person or entity or with respect to the
intellectual property of any person or entity, or (ii) purchase
or license of any of the Intellectual Property or entering into
of any agreement with respect to the intellectual property of
any
-6-
<PAGE>
person or entity, or (iii) change in pricing or royalties set
or charged by Glyko, Inc. to its customers or licensees or in
pricing or royalties set or charged by persons who have
licensed any of the Intellectual Property to Glyko, Inc.;
(xviii)any event or condition of any character that has had or is
reasonably likely to have a material adverse effect on Glyko,
Inc.; or
(xix) agreement by Glyko, Inc. or any officer or employees thereof to
do any of the things described in the preceding clauses (i)
through (xviii)
(d) Neither the execution and delivery of this Agreement by the Vendor nor
the consummation of the transactions herein contemplated will conflict
with or result in:
(i) a violation, contravention or breach by the Vendor or Glyko,
Inc. of any of the terms, conditions or provisions of any
agreement or instrument to which the Vendor or Glyko, Inc. is a
party, or by which the Vendor or Glyko, Inc. is bound or
constitute a default by the Vendor or Glyko, Inc. thereunder,
or under any statute, regulation, judgment, decree or law by
which the Vendor or Glyko, Inc. is subject or bound, or result
in the creation or imposition of any mortgage, lien, charge or
encumbrance of any nature whatsoever upon any of the Glyko
Shares or any of the Intellectual Property; or
(ii) a violation by the Vendor or Glyko, Inc. of any law or
regulation or any applicable order of any court, arbitrator or
governmental authority having jurisdiction over the Vendor or
Glyko, Inc. , or require the Vendor or Glyko, Inc., prior to
the Closing or as a condition precedent thereof, to make any
governmental or regulatory filings, obtain any consent,
authorization, approval, clearance or other action by any
Person, or await the expiration of any applicable waiting
period.
(e) The Glyko Shares are duly and validly created, authorized and issued
and are fully paid and non-assessable.
(f) No Person has any agreement or option or any right or privilege
(whether pre-emptive or contractual) which is or is capable of
becoming an agreement or option for the purchase from the Vendor of
any of the Glyko Shares or any of the Intellectual Property.
(g) Glyko, Inc. is not a party to nor is it bound by:
(i) any written employment or consulting agreement, contract or
commitment with an employee or individual consultant or
salesperson or consulting or sales agreement, contract or
commitment with a firm or other organization, or employee
benefit plan, option plan or option agreement;
-7-
<PAGE>
(ii) any agreement or plan, including, without limitation, any stock
option plan, stock appreciation rights plan or stock purchase
plan, any of the benefits of which will be increased, or the
vesting of benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated
by this Agreement (for the purposes of this Section 3(g)(ii),
such agreement or plan shall include any agreement or plan of
Vendor being assumed by Purchaser pursuant to Section 2.2(i)
hereof);
(iii) any fidelity or surety bond or completion bond;
(iv) any lease of real or personal property having a value in excess
of $25,000 individually or $50,000 in the aggregate;
(v) any agreement, contract or commitment containing any covenant
limiting the freedom of Glyko, Inc. to engage in any line of
business or to compete with any person,
(vi) any agreement, contract or commitment relating to capital
expenditures and involving future payments in excess of $25,000
individually or $50,000 in the aggregate;
(vii) any agreement, contract or commitment relating to the
disposition or acquisition of assets or any interest in any
business enterprise outside the ordinary course of Glyko,
Inc.'s business;
(viii) any mortgages, indentures, loans or credit agreements, security
agreements or other agreements or instruments relating to the
borrowing of money or extension of credit;
(ix) any purchase order or contract for the purchase of materials
involving in excess of $25,000 individually or $50,000 in the
aggregate;
(x) any construction contracts in excess of $10,000 individually or
$20,000 in the aggregate;
(xi) any dealer, distribution, joint marketing or development
agreement;
(xii) any sales representative, original equipment manufacturer,
value added remarketer, reseller or independent vendor or other
agreement for use or distribution of Glyko, Inc.'s products,
technology or services; or
(xiii) any other agreement, contract or commitment that involves
$25,000 individually or $50,000 in the aggregate or more and is
not cancelable without penalty within thirty (30) days.
(h) Glyko, Inc. is in compliance with and has not breached, violated or
defaulted under, or received notice that it has breached, violated or
defaulted under, any of the terms or conditions of any material
agreement, contract, covenant, instrument, lease, license or
commitment to which
-8-
<PAGE>
Glyko, Inc. is a party or by which it is bound (collectively a
"Contract"), nor is Glyko, Inc. aware of any event that would
--------
constitute such a breach, violation or default with the lapse of time,
giving of notice or both. Each Contract is in full force and effect
and Glyko, Inc. is not subject to any default thereunder, nor to the
knowledge of Glyko, Inc. is any party obligated to Glyko, Inc.
pursuant to any such Contract subject to any default thereunder.
Following the Closing Date, Glyko, Inc. will be permitted to exercise
all of Glyko, Inc.'s rights under the Contracts without the payment of
any additional amounts or consideration other than ongoing fees,
royalties or payments which Glyko, Inc. would otherwise be required to
pay had the transactions contemplated by this Agreement not occurred.
(i) The Vendor has all necessary power, authority and capacity to enter
into this Agreement and all other agreements and instruments to be
executed by it as contemplated by this Agreement and to carry out its
obligations under this Agreement and such other agreements and
instruments. The execution and delivery of this Agreement and such
other agreements and instruments and the consummation of the
transactions contemplated hereby and such other agreements and
instruments have been duly authorized by all necessary corporate
action on the part of the Vendor.
(j) This Agreement constitutes a valid and binding obligation of the
Vendor enforceable against the Vendor in accordance with its terms
subject, however, to limitations with respect to enforcement imposed
by law in connection with bankruptcy, insolvency, reorganization or
other laws affecting creditors' rights generally and to the extent
that equitable remedies such as specific performance and injunctions
are only available in the discretion of the court from which they are
sought.
(k) The Vendor is the record and beneficial owner of the Glyko Shares and
has good and marketable title thereto free and clear of any
Encumbrances. The Vendor has the exclusive right and full power to
transfer the Glyko Shares to the Purchaser as herein contemplated free
and clear of any Encumbrances.
(l) Intellectual Property:
(i) Glyko, Inc. owns all right, title and interest in and to the
Intellectual Property with good and marketable title thereto,
free and clear of all Encumbrances;
(ii) Glyko, Inc. is entitled to make use of or otherwise exploit the
Intellectual Property (including without limitation the right
to derivatives and improvements thereto) without payment of any
royalty or other amounts;
(iii) Glyko, Inc. is under no obligation to obtain any approval or
consent for use of or other exploitation (including without
limitation enforcement, assignment, license, sublicense or
other transfer) of the Intellectual Property; (iv) no charge,
complaint action, suit, proceeding, hearing, investigation,
claim or demand is pending or threatened which challenges the
legality, validity, enforceability, use or ownership by Glyko,
Inc. of any of the Intellectual Property;
-9-
<PAGE>
(iv) no charge, complaint action, suit, proceeding, hearing,
investigation, claim or demand is pending or threatened which
challenges the legality, validity, enforceability, use or
ownership by Glyko, Inc. of any of the Intellectual Property;
(v) the Intellectual Property represents all intellectual property
rights (including without limitation patents, patent
applications, trademarks, trademark applications, service
marks, service mark applications, trade names, copyrights,
manufacturing process, trade secrets) which are reasonably
necessary or material to the conduct of Glyko, Inc.'s business
as presently conducted;
(vi) neither the Intellectual Property , the Technology nor the use
or exploitation thereof would infringe any patent, copyright,
trade secret or other proprietary right owned or controlled by
Vendor and no basis for such claim exists and neither Vendor
nor Glyko, Inc. has received notice, written or otherwise, of
such a claim of infringement by any third party;
(vii) the Intellectual Property is not subject to any outstanding
judgment, order decree, stipulation, injunction or charge nor
the subject matter or any charge, complaint, action, suit,
proceeding of any Federal, state, local or foreign jurisdiction
or before any arbitrator;
(viii) Glyko, Inc. has not given or otherwise communicated to any
entity any notice, charge, claim or assertion of any present,
impending or threatened infringement by such other entity of
any of the Intellectual Property;
(ix) Glyko, Inc. has taken all steps that are reasonably required to
protect Glyko, Inc.'s rights in confidential information and
trade secrets of Glyko, Inc. or provided by any other entity to
Glyko, Inc. Without limiting the foregoing, Glyko, Inc. has,
and enforces, a policy requiring each employee, consultant and
contractor to execute proprietary information, confidentiality
and assignment agreements in Glyko, Inc.'s standard forms, and
all current and former employees, consultants and contractors
of Glyko, Inc. have executed such an agreement. A copy of such
agreement has been provided to counsel for Purchaser; and
(x) the Intellectual Property has not been licensed to or licensed
from any third party or the Vendor.
(m) To the knowledge of the Vendor, there is not pending, threatened or
contemplated, any suit, action, legal proceeding, litigation or
governmental investigation of any sort relating to Glyko, Inc., the
Glyko Shares, the Intellectual Property or the Transaction, nor is
there any present state of facts or circumstances which can be
reasonably anticipated to be a basis for any such suit, action, legal
proceeding, litigation or governmental investigation nor is there
presently outstanding against Glyko, Inc., any judgment, decree,
injunction, rule or order of any court, governmental department,
commission, agency, instrumentality, or arbitrator, to which the
Vendor or Glyko, Inc. is a party or to which the property of the
Vendor or Glyko, Inc. is subject that would result individually or in
the aggregate in
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<PAGE>
any material adverse change in the operation, business, condition,
income or future prospects of the Vendor or Glyko, Inc.
(n) No order ceasing or suspending trading in securities of Glyko, Inc. or
prohibiting the sale of securities by Glyko, Inc. has been issued and
no proceedings for this purpose have been instituted, or are pending,
or, to the knowledge of the Vendor, are contemplated or threatened.
(o) Glyko, Inc. has not, directly or indirectly, declared or paid any
dividend or declared or made any other distribution on any of its
shares or securities or, directly or indirectly, redeemed, purchased
or otherwise acquired any of its shares or securities or agreed to do
any of the foregoing.
(p) The Vendor has not entered into any agreement that would entitle any
person to any valid claim against the Purchaser for a broker's
commission, finder's fee, or any like payment in respect of the sale
of the Glyko Shares or the purchase of the BioMarin Shares or any
other matters contemplated by this Agreement.
(q) Glyko, Inc. has not received any notices of violation with respect to,
any foreign, federal, state or local statute, law or regulation,
including without limitation environmental laws and regulations and,
to the knowledge of Vendor, Glyko, Inc. has complied with and is not
in violation of any of the foregoing.
(r) None of the foregoing representations and warranties knowingly
contains any untrue statement of material fact or knowingly omits to
state any material fact necessary to make any such representation or
warranty not misleading to a prospective purchaser of the Glyko Shares
seeking full information as to the Glyko Shares and the Intellectual
Property.
(s) Vendor has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of the
purchase of the BioMarin Shares pursuant to this Agreement and of
protecting the Vendor's interests in connection herewith. Vendor has
the ability to bear the economic risk of the investment, including
complete loss of the investment.
(t) Vendor is acquiring the BioMarin Shares for investment for its own
account, not as a nominee or agent, and not with a view to, or for
resale in connection with, any distribution thereof, and Vendor has no
present intention of selling, granting any participation in, or
otherwise distributing the same. Vendor understands that the BioMarin
Shares have not been registered under the Securities Act of 1933, as
amended (the "Securities Act") but have been issued pursuant to a
specific exemption from the registration provisions of the Securities
Act which depends upon, among other things, the bona fide nature of
the investment intent and the accuracy of Vendor's representations as
expressed herein.
(u) Vendor understands that the BioMarin Shares are characterized as
"restricted securities" under U.S. federal securities laws inasmuch as
they are being acquired from Purchaser in a transaction not involving
a public offering and that under such laws and applicable regulations
the BioMarin Shares may be resold without registration under the
Securities Act only in
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<PAGE>
certain limited circumstances. Vendor acknowledges that the BioMarin
Shares must be held indefinitely unless subsequently registered under
the Securities Act or an exemption from such registration is
available. Vendor is aware of the provisions of Rule 144 promulgated
under the Securities Act which permits limited resale of shares
purchased in a private placement subject to the satisfaction of
certain conditions.
(v) Vendor understands that the BioMarin Shares may be subject to a lock-
up period of up to 180 days following the effective date a
Registration Statement filed under the Securities Act, pursuant to
Section 7 of the Amended and Restated Registration Rights Agreement
attached hereto as Schedule "E".
------------
(w) Vendor understands that no public market now exists for the Common
Stock of Purchaser or for any other securities issued by Purchaser and
that there is no assurance that a public market will ever exist for
the BioMarin Shares.
(x) Without in any way limiting the representations set forth above,
Vendor further agrees not to make any offer or sale of all or any
portion of the BioMarin Shares within the United States or to a U.S.
resident unless and until;
(i) There is then in effect a Registration Statement under the
Securities Act covering such proposed offer or sale and such
offer or sale is made in accordance with such Registration
Statement; or
(ii) Vendor shall have notified Purchaser of the proposed offer or
sale and shall have furnished Purchaser with a detailed
statement of the circumstances surrounding the proposed
disposition, and if reasonably requested by the Purchaser,
Vendor shall have furnished Purchaser with an opinion of
counsel, reasonably satisfactory to Purchaser, that such offer
or sale is exempt from the registration requirements under the
Securities Act.
(y) The certificate representing the BioMarin Shares, and any securities
issued in respect thereof or exchange therefor shall bear legends
substantially in the following forms (in addition to any legend
required under applicable state securities laws):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH,
THE SALE OR DISTRIBUTION THEREOF. SUCH SECURITIES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION UNLESS THE CORPORATION
RECEIVES AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT STATING
THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT. COPIES OF THE
AGREEMENTS COVERING THE PURCHASE OF THESE SECURITIES AND RESTRICTING
THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY
THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY
-12-
<PAGE>
OF THE CORPORATION AT THE PRINCIPAL EXECUTIVE OFFICES OF THE
CORPORATION.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A LOCKUP
PERIOD OF 180 DAYS FOLLOWING THE EFFECTIVE DATE OF A REGISTRATION
STATEMENT OF THE COMPANY FILED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AS SET FORTH IN AN AGREEMENT BETWEEN THE ISSUER AND THE
ORIGINAL HOLDER OF THESE SECURITIES, A COPY OF WHICH MAY BE OBTAINED
AT THE PRINCIPAL OFFICE OF THE CORPORATION. SUCH LOCKUP PERIOD IS
BINDING ON TRANSFEREES OF THESE SECURITIES."
(z) Vendor presently does and will as of the Closing Date qualify as an
"accredited investor" within the meaning of Rule 501(a) promulgated
under the Securities Act and meets the relevant criteria indicated on
its completed and signed copy of the Accredited Investor Questionnaire
attached hereto as Schedule "F".
------------
(aa) Immediately following the Closing, Vendor will not own any material
asset other than 10,917,091 shares of Common Stock of Purchaser. For
avoidance of any doubt, immediately following the Closing Vendor will
not own any right, title or other interest in or to any intellectual
property rights (including without limitation domestic and foreign
patents, patent applications, trademarks (other than "Glyko BioMedical
Limited"), trade mark applications, trade names (other than "Glyko
BioMedical Limited"), copyrights or trade secrets).
(bb) All inter-company debt and equity accounts between Vendor and Glyko,
Inc., have been settled on or before the Closing Date.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
-----------------------------------------------
Except as set forth in the disclosure schedule attached hereto as Schedule
--------
G, the Purchaser hereby represents and warrants to the Vendor as follows as of
- -
the date hereof and acknowledges and confirms that the Vendor is relying upon
such representations and warranties in connection with the transactions
contemplated hereby:
(a) Attached hereto as Schedule "H" are Purchaser's unaudited balance
-----------
sheet as of June 30, 1998 and the related unaudited statements of
income and cash flow for the six (6) month period ended June 30, 1998
(collectively, the "Financials"). The Financials are correct in all
----------
material respects and have been prepared in accordance with United
States generally accepted accounting principles ("GAAP") consistently
applied on a basis consistent throughout the periods indicated and
consistent with each other (except that the Financials do not contain
footnotes and other presentation items that may be required by GAAP).
The Financials present fairly the financial condition, operating
results and cash flows of Purchaser as of the dates and during the
periods indicated therein, subject to normal year-end adjustments,
which normal year-end adjustments have not been material in amount or
significance in any individual case or in the aggregate in prior
years. Purchaser's unaudited
-13-
<PAGE>
balance sheet as of June 30, 1998, is referred to hereinafter as the
"Current Balance Sheet."
---------------------
(b) Glyko, Inc. has no liability, indebtedness, obligation, expense,
claim, deficiency, guaranty or endorsement of any type, whether
accrued, absolute, contingent, matured, unmatured or other (whether or
not required to be reflected in financial statements in accordance
with GAAP), which individually or in the aggregate (i) has not been
reflected in the Current Balance Sheet, or (ii) has not arisen in the
ordinary course of business consistent with past practices since June
30, 1998, in either case which amounts do not exceed $50,000 in the
aggregate.
(c) Since June 30, 1998, there has not been, occurred or arisen any:
(i) transaction by Purchaser except in the ordinary course of
business as conducted on that date and consistent with past
practices;
(ii) amendments or changes to the Certificate of Incorporation or
Bylaws of Purchaser;
(iii) capital expenditure or commitment by Purchaser exceeding
$25,000 individually or $50,000 in the aggregate;
(iv) destruction of, damage to or loss of any material assets,
material business or material customer of Purchaser (whether or
not covered by insurance);
(v) claim of wrongful discharge or other unlawful labor practice or
action;
(vi) change in accounting methods or practices (including any change
in depreciation or amortization policies or rates) by Purchaser
other than required by GAAP;
(vii) revaluation by Purchaser of any of its assets which, in the
aggregate, changed such value by at least $5,000;
(viii) declaration, setting aside or payment of a dividend or other
distribution (whether in cash, stock or property) in respect of
any capital stock of Purchaser, or any split, combination or
reclassification in respect of any shares of capital stock of
Purchaser, or any issuance or authorization of any issuance of
any other securities in respect of, in lieu of or in
substitution for shares of capital stock of Purchaser, or any
direct or indirect repurchase, redemption, or other acquisition
by Purchaser of any shares of capital stock of Purchaser (or
options, warrants or other rights convertible into, exercisable
or exchangeable therefor), except in accordance with the
agreements evidencing option grants by Purchaser;
(ix) except in the ordinary course of its business as conducted on
June 30, 1998, increase in the salary or other compensation
payable or to become payable by Purchaser to any of its
officers, directors, employees or advisors, or the declaration,
payment or commitment
-14-
<PAGE>
or obligation of any kind for the payment, by Purchaser, of a
bonus or other additional salary or compensation to any such
person;
(x) agreement, contract, covenant, instrument, lease, license or
commitment to which Purchaser is a party or by which it or any
of its assets (including but not limited to the intellectual
property of Purchaser and intangible assets) are bound or any
termination, extension, amendment or modification the terms of
any agreement, contract, covenant, instrument, lease, license
or commitment to which Purchaser is a party or by which it or
any of its assets are bound;
(xi) sale, lease, license or other disposition of any of the
material assets or properties of Purchaser or any creation of
any security interest in such assets or properties;
(xii) loan by Purchaser to any person or entity, incurring by
Purchaser of any indebtedness, guaranteeing by Purchaser of any
indebtedness, issuance or sale of any debt securities of
Purchaser or guaranteeing of any debt securities of others,
except for advances to employees for travel and business
expenses in the ordinary course of business consistent with
past practices;
(xiii) waiver or release of any right or claim of Purchaser, including
any write-off or other compromise of any account receivable of
Purchaser which, in the aggregate, had a value of a least
$5,000;
(xiv) written notice of the commencement or threat of any lawsuit,
proceeding or other investigation against Purchaser or its
affairs, or, to the knowledge of Purchaser, the commencement,
notice or threat of any lawsuit or proceeding or other
investigation against Purchaser or its affairs;
(xv) written notice of any claim or potential claim of ownership by
any person other than Purchaser of the intellectual property of
Purchaser or of infringement by Purchaser of any other person's
intellectual property or, to the knowledge of Purchaser, notice
of such in any other form other than written documentation;
(xvi) issuance or sale, or contract to issue or sell, by Purchaser of
any shares of capital stock of Purchaser or securities
convertible into, or exercisable or exchangeable for, shares of
capital stock of Purchaser, or any securities, warrants,
options or rights to purchase any of the foregoing;
(xvii) (i) sale or license of any of the intellectual property of
Purchaser or entering into of any agreement with respect to the
intellectual property of Purchaser with any person or entity or
with respect to the intellectual property of any person or
entity, or (ii) purchase or license of any of the intellectual
property of Purchaser or entering into of any agreement with
respect to the intellectual property of any person or entity,
or (iii) change in pricing or
-15-
<PAGE>
royalties set or charged by Purchaser to its customers or
licensees or in pricing or royalties set or charged by persons
who have licensed any of the intellectual property of Purchaser
to Purchaser;
(xviii)any event or condition of any character that has had or is
reasonably likely to have a material adverse effect on
Purchaser; or
(xix) agreement by Purchaser or any officer or employees thereof to
do any of the things described in the preceding clauses (i)
through (xviii).
(d) Purchaser is not a party to nor is it bound by:
(i) any written employment or consulting agreement, contract or
commitment with an employee or individual consultant or
salesperson or consulting or sales agreement, contract or
commitment with a firm or other organization, or employee
benefit plan, option plan or option agreement;
(ii) any agreement or plan, including, without limitation, any stock
option plan, stock appreciation rights plan or stock purchase
plan, any of the benefits of which will be increased, or the
vesting of benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated
by this Agreement;
(iii) any fidelity or surety bond or completion bond;
(iv) any lease of real or personal property having a value in excess
of $25,000 individually or $50,000 in the aggregate;
(v) any agreement, contract or commitment containing any covenant
limiting the freedom of Purchaser to engage in any line of
business or to compete with any person,
(vi) any agreement, contract or commitment relating to capital
expenditures and involving future payments in excess of $25,000
individually or $50,000 in the aggregate;
(vii) any agreement, contract or commitment relating to the
disposition or acquisition of assets or any interest in any
business enterprise outside the ordinary course of Purchaser's
business;
(viii) any mortgages, indentures, loans or credit agreements, security
agreements or other agreements or instruments relating to the
borrowing of money or extension of credit;
(ix) any purchase order or contract for the purchase of materials
involving in excess of $25,000 individually or $50,000 in the
aggregate;
(x) any construction contracts in excess of $10,000 individually or
$20,000 in the aggregate;
-16-
<PAGE>
(xi) any dealer, distribution, joint marketing or development
agreement;
(xii) any sales representative, original equipment manufacturer,
value added remarketer, reseller or independent vendor or other
agreement for use or distribution of Purchaser's products,
technology or services; or
(xiii) any other agreement, contract or commitment that involves
$25,000 individually or $50,000 in the aggregate or more and is
not cancelable without penalty within thirty (30) days.
(e) Purchaser is in compliance with and has not breached, violated or
defaulted under, or received notice that it has breached, violated or
defaulted under, any of the terms or conditions of any material
agreement, contract, covenant, instrument, lease, license or
commitment to which Purchaser is a party or by which it is bound
(collectively a "Purchaser Contract"), nor is Purchaser aware of any
------------------
event that would constitute such a breach, violation or default with
the lapse of time, giving of notice or both. Each Purchaser Contract
is in full force and effect and Purchaser is not subject to any
default thereunder, nor to the knowledge of Purchaser is any party
obligated to Purchaser pursuant to any such Purchaser Contract subject
to any default thereunder. Following the Closing Date, Purchaser will
be permitted to exercise all of Purchaser's rights under the Purchaser
Contracts without the payment of any additional amounts or
consideration other than ongoing fees, royalties or payments which
Purchaser would otherwise be required to pay had the transactions
contemplated by this Agreement not occurred.
(f) The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all
necessary corporate action on behalf of the Purchaser and this
Agreement has been duly executed and delivered by the Purchaser and is
a valid and binding obligation of the Purchaser.
(g) At the Time of Closing the BioMarin Shares will be duly and validly
created, authorized and issued as fully paid and non-assessable
shares, and the shares of Common Stock of Purchaser issuable upon
exercise of the options set forth on Schedule A shall, upon exercise
----------
in accordance with their terms, be duly and validly created,
authorized and issued as fully paid and non-assessable shares.
(h) Neither the execution and delivery of this Agreement by the Purchaser
nor the consummation of the transactions contemplated hereby will
conflict with or result in or create a state of facts which after
notice or lapse of time or delay or both, will conflict with or result
in:
(i) a violation, contravention or breach by the Purchaser of any of
the terms, conditions or provisions of the Restated Certificate
of Incorporation, Bylaws or resolutions of the Purchaser or of
any agreement or instrument to which the Purchaser is a party
or by which it is bound or constitute a default of the
Purchaser thereunder, or of any statute, regulation, judgment,
decree or law by which the Purchaser or the assets of the
Purchaser are subject
-17-
<PAGE>
or bound, or result in the creation or imposition of any
Encumbrance upon any of the BioMarin Shares; or
(ii) a violation by the Purchaser of any law or regulation or any
applicable order of any court, arbitrator or governmental
authority having jurisdiction over the Purchaser, or require
the Purchaser, prior to the Closing or as a condition precedent
thereof, to make any governmental or regulatory filings, obtain
any consent, authorization, approval, clearance or other action
by any Person or await the expiration of any applicable waiting
period.
(i) The authorized capital stock of the Purchaser consists of 30, 000,000
shares of Common Stock. Immediately prior to the Closing, 23,916,483
shares of Common Stock are issued and outstanding, all of which have
been duly authorized and validly issued, are fully paid and
nonassessable. Warrants to purchase 801,500 shares of Common Stock are
currently outstanding. Immediately prior to the Closing, the Board of
Directors has approved the grant of options to purchase a total of
2,304,120 shares of Common Stock to outside consultants, directors and
employees. There are no other options, warrants, conversion
privileges, pre-emptive rights (other than the pre-emptive rights
agreement between Glyko Biomedical Ltd. and the Purchaser dated June
27, 1997, the pre-emptive rights agreement between BB BioVentures L.P.
and the Purchaser dated December 30, 1997, and the pre-emptive rights
agreement between Genzyme Corporation and the Purchaser dated
September 4, 1998) presently outstanding to purchase or otherwise
acquire any capital stock or other securities of the Company;
(j) To the knowledge of the Purchaser, there is not pending, threatened or
contemplated, any suit, action, legal proceeding, litigation or
governmental investigation of any sort relating to the Purchaser or
the BioMarin Shares, nor is there any present state of facts or
circumstances which can be reasonably anticipated to be a basis for
any such suit, action, legal proceeding, litigation or governmental
investigation nor is there presently outstanding against the
Purchaser, any judgment, decree, injunction, rule or order of any
court, governmental department, commission, agency, instrumentality,
or arbitrator, to which the Purchaser is a party or to which the
property of the Purchaser is subject that would result individually or
in the aggregate in any material adverse change in the operation,
business, condition, income or future prospects of the Purchaser.
(k) No order ceasing or suspending trading in securities of the Purchaser
or prohibiting the sale of securities by the Purchaser has been issued
and no proceedings for this purpose have been instituted, or are
pending, or, to the knowledge of the Purchaser, are contemplated or
threatened.
(l) Neither the Restated Certificate of Incorporation or Bylaws of the
Purchaser nor any agreement, mortgage, note, debenture, indenture or
other instrument or document to which the Purchaser is a party,
contain any restriction upon or impediment to the declaration or
payment of dividends by the directors of the Purchaser or the payment
of dividends by the Purchaser to the holders of the BioMarin Shares.
-18-
<PAGE>
(m) Upon execution of the Amended and Restated Registration Rights
Agreement, attached hereto as Schedule "E," Vendor shall have
-----------
registration rights with regard to the BioMarin Shares, as enumerated
therein.
(n) The Purchaser has not entered into any agreement that would entitle
any person to any valid claim against the Vendor for a broker's
commission, finder's fee, or any like payment in respect of the
purchase of the Glyko Shares or the sale of the BioMarin Shares or any
other matters contemplated by this Agreement.
(o) Purchaser has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of the
purchase of the Glyko Shares pursuant to this Agreement and of
protecting the Purchaser's interests in connection herewith. Purchaser
has the ability to bear the economic risk of the investment, including
complete loss of the investment.
(p) Purchaser is acquiring the Glyko Shares for investment for its own
account, not as a nominee or agent, and not with a view to, or for
resale in connection with, any distribution thereof, and Purchaser has
no present intention of selling, granting any participation in, or
otherwise distributing the same. Purchaser understands that the Glyko
Shares have not been registered under the Securities Act of 1933, as
amended (the "Securities Act") but have been issued pursuant to a
specific exemption from the registration provisions of the Securities
Act which depends upon, among other things, the bona fide nature of
the investment intent and the accuracy of Purchaser 's representations
as expressed herein.
(q) Purchaser understands that the Glyko Shares are characterized as
"restricted securities" under U.S. federal securities laws and that
under such laws and applicable regulations the Glyko Shares may be
resold without registration under the Securities Act only in certain
limited circumstances. Purchaser acknowledges that the Glyko Shares
must be held indefinitely unless subsequently registered under the
Securities Act or an exemption from such registration is available.
Purchaser is aware of the provisions of Rule 144 promulgated under the
Securities Act which permits limited resale of shares purchased in a
private placement subject to the satisfaction of certain conditions.
(r) Purchaser understands that no public market now exists for the Common
Stock of Glyko, Inc. or for any other securities issued by Glyko, Inc.
and that there is no assurance that a public market will ever exist
for the Glyko Shares.
(s) Without in any way limiting the representations set forth above,
Purchaser further agrees not to make any offer or sale of all or any
portion of the Glyko Shares within the United States or to a U.S.
resident unless and until;
(i) There is then in effect a Registration Statement under the
Securities Act covering such proposed offer or sale and such
offer or sale is made in accordance with such Registration
Statement; or
-19-
<PAGE>
(ii) Purchaser shall have notified Glyko, Inc. of the proposed offer
or sale and shall have furnished Glyko, Inc. with a detailed
statement of the circumstances surrounding the proposed
disposition, and if reasonably requested by the Glyko, Inc.,
Purchaser shall have furnished Glyko, Inc. with an opinion of
counsel, reasonably satisfactory to Glyko, Inc., that such
offer or sale is exempt from the registration requirements
under the Securities Act.
(t) Purchaser presently does and will as of the Closing Date qualify as an
"accredited investor" within the meaning of Rule 501(a) promulgated
under the Securities Act and meets the relevant criteria indicated on
its completed and signed copy of the Accredited Investor Questionnaire
attached hereto as Schedule "F".
------------
(u) None of the foregoing representations and warranties knowingly
contains any untrue statement of material fact or knowingly omits to
state any material fact necessary to make any such representation or
warranty not misleading to a prospective purchaser of the BioMarin
Shares seeking full information as to the BioMarin Shares.
5. CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS
-----------------------------------------------
All obligations of the Purchaser under this Agreement, including but not
limited to those to purchase the Glyko Shares, to assume the Employee Options
and to sell to Vendor the BioMarin Shares, are subject to the fulfillment prior
to or at the Closing of each of the following conditions:
(a) Purchaser shall have received from Vendor a certificate, dated as of
the Closing Date, signed by the President of Vendor, stating that the
representations and warranties made by the Vendor in or under this
Agreement are true in all material respects on and as of the date of
the Closing and that, on or prior to the Closing, Vendor has complied
with all covenants and agreements herein agreed to be performed or
caused to be performed by it on or prior to the Closing Date.
(b) On or before the Closing Date there shall have been obtained from all
appropriate Federal, provincial, state, municipal, foreign or other
governmental or administrative bodies all such approvals and consents,
if any, in form and terms satisfactory to the Purchaser, as may be
required in order to permit the change of ownership of the Glyko
Shares.
(c) On or before the Closing Date the Vendor and Glyko, Inc. shall have
settled all inter-company debt and equity accounts.
(d) Purchaser shall have received from Vendor a copy of this Agreement
duly executed on behalf of Vendor with all schedules attached thereto
completed to the mutual satisfaction of Purchaser and Vendor.
(e) Purchaser shall have received from Vendor an executed copy of the
Amended and Restated Registration Rights Agreement attached hereto as
Schedule "E."
-------------
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<PAGE>
(f) Purchaser shall have received from counsel to Vendor an executed legal
opinion in a form reasonably satisfactory to Purchaser.
(g) Vendor shall have delivered, subject to the provisions of Section 2.4
hereof, the Glyko Shares together with such executed documentation as
is necessary and appropriate to the effect the transfer of ownership
of the Glyko Shares from Vendor to Purchaser.
In case any of the foregoing conditions cannot be fulfilled on or before
the Closing Date to the satisfaction of the Purchaser, the Purchaser may rescind
this Agreement by notice to the Vendor and in such event each of the Purchaser
and the Vendor shall be released from all obligations hereunder; provided,
however, that any such conditions may be waived in whole or in part by the
Purchaser without prejudice to its rights of rescission in the event of the non-
fulfillment of any other condition or conditions, and that the closing of the
Transaction as contemplated by this Agreement shall be deemed to be a waiver of
any unfulfilled conditions.
6. CONDITIONS PRECEDENT TO THE VENDOR'S OBLIGATIONS
------------------------------------------------
All obligations of the Vendor under this Agreement, including but not
limited to those to sell the Glyko Shares to Purchaser and to purchase the
BioMarin Shares, are subject to the fulfillment prior to or at the Closing of
each of the following conditions:
(a) Vendor shall have received from Purchaser a certificate dated as of
the Closing Date, signed by the Chief Executive Officer of Purchaser,
stating that the representations and warranties of the Purchaser under
this Agreement are true in all material respects on and as of the date
of such Closing and that, on or prior to the Closing, the Purchaser
has complied with all covenants and agreements herein agreed to be
performed or caused to be performed by it on or prior to the Closing
Date.
(b) No action shall have been taken by any court or governmental body
prohibiting or making illegal the execution and delivery of this
Agreement, or any transaction contemplated by this Agreement. No
action, suit or proceeding shall have been instituted and be
continuing by any Person to restrain, modify or prevent the
consummation of the transactions contemplated by this Agreement, or to
seek damages against the Purchaser in connection with such
Transaction, or that has been or is reasonably likely to have a
material adverse affect on the ability of any party hereto to fully
consummate the transactions contemplated by this Agreement.
(c) The Purchaser shall have delivered to Vendor, subject to the
provisions of Section 2.4 hereof, releases of the Employee Options
executed by the subject optionees, in form reasonably satisfactory to
the Vendor.
(d) Purchaser shall have delivered, subject to the provisions of Section
2.4 hereof, a certificate representing the BioMarin Shares registered
in the name of the Vendor bearing restrictive legends as provided for
in Section 3(z).
(e) On or before the Closing Date the Vendor and Glyko, Inc. shall have
settled all inter-company debt and equity accounts.
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<PAGE>
(f) Vendor shall have received from counsel to Purchaser an executed legal
opinion in a form reasonably satisfactory to Vendor.
(g) Vendor shall have received from Purchaser a copy of this Agreement
duly executed on behalf of Purchaser with all schedules attached
thereto completed to the mutual satisfaction of Purchaser and Vendor.
(h) Vendor shall have received from Purchaser $500 in cash pursuant to
Section 2.2 hereof.
(i) Vendor shall have received from Purchaser an executed copy of the
Amended and Restated Registration Rights Agreement attached hereto as
Schedule "E."
-------------
In case any of the foregoing conditions cannot be fulfilled on or before
the Closing Date to the satisfaction of the Vendor, the Vendor may rescind this
Agreement by notice to Purchaser and in such event each of the Vendor and the
Purchaser shall be released from all obligations hereunder; provided, however,
that any such conditions may be waived in whole or in part by the Vendor without
prejudice to its rights or rescission in the event of the non-fulfillment of any
other condition or conditions and that the Closing shall be deemed to be a
waiver of any unfulfilled conditions.
7. NATURE OF REPRESENTATIONS AND WARRANTIES
----------------------------------------
(a) Regardless of any investigation at any time made by or on behalf of
any party hereto or of any information any party may have in respect
thereof, all representations and warranties made hereunder shall
survive the Closing for a period of 24 months following the Closing
Date.
(b) This Agreement, and the documents specifically referred to herein or
executed and delivered concurrently herewith or at the Closing
constitute the entire agreement, understanding, representations and
warranties of the parties hereto and supersede any prior agreement,
understanding, representation, warranty or documents relating to the
subject matter of this Agreement.
8. NOTICES
-------
All notices, requests, demands and other communications hereunder shall be
in writing and shall be deemed to have been duly given, if delivered in person,
telegraphed, or mailed by certified registered mail, postage prepaid:
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<PAGE>
(a) If to the Vendor, addressed as follows:
Glyko Biomedical Limited
11 Pimental Court
Novato, Ca.
94949
Attention: Dr. John Klock
Telecopy No.: 415-382-7889
With a copy to:
Cassels Brock & Blackwell
Suite 2100
Scotia Plaza
Toronto, Ontario
M5H 3C2
Attention: Mark I. Young
Telecopy No.: 416-350-6902
(b) If to the Purchaser, addressed as follows:
BioMarin Pharmaceutical Inc.
11 Pimental Court
Novato, Ca.
94949
Attention: Grant W. Denison, Jr.
Telecopy No.: 415-382-7889
With a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA
94303-1050
Attention: Frank Currie
Telecopy No.: 650-493-6811
or to such other address as the party to be notified shall have furnished to the
other party in writing. Any notice given in accordance with the foregoing shall
be deemed to have been given when delivered in person or on the next business
day following the date on which it shall have been telegraphed or mailed.
9. AMENDMENTS
----------
This Agreement may be amended or modified only by a written instrument
executed by the parties affected thereby, or by their respective successors and
permitted assigns.
-23-
<PAGE>
10. GENERAL
-------
(a) This Agreement:
(i) shall be construed and enforced in accordance with the laws of
the Province of Ontario; and
(ii) shall enure to the benefit of and be binding upon the Purchaser
and the Vendor and their respective executors, administrators,
legal representatives, successors and permitted assigns,
nothing in this Agreement, express or implied, being intended
to confer upon any other person any rights or remedies
hereunder.
(b) Time shall be of the essence hereof.
(c) Each of the parties hereto covenants and agrees that at any time and
from time to time after the Closing Date such party will, upon the
request of the other party, do, execute, acknowledge and deliver all
such further acts, documents and assurances as may be reasonably
required for the better carrying out of the terms of this Agreement
and to consummate the transactions contemplated hereby.
(d) This Agreement may be executed in one or more counterparts, each of
which so executed shall constitute an original and all of which
together shall constitute one and the same agreement.
(e) Each of the parties hereto shall pay their respective legal and
accounting costs and expenses incurred in connection with the
preparation, execution and delivery of this Agreement and all
documents and instruments executed pursuant hereto and any other costs
and expenses whatsoever and howsoever incurred in connection with the
completion of the transactions contemplated hereby.
(f) The parties hereto agree to file in a timely manner all forms required
to be filed after the Closing Date by applicable law and by the
regulations and policies of all applicable securities regulatory
authorities in connection with the transactions contemplated hereby.
(g) Neither this Agreement nor any right or obligation hereunder shall be
assignable by any party hereto without the prior written consent of
the other parties hereto, which consent may be arbitrarily withheld.
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<PAGE>
IN WITNESS WHEREOF the parties hereto have duly executed this
Agreement as of the day and date first above written.
GLYKO BIOMEDICAL LTD.
By: /s/ John C. Klock
-----------------
Dr. John C. Klock,
President
BIOMARIN PHARMACEUTICAL INC.
By: /s/ Grant W. Denison, Jr.
-------------------------
Grant W. Denison, Jr.,
Chief Executive Officer
[SIGNATURE PAGE TO AGREEMENT REGARDING SALE OF CAPITAL STOCK OF GLYKO, INC.]
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<PAGE>
2.1
SCHEDULE "A"
EMPLOYEE OPTIONS
----------------
<PAGE>
SCHEDULE "A"
EMPLOYEE OPTIONS
----------------
<TABLE>
<CAPTION>
Equivalent
Number of Number of
Vendor's Purchaser's
Shares Exercise Shares
Subject to Price Subject to Exercise Price
Name of Optionee Options Per Share Value Options Per Share Value
- -------------------------- ----------- ----------- ----------- ----------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Batchelor Stanley 1,915 0.83 3,417.02 835 1.91 3,417.02
Conary Lisa 12,500 2.60 249.68 5,451 5.95 249.68
Brandley Brian 150,000 2.30 47,937.60 65,415 5.27 47,937.60
Devereaux Dawn 3,010 0.83 5,370.88 1,313 1.91 5,370.88
Hague Charles 180 0.67 351.14 78 1.53 351.14
Hague Charles 4,657 0.63 9,239.88 2,031 1.45 9,239.88
Hague Charles 7,040 0.83 12,561.78 3,070 1.91 12,561.78
Hariri Azadeh 18,000 0.70 34,515.07 7,850 1.60 34,515.07
Hariri Azadeh 1,450 0.83 2,587.30 632 1.91 2,587.30
Jacobs Jerome 18,000 0.43 39,308.83 7,850 0.99 39,308.83
Jacobs Jerome 3,670 0.83 6,548.54 1,600 1.91 6,548.54
Klock John 21,175 0.40 46,947.39 9,234 0.92 46,947.39
Klock John 54,701 0.40 121,278.35 23,855 0.92 121,278.35
Klock John 64,740 0.43 141,380.77 28,233 0.99 141,380.77
Klock John 11,290 0.83 20,145.24 4,924 1.91 20,145.24
Lenherr Betty 730 0.83 1,302.57 318 1.91 1,302.57
Masada Irene 8,638 0.63 17,138.52 3,767 1.45 17,138.52
Masada Irene 2,978 0.40 6,602.57 1,299 0.92 6,602.57
Masada Irene 9,027 0.40 20,013.89 3,937 0.92 20,013.89
Masada Irene 11,890 0.43 25,965.67 5,185 0.99 25,965.67
Miller Beth 18,000 0.42 39,548.52 7,850 0.96 39,548.52
Miller Beth 895 0.63 1,775.76 390 1.45 1,775.76
Miller Beth 2,529 0.40 5,607.08 1,103 0.92 5,607.08
Miller Beth 7,188 0.40 15,936.62 3,135 0.92 15,936.62
Miller Beth 12,590 0.43 27,494.34 5,490 0.99 27,494.34
Miller Beth 5,340 0.83 9,528.40 2,329 1.91 9,528.40
Power Sharon 2,405 0.83 4,291.35 1,049 1.91 4,291.35
Starr Chris 14,300 0.40 31,704.73 6,236 0.92 31,704.73
Starr Chris 30,784 0.40 68,251.64 13,425 0.92 68,251.64
Starr Chris 40,350 0.43 88,117.30 17,597 0.99 88,117.30
Starr Chris 6,920 0.83 12,347.66 3,018 1.91 12,347.66
Striepeke Steve 4,376 0.63 8,682.35 1,908 1.45 8,682.35
Striepeke Steve 9,880 0.83 17,629.32 4,309 1.91 17,629.32
Tsuchimoto Kim 19,271 0.43 42,084.47 8,404 0.99 42,084.47
Tsuchimoto Kim 5,550 0.83 9,903.11 2,420 1.91 9,903.11
----------- ----------- ----------- -----------
TOTAL 585,969 $945,765.32 255,540 $945,765.32
=========== =========== =========== ===========
</TABLE>
<PAGE>
SCHEDULE "B"
INTELLECTUAL PROPERTY
---------------------
<PAGE>
Patent.xls
<TABLE>
<CAPTION>
P&E NO. TITLE OF PATENT DESIGNATION DATE STATUS OTHER
<S> <C> <C> <C> <C> <C>
8133-0003-002 LUCIFER YELLOW GLYK 20010 UK ABANDONED
8133-0003-228 LUCIFER YELLOW PCT ABANDONED
8133-0003-999 LUCIFER YELLOW GLYK 20010 US ABANDONED
8123-0004-002 ANTS 2D UK/EPO ISSUED EP 0494178
8133-0004-003 ANTS Germany/EPO ISSUED EP 0494178
8133-0004-004 ANTS France/EPO ISSUED EP 0494178
8133-0004-012 ANTS 2D JPN ABANDONED 2-512920/1990
8133-0004-227 ANTS 2D EPC ISSUED EP 0494178 90913718.4
8133-0004-228 ANTS PCT GB90-01448 In Net Stage WO91/05256
8133-0004-999 ANTS GLYK 20030 ISSUED US 5,340,453
8133-0006-012 FACE DIAGNOSIS JPN 6-May-92 FILED JPN 4-512002
8133-0006-227 FACE DIAGNOSIS EPC In Regional Phase 92912616.7
8133-0006-228 FACE DIAGNOSIS PCT PCT US92-03740 WO92/19975
8133-0006-999 FACE DIAGNOSIS GLYK 20060 584 ISSUED 5,205,917
8133-0007-999 FACE DIAGNOSIS KIT CIP OF 584 27-Mar-91 08/052,785
8133-0008-999 FACE DIAGNOSIS 2AA CIP OF 785 ISSUED US 5,472,582 80.089.694
8133-0009-999 FADA US 30-Aug-91 ABANDONED
8133-0010-228 FADA PCT 28-Aug-92 ABANDONED WO9305076
8133-0010-999 FADA CIP OF 196 31-Aug-92 07,938,832
8133-0011-002 ANTS-BLOTTING (AS) GBR 27-Sep-89 ABANDONED 89/21818.4
8133-0011-012 ANTS-BLOTTING (AS) JPN 26-Mar-92 JPN 2-513143, Abandon PUB #5-503146
8133-0011-227 ANTS-BLOTTING (AS) EPC 20-Sep-90 To Abandon 90914072.5
8133-0011-228 ANTS-BLOTTING (AS) PCT 20-Sep-90 PCT/UB90/01449 WO91/105265
8133-0011-999 ANTS-BLOTTING (AS) GLYK 20080 27-Sep-89 ISSUED US 5.316,638 FILED 90914072.5
8133-0012-227 FACE TDM EPC 20-Nov-92 92-925368.0. abandoned EP 0641438
8133-0012-228 FACE TDM PCT 20-Nov-92 To Abandon PCT/US92/10061
8133-0012-999 FACE TDM US 21-Nov-91 726 ABANDONED
8133-0013-999 FACE CLONING ASSAY GLYK 20130 27-Mar-91 ISSUED US 5,258,295
8133-0014-228 ANTS 2D GLYCOMED PCT 21-Nov-90 ABANDONED
8133-0014-999 ANTS 2D GLYCOMED GLYK 20150 16-Feb-90 ISSUED US 4,975,165
8133-0015-999 ANTS 2D GLYCOMED ISSUED US 3,094,740
8133-0016-227 ANTS BLOTTING (GLYCOMED) EPC 21-Nov-90 ABANDONED 91/901355.7
8133-0016-228 ANTS BLOTTING (GLYCOMED) PCT 21-Nov-90 ABANDONED
8133-0016-999 ANTS BLOTTING (GLYCOMED) GLYK 20160 16-Feb-90 ISSUED US 5,019,231
8133-0017-999 ANTS BLOTTING (GLYCOMED) 27-Sep-90 ISSUED US 5,094,731 431 CIP
8133-0018-228 ANSA TAG (GLYCOMED) PCT 16-Feb-90 ABANDONED
8133-0018-999 ANSA TAG (GLYCOMED) US ISSUED US 5,035,786 043 CIP
8133-0019-999 ANSA TAG (GLYCOMED) CIP 043 31-Aug-92 ISSUED US 5,087,337 441 CIP
8133-0020-228 FACE SYNTHESIS PCT 5-Oct-93 ABANDONED
8133-0020-999 FACE SYNTHESIS GLYK 201NG 30-Oct-92 ISSUED US 5,308,460
8133-0021-002 CARBOHYDRATE SEQUENCING GBR GB8714270 ISSUED GB2215836
8133-0021-012 CARBOHYDRATE SEQUENCING JPN To Be Abandoned JP 505094/1988
8133-0021-227 CARBOHYDRATE SEQUENCING EPC 20-Jun-88 ABANDONED EP 88905402.9
8133-0021-228 CARBOHYDRATE SEQUENCING PCT 20JUN88 PCT GB8800472 WO ??/10422
8133-0021-999 CARBOHYDRATE SEQUENCING GLYK 20200 14-Feb-89 ISSUED US 5,104,508
8133-0022-002 CCD DETECTION GBR GB 8513538 ISSUED UK 2,175,690 JP 124625/1986
8133-0022-227 CCD DETECTION EPC ISSUED EP 0.214,713 22.175.690
8133-0022-999 CCD DETECTION 6-Jun-88 ISSUED US 4,874,492
8133-0023-227 METHODS COMP TRAINING EPC 21-Mar-95 To Abandon 94915861.2
</TABLE>
Page 1
<PAGE>
Patent.xls
<TABLE>
<S> <C> <C> <C> <C> <C>
8133-0023-228 METHODS COMP TREATING PCT 23-Apr-93 pctus9404464 wo94/25061
8133-0023-999 METHODS COMP TREATING US CIP OF 782U 23-Apr-93 ABANDONED US052,782
8133-0024-228 PRECAST GELS PCT 9-Sep-94 ABANDONED WO 95-07458 G UK
8133-0024-999 PRECAST GELS US 9-Sep-93 ISSUED US 5,718,508
8133-0026-999 AFFINITY-BASED-ASSAY US FILED 1/28/93 ABANDONED
8133-0027-999 AFFINITY-BASED-ASSAY US CIP ABANDONED
8133-0036-002 FACE(TM) GBR SER # 1.461.597
8133-0036-003 FACE(TM) GER 24-Feb-92 SER # 2009970
8133-0036-004 FACE(TM) FR 4-Nov-91 SER # 1,662,472
8133-0036-012 FACE(TM) JPN 23-Apr-91 ABANDONED
8133-0036-999 FACE(TM) US 22-Dec-92 SER # 1,742,047
8133-0037-002 GILYKO INC(TM) GBR 28-May-92 SER # 1,429,250
8133-0037-003 GILYKO(TM) GBR 24-Jun-94 SER # 1,429,251
8133-0037-002 GILYKO(TM) JPN 3-41441 Rejected
8133-0039-999 COMPUTER CODE (C) US COPYRIGHTED
8133-0040-032 LUCIFER YELLOW Jpn ABANDONED
8133-0040-227 LUCIFER YELLOW EPC ABANDONED
8133-0040-228 LUCIFER YELLOW PCI ABANDONED
8133-0041-002 2-AMINOACRIDONE (COMBO) GBR ISSUED GB2254851 GB 91/27091.8
8133-0041-012 2-AMINOACRIDONE (COMBO) JPN 24-Aug-92 ABANDONED JPN not 8:24:92
8133-0041-227 2-AMINOACRIDONE (COMBO) EPC 19-Dec-91 ABANDONED 92907009.2
8133-0041-228 2-AMINOACRIDONE (COMBO) PCT 19-Dec-91 PCT us9109727 WO 92/11531 aband
8133-0042-002 2-AMINOACRIDONE 2-DEPHOR GBR 9104412.3 ABANDONED
P&E NO. TITLE OF PATENT DESIGNATION DATE STATUS OTHER
8133-0043-002 ANTS-QUENCHING GLYK 20140 26-Jun-90 ABANDONED
8133-0044-999 CCD IMAGER GLYK 20240 14-Sep-94 Abandon for 0054 06/306,068
8133-0045-999 FACE TDM US FWC7726 16-Jun-94 623 Abandoned
8133-0046-999 NANAsel 18-Aug-94 ISSUED US5591839
8133-0048-999 FACE DIAGNOSIS FACE DX CZE 7-Oct-94 06/320,282 Abandoned 1/17/96
8133-0049-999 METHODS-COMP TREATING US FWC of 782 ABANDONED 06/406,414
8133-0052-999 PRECAST GELS cip of 957 file024 ISSUED US5660702
8133-0053-999 FACE TDM CIP of 623 file045 17-Aug-95 ABANDONED 08/516,120
8133-0054-999 CCD IMAGER CIP of 068 6-Mar-96 ISSUED US5672881 08/612,195
8133-0055-999 CS Marker US 13-Sep-98 D6713,403 ALLOWED
8133-0056-999
</TABLE>
Page 2
<PAGE>
SCHEDULE "C"
VENDOR'S DISCLOSURE SCHEDULE
----------------------------
<PAGE>
3. Representations and Warranties of the Vendor
-----------------------------------------------
Disclosure Schedule
Schedule C
Exceptions
3. (c) (iii) Physical separation of a laboratory, previously shared by
Glyko, Inc. and BioMarin, has made continued sharing of equipment
unfeasible. Glyko, Inc. will spend up to $100,000 to replace certain
shared equipment. The only single item above $25,000 (at $55,000) is a
Pharmacia AKTA System for the; separation and purification of
proteins.
3. (c) (xv) Oxford GlycoSystems has notified Glyko, Inc. that it believes
Glyko, Inc. is infringing on a patent for a recombinant method of
manufacture of PNGase F. Glyko, Inc. believes that the patent is not
enforceable and, in any case, can manufacture the enzyme by
alternative means. Glyko, Inc. has not yet decided on the best course
of action to respond to this infringement claim.
3. (g) (i) In the ordinary course of business, Glyko, Inc. uses offer
letters, which outline certain terms and conditions of employment, to
extend employment offers to potential new employees and requires new
employees to sign confidentiality agreements. Glyko, Inc. provides an
employee benefits plan which includes radical and dental insurance
along with other benefits. Glyko, Inc. believes its benefits plans are
competitive with other plans for companies of similar size and
situation. Glyko, Inc. used the Glyko Biomedical, Ltd. option plan.
Glyko, Inc. sponsors a 401 (k) plan. Glyko, Inc. currently has one
active consultant, Peter Edridge, who writes software to improve the
diagnosis of certain lysosomal storage diseases. In addition, Glyko,
Inc. has a consultant, Carol Foxall, who is part time and
intermittent, for various laboratory services. Glyko, Inc. uses Frank
Nakamoto (dba Axon Consulting) from time to time for business
relationships in Japan and Harold Mielke for various scientific
consulting.
3. (g) (iii) Glyko, Inc. has the required employee fidelity bond for the
401 (k) plan.
3. (g) (iv) Glyko, Inc. leases the 11 Pimentel Court building and
subleases part of the building to two other parties, including
BioMarin.
3. (g) (v) Glyko, Inc. has an exclusive distribution agreement with
Toyobo as to a defined Territory (Japan).
3. (g) (vi) See 3. (c) (iii) above.
3. (g) (viii) Glyko, Inc. has provided a letter of credit in lieu of a
deposit for the 11 Pimentel Court lease.
1
<PAGE>
3. Representations and Warranties of the Vendor
-----------------------------------------------
Disclosure Schedule
Schedule C
Exceptions
3. (g) (ix) In the ordinary course of business, Glyko, Inc. incurs accounts
payable which are currently in line with its prior experience. Accounts
payable, which include payables for services and materials, were $43,424 at
June 30, 1998.
3. (g) (xi) In the ordinary course of business, Glyko, Inc. has distribution and
supply, agreements with Toyobo, Bio-Rad, Beckman, CN Bioscience, Sigma,
Seikagaku America, Dextra, Gradipore, Amersham Pharmacia Biotech, and Control
Technico Y. It also has letter agreements for non-exclusive distribution with
Analytik und Biotechnologie, MC Medical, Finnzymes, Van Der Heyden, Top Bio
Co. It has a development agreement with Array Medical. It has a service
contract with Vascular Therapeutics.
3. (g) (xii) See 3. (g) (xi) above.
3. (1) (ii) Glyko, Inc. will continue to pay royalties to Stanford University
for products made under its license to certain Stanford patents until
approximately year-end 1998. Glyko, Inc. licensed certain know-how (and any
new joint technology developed) as part of its License and Development
Agreement with Array Medical, Inc. It has licensed certain imager, FACE, and
kit technology on a non-exclusive basis to Bio-Rad.
3. (1) (x) See 3. (1) (ii) and 3. (g) (xi) above.
3. (m) See 3. (c) (xv) above.
2
<PAGE>
SCHEDULE "D"
GLYKO, INC.'S FINANCIALS
------------------------
<PAGE>
GLYKO, INC.
BALANCE SHEETS
(unaudited, in U.S. dollars)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------ --------------
<S> <C> <C>
Assets
Current assets:
Cash $ 719,980 $ 528,280
Trade receivables 99,674 141,743
Due from related parties 83,318 86,425
Inventories 74,365 95,210
Other current assets 25,681 15,179
------------ --------------
Total current assets 1,003,018 866,837
Property, plant and equipment, net 102,157 118,910
------------ --------------
Other assets 2,205 2,205
Total assets $ 1,107,380 $ 987,952
============= ==============
Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable $ 43,424 $ 20,380
Accrued liabilities 84,309 86,979
Deferred rent 14,077 10,675
Deferred revenue 4,575 7,418
Due to related parties, current maturities 582,275 526,858
------------- --------------
Total current liabilities 728,660 652,310
Due to related parties, less current maturities 3,651,979 3,651,979
------------- --------------
Total liabilities 4,380,639 4,304,289
Stockholders' deficit:
Common stock, no par value, unlimited shares
authorized, 5,882 and 5,882 shares
issued and outstanding at June 30, 1998 and
December 31, 1997, respectively 3,581,572 3,581,572
Additional Paid In Capital 5,417,491 5,417,491
Accumulated deficit (12,272,322) (12,315,400)
------------- --------------
Total stockholders' deficit (3,273,259) (3,316,337)
------------- --------------
Total liabilities and stockholders' deficit $ 1,107,380 $ 987,952
============= ==============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
GLYKO, INC.
STATEMENTS OF OPERATIONS
(unaudited, in U.S. dollars)
<TABLE>
<CAPTION>
Six months ended June 30,
------------------------------------------
1998 1997
------------------ -----------------
<S> <C> <C>
Revenues:
Sales of products and services $ 541,152 $ 517,280
Other revenues 204,345 628,135
------------------ -----------------
Total revenues: 745,497 1,145,415
Expenses:
Cost of products and services 179,890 259,175
Research and development 346,377 338,844
Selling, general and administrative 359,040 353,520
Other (165,880) -
------------------ -----------------
Total expenses: 719,427 951,539
------------------ -----------------
Income from operations 26,070 193,876
Interest income 17,008 5,110
Other income - 14,097
------------------ -----------------
Net income $ 43,078 $ 213,083
================== =================
Net income per common share, basic and diluted $ 7.32 $ 36.23
================== =================
Weighted average number of shares
used in computing per share amounts 5,882 5,882
================== =================
</TABLE>
The accompanying notes are an integral part of these statements.
F.4
<PAGE>
GLYKO, INC.
STATEMENTS OF CASH FLOWS
(unaudited, in U.S. dollars)
<TABLE>
<CAPTION>
Six months ended June 30,
------------------------------------------
1998 1997
------------------ -----------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 43,078 $ 213,083
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 23,702 28,471
Gain on settlement of claim (165,880)
Change in assets and liabilities:
Trade receivables 42,069 3,432
Inventories 20,846 (7,341)
Due from related parties 3,107 86,549
Other assets (10,502) (10,361)
Accounts payable 23,044 (93,417)
Accrued liabilities (2,670) (104,550)
Payable to related parties 221,296 158,446
Deferred revenue (6,100) -
Deferred rent and related costs 6,659 -
------------------ -----------------
Total adjustments 155,571 61,229
------------------ -----------------
Net cash provided by operating activities 198,649 274,312
Cash flows from investing activities:
Purchases of property and equipment (6,949) (66,906)
------------------ -----------------
Net cash used in investing activities (6,949) (66,906)
------------------ -----------------
Net increase (decrease) in cash 191,700 207,406
Cash and cash equivalents, beginning of period 528,280 210,992
------------------ -----------------
Cash and cash equivalents, end of period $ 719,980 $ 418,398
================== =================
</TABLE>
The accompanying notes are an integral part of these statements.
F.6
<PAGE>
SCHEDULE "E"
AMENDED AND RESTATED
--------------------
REGISTRATION RIGHTS AGREEMENT
-----------------------------
THIS AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT is entered into as
of September ,1998, by and among BIOMARIN PHARMACEUTICAL INC., a Delaware
corporation (the "Corporation"), and the individuals and entities listed on
Schedule A hereto (the "Holders").
RECITALS:
In connection with the sale and issue of the shares of Common Stock, the
Corporation and certain Holders entered into a Registration Rights Agreement,
some of which are dated October 1, 1997, and others of which are dated October
16, 1997 (the "Original Rights Agreement"), pursuant to which the Corporation
granted certain registration and information rights such Holders.
This Amended and Restated Registration Rights Agreement, which amends and
restates the Original Rights Agreement in its entirety, has been previously
entered into in connection with the sale and issuance of shares of Common Stock
to other investors who purchased shares of Common Stock pursuant to Subscription
Agreements (the "Subscription Agreements"), which sales closed on October 1,
1997, October 16, 1997, December 30, 1997, June 30, 1998, July 14, 1998, August
3, 1998 and September 4, 1998.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises and covenants contained herein the parties hereby agree as follows:
1. Definition. As used herein, the following terms shall have the following
------------
respective meanings:
(a) "Commission" shall mean the Securities and Exchange Commission or
----------
any other Federal agency at the time administering the Securities Act
(b) "Holders" shall mean and include any person or persons to whom
-------
Registrable Securities (as defined herein) were originally issued or qualifying
transferees under Section 10 hereof who hold Registrable Securities,
(c) The terms "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 the
effectiveness of such registration statement.
2
<PAGE>
(d) "Registrable Securities" means: (i) shares of the Corporation's
----------------------
Common Stock issued pursuant to a Subscription Agreement, (ii) any Common Stock
of the Corporation issued as (or issuable upon the conversion or exercise of any
warrant, right or other security that is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of the shares
referred to in (i) above, excluding in all cases, however, any Registrable
Securities sold by a person in a transaction in which the rights under this
Agreement are not assigned, and (iii) shares of stock owned by parties as to
which the Corporation has granted registration rights pursuant to Section 12.
(e) "Registration Expenses" shall mean all expenses incurred by the
---------------------
Corporation in complying with Sections 2 and 3 hereof, including, without
limitation, all registration, qualification and filing fees, printing expenses,
escrow fees, fees and disbursements of counsel for the Corporation, reasonable
fees and disbursements of one counsel for all 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
Corporation which shall be paid in any event by the Corporation).
(f) "Securities Act" shall mean the Securities Act of 1933, as
--------------
amended, or any similar federal statute and the roles and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
(g) "Selling Expenses" shall mean all underwriting fees, discounts,
----------------
selling commissions and stock transfer taxes applicable to the securities
registered by the Holders and all fees and disbursements of counsel for any
Holder, other than the fees and disbursements for one counsel acting on behalf
of all Holders with respect to any registration effected pursuant to the terms
of Sections 2 or 3 hereof.
2. Registration Rights.
--------------------
A. Corporation Registration.
-------------------------
(a) Notice of Registration to Holders. If at any time or from time to
-----------------------------------
time, the Corporation shall determine to register any of its securities, either
for its own account or the account of a security holder or holders, other than:
(i) a registration relating solely to employee benefit plans, or (ii) a
registration relating solely to a Commission Rule 145 transaction, the
Corporation will:
(i) promptly give to each Holder written notice thereof, and
(ii) include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting involved
therein, all the Registrable Securities specified in a written request or
requests, made within 15 days after receipt of such written notice from the
Corporation, by any Holder or Holders.
(b) Underwriting. If the registration of which the Corporation gives
--------------
notice is for a registered public offering involving an underwriting, the
Corporation shall so advise the Holders as a part of the written notice given
pursuant to Section 2(a)(i). In such event the right of any Holder to
registration pursuant to this Section 2 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
(together with the Corporation) enter into an underwriting agreement in,
3
<PAGE>
customary form, with the underwriter selected for such underwriting by the
Corporation. Notwithstanding any other provision of this Section 2, if the
managing underwriter determines that marketing factors require a limitation of
the number of shares to be underwritten, the underwriter may exclude some or all
Registrable Securities from such registration and underwriting. The Corporation
shall so advise all Holders distributing their securities through such
underwriting, and the number of shares of Registrable Securities that may be
included in the registration and underwriting shall be allocated among all
Holders requesting registration, in proportion, as nearly as practicable, to the
respective amounts of securities held by all such Holders entitled to inclusion
in such registration at the time of filing of the registration statement. No
securities other than Registrable Securities (other than those to be sold for
the account of the Corporation) may be included in such registration unless all
Registrable Securities requested for inclusion shall have first been included.
If any Holder disapproves of the terms of any such underwriting, such Holder may
elect to withdraw therefrom by written notice to the Corporation and the
managing underwriter. Any securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration, but if the registration
is the first offering by the Corporation to the general public of its securities
for its own account, then the securities so excluded or withdrawn shall not be
transferred in a public distribution prior to one hundred and eighty (180) days
after the effective date of the registration statement relating thereto.
B. Demand Registration.
--------------------
(a) If, at any time after the earlier off (x) December 1, 2000 or (y)
the date six (6) months after the effective date of the first registration
statement for a public offering of securities of the Corporation, the
Corporation should receive from a Holder or Holders ("Initiating Holders") a
written request that the Corporation effect a registration statement under the
Securities Act with respect to at least thirty percent (30%) of the outstanding
Registrable Securities, then the Corporation shall:
(i) within ten (10) days of the receipt thereof, give written
notice of such request to all Holders; and
(ii) use its best efforts to effect such registration as soon as
practicable and in any event to file within sixty (60) days of the receipt of
such request a registration statement under the Securities Act coveting all the
Registrable Securities that the Holders request in writing to be registered
within ten (10) days of receipt of the Corporation's written notice under clause
(i) and to use its best efforts to have such registration statement become
effective.
(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 Corporation as a part of their request made pursuant to subsection
2B(a) and the Corporation shall include such information in the written notice
referred to in subsection 2B(a)(i). The underwriter will be selected by the
Corporation and shall be reasonably acceptable to a majority in interest of the
Initiating Holders. In such event, the right of any Holder to include
Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their Registrable
Securities through such underwriting shall (together with the Corporation as
provided in subsection 5(e)) enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for such underwriting.
Notwithstanding any other provision of this Section 2B, if the underwriter
advises the Initiating Holders in writing that marketing factors require a
limitation of the number of shares to be underwritten, then the Initiating
Holders shall so
4
<PAGE>
advise all Holders of Registrable Securities that would otherwise be
underwritten pursuant hereto, and the number of shares of Registrable Securities
that may be included in the underwriting shall be allocated among all Holders
thereof, including the Initiating Holders, in proportion (as nearly as
practicable) to the amount of Registrable Securities owned by each such Holder;
provided, however, that the number of shares of Registrable Securities to be
included in such underwriting shall not be reduced unless all other securities
are first entirely excluded from the underwriting.
(c) Notwithstanding the foregoing, if the Corporation shall furnish to
the Initiating Holders a certificate signed by the Chairman or President of the
Corporation stating that, in the good faith judgment of the Board of Directors
of the Corporation, it would be seriously detrimental to the Corporation and its
shareholders for a registration statement to be filed on or before the date
filing would be required, and it is therefore essential to defer the filing of
such registration statement, the Corporation 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, however, that the
Corporation may not utilize this right more than once in any twelve-month
period.
(d) The Corporation shall not be obligated to effect, or to take any
action to effect, any registration pursuant to this Section 2B after the
Corporation has effected one registration on Form S-1 or a successor form
pursuant to this Section 2B and such registration statement has been declared or
ordered effective and the sales of Registrable Securities under such
registration statement have closed.
(e) No demand right under this Section 2B shall be construed to limit
any registration required under Section 2A or Section 3 hereof.
3. Registration on Form S-3.
-------------------------
(a) In addition to the rights set forth in Sections 2A and 2B, if
Holders request that the Corporation file a registration statement on Form S-3
(or any successor to Form S-3) for a public offering of shares of Registrable
Securities the reasonably anticipated aggregate price to the public of which
would equal at least $2,500,000 (the "S-3 Initiating Holders"), and the
Corporation is a registrant entitled to use Form S-3 to register such shares for
such an offering, the Corporation shall, within ten (10) days thereafter, give
written notice of the proposed registration, and any related qualification or
compliance, to all other Holders and shall use its best efforts to cause such
shares, 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 Corporation, to be registered for the offering as soon as practicable on
Form S-3 (or any successor form to Form S-3). The Corporation shall include in
the registration statement a description of the manner of intended sale or
distribution requested by each such Holder. The number of shares of Registrable
Securities that may be included on the Form S-3 shall be allocated among all
Holders requesting registration in proportion to the respective amounts of
Registrable Securities entitled to inclusion in such registration at the time of
filing the registration statement.
(b) Notwithstanding the foregoing, the Corporation shall not be
obligated to take any action pursuant to this Section 3: (i) in any particular
jurisdiction in which the Corporation would be required to execute a general
consent to service of process in effecting such registration, qualification or
compliance unless the Corporation is already subject to service in such
jurisdiction and except as may be required by the Securities Act; (ii) if the
Corporation, within ten (10) days of the receipt of the request of the S-3
Initiating Holders, gives notice of its bona fide intention to effect
5
<PAGE>
the filing of a registration statement with the Commission within ninety (90)
days of receipt of such request (other than with respect to a registration
statement relating to a Rule 145 transaction, an offering solely to employees,
or any other registration which is not appropriate for the registration of
Registrable Securities); or (iii) during the period starting with the date of
filing of, and ending on a date which is six (6) months following the effective
date of, a registration statement described in (ii) above, or filed pursuant to
this Section 3(b) or Section 2A or 2B hereof, provided that the Corporation is
actively employing in good faith all reasonable efforts to cause the
registration statement referred to in (ii) or (iii), respectively, to become
effective and provided, further, that no other person or entity could require
the Corporation to file a registration statement in such period.
(c) Subject to the foregoing clauses, the Corporation shall file a
registration statement on Form S-3 coveting the Registrable Securities so
requested to be registered as soon as practicable after receipt of the request
of the S-3 Initiating Holders; provided, however, that if the Corporation shall
furnish to such S-3 Initiating Holders a certificate signed by the Chairman or
President of the Corporation stating that in the good faith judgment of the
Board of Directors of the Corporation, it would be seriously detrimental to the
Corporation and its shareholders for such registration statement to be filed on
or before the date filing would be required, and it is therefore essential to
defer the filing of such registration statement, the Corporation shall have the
right to defer such filing for a period of not more than 120 days after receipt
of the request of the S-3 Initiating Holders provided that the Corporation may
not utilize this right more than once in any 12-month period.
(d) Underwriting.
-------------
If the S-3 Initiating Holders intend to distribute the
Registrable
Securities covered by their request by means of an underwriting, they shall so
advise the Corporation as a part of their request made pursuant to Section 3(a)
and the Corporation shall include such information in the written notice
referred to in that Section. In such event, the Corporation (together with all
S-3 Initiating Holders proposing to distribute their securities through such
underwriting) shall enter into an underwriting agreement in customary form with
the managing underwriter selected for such underwriting by a majority in
interest of the S-3 Initiating Holders requesting such underwriting.
4. Expenses of Registration. All Registration Expenses incurred in connection
--------------------------
with any registration, qualification or compliance pursuant to Sections 2A, 2B
or 3 hereof shall be borne by the Corporation. All Selling Expenses relating to
securities registered by the Holders shall be borne by the holders of such
securities pro rata on the basis of the number of shares so registered.
5. Registration Procedures. In the case of each registration, qualification or
-------------------------
compliance requested pursuant to this Agreement, the Corporation will keep each
Holder advised in writing as to the initiation of each registration,
qualification and compliance and as to the completion thereof. Whenever required
under this Agreement to use its best efforts to effect the registration of any
Registrable Securities, the Company shall, as expeditiously as reasonably
possible, prepare and file with the SEC a registration statement with respect to
such Registrable Securities and use its best efforts to cause such registration
statement to become effective. In addition, at its expense, the Corporation
will:
(a) Keep such registration, qualification or compliance effective and
current for a period of ninety (90) days (or such longer period as may be
necessary to accommodate the filing of amendments or supplements necessary to
comply with the Securities Act) or until the Holder or
<PAGE>
Holders have completed the distribution described in the registration statement
relating thereto, whichever first occurs; provided, however, that such 90-day
period shall be extended for a period of time equal to the period the Holder
refrains from selling any securities included in such registration at the
request of an underwriter;
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement;
(c) Furnish such number of prospectuses, in conformity with the
requirements of the Securities Act, and other documents incident thereto as a
Holder from time to time may reasonably request;
(d) Use its best 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 Corporation 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 jurisdiction, unless the Corporation is
already subject to service in such jurisdiction and except as may be required by
the Securities Act;
(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 of such offering. Each Holder participating
in such underwriting shall also enter into and perform its obligations under
such an agreement; and
(f) Notify each Holder of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto covered
by such registration statement is required to be delivered under the Securities
Act, of the occurrence 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 light of
the circumstances then existing, and promptly prepare and file such supplements
and amendments thereto as may be required under Section 5(b) on account of such
event, and use its best efforts to cause each such supplement and amendment to
become effective.
6. Indemnification.
----------------
(a) The Corporation will indemnify each Holder, each of such Holder's officers
and directors and partners, and such Holder's legal counsel and independent
accountants, and each person controlling any such persons within the meaning of
Section 15 of the Securities Act, with respect to which registration,
qualification or compliance has been effected pursuant to this Agreement, and
each underwriter, if any, and each person who controls any underwriter within
the meaning of Section 15 of the Securities Act, against all expenses, claim
losses, damages and liabilities (or actions in respect thereof), including any
of the foregoing incurred in settlement of any litigation, commenced or
threatened, provided such settlement is effected with the written consent of the
Corporation (which consent shall not be unreasonably withheld), arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any registration statement, prospectus, offering circular or
other document, or any amendment or supplement thereto. incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the
7
<PAGE>
statements therein, not misleading, or any violation by the Corporation of any
role or regulation promulgated under the Securities Act or any state securities
laws applicable to the Corporation and relating to action or inaction by the
Corporation in connection with any such registration, qualification or
compliance, and will reimburse each such Holder, each of its officers and
directors and partners and such Holder's legal counsel and independent
accountants, and each person controlling any such persons, each such underwriter
and each person who controls any such underwriter, for any legal and any other
expenses reasonably incurred in connection with investigating, preparing or
defending any such claim, loss, damage, liability or action, provided that the
Corporation will not be liable in any such case to the extent that any such
claim, loss, damage, liability or expense arises out of or is based on any
untrue statement or omission or alleged untrue statement or omission, made in
reliance upon and in conformity with written information furnished to the
Corporation by such Holder or underwriter for inclusion in the respective
registration statement, prospectus or offering circular.
(b) Each Holder will, if Registrable Securities held by such Holder
are included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Corporation, each of its directors
and officers and its legal counsel and independent accountants, and each
underwriter, if any, of the Corporation's securities covered by such a
registration statement, each person who controls the Corporation or such
underwriter within the meaning of Section 15 of the Securities Act, and each
other such Holder, each of its officers, directors, partners, legal counsel and
independent accountants and each person controlling such Holder within the
meaning of Section 15 of the Securities Act against all expenses, claims,
losses, damages and liabilities (or actions in respect thereof), including any
of the foregoing, incurred in settlement of any litigation, commenced or
threatened, provided such settlement is effected with the written consent of the
Holder (which consent shall not be unreasonably withheld), arising out of or
based on any untrue statement (or alleged untrue statement) of a material fact
contained in any such registration statement, prospectus, offering circular or
other document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse the
Corporation, such Holders, such directors, officers, partners, legal counsel,
independent accountants, underwriters or control persons for any legal or any
other expenses reasonably incurred in connection with investigating, preparing
or defending any such claim, loss, damage, liability or action, in each case to
the extent, but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular, other document, or amendment or
supplement thereto in reliance upon and in conformity with information furnished
to the Corporation by such Holder for inclusion in the respective registration
statement, prospectus or offering circular.
(c) Each party entitled to indemnification under this Section 6 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld). The Indemnified Party may participate in such defense at such party's
expense; provided, however, that the Indemnifying Party shall bear the expense
of such defense of the Indemnified Party if representation of both parties by
the same counsel would be inappropriate due to actual or potential conflicts of
interest. The failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this
Agreement, unless such failure is prejudicial to the ability of the Indemnifying
Party to defend the action. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the
8
<PAGE>
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 a release from all
liability in respect of such claim or litigation.
7. Lockup Agreement In consideration for the Corporation agreeing its
----------------
obligations under this Agreement, each Holder agrees, in connection with the
first registration of the Corporation's securities, upon the request of the
Corporation or the underwriters managing the underwritten offering of the
Corporation's securities, not to sell, make any short sale of, loan, grant any
option for the purchase of, or otherwise dispose of any Registrable Securities
(other than those included in the registration) without the prior written
consent of the Corporation or such underwriters, as the case may be, for such
period of time (not to exceed one hundred and eighty (180) days) from the
effective date of such registration as the Corporation or the underwriters may
specify; provided, however, that nothing herein shall prevent any Holder that is
a partnership from making a distribution of Registrable Securities to the
partners thereof that is otherwise in compliance with applicable securities
laws.
8. Information by Holder. The Holder or Holders of Registrable Securities
---------------------
included in any registration shall furnish in writing to the Corporation such
information regarding such Holder or Holders and the distribution proposed by
such Holder or Holders as the Corporation may request in writing and as shall be
required in connection with any registration, qualification or compliance
referred to in this Agreement.
9. Rule 144 Reporting. With a view to making available the benefits of certain
------------------
roles and regulations of the Commission which may at any time permit the sale of
securities of the Corporation to the public without registration, after such
time as a public market exists for the Common Stock of the Corporation, the
Corporation agrees to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times after
the effective date of the first registration under the Securities Act filed by
the Corporation for an offering of its securities to the general public; and
(b) Use its best efforts to then file with the Commission in a timely
manner all reports and other documents required of the Corporation under the
Securities Act and the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (at any time after it has become subject to such reporting
requirements); and
(c) So long as a Holder owns any Registrable Securities, furnish to
the Holder forthwith upon request a written statement by the Corporation as to
its compliance with the reporting requirements of said Rule 144 (at any time
after ninety (90) days following the effective date of the first registration
statement filed by the Corporation for an offering of its securities to the
general public), and of the Securities Act and 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 Corporation, and such other reports and
documents of the Corporation as a Holder may reasonably request in availing
itself of any role or regulation of the Commission allowing a Holder to sell any
such securities without registration.
10. Transfer of Registration Rights. The rights to cause the Corporation to
---------------------------------
register securities granted Holders under Section 3 hereof may be assigned by
any Holder of Registrable Securities to a transferee or assignee who following
such transfer holds at least fifty percent (50%) of the Registrable Securities
initially held by such Holder, provided that the Corporation receives prior
9
<PAGE>
written notice of each such assignment. Notwithstanding the foregoing, rights to
cause the Corporation to register securities may be assigned in connection with
the transfer or assignment of Registrable Securities, without limitation, either
during the Holder's lifetime or upon death by will or intestacy to such Holder's
other ancestors, descendants or spouse, or any custodian or trustee for the
account of a Holder or a Holder's ancestors, descendants or spouse or to any
partner of a Holder, where such Holder is a partnership, or to any parent or
subsidiary corporation or any officer, director or principal shareholder
thereof, where such Holder is a corporation. All transferees and assignees of
Registrable Securities, as a condition to the transfer of Registrable
Securities, shall covenant to be bound by the agreement set forth in Section 7.
11. Termination of Registration Rights. Securities of the Corporation held by
------------------------------------
any Holder shall cease to be Registrable Securities at such time as such Holder
may sell such Securities under Rule 144, or a successor role, in any two
successive three-month periods.
12. Limitations on Registration Rights Granted To Other Securities. The parties
----------------------------------------------------------------
hereto agree that additional holders may be added as parties to this Agreement
with respect to any or all securities of the Corporation held by them; provided,
however, that from and after the date of this Agreement, the Corporation shall
not without the prior written consent of the Holders of sixty-six percent (66%)
of the Registrable Securities then outstanding, enter into any agreement with
any holder or prospective holder of any securities of the Corporation providing
for the grant to such holder of registration rights superior to those granted
herein. Any additional parties shall execute a counterpart of this Agreement,
and upon execution by such additional parties and by the Corporation, shall be
considered Holders for all purposes of this Agreement and Schedule "A" shall be
amended accordingly.
13. Miscellaneous.
--------------
(a) Waivers and Amendments. With the written consent of the
----------------------
Corporation and the holders of at least sixty-six percent (66%) in the aggregate
of Registrable Securities then outstanding, the obligations and rights of the
Corporation and the Holders under this Agreement may be waived (either generally
or in a particular instance, either retroactively or prospectively, and either
for a specified period of time or indefinitely) or amended; provided, however,
that no such waiver or amendment shall reduce the aforesaid portion of
Registrable Securities, the holders of which are required to consent to any
waiver or amendment, without the consent of all the Holders. Upon the
effectuation of each such waiver or amendment, the Corporation shall promptly
give written notice thereof to any Holders who have not previously consented to
such waiver in writing.
(b) Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the State of California as such laws are applied to contracts
made and to be fully performed entirely within that state between residents of
that state.
(c) Successors and Assigns. Except as otherwise expressly provided
----------------------
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, permitted assigns, heirs, executors and administrators of
the parties hereto.
(d) Entire Agreement. This Agreement constitutes the full and entire
----------------
understanding and agreement between the parties with regard to the subject
matter hereof.
(e) Notices. All notices and other communications required or
-------
permitted hereunder shall be in writing and shall be deemed effectively given
upon personal delivery; upon confirmed transmission by telecopy or telex; or
seven (7) days following deposit with the United
10
<PAGE>
States Post Office, by certified mail, postage prepaid, addressed (i) if to a
Holder, to such Holder's address set forth in the Subscription Agreement, or to
such other address as such Holder shall have furnished to the Corporation in
writing, or (ii) if to the Corporation, to 1 Pimentel Court, Novato, California
94949, or to such other address as the Corporation shall have furnished to the
Holders in writing, with a copy to the Corporation's legal counsel, Wilson
Sonsini Goodrich & Rosati, 650 Page Mill Road, Palo Alto, California 94304,
Attn: Frank Currie.
(f) Severability. In case any provision of this Agreement shall be
------------
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions of this Agreement shall not in any way be affected or
impaired thereby.
(g) tles and Subtitles. The titles of the sections and subsections
----------------------
oft his Agreement are for convenience of reference only and are not 1;o be
considered in construing this Agreement.
(h) Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original, but all of which together
constitute one instrument.
14. Aggregation. Shares of capital stock of the Corporation owned by
-----------
partnerships and corporations having substantially common ownership interests or
managed by the same principals and owned by individual investors affiliated with
one another may be aggregated for the purposes of circulating the aggregate
percentage of capital stock of the Corporation owned by any Holder and any
permitted transferee hereunder.
The foregoing Agreement is hereby executed as of the date set forth above.
THE CORPORATION
BIOMARIN PHARMACEUTICAL INC.
By: /s/ Grant W. Denison Jr.
Title: Chief Executive Officer
--------------------------------------
GLYKO BIOMEDICAL LTD.
By: John C. Klock,
-----------------------------------------
Dr. John C. Klock, President
11
<PAGE>
SCHEDULE A
----------
HOLDERS
<TABLE>
<CAPTION>
Name Number of Shares
<S> <C>
Rued, Blass & Cie 750,000
LaMont Asset Management S.A. 400,000
Banca del Gottardo 300,000
Clubb Capital Ltd. 801,500
Clubb Capital Ltd. (Warrants) 801,500
Falcon Corporate Investments Ltd. 250,000
Royal Bank of Canada Trust Company (Jersey) Limited 250,000
Swiss Bank Corporation 250,000
LaMont Asset Management S.A. 200,000
Egger & Co. 200,000
Thomas Girschweiler 180,000
Bank Sarasin & Cie 150,000
LaMont Asset Management S.A. 50,000
Maurizio Tassi 10,000
Paul S. Rochester and Yannick La Guyader 100,000
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Name Number of Shares
<S> <C>
The estate of Olga H. Bolenius, 250,000
Richard E. Drews, Executor
Grosvenor Fund, L.P. 400,000
BB Biovenmres, L.P. 5,000,000
LaMont Asset Management S.A. 25,000
Glyko Biomedical Ltd. 166,667
Clariden Biotechnology Equity Fund 67,000
Royal Bank of Canada Trust Co. (Jersey) Ltd. Nomura 333,500
Ebti: 835292
Clubb Capital Ltd. 28,018
Belmont Capital Ltd. 3,350
BB Bioventures L.P. 381,792
MPM Bioventures Parallel Fund, L.P. 30,083
MPM Asset Management Investors 1998 L.L.C. 4,792
LaMont Asset Management SA 375,000
Actieninvest AG 20,000
20,000
30,000
10,000
Danske & Co. 333,500
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Name Number of Shares
<S> <C>
Ciran Trading Ltd. 15,000
John S. Glass 16,667
C. Bowdoin Train 16,667
JDS Partners 34,000
Bruce B. Dunnan 16,667
Douglas M. Dunnan 16,667
Clubb Capital Ltd. 41,079
Belmont Capital Ltd. 22,750
Wealth Management Services Ltd. 750
Nicole R. Kubin 4,167
Rudolph Stager 3,500
Dmitri Vassin 8,333
Liechtensteinische Landesbank AG 1,500
Clubb Capital Ltd. 2,053
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
Name Number of Shares
<S> <C>
Fondation Limbau, Vaduz 8,833
Cambrian Holdings Limited 500
Maureen E. Mallon 1,000
Argentierre Holdings Ltd 1,500
Genzyme Corporation 1,666,667
Glyko Biomedical Ltd. 2,259,039
</TABLE>
iv
<PAGE>
SCHEDULE "F"
ACCREDITED INVESTOR QUESTIONNAIRE
---------------------------------
Glyko BioMedical Limited, as a purchaser of 2,250,424 shares of Common
Stock (the "Securities") of BIOMARIN PHARMACEUTICAL INC. (the "Company"), has
represented in its Agreement that it is an "accredited investor" as defined in
Rule 501 of Regulation D promulgated under the Securities Act of 1933, as
amended (the "Securities Act"). As part of such representation, it has indicated
below the categories enumerated in Rule 501 (a) which it satisfies.
The undersigned understands that the Company is relying on this information
in determining to sell the Securities to the undersigned in a manner exempt from
the registration requirements of the Securities Act and applicable state
securities laws.
ACCREDITED INVESTOR STATUS
Glyko BioMedical Limited represents and warrants that it is [check each
applicable item]:
________________ (i) A bank, as defined in Section 3(a)(2) of
the Securities Act, or a savings and
loan association or other institution as
defined in Section 3(a)(5)(A) of the
Securities Act. whether acting in its
individual or fiduciary capacity.
________________ (ii) A broker or dealer registered pursuant
to Section 15 of the Securities Exchange
Act of 1934, as amended.
________________ (iii) An insurance company as defined In
Section 2(13) of the Securities Act.
1
<PAGE>
________________ (iv) An investment company registered under
the Investment Company Act of 1940 (the
"1940 Act").
________________ (v) A business development company (as
defined in Section 2(a)(48) of the 1940
Act).
________________ (vi) A private business development company
(as defined in Section 202(a)(22) of
the Investment Advisers Act of 1940).
________________ (vii) A Small Business Investment Company
licensed by the Small Business
Administration under Section 301 (c) or
(d) of the Small Business Investment
Act of 1958.
________________ (viii) An employee benefit plan within the
meaning of the Employee Retirement
Income Security Act of 1974 ("ERISA"),
if the investment decision is made by a
plan fiduciary as defined in Section
3(21) of ERISA, which is either a bank,
savings and loan association, insurance
company or registered investment
advisor, or if the employee benefit
plan has total assets in excess of
$5,000,000, or, if a self-directed
plan, with investment decisions made
solely by persons that are accredited
investors.
________________ (ix) Any plan for the benefit of employees
established and maintained by the U.S.
government, a state, its political
subdivisions, or any agency or
instrumentality of the U.S. government,
a state or its political subdivisions,
if such plan has total assets in excess
of $5,000,000.
________________ (x) An organization described in Section
501 (c)(3) of the Internal Revenue
Code, corporation, Massachusetts or
similar business trust, or partnership,
not formed for the specific purpose of
acquiring the Securities offered,
having total assets in excess of
$5,000,000.
2
<PAGE>
________________ (xi) A director, executive officer or
general partner of the issuer of the
Securities, or any director, executive
officer, or general partner of a
general partner of the Company.
________________ (xii) A natural person whose individual net
worth, or joint net worth with that
person's spouse, at the time of his
purchase exceeds $1,000,000.
________________ (xiii) A natural person who had an individual
income in excess of $200,000 in each of
the two most recent years or a joint
income with that person's spouse in
excess of $300,000 in each of those
years, and has a reasonable expectation
of reaching the same income level in
the current year.
________________ (xiv) A trust, with total assets in excess of
$5,000,000, not formed for the specific
purpose of acquiring the Securities
offered hereby, whose purchase is
directed by a sophisticated person as
described in Rule 506(b)(2)(ii) of
Regulation D under the Securities Act.
________________ (xv) An entity in which all of the equity
owners are accredited investors.
________________ (xvi) A self-directed IRA, Keogh, or similar
plan of which the individual directing
the investments qualifies as an
"accredited investor" under one or more
of items (a)-(o) above. Also check the
item(s) (a)-(o) above that applies.
As used in this questionnaire, the term "net worth" means the excess of
total assets over total liabilities. In computing net worth for the purpose of
this questionnaire, the principal residence of the investor must be valued at
cost, including cost of improvements, or at recently appraised value by an
institutional lender making a secured loan, net of encumbrances. In determining
income, an investor should add to adjusted gross income any amount attributable
to tax exempt income received, losses claimed as a limited partner in any
limited partnership, deductions claimed for depletion,
3
<PAGE>
contributions to an IRA or Keogh retirement plan, alimony payments, add any
amount by which income from long-term capital gains has been reduced in arriving
at adjusted gross income.
IN WITNESS WHEREOF, the undersigned has executed this Questionnaire as of
the ______day of September, 1998.
Name:
By: /s/ John C. Klock
----------------------------
Title: ________________________
4
<PAGE>
contributions to an IRA or Keogh retirement plan, alimony payments, and any
amount by which income from long-term capital gains has been reduced in arriving
at adjusted gross income.
IN WITNESS WHEREOF, the undersigned has executed this Questionnaire as of
the _______ day of September, 1998.
BioMarin Pharmaceutical, Inc.
Name:
By: /s/ R. W. Anderson
---------------------------------------------
Title: Vice President Finance and Administration
------------------------------------------
5
<PAGE>
SCHEDULE "G"
PURCHASER'S DISCLOSURE SCHEDULE
-------------------------------
<PAGE>
SCHEDULE G
PURCHASER'S DISCLOSURE SCHEDULE
-------------------------------
4. REPRESENTATIONS AND WARRANTIES OF THE ,PURCHASER
------------------------------------------------
EXCEPTIONS
4. (b) BioMarin has multiple obligations which in the aggregate exceed
$50,000. These obligations are documented in the following list of
exceptions.
4. (c) (i) Although in the ordinary course of business, two notable events of
unusual size have happened since June 30, 1998. In July and August of 1998,
two portions of the second round of the private placement of common stock
were closed for a total of approximately $ 8.1 million. On September 4,
1998, BioMarin completed a joint venture agreement with Genzyme Corp. for
the development and commercialization of alpha-L-iduronidase. The Genzyme
transaction included an $8 million private placement in which Genzyme
purchased BioMarin common stock at $6.00 per share.
4. (c) (iii) BioMarin will make the following commitments:
Commitment to fund 50% of BioMarin/Genzyme LLC
Lease for 371 BioMarin Keys Boulevard office space
Lease for 46 Galli Drive for warehouse and office space (to be
converted to manufacturing space)
Lease for 110 Digital Drive R&D shell space
Lease for Carson Street, Torrance, CA space for cGMP manufacturing and
office space
Commitment for development of Carson Sweet space for development of a
cGMP facility including related process equipment
Commitment for build-out (two phases) of office space in Bel Marin Keys
building
Commitment for modular laboratory installation in Galli building
Commitment for development of manufacturing and process development
laboratory in Galli building including related process equipment
Commitment for structural upgrades on shell of 110 Digital Drive
Commitment for Company-wide telephone system
Commitment for Company-wide WAN-LAN computer network
License fee and other financial commitments to a medical institution
for certain intellectual property related to a genetic disease
Commitment to pay various legal and accounting fees and other expenses
related to corporate transaction, which is uncertain.
1
<PAGE>
SCHEDULE G
PURCHASER'S DISCLOSURE SCHEDULE
-------------------------------
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
-----------------------------------------------
EXCEPTIONS
4. (c) (ix) Salaries for Denison, Klock, and Starr are adjusted in accordance
with a formula which is based on the BioMarin valuation. Such an adjustment
occurred as a result of the second common stock investment round completed in
August.
4. (c) (x) BioMarin entered into a joint venture with Genzyme in which certain
intellectual property, licensed from Harbor-UCLA RBI, was sublicensed to the
joint venture.
4. (c) (xii) BioMarin agreed as pan of this acquisition to provide loans to
certain employees of Glyko, Inc. (including officers of BioMarin) to
facilitate the exercise of certain stock options from the Glyko BioMedical
stock option plan.
4. (c) (xvi) BioMarin sold common stock in a private placement which had two
closings for a total of approximately $ 8.1 million in July and August.
BioMarin sold $8 million in common stock to Genzyme and is committed to sell
an additional $10 million in a private sale concurrent with the initial
public offering of BioMarin at the public offering price.
BioMarin, as part of this acquisition, will issue common stock of BioMarin to
holders of Glyko Biomedical stock options in lieu of such holders receiving
an equivalent number of Glyko Biomedical shares.
BioMarin has issued stock options to new employees as part of its ordinary
course of business.
4. (c) (xvii) See 4. (c) (x) and 4. (c) (iii) above in which BioMarin licensed
certain intellectual property for a genetic disease from a medical
institution.
4. (d) (i) In the ordinary course of business, BioMarin has employment contracts
for certain officers and uses offer letters for employees which define
certain terms and conditions of employment. BioMarin has employee benefit
plan's including medical, dental, life insurance and a 401(k) Plan. BioMarin
has consulting, (or similar) agreements with certain individuals/institutions
including: Dr. Behr (Stanford University), Integrated Wound Management (Dr.
Mulder), Richard Christiansen (a facilities construction consultant), Jeff
Yuan (a Regulatory/FDA, consultant), UC San Diego (Dr. Hansborough), Brighams
and Womens Hospital, Boston Medical Center, M/T, The Frankel Group (marketing
and strategic consulting), Dr. Skinner (Washington State University), Dr.
Mishra (MIT), Frank Nakamoto (Axon Research), . Inveresk (Clinical
research/regulatory organization), Bradford Heedle (regulatory consultant),
Vanderbilt University and Harbor-UCLA Research and Educational
2
<PAGE>
SCHEDULE G
----------
PURCHASER'S DISCLOSURE SCHEDULE
-------------------------------
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
-----------------------------------------------
EXCEPTIONS
Institute. BioMarin has a stock option plan for employees, consultants and
directors. BioMarin has multiple contracts with other business organizations
in the ordinary course of business.
4. (d) (ii) See 4. (c) (ix) above. Any increase in BioMarin valuation may
trigger an automatic increase in salary for three officers. This transaction
is not sufficient in itself to do so, but when combined with other
transactions may contribute to this salary increase.
4. (d) (iii) BioMarin carries employee fidelity insurance required for 401(k)
plan.
4. (d) (iv) See 4. (c) (ill) above.
4. (d) (v) BioMarin entered into a joint venture with Genzyme for MPS-1 which
limits BioMarin's ability to do any other therapeutic for NIPS-1 using alpha-
L-iduronidase.
4. (d) (vi) See 4. (c) (iii) above.
4. (d) (vii) Acquisition of Glyko, Inc. in this agreement. Joint venture with
Genzyme.
4. (d) (viii) Letter of credit in lieu of deposit for Galli Drive.
4. (d) (ix) In the ordinary course of business, BioMarin purchases materials and
incurs accounts payable for the payment of such purchases. At June 30, 1998,
accounts payable for the purchase of materials and services totaled
$676,:578.
4. (d) (x) See 4. (c) (iii) above.
4. (d) (xi) The Genzyme joint venture is a joint development and
commercialization agreement.
4. (d) (xii) See 4. (d) (xi) above.
4. (d) (xiii) See 4. (c) (iii) above.
4. (i) There are two options for 35,000 shares pending which haw not been
approved, but are likely to be approved shortly after Closing of this
agreement.
3
<PAGE>
SCHEDULE "H"
PURCHASER'S FINANCIALS
----------------------
2
<PAGE>
BIOMARIN PHARMACEUTICAL, INC.
(a development-stage company)
BALANCE SHEETS
(in U.S. dollars)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
(unaudited) (audited)
------------- --------------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,188,258 $ 5,987,433
Short-term investments 2,017,748 900,827
Due from Glyko, Inc. 5,772 9,135
Due from Glyko Biomedical, Ltd. 79,607 79,607
Other receivables 3,333,719 -
Prepaid expenses 903,726 539,445
Deposits 51,682 -
------------- ---------------
Total current assets 7,580,512 7,516,447
PROPERTY AND EQUIPMENT, net of accumulated depreciation
of $43,308 and $4,790 579,838 145,683
------------- ---------------
Total assets $ 8,160,350 $ 7,662,130
============= ===============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 676,578 $ 168,062
Accrued expenses 33,476 43,395
Due to Glyko, Inc. 64,863 70,207
------------- ---------------
Total current liabilities 774,917 281,664
------------- ---------------
STOCKHOLDER EQUITY (DEFICIT):
Common stock, $0.001 par value: 30,000,000 shares authorized, 21,165,035 and
20,566,500 issued and outstanding at June 30, 1998 and December 31, 1997,
respectively 21,165 20,567
Additional paid-in capital 15,876,328 12,548,924
Warrants 128,240 128,240
Deferred compensation (178,290) (217,000)
Notes receivable from stockholders (2,451,210) (2,337,500)
Deficit accumulated during development stage (6,010,800) (2,762,765)
------------- ---------------
Total stockholders' equity 7,385,433 7,380,466
------------- ---------------
Total liabilities and stockholders' equity $ 8,160,350 $ 7,662,130
============= ===============
</TABLE>
The accompanying notes are an integral part of these statements.
F.1
<PAGE>
BIOMARIN PHARMACEUTICAL, INC.
(a development-stage company)
STATEMENTS OF OPERATIONS
(unaudited, in U.S. dollars)
<TABLE>
<CAPTION>
Period from Period from
March 21, 1997 March 21, Period from
(inception), to 1997 Six months March 21, 1997
December 31, (inception), to ended June (inception), to
1997 June 30, 1997 30, 1998 June 30, 1998
----------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
OPERATING COSTS AND EXPENSES:
Research and development $ 1,913,795 $ 917,873 $ 2,155,558 $ 4,069,353
General and administrative expenses 914,299 290,654 1,331,744 2,246,043
----------------- ---------------- -------------- --------------
Loss from operations (2,828,094) (1,208,527) (3,487,302) (6,315,396)
INTEREST INCOME 65,329 2,889 239,267 304,596
----------------- ---------------- -------------- ---------------
Net loss $ (2,762,765) $ (1,205,638) $ (3,248,035) $ (6,010,800)
----------------- ---------------- -------------- ---------------
NET LOSS PER SHARE, basic and diluted $ (0.34) $ (0.24) $ (0.16) $ (0.52)
================= ================ ============== ==============
WEIGHTED AVERAGE COMMON
SHARE OUTSTANDING 8,136,475 5,000,000 20,865,768 11,593,432
================= ================ ============== ==============
</TABLE>
The accompanying notes are an integral part of these statements.
F.2
<PAGE>
BIOMARIN PHARMACEUTICAL, INC.
(a development-stage company)
STATEMENT OF CASH FLOWS
(unaudited, in U.S. dollars)
<TABLE>
<CAPTION>
Period from
Period from Period from March 21,
March 21, 1997 March 21, 1997 For the Six 1997
(inception), to (inception), to months Ended (inception),
December 31, June 30, June 30, June 30
1997 1997 1998 1998
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (2,762,765) $ (1,205,638) $ (3,248,035) $ (6,010,800)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation 4,790 461 38,517 43,307
Compensation in the form of common
stock and common stock options 18,020 - - 18,020
Changes in operating assets and liabilities:
Receivables from Glyko Biomedical, Ltd.
and Glyko, Inc. (88,742) (264,269) - (88,742)
Other receivables - - (2,354) (2,354)
Prepaid expenses (539,445) - (364,281) (903,726)
Deposits - - (51,682) (51,682)
Accounts payable 168,062 46,094 508,516 676,578
Accrued expenses 43,395 - (9,919) 33,476
Due to Glyko, Inc. 70,207 34,028 (5,344) 64,863
------------------------------------------------------------------------
Net cash used in operating activities (3,086,478) (1,389,324) (3,134,582) (6,221,060)
------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (150,473) (18,657) (472,672) (623,145)
Purchase of short-term investments (900,827) - (1,116,921) (2,017,748)
------------------------------------------------------------------------
Net cash used in investing activities (1,051,300) (18,657) (1,589,593) (2,640,893)
------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Bridge loan 880,000 - - 880,000
Accrued interest on notes receivable
from stockholders (37,500) - (75,000) (112,500)
Proceeds from sale of common stock,
net of issuance costs 9,282,711 1,500,000 - 9,282,711
------------------------------------------------------------------------
Net cash used in financing activities 10,125,211 1,500,000 (75,000) 10,050,211
------------------------------------------------------------------------
Net increase (decrease) in cash and 5,987,433 92,019 (4,799,175) 1,188,258
cash equivalents
CASH AND CASH EQUIVALENTS:
Beginning of period - - 5,987,433 -
------------------------------------------------------------------------
End of period $ 5,987,433 $ 92,019 $ 1,188,258 $ 1,188,258
========================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
F 4
<PAGE>
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
BioMarin Pharmaceutical, Inc, a California corporation ("BioMarin"), and
John C. Klock ("Klock"), an individual resident of California, enter into this
Employment Agreement ("Agreement"), effective on the date that it is signed by
the second of them.
RECITALS
A. BioMarin wishes to employ Klock as its president, and once Klock is
employed, to retain him, in order to avail itself of Klock's experience, skills,
and knowledge.
B. Klock wishes to be employed as BioMarin's president and, once employed,
to be assured of security in his position.
C. BioMarin and Klock wish to enter into this Agreement on the terms and
conditions set forth below.
AGREEMENT
1. TERM. 1.1 BioMarin shall employ Klock as its president for
three years, commencing on the effective date of this agreement. Unless BioMarin
or Klock gives notice of its or his intention not to renew in accord with the
notice requirements of Paragraph 11.2 this Agreement shall be deemed renewed at
the expiration of its three-year term on all of its terms and conditions, except
those governing Klock's compensation, which shall be renewed under Paragraph 1.2
1.2. If this Agreement is renewed under the provisions of Paragraph
1.1, BioMarin and Klock shall confer, as soon as is practicable after the
commencement of the renewal term, and shall negotiate in good faith the
adjustment of Klock's compensation during this Agreement's renewal term. Should
BioMarin and Klock fail to meet or to agree upon the adjustment of Klock's
compensation within fifteen days after the renewal of this Agreement, BioMarin
may, upon two day's written notice, unilaterally adjust the compensation by
amounts that, under the circumstances, BioMarin reasonably believes will
compensate Klock fairly for his services during the renewal term. In that event,
Klock, without penalty or liability for BioMarin or Klock, and upon fifteen
days' written notice, may terminate this agreement as of the effective date of
the compensation adjustment, unless BioMarin agrees on or before such effective
date to any compensation adjustment demanded by Klock in his written notice.
<PAGE>
2. KLOCK'S DUTIES. 2.1 In his capacity as BioMarin's
president, Klock shall perform all acts or services and do all things necessary
or advisable to manage or conduct BioMarin's business, subject to the policies
set by BioMarin's board of directors.
2.2 Except with the written consent of BioMarin's board of
directors, Klock shall devote seventy percent (70%) of his productive time,
ability, and attention to BioMarin's business and during this 70% of time, shall
not engage in any other business or render any services of a business,
commercial, or professional nature to or on behalf of any other person or
enterprise. With respect to the 30% of his time not devoted to BioMarin, Klock
shall not do any activity which is directly competitive with BioMarin. This
provision shall not prevent Klock from making passive personal investments,
except investments that result in Klock's direct or indirect acquisition of an
interest in a business actually or potentially competitive with BioMarin,
provided, however, that notwithstanding the foregoing, Klock shall not be
prohibited from acquiring in the public market shares of securities that do not
exceed 1% of the outstanding stock of such issuer, and to the extent that, on
the effective date of this Agreement, Klock has interests in businesses actually
or potentially competitive with BioMarin, nothing in this Agreement shall be
construed to require Klock to divest himself of such interests.
2.3 Klock shall not misuse, misappropriate, or, except as
authorized by BioMarin's board of directors, disclose to persons not employed by
BioMarin, any confidential information concerning BioMarin so long as the
information is reasonably subject to characterization as a "trade secret" within
the meaning of California Civil Code Section 3426.1 (d) as that section exists
on the date of this Agreement is executed or renewed. The confidential
information subject to the prohibition in this paragraph includes, but is not
limited to, information concerning finances, personnel, customers, computer
operations and programs, research and development, products, or services.
3. BIOMARIN'S DUTIES. 3.1 BioMarin shall provide Klock with the
compensation, incentives, benefits, and business expense reimbursement set out
in other paragraphs of this Agreement.
<PAGE>
4. KLOCK'S COMPENSATION.
4.1 During the first year of this Agreement Klock's BioMarin
compensation shall be the sum of $175,000.00 payable in twenty-four equal
installments of $7,291.66 each. During the second and third years of this
Agreement, Klock's compensation shall be reviewed by the board of directors and
appropriate adjustments based on cost-of-living and performance, but in no case
will the salary be less than paid in the first year of this Agreement. During
any renewal of this Agreement, Klock's compensation shall be as set forth in an
addendum to this Agreement, signed by or on behalf of BioMarin and Klock.
4.2 The installments provided in Paragraph 4.1 shall be paid on the
fifteenth and last days of each month, unless those days are Saturdays, Sundays,
or legal holidays, in which case the installments shall be paid on the last
preceeding business day.
4.3 On the first day of every quarter or the first trading day of a
quarter, the Company will calculate the capitalization of BioMarin using the
price of the common stock either on a publically traded exchange or the most
recent price at which a disinterested third party has acquired securities with a
value of at least one million dollars ($1,000,000) times the number of
outstanding shares. The first adjustment in Klock's salary occurs when the
capitalization of BioMarin reaches 50 million dollars ($50,000,000) and for each
subsequent increase or decrease of 50 million dollars ($50,000,000), Klock's
compensation shall be adjusted upwards or downwards by adding or subtracting
fifty thousand dollars ($50,000) in compensation for each fifty million dollar
($50,000,000) change in BioMarin's capitalization.
5. KLOCK'S BENEFITS. 5.1 BioMarin shall reimburse Klock for
the use of his personal automobile(s) for BioMarin-related activities, and Klock
shall maintain written records of such use and shall be reimbursed at standard
mileage rates acceptable to the Internal Revenue Service payable to him as a
result of such personal use.
5.2 BioMarin shall provide Klock with term life insurance, payable
as directed by Klock, in the amount of twice his annual compensation, but in no
case less than $300,000.00, and shall provide Klock and his dependents with
coverage under the Company's health insurance policy.
5.3 If Klock, in the opinion of a licensed medical doctor, becomes
mentally or physically incapacitated to the extent that he is unable to
discharge his employment duties under this Agreement for a period of six months
or more, BioMarin shall continue to provide Klock, for a period ending six
months from the determination of incapacity, or at until end of the term of this
Agreement if earlier, with his compensation as set out in Paragraph 4.1.
<PAGE>
5.4 If Klock dies during the term of this Agreement, BioMarin shall
continue to pay, for six months following Klock's death, or until the end of the
term of this Agreement if earlier, Klock's compensation, as set out in Paragraph
4.1 of this Agreement, to Klock's surviving spouse, if there is one, or, if not,
to the executor or administrator of Klock's estate. BioMarin shall pay any sums
owed to Klock as of the date of his death to the executor or administrator of
his estate.
5.5 Klock shall be entitled to such vacation time each year as
BioMarin provides to its other management employees, on the same terms and
conditions.
6. REIMBURSEMENT OF KLOCK'S REASONABLE BUSINESS EXPENSES. BioMarin
shall promptly reimburse Klock for all reasonable business expenses incurred by
Klock in the discharge of his duties under this agreement, so long as the
expenditures qualify as proper business deductions under the Internal Revenue
Code, and they are properly substantiated by Klock with documentation adequate
to establish their deductibility under the Internal Revenue Code.
7. TERMINATION.
7.1 This Agreement shall be terminated upon Klock's disability,
subject to the provisions of Paragraph 5.3; death, subject to the provisions of
Paragraph 5.4; upon Klock's voluntary resignation, or retirement.
7.2 This Agreement may be terminated at any time by BioMarin
without cause upon six months' notice to Klock and by Klock upon three months'
notice to BioMarin's board of directors. If this Agreement is terminated under
the provisions of this paragraph, BioMarin shall determine in its sole
discretion whether Klock shall continue to discharge his duties as BioMarin's
president or if his duties shall terminate at a date prior to the date this
Agreement is terminated. In any case, Klock shall be entitled to compensation
and benefits as provided in this Agreement until the effective date of this
Agreement's termination.
7.3 If, within twelve months of the effective date of this
Agreement, Klock employment terminates for "Cause" (as defined herein), Klock
shall not be entitled to compensation and benefits as provided in this
Agreement. "Cause" is defined as (i) an act of personal dishonesty taken by
Klock in connection with his responsibilities as an employee and intended to
result in personal enrichment of Klock, (ii) Klock's conviction of, plea of nolo
----
contendere to, a felony, (iii) a willful act by Klock which constitutes gross
- ----------
misconduct and which is injurious to the Company, and (iv) following delivery to
Klock of a written demand for performance from the Company which describes the
basis for the Company's belief that Klock has not substantially performed his
duties, continued violations by Klock of Klock's obligations to the Company. The
notice of termination under the provisions of this paragraph shall state the
grounds for termination and state all relevant facts supporting the grounds.
<PAGE>
8. PURCHASE OF STOCK AND STOCK BUY-BACK RIGHTS. Klock shall be
entitled to purchase 800,000 shares of the Company's stock at a purchase price
of one dollar ($1.00) per share. The Company shall provide a 4-year loan as of
the effective date of this Agreement to Klock for the purpose of share purchase.
Any stock purchase loans to Klock from the Company shall be due and payable upon
termination of employment.
If this Agreement is terminated for any reason, then Klock agrees to resell back
to BioMarin up to one-half of any stock sold or given to him by BioMarin as
compensation at the original purchase price on a pro-rata basis as stated below:
For example if Klock has been sold 1000 Shares, such shares resold are
equal to 1000 minus (1000 times the number of days from June 26, 1997 until June
25,2001 divided by one thousand four hundred sixty (1460)). For example if the
agreement is terminated at 300 days after June 26, 1997, the number of shares
resold would be:
1000 - 1000 x 300 = 794 Shares (capped at 50% or 500 shares)
-----------
1460
9. EFFECT OF MERGER, TRANSFER OF ASSETS, OR DISSOLUTION. This
Agreement shall not be terminated by a voluntary or involuntary termination of
BioMarin's existence resulting from a merger or consolidation in which BioMarin
is not the consolidated or surviving entity or a transfer of all or
substantially all of BioMarin's assets. If such a merger, consolidation, or
transfer of assets occurs, BioMarin's obligations shall be delegated to the
surviving, resulting, or transferee entity.
10. OWNERSHIP OF INTANGIBLES. All research, development, designs,
processes, inventions, copyrights, patents, trademarks, service marks, and the
like that Klock conceives or develops while this Agreement is in effect shall be
BioMarin's property. Klock shall execute and deliver to BioMarin a copy of
BioMarin's standard employee confidentiality and proprietary rights agreement.
11. NON-COMPETITION BY KLOCK AFTER TERMINATION 11.1. Immediately
upon termination of this Agreement, Klock shall immediately deliver to BioMarin
all of BioMarin's property then in his possession or under his control.
<PAGE>
11.2 For a period of two years after termination of this Agreement.
Klock agrees not to compete unfairly, whether directly or indirectly, with
BioMarin. For purposes of this paragraph, to "compete unfairly" is to (a) use or
provide to third parties property that is owned by BioMarin under Paragraph 9;
(b) use or provide to third parties trade secrets within the definition of
California Civil Code Section 3426.1(d) as that section exists on the date this
Agreement is executed or renewed; (c) compete or to assist third parties to
compete with BioMarin for the business of BioMarin's customers with respect to
the services offered by BioMarin on the date this Agreement is terminated; or
(d) attempt to induce or assist third parties to induce or attempt to induce,
any of BioMarin's employees to terminate employment with BioMarin and obtain
employment by any person or entity that competes with BioMarin.
12. MISCELLANEOUS PROVISIONS. 12.1. This Agreement is made in and
is subject to the law of the State of California.
12.2 Notices to be given in writing shall be transmitted by personal
delivery or by certified mail, return receipt requested, addressed as set forth
below or to another address given through written notice under the provisions of
this paragraph:
If to BioMarin:
BioMarin, Inc
Attention: Board of Directors
11 Pimentel Court
Novato, California 94949
If to Klock:
John C. Klock
11 Pimentel Court
Novato, California 94949
Notices delivered personally shall be deemed communicated as of the date of
receipt. Mailed notices shall be deemed communicated as of the date of mailing.
<PAGE>
12.3 Disputes concerning this Agreement shall be referred to
arbitration under the California Arbitration Act upon written notice to the
other by the party seeking arbitration. BioMarin and Klock shall each appoint
one person to hear the dispute, and those persons shall appoint a third. The
decision of the arbitrators shall be by a majority and shall be final, and costs
--------------------------
of the arbitration are to be borne in such proportion as the arbitrators may
decide.
12.4 This Agreement is BioMarin's and Klock's entire agreement with
respect to Klock's employment and it supersedes all other agreements, whether
written or oral, between them. Each acknowledges there is no representation,
inducement, promise, or agreement, whether oral or in writing, with respect to
this Agreement's subject matter that is not incorporated into this Agreement.
Executed at Toronto, Canada
this 26th day of June, 1997
BioMarin Pharmaceuticals, Inc
By /s/ Gwynn R. Williams
------------------------------
Director
Executed at Toronto, Canada
this 26th day of June, 1997
John C. Klock
/s/ JOHN C. KLOCK
-------------------
<PAGE>
AMENDMENT TO EMPLOYMENT AGREEMENT
---------------------------------
WHEREAS: BioMarin Pharmaceutical Inc. (the "COMPANY") and John C. Klock
-------
("EMPLOYEE") entered into an Employment Agreement dated as of June 26, 1997, a
copy of which is attached hereto as Exhibit "A" (the "EMPLOYMENT AGREEMENT");
----------
and
WHEREAS: Each of the Company and Employee now desire to amend, in part,
-------
Section 2.2 of the Employment Agreement.
NOW, THEREFORE, the Company and Employee agree that, as of October 26,
1998, the first two sentences of Section 2.2 of the Employment Agreement shall
be amended to read as follows:
"2.2 Except with the written consent of BioMarin's board of directors,
Klock shall devote one hundred percent (100%) of his productive, time, ability
and attention to BioMarin's business and shall not engage in any other business
or render any services of a business, commercial or professional nature to or on
behalf of any other person or enterprise. Klock shall not engage in any activity
which is directly competitive with BioMarin."
IN WITNESS WHEREOF, each of the parties have executed this Amendment to the
Employment Agreement as of October 26, 1998.
BIOMARIN PHARMACEUTICAL INC.
By: /s/ RAYMOND W. ANDERSON
-------------------------------
Raymond W. Anderson
Chief Financial Officer
EMPLOYEE
/s/ JOHN C. KLOCK
-------------------------------
John C. Klock
<PAGE>
AMENDMENT TO EMPLOYMENT AGREEMENT
---------------------------------
WHEREAS: BioMarin Pharmaceutical Inc. (the "COMPANy") and John C. Klock
-------
("EMPLOYEE") entered into an Employment Agreement dated as of June 26, 1997, a
copy of which is attached hereto as Exhibit "A";
-----------
WHEREAS: The Company and Employee entered into an amendment to the
-------
Employment Agreement dated October 26, 1998, a copy of which is attached hereto
as Exhibit "B" (Exhibit A and Exhibit B together, the "EMPLOYMENT AGREEMENT");
-----------
and
WHEREAS: Each of the Company and Employee now desire to amend Section 4.3
-------
of the Employment Agreement.
NOW, THEREFORE, the Company and Employee agree that, as of January 1, 1998,
Section 4.3 of the Employment Agreement shall be amended to read as follows:
"4.3 Klock shall be paid an annual bonus, in addition to annual cash
compensation as detailed in Sections 4.1 and 4.2, according to the guidelines
enumerated on the document titled `Founders' Incentive Compensation Adjustment
as of January 1, 1998,' which document is hereby deemed incorporated by
reference herein. "
The document titled "Founders' Incentive Compensation Adjustment as of
January 1, 1998" is attached hereto as Exhibit "C".
-----------
IN WITNESS WHEREOF, each of the parties have executed this Amendment to the
Employment Agreement as of January 1, 1998.
BIOMARIN PHARMACEUTICAL INC.
By: /s/ Raymond W. Anderson
---------------------------
Raymond W. Anderson
Chief Financial Officer
EMPLOYEE
/s/ John C. Klock
---------------------------
John C. Klock
<PAGE>
Exhibit C
BioMarin Pharmaceutical Inc.
Founders' Incentive Compensation
Adjustment as of January 1, 1998
Definitions
Quarterly Market Capitalization (QMC)
The QMC is the average market capitalization for the last ten trading days
of the calendar quarter. The market capitalization for a trading day is
the product of the shares outstanding times the NASD market system closing
price for that day. If the stock is not traded on a major exchange
(NASDAQ), then the common stock price of the last major investment of $1
million or greater by an independent investor will be the stock price used
for the QMC calculation.
Quarterly Adjustment Factor (QAF)
The QAF will be .24 for the first calendar quarter, .25 for the second
calendar quarter, .25 for the third calendar quarter, and .26 for the
fourth calendar quarter.
Valuation Minimum (VM)
The VM will be $20,000,000 for the first quarter of 1998 and will increase
by $1,000,000 per quarter every quarter through the second quarter of 2000.
Maximum Cash Bonus (MCB)
The MCB will be 100% of base salary.
Valuation Step-up (VSU)
The VSU will be $5,000,000.
Bonus Factor (BF)
The BF (for each complete VSU) will be a $5,000 bonus on an annual basis.
Quarterly Calculation (QC)
The QC is equal to the (QMC-VM)/VSU*BF*QAF where the quantity (QMC-VM)/VSU
is rounded down to the nearest whole number.
<PAGE>
BioMarin Pharmaceutical Inc.
Founders' Incentive Compensation
Adjustment as of January 1, 1998
Annual Bonus (AB)
The AB will be the sum of the four QC (quarterly calculations).
Other
This bonus program will be effective to June 30, 2000 unless otherwise
extended by mutual agreement of the Board of Directors and the named
executive.
The AB (annual bonus) will be paid in cash advances made with each
bimonthly salary payment up to the MCB. A final annual cash bonus, if
needed, up to the MCB and bonus stock options will be paid/granted within
30 days of year-end. The final cash payment will reconcile any cash
differences for the year up to the MCB.
If stock options are required to pay the full AB amount, the stock options
will have the following characteristics:
Exercise price as of December 31 for 1998 and 1999 and June 30 for
2000 if not extended.
Black-Scholes Value
Fully vested
The bimonthly cash advance will be paid in amounts that do not cumulatively
exceed 100% of base salary for the year-to-date period.
<PAGE>
AMENDMENT TO EMPLOYMENT AGREEMENT
---------------------------------
WHEREAS: BioMarin Pharmaceutical Inc. (the "COMPANY") and John C.
-------
Lelock ("EMPLOYEE") entered into an Employment Agreement dated as of June
26, 1997, a copy of which is attached hereto as Exhibit "A";
-----------
WHEREAS: Each of the Company and Employee now desire to amend the
-------
Employment Agreement.
NOW, THEREFORE, the Company and Employee agree that, as of January 1, 1999,
the Employment Agreement shall be amended to add the following provisions:
In the event of the Involuntary Termination, as defined below, of
Employee's employment with the Company within one (1) year of a Change of
Control, as defined below, Employee shall be entitled to receive from the
Company, within ten (10) days of such Involuntary Termination, a severance
payment equal to six (6) months of Employee's then-current annual salary and
fifty percent (50%) of the annual bonus that Employee would otherwise be
entitled to receive for the calendar year in which such Involuntary Termination
occurs. Additionally, upon such Involuntary Termination, fifty percent (50%) of
the then-unvested portion of all of Employee's options to purchase capital stock
of the Company shall immediately vest. The capitalized terms used above shall
have the following meanings:
1. "Change of Control" shall mean the occurrence of any of the following
events:
a) Any "person" (as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended) becoming the "beneficial owner"
(as defined in Rule 13d-3 under said Act), directly or indirectly, of securities
of the Company representing fifty percent (50%) or more of the total voting
power represented by the Company's then outstanding voting securities;
b) A change in the composition of the Board of Directors of the
Company occurring within a two-year period, as a result of which fewer than a
majority of the directors are Incumbent Directors. "Incumbent Directors" shall
mean directors who either (A) are directors of the Company as of the date
hereof, or (B) are elected, or nominated for election, to the Board of Directors
of the Company with the affirmative votes of at least a majority of the
Incumbent Directors at the time of such election or nomination (but shall not
include an individual not otherwise an Incumbent Director whose election or
nomination is in connection with an actual or threatened proxy contest relating
to the election of directors to the Company); or
c) The approval by stockholders of the Company of a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or the approval by
the stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all or
substantially all the Company's assets.
2. "Involuntary Termination" shall mean (i) without the Employee's express
written consent, a significant reduction of the Employee's duties, position or
responsibilities, or the removal of the Employee from such position and
responsibilities, unless the Employee is provided with a comparable position
(i.e., a position of equal or greater organizational level, duties, authority,
compensation and status); (ii) without the Employee's express written consent, a
substantial reduction, without good
<PAGE>
business reasons, of the facilities and perquisites (including office space and
location) available to the Employee immediately prior to such reduction; (iii) a
reduction by the Company in the annual salary of the Employee as in effect
immediately prior to such reduction; (iv) a material reduction by the Company in
the kind or level of employee benefits to which the Employee is entitled
immediately prior to such reduction with the result that the Employee's overall
benefits package is significantly reduced; (v) without the Employee's express
written consent, the relocation of the Employee to a facility or a location more
than 25 miles from the Employee's then present location; (vi) any purported
termination of the Employee by the Company which is not effected for disability
or for Cause, or any purported termination for which the grounds relied upon are
not valid; or (vii) the failure of the Company to obtain the assumption of this
Agreement by any successors in the event of a Change of Control.
IN WITNESS WHEREOF, each of the parties have executed this Amendment to the
Employment Agreement as of January 1, 1999.
BIOMARIN PHARMACEUTICAL INC.
By: /s/ Grant W. Denison, Jr.
-------------------------------------------
Grant W. Denison, Jr. Chief Executive Officer
EMPLOYEE
/s/ John C. Klock
--------------------
John C. Klock
<PAGE>
EXHIBIT 10.9
EMPLOYMENT AGREEMENT
BioMarin Pharmaceutical, Inc, a California corporation ("BioMarin"), and
Grant W. Denison, Jr. ("Denison"), an individual resident of Illinois, enter
into this Employment Agreement ("Agreement"), effective on the date that it is
signed by the second of them.
RECITALS
A. BioMarin wishes to employ Denison as its Chief Executive Officer, and
once Denison is employed, to retain him, in order to avail itself of Denison's
experience, skills, and knowledge.
B. Denison wishes to be employed as BioMarin's Chief Executive Officer
and, once employed, to be assured of security in his position.
C. BioMarin and Denison wish to enter into this Agreement on the terms
and conditions set forth below.
AGREEMENT
1. TERM. 1.1 BioMarin shall employ Denison as its Chief Executive
Officer for three years, commencing on the effective date of this agreement.
Unless BioMarin or Denison gives notice of its or his intention not to renew in
accord with the notice requirements of Paragraph 11.2 this Agreement shall be
deemed renewed at the expiration of its three-year term on all of its terms and
conditions, except those governing Denison's compensation, which shall be
renewed under Paragraph 1.2
1.2. If this Agreement is renewed under the provisions of Paragraph
1.1, BioMarin and Denison shall confer, as soon as is practicable after the
commencement of the renewal term, and shall negotiate in good faith the
adjustment of Denison's compensation during this Agreement's renewal term.
Should BioMarin and Denison fail to meet or to agree upon the adjustment of
Denison's compensation within fifteen days after the renewal of this Agreement,
BioMarin may, upon two day's written notice, unilaterally adjust the
compensation by amounts that, under the circumstances, BioMarin reasonably
believes will compensate Denison fairly for his services during the renewal
term. In that event, Denison, without penalty or liability for BioMarin or
Denison, and upon fifteen days' written notice, may terminate this agreement as
of the effective date of the compensation adjustment, unless BioMarin agrees on
or before such effective date to any compensation adjustment demanded by Denison
in his written notice.
<PAGE>
2. DENISON'S DUTIES. 2.1 In his capacity as BioMarin's Chief Executive
Officer, Denison shall perform all acts or services and do all things necessary
or advisable to manage or conduct BioMarin's business, subject to the policies
set by BioMarin's board of directors.
2.2 Except with the written consent of BioMarin's board of
directors, Denison shall devote seventy percent (70%) of his productive time,
ability, and attention to BioMarin's business and during this 70% of time, shall
not engage in any other business or render any services of a business,
commercial, or professional nature to or on behalf of any other person or
enterprise. With respect to the 30% of his time not devoted to BioMarin, Denison
shall not do any activity which is directly competitive with BioMarin. This
provision shall not prevent Denison from making passive personal investments,
except investments that result in Denison's direct or indirect acquisition of an
interest in a business actually or potentially competitive with BioMarin,
provided, however, that notwithstanding the foregoing, Denison shall not be
prohibited from acquiring in the public market shares of securities that do not
exceed 1% of the outstanding stock of such issuer, and to the extent that, on
the effective date of this Agreement, Denison has interests in businesses
actually or potentially competitive with BioMarin, nothing in this Agreement
shall be construed to require Denison to divest himself of such interests.
2.3 Denison shall not misuse, misappropriate, or, except as
authorized by BioMarin's board of directors, disclose to persons not employed by
BioMarin, any confidential information concerning BioMarin so long as the
information is reasonably subject to characterization as a "trade secret" within
the meaning of California Civil Code Section 3426.1 (d) as that section exists
on the date of this Agreement is executed or renewed. The confidential
information subject to the prohibition in this paragraph includes, but is not
limited to, information concerning finances, personnel, customers, computer
operations and programs, research and development, products, or services.
3. BIOMARIN'S DUTIES. 3.1 BioMarin shall provide Denison with
the compensation, incentives, benefits, and business expense reimbursement set
out in other paragraphs of this Agreement.
<PAGE>
4. DENISON'S COMPENSATION.
4.1 During the first year of this Agreement Denison's BioMarin
compensation shall be the sum of $180,000.00 payable in twenty-four equal
installments of $7,500.00 each. During the second and third years of this
Agreement, Denison's compensation shall be reviewed by the board of directors
and appropriate adjustments based on cost-of-living and performance, but in no
case will the salary be less than paid in the first year of this Agreement.
During any renewal of this Agreement, Denison's compensation shall be as set
forth in an addendum to this Agreement, signed by or on behalf of BioMarin and
Denison.
4.2 The installments provided in Paragraph 4.1 shall be paid on the
fifteenth and last days of each month, unless those days are Saturdays, Sundays,
or legal holidays, in which case the installments shall be paid on the last
preceeding business day.
4.3 On the first day of every quarter or the first trading day of
a quarter, the Company will calculate the capitalization of BioMarin using the
price of the common stock either on a publically traded exchange or the most
recent price at which a disinterested third party has acquired securities with a
value of at least one million dollars ($1,000,000) times the number of
outstanding shares. The first adjustment in Denison's salary occurs when the
capitalization of BioMarin reaches 50 million dollars ($50,000,000) and for each
subsequent increase or decrease of 50 million dollars ($50,000,000), Denison's
compensation shall be adjusted upwards or downwards by adding or subtracting
fifty thousand dollars ($50,000) in compensation for each fifty million dollar
($50,000,000) change in BioMarin's capitalization.
5. DENISON'S BENEFITS. 5.1 BioMarin shall reimburse Denison for
the use of his personal automobile(s) for BioMarin-related activities, and
Denison shall maintain written records of such use and shall be reimbursed at
standard mileage rates acceptable to the Internal Revenue Service payable to him
as a result of such personal use.
5.2 BioMarin shall provide Denison with term life insurance,
payable as directed by Denison, in the amount of twice his annual compensation,
but in no case less than $360,000.00, and shall provide Denison and his
dependents with coverage under the Company's health insurance policy.
5.3 If Denison, in the opinion of a licensed medical doctor, becomes
mentally or physically incapacitated to the extent that he is unable to
discharge his employment duties under this Agreement for a period of six months
or more, BioMarin shall continue to provide Denison, for a period ending six
months from the determination of incapacity, or until the end of the term of
this Agreement if earlier, with his compensation as set out in Paragraph 4.1.
<PAGE>
5.4 If Denison dies during the term of this Agreement, BioMarin
shall continue to pay, for six months following Denison's death, or until the
end of the term of this Agreement if earlier, Denison's compensation, as set out
in Paragraph 4.1 of this Agreement, to Denison's surviving spouse, if there is
one, or, if not, to the executor or administrator of Denison's estate. BioMarin
shall pay any sums owed to Denison as of the date of his death to the executor
or administrator of his estate.
5.5 Denison shall be entitled to such vacation time each year as
BioMarin provides to its other management employees, on the same terms and
conditions.
6. REIMBURSEMENT OF DENISON'S REASONABLE BUSINESS EXPENSES.
BioMarin shall promptly reimburse Denison for all reasonable business expenses
incurred by Denison in the discharge of his duties under this agreement, so long
as the expenditures qualify as proper business deductions under the Internal
Revenue Code, and they are properly substantiated by Denison with documentation
adequate to establish their deductibility under the Internal Revenue Code.
7. TERMINATION.
7.1. This Agreement shall be terminated upon Denison's disability,
subject to the provisions of Paragraph 5.3; death, subject to the provisions of
Paragraph 5.4; upon Denison's voluntary resignation, or retirement.
7.2 This Agreement may be terminated at any time by BioMarin
without cause upon six months' notice to Denison and by Denison upon three
months' notice to BioMarin's board of directors. If this Agreement is terminated
under the provisions of this paragraph, BioMarin shall determine in its sole
discretion whether Denison shall continue to discharge his duties as BioMarin's
chief executive officer or if his duties shall terminate at a date prior to the
date this Agreement is terminated. In any case, Denison shall be entitled to
compensation and benefits as provided in this Agreement until the effective date
of this Agreement's termination.
7.3 If, within twelve months of the effective date of this
Agreement, Denison employment terminates for "Cause" (as defined herein),
Denison shall not be entitled to compensation and benefits as provided in this
Agreement. "Cause" is defined as (i) an act of personal dishonesty taken by
Denison in connection with his responsibilities as an employee and intended to
result in personal enrichment of Denison, (ii) Denison's conviction of, plea of
nolo contendere to, a felony, (iii) a willful act by Denison which constitutes
- ---------------
gross misconduct and which is injurious to the Company, and (iv) following
delivery to Denison of a written demand for performance from the Company which
describes the basis for the Company's belief that Denison has not substantially
performed his duties, continued violations by Denison of Denison's obligations
to the Company. The notice of termination under the provisions of this paragraph
shall state the grounds for termination and state all relevant facts supporting
the grounds.
<PAGE>
8. PURCHASE OF STOCK AND STOCK BUY-BACK RIGHTS. Denison shall be
entitled to purchase 1,300,000 shares of the Company's stock at a purchase price
of one dollar ($l.00) per share. The Company shall provide a 4-year loan as of
the effective date of this Agreement to Denison for the purpose of share
purchase. Any stock purchase loans to Denison from the Company shall be due and
payable upon termination of employment.
If this Agreement is terminated for any reason, then Denison agrees to resell
back to BioMarin up to one-half of any stock sold or given to him by BioMarin as
compensation at the original purchase price on a pro-rata basis as stated below:
For example if Denison has been sold 1000 Shares, such shares resold are
equal to 1000 times the number of days from January 01, 1996 until December 31,
1999 divided by one thousand four hundred sixty (1460). For example if the
agreement is terminated at 300 days after January 01, 1996, the number of shares
resold would be:
1000 - 1000 x 300 = 794 Shares (capped at 50% or 500 shares)
-----------
1460
9. EFFECT OF MERGER, TRANSFER OF ASSETS, OR DISSOLUTION. This
Agreement shall not be terminated by a voluntary or involuntary termination of
BioMarin's existence resulting from a merger or consolidation in which BioMarin
is not the consolidated or surviving entity or a transfer of all or
substantially all of BioMarin's assets. If such a merger, consolidation, or
transfer of assets occurs, BioMarin's obligations shall be delegated to the
surviving, resulting, or transferee entity.
10. OWNERSHIP OF INTANGIBLES. All research, development, designs,
processes, inventions, copyrights, patents, trademarks, service marks, and the
like that Denison conceives or develops while this Agreement is in effect shall
be BioMarin's property. Denison shall execute and deliver to BioMarin a copy of
BioMarin's standard employee confidentiality and proprietary rights agreement.
11. NON-COMPETITION BY DENISON AFTER TERMINATION 10.1. Immediately
upon termination of this Agreement, Denison shall immediately deliver to
BioMarin all of BioMarin's property then in his possession or under his
control.
<PAGE>
11.2 For a period of two years after termination of this Agreement,
Denison agrees not to compete unfairly, whether directly or indirectly, with
BioMarin. For purposes of this paragraph, to "compete unfairly" is to (a) use or
provide to third parties property that is owned by BioMarin under Paragraph 9;
(b) use or provide to third parties trade secrets within the definition of
California Civil Code Section 3426.1 (d) as that section exists on the date this
Agreement is executed or renewed; (c) compete or to assist third parties to
compete with BioMarin for the business of BioMarin's customers with respect to
the services offered by BioMarin on the date this Agreement is terminated; or(d)
attempt to induce or assist third parties to induce or attempt to induce, any of
BioMarin's employees to terminate employment with BioMarin and obtain employment
by any person or entity that competes with BioMarin.
12. MISCELLANEOUS PROVISIONS. 11.1. This Agreement is made in
and is subject to the law of the State of California.
12.2 Notices to be given in writing shall be transmitted by personal
delivery or by certified mail, return receipt requested, addressed as set forth
below or to another address given through written notice under the provisions of
this paragraph:
If to BioMarin:
BioMarin, Inc
Attention: Board of Directors
11 Pimentel Court
Novato, California 94949
If to Denison:
Grant W. Denison, Jr.
119 Abingdon Avenue
Kenilworth, IL 60043
Notices delivered personally shall be deemed communicated as of the date of
receipt. Mailed notices shall be deemed communicated as of the date of mailing.
<PAGE>
12.3 Disputes concerning this Agreement shall be referred to
arbitration under the California Arbitration Act upon written notice to the
other by the party seeking arbitration. BioMarin and Denison shall each appoint
one person to hear the dispute, and those persons shall appoint a third. The
decision of the arbitrators shall be by majority and shall be final, and costs
------------------------
of the arbitration are to be borne in such proportion as the arbitrators may
decide.
12.4 This Agreement is BioMarin's and Denison's entire agreement with
respect to Denison's employment and it supersedes all other agreements, whether
written or oral, between them. Each acknowledges there is no representation,
inducement, promise, or agreement, whether oral or in writing, with respect to
this Agreement's subject matter that is not incorporated into this Agreement.
Executed at Toronto, Canada
this 26th day of June, 1997
BioMarin Pharmaceuticals, Inc
By /s/ Gwynn R. Williams
--------------------------------
Director
Executed at ________________, _______________
this ___ day of ____, 1997
Grant W. Denison, Jr.
/s/ GRANT W. DENISON, JR.
-------------------------
<PAGE>
AMENDMENT TO EMPLOYMENT AGREEMENT
---------------------------------
WHEREAS: BioMarin Pharmaceutical, Inc. (the "COMPANY") and Grant W.
--------
Denison, Jr. ("EMPLOYEE") entered into an Employment Agreement dated as of June
26, 1997, a copy of which is attached hereto as Exhibit "A" (the "EMPLOYMENT
----------
AGREEMENT"); and
WHEREAS: Each of the Company and Employee now desire to amend, in part,
--------
Section 2.2 of the Employment Agreement.
NOW, THEREFORE, the Company and Employee agree that, as of October 26,
1998, the first two sentences of Section 2.2 of the Employment Agreement shall
be amended to read as follows:
"2.2 Except with the written consent of BioMarin's board of directors,
Denison shall devote one hundred percent (100%) of his productive, time, ability
and attention to BioMarin's business and shall not engage in any other business
or render any services of a business, commercial or professional nature to or on
behalf of any other person or enterprise except to the extent such activities
are in the interest of BioMarin. Denison shall not engage in any activity which
is directly competitive with BioMarin."
IN WITNESS WHEREOF, each of the parties have executed this Amendment to the
Employment Agreement as of October 26, 1998.
BIOMARIN PHARMACEUTICAL INC.
By: /s/ RAYMOND W. ANDERSON
--------------------------------
Raymond W. Anderson
Chief Financial Officer
EMPLOYEE
/s/ GRANT W. DENISON, JR.
--------------------------------
Grant W. Denison, Jr.
Chairman of the Board and Chief Executive
Officer
<PAGE>
AMENDMENT TO EMPLOYMENT AGREEMENT
---------------------------------
WHEREAS: BioMarin Pharmaceutical Inc. (the "COMPANY") and Grant W.
-------
Denison, Jr. ("EMPLOYEE") entered into an Employment Agreement dated as of June
26, 1997, a copy of which is attached hereto as Exhibit "A";
-----------
WHEREAS: The Company and Employee entered into an amendment to the
-------
Employment Agreement dated October 26, 1998, a copy of which is attached hereto
as Exhibit "B" (Exhibit A and Exhibit B together, the "EMPLOYMENT AGREEMENT");
-----------
and
WHEREAS: Each of the Company and Employee now desire to amend Section 4.3
-------
of the Employment Agreement.
NOW, THEREFORE, the Company and Employee agree that, as of January 1, 1998,
Section 4.3 of the Employment Agreement shall be amended to read as follows:
"4.3 Denison shall be paid an annual bonus, in addition to annual cash
compensation as detailed in Sections 4.1 and 4.2, according to the guidelines
enumerated on the document titled `Founders' Incentive Compensation Adjustment
as of January 1, 1998,' which document is hereby deemed incorporated by
reference herein."
The document titled "Founders' Incentive Compensation Adjustment as of
January 1, 1998" is attached hereto as Exhibit "C".
-----------
IN WITNESS WHEREOF, each of the parties have executed this Amendment to the
Employment Agreement as of January 1, 1998.
BIOMARIN PHARMACEUTICAL INC.
By: /s/ Raymond W. Anderson
-------------------------
Raymond W. Anderson
Chief Financial Officer
EMPLOYEE
/s/ Grant W. Denison, Jr.
-------------------------
Grant W. Denison, Jr.
<PAGE>
EXHIBIT C
BioMarin Pharmaceutical Inc.
Founders' Incentive Compensation
Adjustment as of January 1, 1998
Definitions
Quarterly Market Capitalization (QMC)
The QMC is the average market capitalization for the last ten trading days
of the calendar quarter. The market capitalization for a trading day is
the product of the shares outstanding times the NASD market system closing
price for that day. If the stock is not traded on a major exchange
(NASDAQ), then the common stock price of the last major investment of $1
million or greater by an independent investor will be the stock price used
for the QMC calculation.
Quarterly Adjustment Factor (QAF)
The QAF will be .24 for the first calendar quarter, .25 for the second
calendar quarter, .25 for the third calendar quarter, and .26 for the
fourth calendar quarter.
Valuation Minimum (VM)
The VM will be $20,000,000 for the first quarter of 1998 and will increase
by $1,000,000 per quarter every quarter through the second quarter of 2000.
Maximum Cash Bonus (MCB)
The MCB will be 100% of base salary.
Valuation Step-up (VSU)
The VSU will be $5,000,000.
Bonus Factor (BF)
The BF (for each complete VSU) will be a $5,000 bonus on an annual basis.
Quarterly Calculation (QC)
The QC is equal to the (QMC-VM)/VSU*BF*QAF where the quantity (QMC-VM)/VSU
is rounded down to the nearest whole number.
<PAGE>
Biomarin Pharmaceutical Inc.
Founders' Incentive Compensation
Adjustment as of January 1, 1998
Annual Bonus (AB)
The AB will be the sum of the four QC (quarterly calculations).
Other
This bonus program will be effective to June 30, 2000 unless otherwise
extended by mutual agreement of the Board of Directors and the named
executive.
The AB (annual bonus) will be paid in cash advances made with each
bimonthly salary payment up to the MCB. A final annual cash bonus, if
needed, up to the MCB and bonus stock options will be paid/granted within
30 days of year-end. The final cash payment will reconcile any cash
differences for the year up to the MCB.
If stock options are required to pay the full AB amount, the stock options
will have the following characteristics:
Exercise price as of December 31 for 1998 and 1999 and June 30 for
2000 if not extended.
Black-Scholes Value
Fully vested
The bimonthly cash advance will be paid in amounts that do not cumulatively
exceed 100% of base salary for the year-to-date period.
<PAGE>
AMENDMENT TO EMPLOYMENT AGREEMENT
---------------------------------
WHEREAS: BioMarin Pharmaceutical Inc. (the "COMPANY") and Grant W.
-------
Denison, Jr. ("EMPLOYEE") entered into an Employment Agreement dated as of June
26, 1997, a copy of which is attached hereto as Exhibit "A";
-----------
WHEREAS: Each of the Company and Employee now desire to amend the
-------
Employment Agreement.
NOW, THEREFORE, the Company and Employee agree that, as of January 1, 1999,
the Employment Agreement shall be amended to add the following provisions:
In the event of the Involuntary Termination, as defined below, of
Employee's employment with the Company within one (1) year of a Change of
Control, as defined below, Employee shall be entitled to receive from the
Company, within ten (10) days of such Involuntary Termination, a severance
payment equal to six (6) months of Employee's then-current annual salary and
fifty percent (50%) of the annual bonus that Employee would otherwise be
entitled to receive for the calendar year in which such Involuntary Termination
occurs. Additionally, upon such Involuntary Termination, fifty percent (50%) of
the then-unvested portion of all of Employee's options to purchase capital stock
of the Company shall immediately vest. The capitalized terms used above shall
have the following meanings:
1. "Change of Control" shall mean the occurrence of any of the following
events:
a) Any "person" (as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended) becoming the "beneficial owner"
(as defined in Rule 13d-3 under said Act), directly or indirectly, of securities
of the Company representing fifty percent (50%) or more of the total voting
power represented by the Company's then outstanding voting securities;
b) A change in the composition of the Board of Directors of the
Company occurring within a two-year period, as a result of which fewer than a
majority of the directors are Incumbent Directors. "Incumbent Directors" shall
mean directors who either (A) are directors of the Company as of the date
hereof, or (B) are elected, or nominated for election, to the Board of Directors
of the Company with the affirmative votes of at least a majority of the
Incumbent Directors at the time of such election or nomination (but shall not
include an individual not otherwise an Incumbent Director whose election or
nomination is in connection with an actual or threatened proxy contest relating
to the election of directors to the Company); or
c) The approval by stockholders of the Company of a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or the approval by
the stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all or
substantially all the Company's assets.
2. "Involuntary Termination" shall mean (i) without the Employee's express
written consent, a significant reduction of the Employee's duties, position or
responsibilities, or the removal of the Employee from such position and
responsibilities, unless the Employee is provided with a comparable position
(i.e., a position of equal or greater organizational level, duties, authority,
compensation and status); (ii) without the Employee's express written consent, a
substantial reduction, without good
<PAGE>
business reasons, of the facilities and perquisites (including office space and
location) available to the Employee immediately prior to such reduction; (iii) a
reduction by the Company in the annual salary of the Employee as in effect
immediately prior to such reduction; (iv) a material reduction by the Company in
the kind or level of employee benefits to which the Employee is entitled
immediately prior to such reduction with the result that the Employee's overall
benefits package is significantly reduced; (v) without the Employee's express
written consent, the relocation of the Employee to a facility or a location more
than 25 miles from the Employee's then present location; (vi) any purported
termination of the Employee by the Company which is not effected for disability
or for Cause, or any purported termination for which the grounds relied upon are
not valid; or (vii) the failure of the Company to obtain the assumption of this
Agreement by any successors in the event of a Change of Control.
IN WITNESS WHEREOF, each of the parties have executed this Amendment to the
Employment Agreement as of January 1, 1999.
BIOMARIN PHARMACEUTICAL INC.
By: /s/ Raymond W. Anderson
----------------------------
Raymond W. Anderson, Chief Financial Officer
EMPLOYEE
/s/ Grant W. Denison, Jr.
--------------------------
Grant W. Denison, Jr.
<PAGE>
EXHIBIT 10.10
EMPLOYMENT AGREEMENT
BioMarin Pharmaceutical, Inc, a California corporation ("BioMarin"), and
Christopher M. Starr ("Starr"), an individual resident of California, enter into
this Employment Agreement ("Agreement"), effective on the date that it is signed
by the second of them.
RECITALS
A. BioMarin wishes to employ Starr as its Vice President for Research and
Development, and once Starr is employed, to retain him, in order to avail itself
of Starr's experience, skills, and knowledge.
B. Starr wishes to be employed as BioMarin's Vice President for Research
and Development and, once employed, to be assured of security in his position.
C. BioMarin and Starr wish to enter into this Agreement on the terms and
conditions set forth below.
AGREEMENT
1. TERM. 1.1 BioMarin shall employ Starr as its Vice President for
Research and Development for three years, commencing on the effective date of
this agreement. Unless BioMarin or Starr gives notice of its or his intention
not to renew in accord with the notice requirements of Paragraph 11.2 this
Agreement shall be deemed renewed at the expiration of its three-year term on
all of its terms and conditions, except those governing Starr's compensation,
which shall be renewed under Paragraph 1.2
1.2. If this Agreement is renewed under the provisions of Paragraph
1.1, BioMarin and Starr shall confer, as soon as is practicable after the
commencement of the renewal term, and shall negotiate in good faith the
adjustment of Starr's compensation during this Agreement's renewal term. Should
BioMarin and Starr fail to meet or to agree upon the adjustment of Starr's
compensation within fifteen days after the renewal of this Agreement, BioMarin
may, upon two day's written notice, unilaterally adjust the compensation by
amounts that, under the circumstances, BioMarin reasonably believes will
compensate Starr fairly for his services during the renewal term. In that event,
Starr, without penalty or liability for BioMarin or Starr, and upon fifteen
days' written notice, may terminate this agreement as of the effective date of
the compensation adjustment, unless BioMarin agrees on or before such effective
date to any compensation adjustment demanded by Starr in his written notice.
<PAGE>
2. STARR'S DUTIES. 2.1 In his capacity as BioMarin's Vice
President of Research and Development, Starr shall perform all acts or services
and do all things necessary or advisable to manage or conduct BioMarin's
business, subject to the policies set by BioMarin's board of directors.
2.2 Except with the written consent of BioMarin's board of
directors, Starr shall devote seventy percent (70%) of his productive time,
ability, and attention to BioMarin's business and during this 70% of his time
shall not engage in any other business or render any services of a business,
commercial, or professional nature to or on behalf of any other person or
enterprise. With respect to the 30% of his time not devoted to BioMarin, Starr
shall not do any activity which is directly competitive with BioMarin. This
provision shall not prevent Starr from making passive personal investments,
except investments that result in Starr's direct or indirect acquisition of an
interest in a business actually or potentially competitive with BioMarin,
provided, however, that notwithstanding the foregoing Starr shall not
be prohibited from acquiring in the public market shares of securities that do
not exceed 1% of the outstanding stock of such issuer and to the extent that, on
the effective date of this Agreement, Starr has interests in businesses actually
or potentially competitive with BioMarin, nothing in this Agreement shall be
construed to require Starr to divest himself of such interests.
2.3 Starr shall not misuse, misappropriate, or, except as
authorized by BioMarin's board of directors, disclose to persons not employed by
BioMarin, any confidential information concerning BioMarin so long as the
information is reasonably subject to characterization as a "trade secret" within
the meaning of California Civil Code Section 3426.1 (d) as that section exists
on the date of this Agreement is executed or renewed. The confidential
information subject to the prohibition in this paragraph includes, but is not
limited to, information concerning finances, personnel, customers, computer
operations and programs, research and development, products, or services.
3. BIOMARIN'S DUTIES. 3.1 BioMarin shall provide Starr with the
compensation, incentives, benefits, and business expense reimbursement set out
in other paragraphs of this Agreement.
<PAGE>
4. STARR'S COMPENSATION.
4.1 During the first year of this Agreement Starr's BioMarin
compensation shall be the sum of $105,000.00 payable in twenty-four equal
installments of $4,375.00 each. During the second and third years of this
Agreement, Starr's compensation shall be reviewed by the board of directors and
appropriate adjustments based on cost-of-living and performance, but in no case
will the salary be less than paid in the first year of this Agreement. During
any renewal of this Agreement, Starr's compensation shall be as set forth in an
addendum to this Agreement, signed by or on behalf of BioMarin and Starr.
4.2 The installments provided in Paragraph 4.1 shall be paid on the
fifteenth and last days of each month, unless those days are Saturdays, Sundays,
or legal holidays, in which case the installments shall be paid on the last
preceeding business day.
4.3 On the first day of every quarter or the first trading day of
a quarter, the Company will calculate the capitalization of BioMarin using the
price of the common stock either on a publically traded exchange or the most
recent price at which a disinterested third party has acquired securities with a
value of at least one million dollars ($1,000,000) times the number of
outstanding shares. The first adjustment in Starr's salary occurs when the
capitalization of BioMarin reaches 50 million dollars ($50,000,000) and for each
subsequent increase or decrease of 50 million dollars ($50,000,000), Starr's
compensation shall be adjusted upwards or downwards by adding or subtracting
fifty thousand dollars ($50,000) in compensation for each fifty million dollar
($50,000,000) change in BioMarin's capitalization.
5. STARR'S BENEFITS. 5.1 BioMarin shall reimburse Starr for
the use of his personal automobile(s) for BioMarin-related activities, and Starr
shall maintain written records of such use and shall be reimbursed at standard
mileage rates acceptable to the Internal Revenue Service payable to him as a
result of such personal use.
5.2 BioMarin shall provide Starr with term life insurance, payable
as directed by Starr, in the amount of twice his annual compensation, but in no
case less than $300,000.00, and shall provide Starr and his dependents with
coverage under the Company's health insurance policy.
5.3 If Starr, in the opinion of a licensed medical doctor, becomes
mentally or physically incapacitated to the extent that he is unable to
discharge his employment duties under this Agreement for a period of six months
or more, BioMarin shall continue to provide Starr, for a period ending six
months from the determination of incapacity, or at the end of the term of this
Agreement if earlier, with his compensation as set out in Paragraph 4.1.
<PAGE>
5.4 If Starr dies during the term of this Agreement, BioMarin shall
continue to pay, for six months following Starr's death, or until the end of the
term of this Agreement if earlier, Starr's compensation, as set out in Paragraph
4.1 of this Agreement, to Starr's surviving spouse, if there is one, or, if not,
to the executor or administrator of Starr's estate. BioMarin shall pay any sums
owed to Starr as of the date of his death to the executor or administrator of
his estate.
5.5 Starr shall be entitled to such vacation time each year as
BioMarin provides to its other management employees, on the same terms and
conditions.
6. REIMBURSEMENT OF STARR'S REASONABLE BUSINESS EXPENSES. BioMarin
shall promptly reimburse Starr for all reasonable business expenses incurred by
Starr in the discharge of his duties under this agreement, so long as the
expenditures qualify as proper business deductions under the Internal Revenue
Code, and they are properly substantiated by Starr with documentation adequate
to establish their deductibility under the Internal Revenue Code.
9. TERMINATION.
7.1. This Agreement shall be terminated upon Starr's disability,
subject to the provisions of Paragraph 5.3; death, subject to the provisions of
Paragraph 5.4; upon Starr's voluntary resignation, or retirement.
7.2 This Agreement may be terminated at any time by BioMarin
without cause upon six months' notice to Starr and by Starr upon three months'
notice to BioMarin's board of directors. If this Agreement is terminated under
the provisions of this paragraph, BioMarin shall determine in its sole
discretion whether Starr shall continue to discharge his duties as BioMarin's
vice president or if his duties shall terminate at a date prior to the date this
Agreement is terminated. In any case, Starr shall be entitled to compensation
and benefits as provided in this Agreement until the effective date of this
Agreement's termination.
7.3 If, within twelve months of the effective date of this
Agreement, Starr employment terminates for "Cause" (as defined herein), Starr
shall not be entitled to compensation and benefits as provided in this
Agreement. "Cause" is defined as (i) an act of personal dishonesty taken by
Starr in connection with his responsibilities as an employee and intended to
result in personal enrichment of Starr, (ii) Starr's conviction of, plea of nolo
----
contendere to, a felony, (iii) a willful act by Starr which constitutes gross
- ----------
misconduct and which is injurious to the Company, and (iv) following delivery to
Starr of a written demand for performance from the Company which describes the
basis for the Company's belief that Starr has not substantially performed his
duties, continued violations by Starr of Starr's obligations to the Company. The
notice of termination under the provisions of this paragraph shall state the
grounds for termination and state all relevant facts supporting the grounds.
<PAGE>
8. PURCHASE OF STOCK AND STOCK BUY-BACK RIGHTS. Starr shall be
entitled to purchase 400,000 shares of the Company's stock at a purchase price
of one dollar ($1.00) per share. The Company shall provide a 4-year loan as of
the effective date of this Agreement to Starr for the purpose of share purchase.
Any stock purchase loans to Starr from the Company shall be due and payable upon
termination of employment.
If this Agreement is terminated for any reason, then Starr agrees to resell back
to BioMarin up to one half of any stock sold or given to him by BioMarin as
compensation at the original purchase price on a pro-rata basis as stated below:
For example if Starr has been sold 1000 Shares, such shares resold are
equal to 1000 minus (1000 times the number of days from June 26, 1997 until June
25, 2001 divided by one thousand four hundred sixty (1460)). For example if the
agreement is terminated at 300 days after June 26, 1997, the number of shares
resold would be:
1000 - 1000 x 300 = 794 Shares (capped at 50% or 500 shares)
-----------
1460
9. EFFECT OF MERGER, TRANSFER OF ASSETS, OR DISSOLUTION. This
Agreement shall not be terminated by a voluntary or involuntary termination of
BioMarin's existence resulting from a merger or consolidation in which BioMarin
is not the consolidated or surviving entity or a transfer of all or
substantially all of BioMarin's assets. If such a merger, consolidation, or
transfer of assets occurs, BioMarin's obligations shall be delegated to the
surviving, resulting, or transferee entity.
10. OWNERSHIP OF INTANGIBLES. All research, development, designs,
processes, inventions, copyrights, patents, trademarks, service marks, and the
like that Starr conceives or develops while this Agreement is in effect shall be
BioMarin's property. Starr shall execute and deliver to BioMarin a copy of
BioMarin's standard employee confidentiality and proprietary rights agreement.
11. NON-COMPETITION BY STARR AFTER TERMINATION 10.1. Immediately
upon termination of this Agreement, Starr shall immediately deliver to BioMarin
all of BioMarin's property then in his possession or under his control.
<PAGE>
11.2 For a period of two years after termination of this Agreement.
Starr agrees not to compete unfairly, whether directly or indirectly, with
BioMarin. For purposes of this paragraph, to "compete unfairly" is to (a) use or
provide to third parties property that is owned by BioMarin under Paragraph 9;
(b) use or provide to third parties trade secrets within the definition of
California Civil Code Section 3426.1 (d) as that section exists on the date this
Agreement is executed or renewed; (c) compete or to assist third parties to
compete with BioMarin for the business of BioMarin's customers with respect to
the services offered by BioMarin on the date this Agreement is terminated; or
(d) attempt to induce or assist third parties to induce or attempt to induce,
any of BioMarin's employees to terminate employment with BioMarin and obtain
employment by any person or entity that competes with BioMarin.
12. MISCELLANEOUS PROVISIONS. 11.1. This Agreement is made in and
is subject to the law of the State of California.
12.2 Notices to be given in writing shall be transmitted by personal
delivery or by certified mail, return receipt requested, addressed as set forth
below or to another address given through written notice under the provisions of
this paragraph:
If to BioMarin:
BioMarin, Inc
Attention: Board of directors
11 Pimentel Court
Novato, California 94949
If to Starr:
Christopher M. Starr
11 Pimentel Court
Novato, California 94949
Notices delivered personally shall be deemed communicated as of the date of
receipt. Mailed notices shall be deemed communicated as of the date of mailing.
<PAGE>
12.3 Disputes concerning this Agreement shall be referred to
arbitration under the California Arbitration Act upon written notice to the
other by the party seeking arbitration. BioMarin and Starr shall each appoint
one person to hear the dispute, and those persons shall appoint a third. The
decision of the arbitrators shall be final, and costs of the arbitration are to
be borne in such proportion as the arbitrators may decide.
12.4 This Agreement is BioMarin's and Starr's entire agreement with
respect to Starr's employment and it supersedes all other agreements, whether
written or oral, between them. Each acknowledges there is no representation,
inducement, promise, or agreement, whether oral or in writing, with respect to
this Agreement's subject matter that is not incorporated into this Agreement.
Executed at Toronto, Canada
this 26th day of June, 1997
BioMarin Pharmaceuticals, Inc
By /s/ [SIGNATURE]
-------------------------------
Director
Executed at Toronto, Canada
this 26th day of June, 1997
Christopher M. Starr
/s/ CHRISTOPHER M. STARR
------------------------
<PAGE>
AMENDMENT TO EMPLOYMENT AGREEMENT
---------------------------------
WHEREAS: BioMarin Pharmaceutical Inc. (the "COMPANY") and Christopher M.
--------
Starr ("EMPLOYEE") entered into an Employment Agreement dated as of June 26,
1997, a copy of which is attached hereto as Exhibit "A" (the "EMPLOYMENT
----------
AGREEMENT"); and
WHEREAS: Each of the Company and Employee now desire to amend, in part,
--------
Section 2.2 of the Employment Agreement.
NOW, THEREFORE, the Company and Employee agree that, as of October 26,
1998, the first two sentences of Section 2.2 of the Employment Agreement shall
be amended to read as follows:
"2.2 Except with the written consent of BioMarin's board of directors,
Starr shall devote one hundred percent (100%) of his productive, time, ability
and attention to BioMarin's business and shall not engage in any other business
or render any services of a business, commercial or professional nature to or on
behalf of any other person or enterprise. Starr shall not engage in any activity
which is directly competitive with BioMarin."
IN WITNESS WHEREOF, each of the parties have executed this Amendment to the
Employment Agreement as of October 26, 1998.
BIOMARIN PHARMACEUTICAL INC.
By: /s/ RAYMOND W. ANDERSON
--------------------------------
Raymond W. Anderson
Chief Financial Officer
EMPLOYEE
/s/ CHRISTOPHER M. STARR
--------------------------------
Christopher M. Starr
<PAGE>
AMENDMENT TO EMPLOYMENT AGREEMENT
---------------------------------
WHEREAS: BioMarin Pharmaceutical Inc. (the "COMPANy") and Christopher M.
-------
Starr ("EMPLOYEE") entered into an Employment Agreement dated as of June 26,
1997, a copy of which is attached hereto as Exhibit "A";
-----------
WHEREAS: The Company and Employee entered into an amendment to the
-------
Employment Agreement dated October 26, 1998, a copy of which is attached hereto
as Exhibit "B" (Exhibit A and Exhibit B together, the "EMPLOYMENT AGREEMENT");
-----------
and
WHEREAS: Each of the Company and Employee now desire to amend Section 4.3
-------
of the Employment Agreement.
NOW, THEREFORE, the Company and Employee agree that, as of January 1, 1998,
Section 4.3 of the Employment Agreement shall be amended to read as follows:
"4.3 Starr shall be paid an annual bonus, in addition to annual cash
compensation as detailed in Sections 4.1 and 4.2, according to the guidelines
enumerated on the document titled `Founders' Incentive Compensation Adjustment
as of January 1, 1998,' which document is hereby deemed incorporated by
reference herein. "
The document titled "Founders' Incentive Compensation Adjustment as of
January 1, 1998" is attached hereto as Exhibit "C".
-----------
IN WITNESS WHEREOF, each of the parties have executed this Amendment to the
Employment Agreement as of January 1, 1998.
BIOMARIN PHARMACEUTICAL INC.
By: /s/ Raymond W. Anderson
--------------------------
Raymond W. Anderson
Chief Financial Officer
EMPLOYEE
/s/ Christopher M. Starr
--------------------------
Christopher M. Starr
<PAGE>
Exhibit C
BioMarin Pharmaceutical Inc.
Founders' Incentive Compensation
Adjustment As Of January 1, 1998
Definitions
Quarterly Market Capitalization (QMC)
The QMC is the average market capitalization for the last ten trading days
of the calendar quarter. The market capitalization for a trading day is
the product of the shares outstanding times the NASD market system closing
price for that day. If the stock is not traded on a major exchange
(NASDAQ), then the common stock price of the last major investment of $1
million or greater by an independent investor will be the stock price used
for the QMC calculation.
Quarterly Adjustment Factor (QAF)
The QAF will be .24 for the first calendar quarter, .25 for the second
calendar quarter, .25 for the third calendar quarter, and .26 for the
fourth calendar quarter.
Valuation Minimum (VM)
The VM will be $20,000,000 for the first quarter of 1998 and will increase
by $1,000,000 per quarter every quarter through the second quarter of 2000.
Maximum Cash Bonus (MCB)
The MCB will be 100% of base salary.
Valuation Step-up (VSU)
The VSU will be $5,000,000.
Bonus Factor (BF)
The BF (for each complete VSU) will be a $5,000 bonus on an annual basis.
Quarterly Calculation (QC)
The QC is equal to the (QMC-VM)/VSU*BF*QAF where the quantity (QMC-VM)/VSU
is rounded down to the nearest whole number.
<PAGE>
BioMarin Pharmaceutical Inc.
Founders' Incentive Compensation
Adjustment as of January 1, 1998
Annual Bonus (AB)
The AB will be the sum of the four QC (quarterly calculations).
Other
This bonus program will be effective to June 30, 2000 unless otherwise
extended by mutual agreement of the Board of Directors and the named
executive.
The AB (annual bonus) will be paid in cash advances made with each
bimonthly salary payment up to the MCB. A final annual cash bonus, if
needed, up to the MCB and bonus stock options will be paid/granted within
30 days of year-end. The final cash payment will reconcile any cash
differences for the year up to the MCB.
If stock options are required to pay the full AB amount, the stock options
will have the following characteristics:
Exercise price as of December 31 for 1998 and 1999 and June 30 for
2000 if not extended.
Black-Scholes Value
Fully vested
The bimonthly cash advance will be paid in amounts that do not cumulatively
exceed 100% of base salary for the year-to-date period.
<PAGE>
AMENDMENT TO EMPLOYMENT AGREEMENT
---------------------------------
WHEREAS: BioMarin Pharmaceutical Inc. (the "COMPANY") and Christopher M.
-------
Starr ("EMPLOYEE") entered into an Employment Agreement dated as of June 26,
1997, a copy of which is attached hereto as Exhibit "A";
-----------
WHEREAS: Each of the Company and Employee now desire to amend the
-------
Employment Agreement.
NOW, THEREFORE, the Company and Employee agree that, as of January 1, 1999,
the Employment Agreement shall be amended to add the following provisions:
In the event of the Involuntary Termination, as defined below, of
Employee's employment with the Company within one (1) year of a Change of
Control, as defined below, Employee shall be entitled to receive from the
Company, within ten (10) days of such Involuntary Termination, a severance
payment equal to six (6) months of Employee's then-current annual salary and
fifty percent (50%) of the annual bonus that Employee would otherwise be
entitled to receive for the calendar year in which such Involuntary Termination
occurs. Additionally, upon such Involuntary Termination, fifty percent (50%) of
the then-unvested portion of all of Employee's options to purchase capital stock
of the Company shall immediately vest. The capitalized terms used above shall
have the following meanings:
1. "Change of Control" shall mean the occurrence of any of the
following events:
a) Any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended) becoming the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing fifty percent (50%) or
more of the total voting power represented by the Company's then outstanding
voting securities;
b) A change in the composition of the Board of Directors of the
Company occurring within a two-year period, as a result of which fewer than a
majority of the directors are Incumbent Directors. "Incumbent Directors" shall
mean directors who either (A) are directors of the Company as of the date
hereof, or (B) are elected, or nominated for election, to the Board of Directors
of the Company with the affirmative votes of at least a majority of the
Incumbent Directors at the time of such election or nomination (but shall not
include an individual not otherwise an Incumbent Director whose election or
nomination is in connection with an actual or threatened proxy contest relating
to the election of directors to the Company); or
c) The approval by stockholders of the Company of a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or the approval by
the stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all or
substantially all the Company's assets.
2. "Involuntary Termination" shall mean (i) without the Employee's
express written consent, a significant reduction of the Employee's duties,
position or responsibilities, or the removal of the Employee from such position
and responsibilities, unless the Employee is provided with a comparable position
(i.e., a position of equal or greater organizational level, duties, authority,
compensation and status); (ii) without the Employee's express written consent, a
substantial reduction, without good
<PAGE>
business reasons, of the facilities and perquisites (including office space and
location) available to the Employee immediately prior to such reduction; (iii) a
reduction by the Company in the annual salary of the Employee as in effect
immediately prior to such reduction; (iv) a material reduction by the Company in
the kind or level of employee benefits to which the Employee is entitled
immediately prior to such reduction with the result that the Employee's overall
benefits package is significantly reduced; (v) without the Employee's express
written consent, the relocation of the Employee to a facility or a location more
than 25 miles from the Employee's then present location; (vi) any purported
termination of the Employee by the Company which is not effected for disability
or for Cause, or any purported termination for which the grounds relied upon are
not valid; or (vii) the failure of the Company to obtain the assumption of this
Agreement by any successors in the event of a Change of Control.
IN WITNESS WHEREOF, each of the parties have executed this Amendment to the
Employment Agreement as of January 1, 1999.
BIOMARIN PHARMACEUTICAL INC.
By: /s/ Grant W. Denison, Jr.
---------------------------
Grant W. Denison, Jr., Chief Executive Officer
EMPLOYEE
/s/ Christopher M. Starr
--------------------------
Christopher M. Starr
<PAGE>
EXHIBIT 10.16
CONFIDENTIAL
------------
[* * *]: CONFIDENTIAL TREATMENT REQUESTED FOR PORTIONS OF THIS EXHIBIT
OPTION AGREEMENT
----------------
THIS AGREEMENT, is made and entered into this 1st day of May, 1998
("Effective Date") by and between BioMarin Pharmaceutical Inc., having its
principal office at 11 Pimentel Court, Novato, California 94949, ("BioMarin")
and W. R. Grace & Co., having its principal office at One Town Center Road, Boca
Raton, Florida 33486-1010 ("Grace").
RECITALS
A. Grace owns certain Patent Rights, as defined below.
B. BioMarin is interested in evaluating the feasibility of
commercializing products based on such Patent Rights, and in acquiring an
exclusive worldwide license thereunder.
C. Grace is willing to grant to BioMarin an option to acquire such a
license, on the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the premises and mutual covenants,
Grace and BioMarin hereby agree as follows:
ARTICLE I
DEFINITIONS
-----------
I.1 "License Agreement" shall mean the license agreement described in
-----------------
Article III below.
I.2 "Licensed Product" shall mean any product whose manufacture, use or
----------------
sale would infringe a Valid Claim in the country for which such product is
manufactured, used or sold.
I.3 "Option Period" shall mean the three (3) year period commencing as of
-------------
the Effective Date.
I.4 "Patent Rights" shall mean all subject matter claimed in the
-------------
following:
(a) The United States patent Numbers 5,145,681 and 5,505,943, and
United States Patent Application Serial number 867731, filed June 2, 1997, and
any continuations, continuations-in-part, divisions and substitutions of any of
such patent and patent applications and all renewals, reissues and extensions of
any such patent; and
1
<PAGE>
(b) Any foreign patents and/or applications that are counterparts of
a patent described in subparagraph (a) above, including any patent or
application that claims subject matter claimed in, or that takes priority from,
a patent described in subparagraph (a) above.
I.5 "Related Technology" shall mean any biological materials, and any
------------------
research and development information, inventions, know-how, and all pre-
clinical, clinical and other technical data, in each case that are owned by
Grace, or possessed by Grace with the fight to provide to others, as of the
Effective Date, which in each case relate to the practice of the Patent Rights.
I.6 "Valid Claim" shall mean a claim of an issued and unexpired patent
-----------
included within the Patent Rights, which has not been held unenforceable, or
invalid by a court or other governmental agency of competent jurisdiction, and
which has not been admitted to be invalid or unenforceable through reissue,
disclaimer or otherwise.
ARTICLE II
OPTION GRANT
------------
II.1 Subject to the payment of the fee specified in IV.1 below, Grace
hereby grants to BioMarin an exclusive option, for the duration of the Option
Period, to acquire an exclusive fight and license, with a fight to grant and
authorize sublicenses under the Patent Rights and Related Technology, to make,
use and sell Licensed Products, to practice any process, method or procedure of
the Patent Rights and Related Technology and to otherwise exploit the Patent
Rights and the Related Technology. If BioMarin fails to pay any of the specified
fees within 30 days of the due date, BioMarin's option under this Agreement
shall terminate.
II.2 The option contained herein may be exercised by BioMarin at any time
during the Option Period, by so notifying Grace in writing.
ARTICLE III
TERMS OF LICENSE
----------------
III.1 Upon BioMarin's exercise of the option granted under Article II
above, BioMarin and Grace shall enter into a License Agreement, on reasonable
and customary terms and conditions, pursuant to which Grace grants to BioMarin
the license contemplated by Section II. 1 above. The terms of such License
Agreement shall include, but not be limited to, the following:
2
<PAGE>
(a) Royalties payable to Grace on sales by BioMarin, its affiliates
and sublicensees of Licensed Products to independent customers, as outlined
on Exhibit "A" attached hereto.
(b) The right for BioMarin to terminate upon notice in writing to
Grace (i) the License Agreement in its entirety or (ii) as to any patent
application in the Patent Rights, provided that no change in the royalty
obligation would be made.
(c) Either Party would have the fight to assign the License
Agreement to a third party that succeeds to substantially all of the
business or assets to which the subject matter of the License Agreement
relates.
(d) [***]
(e) [***]
III.2 In the event that BioMarin and Grace do not enter into the License
Agreement within six (6) months after BioMarin's exercise, in accordance with
Section I1.2, of the option granted hereunder, BioMarin may either:
(a) Initiate a binding arbitration proceeding, pursuant to which
the terms of the License Agreement shall be established (consistent with
Section III. 1 above). Such arbitration shall be conducted in accordance
with the roles of the American Arbitration Association, and the parties
agree that the arbitrator shall be an individual experienced in
pharmaceutical product licensing. BioMarin may exercise such fight to
initiate arbitration by so notifying Grace within three (3) months after
the end of the six (6) month period described above (such combined nine (9)
month period being referred to below as the "Negotiation Period"). In such
event, Grace and BioMarin will use all reasonable efforts to conclude the
arbitration proceeding as expeditiously as possible; or
(b) Allow the option to lapse by so notifying Grace in writing
within the Negotiation Period. In such event, BioMarin shall have a right
of first refusal with respect to any grant by Grace of a license or other
fight with respect to a patent or application within the Patent Rights
during the twelve (12) month period after the Negotiation Period. If Grace
proposes to make such a grant during such period, Grace shall notify
BioMarin of the proposed terms and conditions of such grant. If BioMarin
does not agree to acquire such license or right on the terms specified in
Grace's notice, Grace shall be free to grant such fights to a third party
on the terms offered in Grace's notice to BioMarin.
3
[*CONFIDENTIAL TREATMENT REQUESTED]
<PAGE>
ARTICLE IV
PAYMENT
-------
IV.1 In consideration of the option granted in Article II above, BioMarin
shall pay to Grace the option fees in accordance with the schedule and for the
stated amounts as set forth on Exhibit "B".
ARTICLE V
REPRESENTATIONS BY GRACE
------------------------
V.1 Grace represents and warrants that: (i) Grace owns all rights, title
and interest in and to the Patent Rights existing as of the Effective Date; (ii)
Grace has the fight to enter into this Agreement, to fully comply with the terms
and conditions of this Agreement, and to enter into the License Agreement and to
grant to BioMarin the fights and licenses contemplated in Section II.1 above;
(iii) Grace has not executed any agreement or contract that is inconsistent with
the fights and licenses granted or to be granted hereunder; and (iv) Grace will
not grant rights to any third party under the Patent Rights during the Option
Period.
ARTICLE VI
REPRESENTATIONS BY BIOMARIN
---------------------------
VI.1 BioMarin represents and warrants that (i) it shall use its best
efforts to produce material toxicology studies of the products based on the
Patent Rights during the period between the first and second anniversary of the
Effective Date; and (ii) it shall use its best efforts to commence clinical
testing of the products based on the Patent Rights after the second anniversary
of the Effective Date; and (iii) BioMarin has the fight to enter into this
Agreement, to fully comply with the terms and conditions of this Agreement, and
to enter into the License Agreement and comply with its terms and conditions.
ARTICLE VII
PATENT PROSECUTION AND MAINTENANCE.
-----------------------------------
VII.1 Grace shall use reasonable efforts to prosecute, as Grace sees fit
and maintain in the countries listed in Exhibit "C" patent applications and
patents within the Patent Rights, using counsel selected by Grace and with due
consultation with BioMarin. Grace shall not abandon or lapse any patent
applications or patents without first offering
4
<PAGE>
these to BioMarin. Grace shall provide BioMarin with copies of all relevant
documentation so that BioMarin may be informed and apprised of the continuing
prosecution, and BioMarin agrees to keep this documentation confidential.
VII.2 Grace shall use reasonable efforts, with due considerations to the
stage of prosecution, to amend any patent application within the Patent Rights
to include claims requested by BioMarin to protect the products contemplated by
BioMarin to be sold under the License Agreement.
ARTICLE VIII
CONFIDENTIALITY
---------------
VIII.1 During the term of this Agreement and for a period of two (2) years
thereafter, BioMarin and Grace shall use their best efforts to protect the
confidentiality of proprietary information provided it by the other party and
identified in writing or orally as confidential and proprietary and not to use
such information except for the purposes of this Agreement. This obligation of
confidentiality shall not apply to information which (a) is or becomes known
publicly through no fault of the other party; (b) is obtained or learned by the
receiving party from a third party entitled to disclose it; (c) is already known
to the receiving party at the time of disclosure, as shown by the receiving
party's prior written records; or (d) is developed by the receiving party
independent of any disclosure made hereunder, which can be demonstrated by
written or other documentary evidence. This obligation of confidentiality does
not apply when such disclosure of information is required by law.
ARTICLE IX
TERM AND TERMINATION
--------------------
IX.1 Unless otherwise required by Section III.2(a) this Agreement shall
become effective on the Effective Date and, unless sooner terminated pursuant to
this Article IX, shall continue in full force and effect until the date of the
Expiration of the Option Period.
IX.2 In the event the License Agreement is entered into by and between
Grace and BioMarin pursuant to Article III, this Agreement shall be replaced
thereby and any and all provisions of this Agreement shall cease to be
effective.
IX.3 BioMarin may notify Grace in writing of its election not to
exercise the option contained herein prior to the expiration of the Option
Period, in which event this Agreement shall cease to be effective upon such
notification. It is understood that BioMarin shall have no obligation to
exercise the option granted hereunder or, after exercise thereof, to enter into
the License Agreement.
5
<PAGE>
IX.4 In the event BioMarin fails to pay any of the option payments of
Exhibit B to this Agreement within the thirty (30) days following its due date,
the Option shall immediately terminate and this Agreement shall cease to be
effective.
ARTICLE X
MISCELLANEOUS
-------------
X.1 This Agreement shall be construed and interpreted, and the fights
and obligations of the parties hereto shall be determined, in accordance with
the laws of the State of California, without regard to the conflicts of laws
principles thereof.
X.2 No alteration or amendment of this Agreement shall be effective
unless embodied in writing and executed by an authorized representative of each
party.
X.3 This Agreement, and the fights and obligations hereunder, shall not
be assigned by either party without the prior written consent of the other
party, except to the successor to or the assign of substantially all of the
business and assets of either party relating to the subject matter of this
Option Agreement and shall be binding upon the parties, their successors and
assigns.
X.4 The addresses of the parties for purposes of notices, payments and
other communications shall be as follows:
BIOMARIN PHARMACEUTICAL, INC.
11 Pimentel Court
Novato CA 94949
Attn: Dr. Christopher M. Starr, Vice President of Research
W. R. GRACE & CO.
One Town Center Road
Boca Raton, Florida 33486-1010
Attn: Dr. Nils Friis, Director of Corporate Development
Either party, by notice to the other, may change its address for the
purpose of this Section X.
X.5 This Agreement sets forth the entire understanding of the parties
hereto with respect to the subject matter hereof and supersedes any previous
understandings and agreements, written or oral, which the parties hereto may
have reached with respect to the subject matter hereof.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Option Agreement to
be executed as of the day and year first above written.
/s/ Nils Friis
----------------------------------
("Grace")
By: /s/ Nils Friis
------------------------------
/s/ Signature
----------------------------------
("BioMarin")
By: /s/ Christopher M. Starr.
------------------------------
7
<PAGE>
EXHIBIT "A"
-----------
ROYALTIES
---------
The royalties payable under the licenses shall be based on annual net sales
(ANS) of the Licensed Product as follows:
[***]
8
[*CONFIDENTIAL TREATMENT REQUESTED]
<PAGE>
EXHIBIT "B"
-----------
PAYMENT SCHEDULE
----------------
1. $25,000 On the Effective Date.
2. $25,000 Upon acceptance of delivery of the Related Technology.
3. $50,000 Upon the earlier to occur of (i) successful production
of the products based on the Patent Rights or (ii) six months
from delivery of the Related Technology.
4. $125,000 On the first anniversary of the Effective Date.
5. $150,000 On the second anniversary of the Effective Date.
9
<PAGE>
<TABLE>
<CAPTION>
Report Date: APRIL 1, 1998 CASE SUMMARY REPORT CASEREPT: PAT002
PAGE: 67
<S> <C>
Case Number: 7454 Reference Number: 07914 Group Code: 01 Priority: USA
Title: Compositions Containing Protease Produced By Disclosure Date: 03/09/1989 Disposition: A
Vibrio And Method Of Use In Debridement And Evaluation Date: 03/01/1991 Subject Codes: 305 307
Wound Healing Project Codes: 6350
Attorney: BJA Beverly J. Artale Key Words: Wound Healing
Orig Division: RES Washington Research Division Orig Department: 154
Owner: GNY W.R. Grace & Co.-Conn. Office of Rec: Columbia, Maryland
Product Line: CTG Corporate Technical
Product Code: COD Commerical Development License
INVENTORS: DURHAM DR FORTNEY DZ
</TABLE>
Abstract:
Compositions and methods of use are provided for debriding and wound healing
applications. The Compositions contain certain proteases produced by
microrganisms of the genus vibrio. Europe designates: Austria, Belgium,
Denmark, France, Germany, Gt Britain, Greece, Holland, Italy, Luxembourg,
Spain, Sweden, Switzerland. Licensed agreement with Johnson & Johnson Medical
Ltd.
Evaluation Remarks: Commercially important
<TABLE>
<CAPTION>
F F1 F1 Application Filing Patent Grant Publictn Exam Tax Renewal
S Country No Ip Number Date Number Date Date Date Date Date
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AUSTRIA 01 PI 91112732.2 07/29/1991 AT0472011 11/13/1996 2/26/1992 07/29/1997
BELGIUM 01 PI 91112732.2 07/29/1991 BE0472011 11/13/1996 07/29/1997
CANADA 01 PI 2046602-5 07/11/1991 07/11/1998 07/11/1993
DENMARK 01 PI 91112732.2 07/29/1991 OK0472011 11/13/1996 07/29/1997
U EUROPE 01 PI 91112732.2 07/29/1991 0472011 11/13/1996 07/29/1993
FRANCE 01 PI 91112732.2 07/29/1991 FR0472011 11/13/1996 07/29/1997
GERMANY 01 PI 91112732.2 07/29/1991 69123099.4 11/13/1996 07/29/1997
GREAT BRI 01 PI 91112732.2 07/29/1991 GB0472011 11/13/1996 07/29/1997
GREECE 01 PI 91112732.2 07/29/1991 J022412 11/13/1996 07/29/1997
HOLLAND 01 PI 91112732.2 07/29/1991 NL0472011 11/13/1996 07/29/1997
ITALY 01 PI 91112732.2 07/29/1991 II0472011 07/29/1997
JAPAN 01 PI 226351/91 08/13/1991 08/13/1998
LUXEMBOUR 01 PI 91112732.2 07/29/1991 LU0472011 11/13/1996 07/29/1997
NEW ZEALA 01 PI 238954 07/12/1991 238954 05/17/1994 07/12/1995
SPAIN 01 PI 91112732.2 07/29/1991 91112732.2 11/13/1996 07/29/1997
SWEDEN 01 PI 91112732.2 07/29/1991 91112732.2 11/13/1996 07/29/1997
SWITZERLA 01 PI 91112732.2 07/29/1991 PO472011 11/13/1996 07/29/1997
A USA 01 CP 670612 03/13/1991
<CAPTION>
F Expiration Assoc Agn Spn Last
S Country Date Code Cod Div Tax
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AUSTRIA 07/29/2011 BARGE CTG 233.27
BELGIUM 07/29/2011 KIRKP CTG 128.19
CANADA GOWL GOW CTG 191.85
DENMARK 07/29/2011 BUDDE CTG 267.01
U EUROPE 11/13/1996 UEXKL CTG 1000.76
FRANCE 07/29/2011 WNSTN CTG 169.84
GERMANY 07/29/2011 UEXKL CTG 206.23
GREAT BRI 07/29/2011 KEMP CTG 240.09
GREECE 07/29/2011 THEOD CTG 163.00
HOLLAND 07/29/2011 VRIES VRI CTG 302.97
ITALY 07/29/2011 BREVE CTG 133.37
JAPAN ODAJ CTG 274.34
LUXEMBOUR 07/29/2011 FREY CTG 96.79
NEW ZEALA 05/17/2011 PARK CTG 133.86
SPAIN 07/29/2011 ISERN CTG 139.37
SWEDEN 07/29/2011 B&S CTG 143.15
SWITZERLA 07/29/2011 EGLI CTG 427.59
A USA 154 0.00
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Report Date: APRIL 1, 1998 CASE SUMMARY REPORT CASEREPT: PAT002
PAGE: 51
<S> <C>
Case Number: 7454 Reference Number: 07454 Group Code: 01 Priority: USA
Title: COMPOSITIONS CONTAINING PROTEASE PRODUCED BY Disclosure Date: 03/09/1989 Disposition: A
VIBRIO AND METHOD OF USE IN DEBRIDEMENT Evaluation Date: 08/01/1991 Subject Codes: 305 307
AND WOUND HEALING Project Codes: 4670
Attorney: BJA Beverly J. Artale Key Words: Wound Healing
Orig Division: RES Washington Research Division Orig Department: 154
Owner: GNY W.R. Grace & & Co.-Conn. Office of Rec: Columbia, Maryland
Product Line: CTG Corporate Technical
Product Code: COD Commerical Development License
INVENTORS: DURHAM DR FORTNEY DZ
</TABLE>
Abstract:
COMPOSITIONS AND METHODS OF USE ARE PROVIDED FOR DEBRIDING AND WOUND HEALING
APPLICATIONS. THE COMPOSITIONS CONTAIN CERTAIN PROTEASES PRODUCED BY
MICROORGANISMS OF THE GENUS VIBRIO. Licensed agreement with Johnson & Johnson
Medical Ltd.
Evaluation Remarks: Commercially important
<TABLE>
<CAPTION>
F Country F1 F1 Application Filing Patent Grant Publictn Exam Tax Renewal Expiration
S No Ip Number Date Number Date Date Date Date Date Date
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
USA 01 PI 567884 08/15/1990 5145681 09/08/1992 03/08/2000 08/15/2010
<CAPTION>
F Country Assoc Agn Spn Last
S Cod Cod Div Tax
- ---------------------------------------------------
<S> <C> <C> <C> <C> <C>
USA CTG 1002.00
</TABLE>
<PAGE>
EXHIBIT 10.17
CONFIDENTIAL
------------
[* * *]: CONFIDENTIAL TREATMENT REQUESTED FOR PORTIONS OF THIS EXHIBIT
GRANT TERMS AND CONDITIONS AGREEMENT
This agreement documents the grant terms and conditions between BioMarin
Pharmaceuticals at 11 Pimentel Court, Novato, CA 94949 (hereinafter referred to
as "BioMarin") and Harbor-UCLA Research and Education Institute at 1124 West
Carson Street, Torrance, CA 90502-2084 (hereinafter referred to as "REI"), and
each referred to as the "Party" or collectively as the "Parties".
1. Principal Investigator:
The Principal Investigator on behalf of REI is Emil D. Kakkis, M.D., Ph.D.
(hereinafter referred to as "Dr. Kakkis" or "Principal Investigator").
2. Research Project:
The Research Project is titled, "Enzyme Replacement Therapy for MPS I with
Recombinant a-L-iduronidase". The research plan for this project is
attached as Appendix A, and includes work which is to be done beyond the
current term of the initial grant period. It is understood that changes to
the protocol may occur as dictated by the progress and needs of the
project.
3. Grant Period:
The Initial grant period is for a period of one year and shall be effective
as of the date the Initial payment #1 (see clause #5(a)) is received by
REI and the date this agreement is fully executed, whichever occurs later.
It is anticipated that this period will be extended with additional funds
based upon project progress and funding available to BioMarin.
4. Grant Amount:
(a) [***]
(b) Appendix B contains the budget for the initial period of the Research
Project. REI can rebudget funds between the major cost categories
(e.g., personnel, facilities, equipment, etc.) as necessary with the
consent of BioMarin, such consent not to be unreasonably withheld, to
achieve the goals of the Research Project. REI may make changes within
the major cost categories without seeking the consent of BioMarin.
(c) The first year's budget reflects the current anticipated costs for the
Initial grant period.
[* CONFIDENTIAL TREATMENT REQUESTED]
<PAGE>
Grant Terms and Conditions Agreement
Page 2
(d) The second year's budget represents an estimate of the operating
budget for the second year. REI shall submit to BioMarin at least 90
days prior to the end of the Initial grant period its request for the
second year's funding. BioMarin shall advise REI of its approval of
the second year's budget, including any additional funding to be
provided if applicable, at least 60 days prior to the end of the
initial grant period.
(e) It is understood that the budgets prepared by REI are based upon the
current best estimates of anticipated costs, and that additional funds
may be necessary for the project, including funds for costs in year 2
and those described under clause #5(c). If at any time REI and
BioMarin determine that the funding provided by BioMarin will not be
adequate to meet the project's needs, REI and BioMarin will decide on
a need for a funding change and BioMarin will endeavor to provide such
funding. If REI and BioMarin are unable to agree on an adequate amount
of funding, then REI shall have the right to terminate the Research
Project and this Agreement in accordance with clause #18(c).
5. PAYMENT TERMS:
(a) BioMarin shall, within ten (10) days of signing this Agreement or
within ten (10) days of the time BioMarin has been funded and has
approved the Research Project, whichever occurs later, make its
initial payment #1 to REI. BioMarin shall make quarterly payments
thereafter which are due two weeks in advance of the start of the next
quarter and in amounts as indicated below.
[***]
(b) If spending needs to be changed due to the progress of the Research
Project, REI and BioMarin shall negotiate in good faith the payment
amounts and due dates. It is understood that, in addition to any other
remedy provided to REI hereunder, REI shall not be obligated to
continue to work on the Research Project, and may terminate this
Agreement in accordance with clause #18, if funds are not received
when due or are otherwise determined by REI in its good faith
discretion to be inadequate to
[*CONFIDENTIAL TREATMENT REQUESTED]
<PAGE>
Grant Terms and Conditions Agreement
Page 3
fulfill the project needs (pay personnel, purchase supplies, etc.)
(See also clause #18(a).)
(c) The items listed below may be needed in order to complete the work,
but they have not been budgeted as these costs cannot be predicted at
this time. BioMarin and REI will determine if any of these or
additional items are necessary in order to complete the Research
Project, and BioMarin will provide these services directly to the
Research Project at its own expense.
- FDA or other special consultant fees
- Biologics or other safety testing by outside subcontractors
- Validation of purification system performed off-site at outside
subcontractor facility
- Computer consultants
- CGMP or other specialized training from staff
- Genotyping of patients by a subcontractor facility
- Costs relating to clinical trial complications and needed medical
specialists and treatment
(d) [***]
(e) In addition, REI will at its own expense deposit and maintain in a
secure, off site location adequate copies of protocols and operating
procedures, and backup cultures or cryopreserved specimens of any
living biological property such as cell lines, cultures, etc.
(f) Checks are to be made payable and sent to:
Harbor-UCLA Research and Education Institute
P.O. Box 60637 Terminal Annex
Los Angeles, California 90060
ATTN: Project No. 008831-00-00
[*CONFIDENTIAL TREATMENT REQUESTED]
<PAGE>
Grant Terms and Conditions Agreement
Page 4
6. Equipment Title:
REI shall retain title to all equipment purchased with grant funds under
this Agreement.
7. Financial Reports:
REI shall submit to BioMarin quarterly financial reports detailing research
project expenses by major cost category (e.g., personnel, facilities,
equipment, supplies, animal costs, other expenses, and travel) within 45
days after the end of each quarter. At BioMarin's request, a detailed audit
can be done by BioMarin or its authorized agent at its own expense with
reasonable advance notice during REI's normal business hours in order to
satisfy BioMarin that payments have been used in accordance with this
Agreement anti REI will cooperate with such audit. REI will maintain annual
financial records for the Research Project for a period of five (5) years.
8. Compliance Committee Approvals:
The Principal Investigator will obtain the necessary approvals from the
Institutional Animal Care and Use Committee for animal studies and
approvals from the Institutional Review Board for human studies and
approvals from the FDA to perform the manufacture of recombinant a-L-
iduronidase for clinical use.
9. Ownership of Data and Records
REI shall own all data and records which it generates relating to or
resulting from the Research Project. BioMarin shall have the right to
inspect such data and records with reasonable advance notice during REI's
normal business hours. It also is understood that applicable governmental
agencies shall have the right to inspect such data and records as required
by law.
10. Right to Publish
(a) The Principal Investigator has the right to publish all research
preclinical and clinical data, methods, negative results or adverse
effects resulting from the Research Project it is understood that
Intellectual property will be protected prior to submission of such
research results for publication. The Principal Investigator will
submit to BioMarin all manuscripts and abstracts containing data or
proprietary Information derived from this grant for review and
comment. BioMarin will have 30 days in which to conduct such review
and comment end shall have the right to require that all confidential
and/or proprietary information be removed. Failure by BioMarin to
respond within
<PAGE>
Grant Terms and Conditions Agreement
Page 5
30 days will indicate their approval to publish in the form in which
it was submitted.
(b) BioMarin has the right to request that any publications and abstracts
resulting from this research acknowledge funding from BioMarin.
11. Use of Name:
BioMarin shall not use the names of REI, the County of Los Angeles, or the
University of California, Los Angeles, or their agents, officers, or
employees, for promotional or advertising purposes without the prior
written approval of REI. However, BioMarin has the right to use REI's name
with actual and potential investors for the purpose of raising capital for
this project.
12. Existing Intellectual Property:
The following list delineates the existing patentable or proprietary
Inventions, trade secrets, scientific knowledge, materials or processes
belonging to and/or known to REI which are covered by this Agreement and
are described more fully in Appendix C:
(a) Cell line 2.131.
(b) Microcarrier culture and harvest process/medium used.
(c) Purification system: heparin phenyl rapid two-step protocol.
(d) ELISA procedure to detect anti-iduronidase antibodies.
(e) Enzyme replacement as therapy for MPS I.
An exclusive worldwide license to this existing Intellectual property is
hereby granted to BioMarin subject to the terms in clause #5(d), 15, and
18(f).
13. New Inventions, Materials, or Processes Anticipated to be Produced and
Which are Covered Under This Agreement:
(a) Methods developed to produce enzyme in Chinese Hamster Ovary Cells.
(b) Methods developed to purify protein or ensure it is safe.
(c) New cell lines produced to make enzyme.
(d) Reagents created to assess enzyme purity or quality.
(e) Use of the enzyme in diagnostic applications.
An exclusive worldwide licensing agreement to the new inventions, materials
or processes produced and covered under this Agreement will be negotiated
subject to the terms in clause #15.
<PAGE>
Grant Terms and Conditions Agreement
Page 6
14. Inventions or Research Discoveries Excluded From This Agreement:
Inventions or research discoveries excluded from this agreement include,
but are not limited to, all research developments or techniques initially
developed during studies of the canine MPS I model during this grant period
since these experiments will be 100% funded by other sources. The excluded
items include, but are not limited to, the following:
(a) A non-invasive method for monitoring enzyme that is currently
under development in the canine model.
(b) Localized application methods of enzyme therapy to be developed in the
dog such as intrathecal, ophthalmic or intrajoint administration.
(c) Optimized administration methods or dosing regimens developed first in
dog studies.
(d) Methods to induce immune tolerance using the enzyme.
(e) Computer software developed to monitor and control the manufacturing
process produced without funding from BioMarin.
15. Inventions and Patent Rights:
.
(a) For purposes of this Agreement, the term "Invention" shall mean any
inventions or discoveries made during the term of this Agreement and
also the existing intellectual property as listed In clause #12,
whether or not patentable, and any know-how or patent rights relating
thereto, which arise out of or relate to the Research Project, with
the exclusions noted in Clause #14 above.
(b) In the event that the inventorship of an Invention under applicable
patent law is attributed solely to personnel performing work on
research on behalf of REI, then such Invention shall be assigned to
and shall be the sole property of REI. The Principal Investigator
agrees to notify BioMarin and REI promptly of the existence of such
invention.
(c) In the event that the inventorship of an Invention under applicable
patent law is attributed solely to personnel performing work on the
research on behalf of BioMarin, then such Invention shall be assigned
to and shall be the sole property of BioMarin. BioMarin agree to
notify REI and Principal Investigator promptly of the existence of
such invention.
(d) In the event that the Inventorship of an Invention under applicable
patent law is attributed jointly to personnel performing work on the
research on behalf of REI and to personnel performing work on the
research on behalf of BioMarin.
<PAGE>
Grant Terms and Conditions Agreement
Page 7
then such Invention shall be assigned by each such person referenced
in this paragraph Jointly and shall be the joint property of BioMarin
and REI.
(e) REI and BioMarin shall in a timely manner jointly review all
Inventions and shall mutually decide whether to prepare and file
patent applications at BioMarin's expense, REI's expense or Jointly.
(f) REI agrees that with respect to any Invention which is assigned solely
to REI hereunder or which is assigned Jointly to BioMarin and REI
hereunder, BioMarin shall have an exclusive worldwide license, with a
right to sublicense, all rights owned by REI in such Invention to
make, have made, use and sell such Invention and products embodying
such Invention, but subject to the provisions of clause 15(g) hereof.
(g) (i) [***]
(ii) Net sales for the purpose of computing royalties means
BioMarin's invoice price, f.o.b, factory, after deduction of
regular trade and quantity discounts, but before deduction of
other Items, including but not limited to freight allowances,
cash discounts and agents commissions. For purposes of this
agreement, "regular trade discounts" shall include pricing
discounts to foreign distributors given in the ordinary course
of business.
(iii) [***]
[*CONFIDENTIAL TREATMENT REQUESTED]
<PAGE>
Grant Terms and Conditions Agreement
Page 8
(iv) BioMarin shall maintain accurate books of account and other
records respecting the sale of such products and payment of
royalties and shall make such books of accounts and other
records available to REI for inspection and copying on
reasonable advance notice at all reasonable times. BioMarin
shall provide in connection with each royalty payment a schedule
setting forth the basis for such payment in a form satisfactory
to REI.
(v) [***]
(h) REI represents that it is authorized to grant license. REI represents
that all personnel performing work on the Research Project on behalf of
REI have a legal obligation to assign to REI all inventions and
discoveries made by such personnel during the course of their work
performed pursuant to this Agreement.
(i) BioMarin represents that all personnel performing work on the Research
Project on behalf of BioMarin have a legal obligation to assign to
BioMarin all inventions and discoveries made by such personnel during the
course of their work performed pursuant to this agreement.
(j) REI represents that, to the best of its knowledge and belief, the
intellectual property listed in clause #12, and described more fully in
Appendix C, constitutes the trade secrets of, and is proprietary to, REI.
It is understood and agreed that certain background proprietary rights
may be held by third parties, those known to REI being described in
Appendix C. It is further understood and agreed that REI does not
Indemnify nor hold harmless BioMarin from and against any claims,
liabilities, costs, attorneys fees, and expenses arising out of a claim
that the manufacture, use, or sale of the intellectual property listed in
clause #12, as described more fully in Appendix C, infringes any third
party patent or other intellectual property right.
(k) BioMarin shall have the right but not the obligation to prosecute at its
own expense any third party infringement of intellectual property owned
by BioMarin or jointly held by REI and BioMarin which relates to this
Research Project. REI shall have the right but not the obligation to
prosecute at its own expense any third party infringement of intellectual
property owned exclusively by REI or jointly by BioMarin and REI which
relates to this Research Project.
[*CONFIDENTAL TREATMENT REQUESTED]
<PAGE>
Grant Terms and Conditions Agreement
Page 9
16. Other Scientific Pursuits and Obligations of Principal Investigator
(a) Dr. Kakkis is a co-Investigator on an NIH grant in which Dr.
Elizabeth Neufeld is Principal Investigator. The project is a high
dose dog trial and intrathecal enzyme trial. Dr. Kakkis shall have the
right to work on this project.
(b) Dr. Kakkis is the Principal Investigator of a subcontract to purify
iduronidase under a pending NIH SBIR grant to Croptech Development
Corporation. This will be performed using space, equipment, and
personnel not covered by this Agreement. Dr. Kakkis has the right to
work on this project. If the methods used under the NIH SBIR grant are
covered by this Agreement and are needed for commercial use by
Croptech, Croptech will negotiate for this with REI and BioMarin.
(c) Dr. Kakkis has the right to pursue other gene therapy research in MPS
I. It is understood that the other work may generate an alternative
therapy which may at some time impact the revenue BioMarin might
receive from enzyme replacement therapy.
(d) Dr. Kakkis also has the right to participate in and submit other grant
and/or contract proposals to any potential funding agency, with the
understanding that he will still have adequate time to complete the
work on this project in a timely fashion.
(e) Dr. Kakkis has a right to develop funding methods to lessen the impact
of enzyme costs on affected families without restraint by BioMarin.
Such alternative sources of funding would enhance the positive impact
of this therapy, provide a paradigm for payment in other rare
disorders, and improve the financial position of BioMarin by lessening
economic resistance to therapy.
17. Progress Reports
(a) Principal Investigator will provide verbal progress reports as
requested by BioMarin.
(b) Principal Investigator will provide quarterly written progress reports
to BioMarin within 45 days after the end of each quarter.
<PAGE>
Grants Terms and Conditions Agreement
Page 10
18. Termination
(a) REI may immediately stop work on this project if BioMarin fails for
any reason to fully fund the Research Project as provided for herein.
REI shall provide BioMarin prompt written notice of its election to
stop work under this Agreement, and BioMarin shall not thereafter be
responsible for further funding of the Research Project; provided,
however, that BioMarin shall remain obligated to pay, for a period of
ninety (90) days after work stoppage, the salaries and fringe benefits
of all project personnel who were assigned to work on the Research
Project on the date that the work stopped, at the rates and benefits
in effect as of the date of work stoppage, and including REI's
Indirect costs.
(b) In the event of a breach of this Agreement by any party hereto, then
any party not in breach may terminate this Agreement effective ninety
(90) days after providing written notice of termination. The failure
of BioMarin to timely make any scheduled payment as set forth in
clauses #5(a) and 5(d) shall be deemed a material breach of this
Agreement.
(c) The failure or inability of BioMarin and REI to agree in accordance
with clauses #4(d) and 4(e), within thirty (30) days after written
request therefor, on the amount or payment date of any additional
funding that REI deems in its good faith judgment is necessary to
conduct the Research Project, shall be cause for termination of this
Agreement (but shall not be breach of this Agreement). In such
event, any party hereto may terminate this Agreement effective ninety
(9O) clays after providing written notice of termination.
(d) Notwithstanding anything to the contrary in this Agreement, BioMarin
shall be obligated to REI to pay all costs and reasonable
noncancellable obligations (including those indicated under clause
#18(a))incurred by REI on or before the effective date of termination.
Such payment shall be made within 30 days after receipt of an invoice
therefor from REI.
(e) Expiration or termination of this Agreement shall not relieve the
parties of any obligation accruing prior to such expiration or
termination. The provisions of this clause #18, as well as any rights
of the parties hereto arising out of a breach by the other party of
any obligations hereunder, shall survive termination of this
Agreement.
(f) (I) In the event of termination of this Agreement for lack of full
funding of
<PAGE>
Grant Terms and Conditions Agreement
Page 11
the Research Project during the Initial grant period (see clause #3,
5(a), 5(b), 5(c), 18(a), 18(b), 18(c), and 18(d)), or for any breach
by BioMarin during the initial grant period (see clause #3 and
18(b)), or at any time for lack of payment of licensing fees when
due, or if at any time BioMarin is in breach of clause #18(d), any
and all rights and licensee granted hereunder to BioMarin with
respect to REI's patents or intellectual property shall terminate
immediately.
(11) Upon termination of this Agreement subsequent to the Initial grant
period (see clause #3 and 18), the license granted herein, and any
sublicenses issued thereunder, may survive the said termination
provided that BioMarin is in full compliance with payment of
licensing fees when due and clause #18(d) and the terms and
conditions of said license including but not limited to clause #1
5(f) and 15(g), and provided further, that there is full compliance
with the terms and conditions of any sublicense issued by BioMarin.
In addition the licensing rights will only survive if the grant is
terminated in a coordinated, planned manner satisfactorily to REI,
including a minimum ninety-day notification of termination of
funding. If the licensing rights survive termination of the
agreement, Dr. Kakkis shall retain the right to produce the
iduronidase enzyme at REI with all the materials and processes
included in the license, such production to be for research purposes
only.
19. Notices
Notices regarding this agreement shall be sent to:
If to BioMarin:
BioMarin Pharmaceuticals
11 Pimentel Court
Novato, California 94949
Facsimile 415-382-7889
ATTN: Chief Executive Officer
If to REI:
Emil Kakkis, M.D., Ph.D.
Harbor-UCLA Research end Education Institute
1124 West Carson Street, Building E4
Torrance, California 90502-2084
Facsimile 310-328-9921
<PAGE>
Grant Terms and Conditions Agreement
Page 12
and
Cathleen Tierney
Grants and Contracts Officer
Harbor-UCLA Research and Education Institute
1124 West Carson Street, Building N14
Torrance, California 90502-2064
Facsimile 310-320-8615
20. Confidentiality Maintained
(a) Proprietary Information
Each Party agrees that the other Party has a proprietary interest in
any information provided by it, whether in connection with this
Agreement or otherwise, and whether in written or oral form, which is
(i) a trade secret, confidential, or proprietary information, (ii) not
publicly known, and (iii) annotated by legend, stamp, or other
written identification as confidential or proprietary information
(hereinafter referred to as "Proprietary Information"). Each Party
shall disclose the Proprietary Information provided by the other
Party only to those of its agents and employees to whom it is
necessary in order to carry out its obligations in accordance with the
terms and conditions hereof. Both during and after the term of this
Agreement, all disclosures by the Party receiving Proprietary
Information to its agents and employees shall be held in strict
confidence by such agents and employees. During and after the term of
this Agreement, such receiving Party, its agents, and employees shall
not use the Proprietary Information for any purpose other than in
connection with discharging its duties in the Territory pursuant to
this Agreement. The receiving Party shall, at its expense, return to
the disclosing Party the Proprietary Information provided by the
disclosing Party as soon as practicable after the term or expiration
of this Agreement. During the term of this Agreement and thereafter,
all such Proprietary Information shall remain the exclusive property
of the Party which provided it. This clause #20 shall, also apply to
any consultants or subcontractors that the receiving Party may engage
in connection with its obligations under this Agreement. The
confidentiality obligations set forth in this clause #20 shall survive
for a period of five (5) years alter termination or expiration of this
Agreement.
(b) Exceptions
Notwithstanding anything contained in this Agreement to the contrary,
each of the Parties shall not be liable for a disclosure of the
Proprietary Information of the other Party if the information so
disclosed: (i) was in the public domain
<PAGE>
Grant Terms and Conditions Agreement
Page 13
at the time of disclosure without breach of this Agreement; (ii)
was known to or contained in the records of receiving Party at
the time of disclosure by the providing Party, as evidenced by
written records; (iii) was independently developed and is so
demonstrated promptly upon receipt of the documentation and
technology by receiving Party; (iv) becomes known to the
receiving Party from a source other than the providing Party
without breach of this Agreement by receiving Party, and can be
so demonstrated; (v) must be disclosed pursuant to a contract or
subcontract with a governmental agency in order to obtain/retain,
procurement contract; or (vi) was disclosed pursuant to court
order or as otherwise compelled by law, provided that the Party
compelled to make such disclosure provides the other Party notice
thereof sufficiently in advance of such disclosure so as to
provide the other Party a reasonable time within which to seek a
protective or similar order.
21. Assignment:
This agreement and all of the provisions hereof shall be binding upon
and inure to the benefit of the parties hereto and their respective
affiliates, successors, transferees and assignees; provided, however,
that neither party hereto may assign or transfer this agreement or any
interest herein, either directly or indirectly, in whole or in part,
without the prior written consent of the other party, which consent
shall not be unreasonably withheld. A change in control of the company
shall be considered an assignment.
ACCEPTANCE
BioMarin Pharmaceuticals Harbor-UCLA Research and Education
Institute
/s/ John C Klock 01 Apr 97 /s/ Frank J. De Santis, 4/1/97
- --------------------------------------- --------------------------------
Signature and Date Signature and Date
Frank J. De Santis, CAE
John Klock - President President
- ------------------------------------- ---------------------------------
Typed Name and Title Typed Name and Title
Principal Investigator:
/s/ [SIGNATURE]
---------------------------------
Signature and Date
<PAGE>
[LOGO OF BIOMARIN APPEARS HERE]
Harbor-UCLA Research and Education Institute
1124 West Carson Street
Torrance, California 90502-2064
Attn: Arthur I. Zweben
August 21, 1998
RE: REI-BIOMARIN GRANT TERMS AND CONDITIONS AGREEMENT
Dear Mr. Zweben:
This Letter Agreement (the "Agreement") sets forth the understanding
between Harbor-UCLA Research and Education institute ("REI") and BioMarin
Pharmaceutical, Inc. ("BioMarin") in connection with BioMarin's sublicense of
certain of the rights (the "REI Technology") granted to BioMarin pursuant to
that certain Grant Terms and Conditions Agreement between REI and BioMarin
executed April 1, 1997 (the "Grant Agreement"). This Agreement represents the
agreement of the REI and BioMarin as follows:
1. This Agreement hereby revises the Grant Agreement to incorporate the
terms and conditions set forth in this Agreement. The relationship of the
parties shall continue to be governed by the terms and conditions of the Grant
Agreement, as amended and revised herein; and in the event that there is any
conflict between the terms and conditions of the Grant Agreement and this
Agreement, the terms and conditions of this Agreement shall control. As used in
this Agreement all capitalized terms shall have the meanings defined for such
terms in this Agreement or, if not defined in the Agreement, the meanings
defined in the Grant Agreement.
2. REI hereby consents and approves of BioMarin's entering into an
arrangement with a limited liability company to :be formed by BioMarin and
Genzyme Corporation for the purpose of commercializing among other things the
REI Technology ("BioMarin/Genzyme LLC") pursuant to which BioMarin will grant to
BioMarin/Genzyme LLC a sublicense under the REI Technology (the "Sublicense").
3. [* * *]
1-
[* CONFIDENTIAL TREATMENT REQUESTED]
<PAGE>
4. This Agreement and the Grant Amendment (together with the Appendices
thereto) constitute the entire agreement between the parties in connection with
the subject matter thereof and supersede all prior and contemporaneous
agreements, understandings, negotiations and discussions, whether oral or
written, of the parties.
5. This Agreement shall become effective on the date when BioMarin/Genzyme
LLC has executed this agreement as indicated below and shall remain in effect
until expiration or termination of the Grant Agreement.
6. This Agreement shall bind and inure to the benefit of the parties
hereto and BioMarin/Genzyme LLC and their successors and assigns. This Agreement
shall be governed by the laws of the State of California, without reference to
conflict of laws principles. This Agreement may not be amended, nor any
obligation waived, except by a writing signed by both parties hereto.
If the foregoing is acceptable, please indicate acceptance by having this
Agreement executed by the appropriate officer of REI and returning an executed
copy to BioMarin to my attention
Very truly yours,
BioMarin Pharmaceutical Inc.
/s/ John C Klock
John C. Klock, M.D.
President
APPROVED AND ACCEPTED this 24 day of August, 1998.
Harbor-UCLA Research and Education Institute
Print Name: C. William Steers, CAE
Title: Executive Vice President,
APPROVED AND ACCEPTED this ___ day of _______,1998
BioMarin/Genzyme LLC
Print Name: ___________________
Title: ___________________
2-
<PAGE>
EXHIBIT 10.18
CONFIDENTIAL
------------
[* * *]: CONFIDENTIAL TREATMENT REQUESTED FOR PORTIONS OF THIS EXHIBIT
LICENSE AGREEMENT
-----------------
This License Agreement ("Agreement"), is made and entered into this 14th day of
August, 1998 ("Effective Date") by and between BioMarin Pharmaceutical, Inc.,
having its principal office at 11 Pimentel Court, Novato, California 94949, USA
("BioMarin") and Women and Children's Hospital, Adelaide, Australia having its
principal office at 72 King William Road, North Adelaide, South Australia,
Australia ("WCH").
RECITALS
A. WCH has been active in the field of research relating to the development of
therapeutic agents for the treatment of Lysosomal Storage Disorders (LSD)
and has, confidential information and know-how in respect to a group of LSD
known as Mucopolysaccharidosis ("MPS") type diseases.
B. BioMarin has agreed to work in the field of developing an enzyme
replacement therapy ("ERT") for the treatment of the disease MPS VI and
subsequent production, clinical trials, marketing and commercialization of
Licensed Products for the benefit of patients. BioMarin desires to develop
the Licensed Products and undertakes to commit significant resources to the
said development for a therapy for children suffering with MPS VI.
C. WCH possesses the Licensed Technology.
D. BioMarin is interested in taking an exclusive worldwide license to the
Licensed Technology for the commercialization of Licensed Products.
E. WCH is willing to grant to BioMarin a license for the Licensed Technology,
on the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the premises and mutual covenants, WCH and
BioMarin hereby agree as follows:
ARTICLE I
DEFINITIONS
-----------
1.1 "Inventions" shall have the meaning as set forth in Section 8.1.
----------
1.2 "Licensed Product" means any therapeutic product for ERT used in the
----------------
treatment of MPS VI, which is developed from or utilizes any part of the
Licensed Technology.
1.3 "Licensed Technology" means the biological materials, clones, host cell
-------------------
lines, and any research and development information, inventions, know-how,
and all technical data applicable solely for MPS VI therapy which has been
developed as of the Effective Date and which shall include recombinant
human enzyme N-acetylgalactosamine-4-sulfatase, the cDNA clone encoding
this enzyme, and the host cell line which expresses this enzyme for the
treatment of MPS VI disease.
<PAGE>
1.4 "Net Sales" means the aggregate gross sales price received by BioMarin on
---------
any Sale of the Licensed Product less any credits for returns and
allowances, cash and trade discounts, sales, use, excise or similar taxes,
duties, insurance and freight and other shipping expenses, to the extent
that such items are separately stated on BioMarin invoices to purchasers.
1.5 A "Sale" means a sale or lease of a Licensed Product. As used herein,
----
"Sale" shall not include Licensed Product retained for quality assurance
purposes, any distribution for assessment by regulatory authorities for
which BioMarin does not receive financial gain.
ARTICLE II
TERMS OF LICENSE
----------------
2.1 License. WCH grants to BioMarin a perpetual, nontransferable, exclusive,
-------
world-wide license, (i) to make use or sell the Licensed Technology or
Inventions to make, use, distribute, market, sell, lease and sub-license
Licensed Products and (ii) to make modifications to and to further develop
the Licensed Technology or Inventions to make, use, distribute, market,
sell, lease and sub-license the Licensed Products.
2.2 Access. WCH will provide to BioMarin, subject to the principles of
------
confidentiality set forth in Article IX, access to all Licensed Technology
and all accompanying know-how and documentation necessary to use the
Licensed Technology.
ARTICLE III
DEVELOPMENT
-----------
3.1 BioMarin will be responsible for the production of the Licensed Product,
including, enzyme material using on any aspect of the Licensed Technology
for clinical trials and, for world wide supply, based on real cost
calculations, in the case of successful clinical trials. WCH hereby grants
and BioMarin accepts the fight to sublicense the Licensed Product to ensure
BioMarin can enter into partnerships or business collaborations, which
involve the manufacture, marketing, sales, and distribution of the Licensed
Products.
3.2 During the term of this Agreement, WCH, under the direction of Professor
John Hopwood, will have substantial responsibility in the design of
BioMarin's MPS VI clinical studies, the terms and conditions of which are
to be agreed by WCH and BioMarin within six (6) months of the effective
date.
2
<PAGE>
ARTICLE IV
DELIVERY
--------
4.1 WCH shall make its best effort to supply to BioMarin a copy of materials
and/or documentation in its possession that contains the Licensed
Technology within sixty (60) days from the Effective Date.
4.2 On the Effective Date, BioMarin shall designate one or more qualified
individual(s) to be responsible for receiving the Licensed Technology. On
or before the expiration of sixty (60) days from the Effective Date, WCH
shall provide up to seventy (70) hours of training to such designated
individual(s) who manufacture or use the Licensed Technology pursuant to
such schedules and locations as the parties may agree. BioMarin will pay
all travel, board, and lodging costs related to the supply of a copy of the
Licensed Technology and documentation from WCH to BioMarin in accordance
with Section 4.1.
ARTICLE V
PAYMENT
-------
5.1 In consideration of the license set forth in Article II above, BioMarin
must pay to WCH the following:
(a) [* * *]
(b) [* * *]
(c) [* * *]
3
[* CONFIDENTIAL TREATMENT REQUESTED]
<PAGE>
(d) [* * *]
(e) [* * *]
(f) [* * *]
ARTICLE VI
REPRESENTATIONS BY WCH
----------------------
6.1 WCH represents and warrants that: (i) WCH has developed and owns all fight,
title and interest in and to the Licensed Technology existing as of the
Effective Date; (ii) WCH has the fight to enter into this Agreement, to
fully comply with the terms and conditions of this Agreement to the best of
WCH's knowledge, to grant to BioMarin the fights and licenses contemplated
in Section 2.1 above; and (iii) WCH has not executed any agreement or
contract that is inconsistent with the fights and licenses granted
hereunder. Except for the warranties made in this Section 6.1, WCH has made
no other warrantees and expressly excludes all warranties to the extent
possible by law.
4
[* CONFIDENTIAL TREATMENT REQUESTED]
<PAGE>
ARTICLE VII
REPRESENTATIONS BY BIOMARIN
---------------------------
7.1 BioMarin will commit best commercially reasonable efforts towards the said
development. For the purposes of this Agreement, commercially reasonable
efforts shall be interpreted as:
Submission of Investigational New Drug Application ("IND") for MPS VI
enzyme replacement therapy (i.e., Licensed Product) to the United States
Food and Drug Administration ("FDA") or equivalent application to be made
to the appropriate regulatory authority of another country at least nine
(9) months from the Execution Date, or twelve (12) months if additional
pre-clinical toxicology studies are required for the submission. Clinical
trials should begin within three (3) months of the filing of an IND
provided that the initiation of clinical trials has been approved by the
FDA.
7.2 BioMarin represents and warrants that (i) BioMarin has the fight to enter
into this Agreement; (ii) BioMarin will fully comply with the terms and
conditions of this Agreement; and (iii) BioMarin will be responsible for
all liability to third parties arising form any use of the Licensed
Technology and its manufacture, distribution and sale of the Licensed
Product.
ARTICLE VIII
PATENTS
-------
8.1 Ownership of Inventions. WCH shall have and retain sole and exclusive title
------------------------
to all inventions, discoveries and know how ("Inventions") which are made
by either party, its employees, agents, or other third parties acting under
authority from either party relating to Licensed Product.
8.2 Maintenance of Patents.
-----------------------
(a) Filings. As between WCH and BioMarin, BioMarin shall, at its expense,
-------
have responsibility for filing, prosecution and maintenance of all
patents in the name of WCH. WCH shall have the fight to review pending
patent applications and make recommendations to BioMarin concerning
them. BioMarin will consider in good faith all reasonable suggestions
of WCH with respect thereto. BioMarin agrees to keep WCH informed of
the course of patent prosecution or other proceedings with respect to
the patents. WCH shall provide such patent consultation to BioMarin at
no cost to BioMarin. WCH shall hold all information disclosed to it
under this Section 8.2(a) as confidential.
5
<PAGE>
(b) Extensions. BioMarin shall have the right but not the obligation to
----------
seek extensions of the terms of patents. At BioMarin's request, WCH
shall either authorize BioMarin to act as WCH's agent for the purpose
of making any application for any extensions of the term of patents
and provide reasonable assistance therefor to BioMarin or shall
diligently seek to obtain such extensions, in either event, at
BioMarin's expense.
8.3 Infringement by Licensed Product. In the event of the institution of any
--------------------------------
suit by a third party against WCH for patent infringement involving the
manufacture, use, sale, distribution or marketing of Licensed Product, WCH
shall promptly notify BioMarin in writing. BioMarin shall have the right
but not the obligation to defend such suit against it at its own expense.
BioMarin and WCH shall assist one another and cooperate in any such
litigation at the other's reasonable request without expense to the
requesting party, and in any event WCH may participate in any such suit
with counsel of its choice at its own expense.
8.4 Third Party Infringement. In the event that BioMarin or WCH becomes aware
------------------------
of actual or threatened infringement of a patent by the manufacture or sale
or use of an ERT product for treatment of MPS VI (the "Field"), that party
shall promptly notify the other party in writing. BioMarin shall have the
first right but not the obligation to bring, at its own expense, an
infringement action against any third party. If BioMarin does not commence
a particular infringement suit within the Field within one hundred twenty
(120) days of receipt of a request by WCH to do so, then WCH, after
notifying BioMarin in writing and obtaining BioMarin's consent, which shall
not be unreasonably withheld, shall be entitled to bring such infringement
action at its own expense. WCH shall keep BioMarin reasonably informed of
its activities during the 120-day period. The party conducting such action
shall have full control over its conduct, including settlement thereof
subject to Section 8.6. In any event, BioMarin and WCH shall assist one
another and cooperate in any such litigation at the other's reasonable
request without expense to the requesting party.
8.5 Recovery. BioMarin and WCH shall recover their respective actual out-of-
--------
pocket expenses, or equitable proportions thereof, associated with any
litigation against infringers undertaken pursuant to Section 8.4 above or
settlement thereof from any resulting recovery made by any party. Any
excess amount of such a recovery shall belong to BioMarin to the extent
such recovery represents damages relative to sales.
8.6 Status of Activities. The parties shall keep one another informed of the
--------------------
status of their respective activities regarding any litigation or
settlement thereof concerning Licensed Product, provided however that no
settlement or consent judgment or other voluntary final disposition of any
suit defended or action brought by a party pursuant to this Section 8 may
be entered into without the consent of the other party if such settlement
would require the other party to be subject to an injunction or to make a
monetary payment or would otherwise adversely affect the other party's
rights under this Agreement.
6
<PAGE>
ARTICLE IX
CONFIDENTIALITY
---------------
9.1 BioMarin and WCH shall use their best efforts to protect the
confidentiality of proprietary information provided to it by the other
party and identified in writing or orally as confidential and proprietary
and not to use such information except for the purposes of this Agreement.
This obligation of confidentiality shall not apply to information which (a)
is or becomes known publicly through no fault of the other party; (b) is
obtained or learned by the receiving party from a third party entitled to
disclose it; (c) is already known to the receiving party at the time of
disclosure, as shown by the receiving party's prior written records; (d) is
developed by the receiving party independent of any disclosure made
hereunder, which can be demonstrated by written or other documentary
evidence; or is required by law to be disclosed.
9.2 The foregoing restrictions shall not apply to any confidential information
of either party ("Disclosing Party") that (i) is in the possession of the
other party ("Receiving Party") at the time of disclosure, (ii) prior to or
after the time of disclosure becomes part of the public domain, not as a
result of any breach by the Receiving Party, (iii) is developed
independently by the Receiving Party without use of or reference to the
confidential Information of the Disclosing Party, (iv) is acquired from a
third party having the fight to disclose such information, or (v) is
approved in writing for release by the Disclosing Party.
ARTICLE X
TERM AND TERMINATION
--------------------
10.1 This Agreement shall commence on the Effective Date for a period of ten
years. BioMarin shall have the option to renew this Agreement for two (2)
periods of one (1) year upon terms to be agreed upon between the parties.
10.2 In the event that BioMarin fails to demonstrate to the WCH that best
commercially reasonable efforts to develop and commercialize any of the
Licensed Technology and Licensed Product then the WCH will inform BioMarin
of this in writing. In case of a dispute, the parties shall have cause to
negotiate in good faith to resolve any such dispute. If a dispute is not
resolved within 30 days then the parties shall have the matter resolved by
binding arbitration.
7
<PAGE>
ARTICLE XI
INDEMNITY BY BIOMARIN
---------------------
11.l BioMarin shall indemnify and hold harmless WCH and its employees, from and
against any and all costs, losses, liabilities and expenses (including WCH
attorneys' fees) arising out of the manufacture, use or sale of Licensed
Products by BioMarin and from any use of the Licensed Technology, except
for any gross negligence or willful acts by WCH employees, that serve to
prohibit BioMarin from carrying out its fights under this Agreement.
11.2 BioMarin confirms that BioMarin has adequate insurance to cover all the
risks referred to in Section 11.1. BioMarin agrees that on request by
WCH,will provide WCH with evidence of the insurance on a certificate of
currency.
ARTICLE XII
GENERAL PROVISIONS
------------------
12.1 Transfer Costs. Costs associated with the manufacture of the Licensed
--------------
Technology or travel costs directly related to the requirement of
attendance by Professor Hopwood or members of his staff, are to be paid
for by BioMarin.
12.2 Return of Licensed Technology. In the event that
-----------------------------
BioMarin terminates their participation in the MPS VI project, all
Licensed Technology including, without limitation, confidential
information, cell lines etc. shall be returned to WCH.
12.3 Governing Law. This Agreement shall be construed and interpreted, and the
-------------
fights and obligations of the parties hereto shall be determined, in
accordance with the laws of the State of California, without regard to the
conflicts of law principles thereof.
12.4 Alteration. No alteration or amendment of this Agreement shall be
----------
effective unless embodied in writing and executed by an authorized
representative of each party.
12.5 Assignment. This Agreement, and the rights and obligations hereunder,
----------
shall not be assigned by WCH without the prior written consent of
BioMarin.
12.6 Addresses The addresses of the parties for purposes of notices, payments
---------
and other communications shall be as follows:
BioMarin Pharmaceutical, Inc.
11 Pimentel Court
Novato CA 94949
Attn.: Dr. Christopher M. Starr, Vice President of Research
8
<PAGE>
Women and Children's Hospital
72 King William Road
North Adelaide
South Australia, Australia
Attn: Mr Steven Hood, Intellectual Property Manager
Either party, by notice to the other, may change its address for the
purpose of this Section 12.6.
12.7 Entire Agreement. This Agreement sets forth the entire understanding of
----------------
the parties hereto with respect to the subject matter hereof and
supersedes any previous understandings and agreements, written or oral,
which the parties hereto may have reached with respect to the subject
matter hereof.
12.8 Arbitration. Any dispute or claim arising out of this Agreement shall be
-----------
finally settled by binding arbitration in San Francisco, California under
the rules of arbitration of the American Arbitration Association by one
arbitrator appointed in accordance with said rules. Judgment on the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof. Notwithstanding the foregoing, the parties may apply to any court
of competent jurisdiction for injunctive relief without breach of this
arbitration provision. Both parties agree to attempt to resolve disputes
within thirty (30) days prior to initiating arbitration.
12.9 Waiver. The failure or delay of either party to exercise any fight under
------
this Agreement may not be construed as a waiver of that fight, and no
waiver of any term or condition of this Agreement shall be valid or
binding on either party unless set forth in a writing signed by such
party.
12.10 Independent Contractors. The relationship of BioMarin and WCH established
-----------------------
by this Agreement is that of independent contractors, and nothing
contained in this Agreement shall be construed to (i) give either party
the power to direct and control the day-to-day activities of the other,
(ii)constitute the parties as partners, joint venturers, co-owners or
otherwise as participants in a joint or common undertaking, or (iii)allow
either party to create or assume any obligation on behalf of the other
party for any purpose whatsoever. All financial obligations associated
with each party's business are the sole responsibility of that party.
12.11 Public Announcement. Neither party shall have the right to disclose to
-------------------
third parties the terms of or the existence of this Agreement, unless
approved in writing by the other party; provided that either party shall
have the right to disclose the terms and existence of this Agreement to
third parties as required by law, to prospective investors and to such
party's accountants, attorneys and other professional advisors.
9
<PAGE>
12.12 Notices. All notices under this Agreement shall be in writing and shall
-------
be deemed to have been given if personally delivered, sent by certified
or registered mail (return receipt) to the persons names in Section 12.6,
or such other address as is provided by notice as set forth herein.
Notices shall be deemed effective upon receipt or, if delivery is not
effected by reason of some fault of the addressee, when tendered.
12.13 Severability. In the event any provision of this Agreement is held to be
------------
unenforceable in any respect, such unenforceability shall not affect any
other provision of this Agreement, provided that the expected economic
benefits of this Agreement are not denied to either party.
12.14 Limitation of Liability. EXCEPT 1N RELATION TO AN INDEMNITY PROVIDED BY
-----------------------
BIOMARIN PURSUANT TO CLAUSE 11.1, THE PARTY'S LIABILITY (IF ANY) 1N ALL
CASES SHALL BE EXCLUDED TO THE EXTENT POSSIBLE BY LAW, AND WHERE IT
CANNOT BE EXCLUDED, IT WILL BE LIMITED TO THE AMOUNTS PAID BY BIOMARIN
HEREUNDER. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY
SPECIAL, INCIDENTAL, CONSEQUENTIAL OR INDIRECT DAMAGES ARISING IN ANY WAY
OUT OF THIS AGREEMENT, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY.
THIS LIMITATION SHALL APPLY EVEN IF EITHER PARTY KNOWS OR HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES AND NOTWITHSTANDING ANY
FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY PROVIDED FOR HEREIN.
12.15 Counterparts. This Agreement may be executed in any number of
------------
counterparts and when so executed and delivered shall have the same force
and effect as though all signatures appeared on one document.
12.16 Compliance with Laws. BioMarin shall be responsible, at its own expense,
--------------------
for obtaining any and all governmental authorizations required (and
comply with all applicable laws) in connection with the manufacture sale
or use of any of the Licensed Technology and the Licensed Products.
12.17 Force Majeure. Nonperformance of either party shall be excused to the
-------------
extent that performance is rendered impossible by strike, fire, flood,
earthquake, governmental acts or orders or restrictions, failure of
suppliers, or any other reason when failure to perform is beyond the
control and not caused by the negligence of the non-performing party.
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this License Agreement
to be executed as of the day and year first above written.
/s/ [SIGNATURE]
-------------------------------------
("WCH")
By: /s/ G. Tattersall
----------------------------------
ASST CHIEF EXECUTIVE OFFICER
/s/ [SIGNATURE]
-------------------------------------
("BioMarin")
By: /s/ Christopher M. Starr
----------------------------------
VP Research
11
<PAGE>
EXHIBIT 10.24
CONFIDENTIAL
------------
[* * *]: CONFIDENTIAL TREATMENT REQUESTED FOR PORTIONS OF THIS EXHIBIT
COLLABORATION AGREEMENT
among
GENZYME CORPORATION,
BIOMARIN PHARMACEUTICAL, INC.
and
BIOMARIN/GENZYME LLC
Dated as of September 4, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I - DEFINITIONS............................................................................ 1
ARTICLE II - SCOPE AND STRUCTURE OF THE COLLABORATION.............................................. 7
2.1 General.................................................................................. 7
2.2 Exclusive Relationship................................................................... 8
ARTICLE III - GRANTS AND RESERVATIONS OF RIGHTS.................................................... 9
3.1 Licenses of Rights to BioMarin/Genzyme LLC............................................... 9
3.2 Sublicenses of Rights from BioMarin/Genzyme LLC to BioMarin and Genzyme.................. 10
3.3 Reservation of Rights.................................................................... 11
3.4 Assignment of Orphan Drug Designation.................................................... 11
ARTICLE IV - PROGRAM FUNDING; LLC INTEREST......................................................... 11
4.1 Program Funding Commitments.............................................................. 11
4.2 Program Funding Capital Contributions.................................................... 11
4.3 Distributions............................................................................ 12
4.4 Sale and Purchase of LLC Interest........................................................ 13
4.5 Books of Account; Audit.................................................................. 13
4.6 Enforceability of Sections 4............................................................. 13
ARTICLE V - THE DEVELOPMENT PROGRAM................................................................ 14
5.1 Conduct of the Development Program....................................................... 14
5.2 Development Information.................................................................. 16
5.3 Regulatory Approval Filings.............................................................. 16
5.4 Clinical Data............................................................................
5.5 Facilities Visit......................................................................... 17
ARTICLE VI - SALES, MARKETING AND ADMINISTRATIVE SERVICES.......................................... 17
6.1 Commercialization Plans.................................................................. 17
6.2 Exclusive Engagement; Diligence.......................................................... 18
6.3 Orders................................................................................... 18
6.4 Marketing and Distribution Expenses...................................................... 19
6.5 Responsibilities of Genzyme.............................................................. 19
6.6 Responsibilities of BioMarin/Genzyme LLC and BioMarin.................................... 20
6.7 General and Administrative Services...................................................... 20
ARTICLE VII - MANUFACTURE AND SUPPLY............................................................... 21
7.1 Process Development...................................................................... 21
7.2 Manufacture and Supply of Collaboration Product.......................................... 21
7.3 Certificates of Analysis................................................................. 22
7.4 Certificates of Manufacturing Compliance................................................. 22
</TABLE>
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<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
7.5 Access to Facilities.................................................................... 23
ARTICLE VIII - MANAGEMENT.......................................................................... 23
8.1 Program Management Team................................................................. 23
8.2 Steering Committee...................................................................... 24
8.3 General Disagreements................................................................... 25
ARTICLE IX - INTELLECTUAL PROPERTY RIGHTS.......................................................... 26
9.1 Ownership............................................................................... 26
9.2 Filing, Prosecution and Maintenance of Patent Rights.................................... 27
9.3 Cooperation............................................................................. 28
9.4 Notification of Patent Term Restoration................................................. 28
9.5 No Other Technology Rights.............................................................. 28
9.6 Defense of Third Party Infringement Claims.............................................. 28
9.7 Enforcement............................................................................. 29
9.8 Third Party Rights...................................................................... 29
9.9 Third Party Agreements--Reports......................................................... 30
ARTICLE X - CONFIDENTIALITY........................................................................ 30
10.1 Nondisclosure Obligations............................................................... 30
10.2 Terms of this Agreement; Press Releases................................................. 31
10.3 Publications............................................................................ 31
ARTICLE XI - REPRESENTATIONS AND WARRANTIES........................................................ 32
11.1 Authorization........................................................................... 32
11.2 Intellectual Property Rights............................................................ 32
11.3 Warranties.............................................................................. 32
11.4 Disclaimer of Representations and Warranties............................................ 33
11.5 Limitation of Liability................................................................. 33
ARTICLE XII - INDEMNITY............................................................................ 33
12.1 BioMarin/Genzyme LLC Indemnity Obligations.............................................. 33
12.2 Insurance............................................................................... 34
ARTICLE XIII - TERM AND TERMINATION................................................................ 34
13.1 Term.................................................................................... 34
13.2 Termination............................................................................. 34
13.3 Effects of Termination.................................................................. 35
13.4 Inventory...............................................................................
13.5 Survival of Rights and Duties........................................................... 42
ARTICLE XIV - MISCELLANEOUS........................................................................ 43
</TABLE>
-ii-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
14.1 Cooperation............................................................................ 43
14.2 Exchange Controls...................................................................... 43
14.3 Withholding Taxes...................................................................... 43
14.4 Interest on Late Payments.............................................................. 43
14.5 Force Majeure.......................................................................... 44
14.6 Assignment............................................................................. 44
14.7 Severability........................................................................... 44
14.8 Notices................................................................................ 44
14.9 Applicable Law......................................................................... 46
14.10 Arbitrate.............................................................................. 46
14.11 Injunctive Relief...................................................................... 47
14.12 Entire Agreement....................................................................... 47
14.13 Headings............................................................................... 48
14.14 Independent Contractors................................................................ 48
14.15 Waiver................................................................................. 48
14.16 Counterparts........................................................................... 48
</TABLE>
-iii-
<PAGE>
COLLABORATION AGREEMENT
THIS COLLABORATION AGREEMENT dated as of September 4, 1998 (the
"Agreement") is made among Genzyme Corporation, a Massachusetts corporation
having its principal place of business at One Kendall Square, Cambridge,
Massachusetts 02139 ("Genzyme"), BioMarin Pharmaceutical, Inc., a Delaware
-------
corporation having its principal place of business at 11 Pimentel Court, Novato,
California 94949 ("BioMarin") and BioMarin/Genzyme LLC, a Delaware limited
--------
liability company having its principal place of business at One Kendall Square,
Cambridge, Massachusetts 02139 ("Genzyme/BioMarin LLC"). Genzyme, BioMarin and
--------------------
BioMarin/Genzyme LLC are sometimes referred to herein individually as a "Party"
-----
and collectively as the "Parties".
-------
RECITALS
A. BioMarin is developing recombinant human alpha-L-iduronidase ("Alpha-
-----
L- iduronidase"). Decreased levels of the Alpha-L-iduronidase enzyme result in
- --------------
individuals having mucopolysaccharidosis I ("MPS I"). BioMarin is currently
-----
developing Alpha-L-iduronidase for the treatment of MPS I and other Alpha-L-
iduronidase deficiencies.
B. Genzyme has expertise in developing, manufacturing and marketing
biopharmaceutical products.
C. BioMarin/Genzyme LLC has been organized by BioMarin and Genzyme as the
vehicle for a joint venture between BioMarin and Genzyme to develop and
commercialize the Collaboration Products (as defined herein) throughout the
Territory (as defined herein).
NOW THEREFORE, in consideration of the premises and of the covenants herein
contained, the Parties mutually agree as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement, the terms defined in this Article shall
have the meanings specified below. Certain other capitalized terms are defined
elsewhere in this Agreement.
1.1 "Affiliate" shall mean any corporation or other entity which
---------
controls, is controlled by, or is under common control with a Party. A
corporation or other entity shall be regarded as in control of another
corporation or entity if it owns or directly or indirectly controls more than
fifty percent (50%) of the voting stock or other ownership interest of the other
corporation or entity, or if it possesses, directly or indirectly, the power to
direct or cause the direction of the management and policies of the corporation
or other entity or the power to elect or appoint more than fifty percent (50%)
of the members of the governing body of the corporation or other entity.
<PAGE>
1.2 "BioMarin Companies" shall mean BioMarin and BioMarin Genetics, Inc.,
------------------
a Delaware corporation and a wholly-owned subsidiary of BioMarin ("BioMarin
Genetics").
1.3 "BioMarin/Genzyme Patent Rights" shall mean the Patent Rights that
------------------------------
claim Joint Inventions (as such term is defined in Section 9.1.1 hereof) that
are discovered, made or conceived during and in connection with the Program
jointly by employees or consultants of Genzyme and BioMarin to the extent that
such Patent Rights relate to or are useful for the research, development,
manufacture or commercialization of Collaboration Products for use in the Field.
1.4 "BioMarin/Genzyme Technology" shall mean all Technology discovered,
---------------------------
made or conceived during and in connection with the Program jointly by employees
or consultants of Genzyme and BioMarin relating to or useful for the research,
development, manufacture or commercialization of Collaboration Products for use
in the Field.
1.5 "BioMarin Patent Rights" shall mean all Patent Rights Controlled by
----------------------
BioMarin during the term of this Agreement to the extent that such Patent Rights
relate to or are useful for the research, development, manufacture or
commercialization of Collaboration Products for use in the Field, including the
BioMarin Patent Rights listed in Schedule 1.5 hereto.
------------
1.6 "BioMarin Technology" shall mean all Technology Controlled by BioMarin
-------------------
during the term of this Agreement to the extent that such Technology relates to
or is useful for the research, development, manufacture or commercialization of
Collaboration Products for use in the Field.
1.7 "BLA" shall mean a Biologics License Application or similar
---
application filed with the FDA after completion of human clinical trials to
obtain marketing approval for a Collaboration Product.
1.8 "Collaboration Product" shall mean any pharmaceutical compositions of
---------------------
Alpha-L-iduronidase, including without limitation any and all improvements,
derivatives, analogs, combination products, delivery systems and dosage forms
related thereto.
1.9 "Commercialization Costs" with respect to a Collaboration Product
-----------------------
shall mean the variable costs and fixed costs incurred by BioMarin/Genzyme LLC
with respect to work performed by the Parties and their Affiliates and
subcontractors in connection with the performance of and in accordance with the
Commercialization Plan for such Collaboration Product, including without
limitation, sales and marketing costs related to performing market research,
post-marketing studies, advertising, producing promotional literature,
sponsoring seminars and symposia, sales training meetings and seminars,
originating sales, providing reimbursement and other patient support services
and such other expenses described in Section 6.4 hereof. For purposes of this
Section 1.9, "variable costs" shall be deemed to be the cost of labor, raw
--------------
materials, supplies and other resources directly consumed in the conduct of the
Commercialization Plan and manufacture of Collaboration Product for use in
commercialization activities, as well as amounts paid to Third Parties under a
Third Party Agreement as a result of performance of the Commercialization Plan,
to the extent not included in Development Costs or Fully Absorbed Cost of Goods.
For purposes of this Section 1.9, "fixed costs" shall be deemed to be the cost
-----------
of facilities, utilities, insurance, equipment depreciation and other fixed
costs directly related to the conduct of and in accordance with the
Commercialization
-2-
<PAGE>
Plan and the manufacture of Collaboration Product for use in commercialization
activities, allocated based upon the proportion of such costs directly
attributable to support or performance of the Commercialization Plan and the
manufacture of Collaboration Product for use in commercialization activities or
by such other method of cost allocation as may be approved by the Steering
Committee. All cost determinations made hereunder shall be made in accordance
with GAAP.
1.10 "Commercialization Plan" shall mean, with respect to a particular
----------------------
Collaboration Product, the comprehensive plan and budget for the
commercialization of such Collaboration Product, as more specifically described
in Section 6.1.1 hereof.
1.11 "Control" shall mean possession of the ability to grant a license or
-------
sublicense as provided for herein without violating the terms of an agreement
with a Third Party.
1.12 "Date of Execution" shall mean the last date on which the Parties
-----------------
executed this Agreement, as shown on the signature pages hereto.
1.13 "Development Costs" with respect to a Collaboration Product shall
-----------------
mean the variable costs and fixed costs incurred by BioMarin/Genzyme LLC with
respect to work performed by the Parties and their Affiliates and subcontractors
in connection with the conduct of and in accordance with the Development Plan
for such Collaboration Product, including without limitation (a) direct, out-of-
pocket external costs, including clinical grants, clinical laboratory fees,
positive controls and the cost of studies conducted and services provided by
contract research organizations and individuals, consultants, toxicology
contractors, and manufacturers necessary or useful for the purpose of obtaining
Regulatory Approvals for such Collaboration Product, (b) amounts paid to Genzyme
and BioMarin by BioMarin/Genzyme LLC with respect to research and development
and pre-commercialization sales and marketing efforts as set forth in the
Development Plan for such Collaboration Product, including without limitation
the efforts of Genzyme and BioMarin to develop and document process methods and
procedures for the manufacture of such Collaboration Product and the Fully
Absorbed Cost of Goods for batches of such Collaboration Product manufactured
and supplied for use in preclinical and clinical trials and pre-
commercialization activities, (c) costs related to data management, statistical
designs and studies, document preparation and other expenses associated with the
clinical testing program for such Collaboration Product, (d) costs for
preparing, submitting, reviewing or developing data or information for the
purpose of submission of applications to obtain Regulatory Approvals for such
Collaboration Product, (e) license fees and other amounts paid to a Third Party
pursuant to a Third Party Agreement as a result of performance of the
Development Plan (excluding any fees payable pursuant to Section 15(g)(iii), but
including amounts payable pursuant to Section 15(g)(i), in each case of that
certain General Terms and Conditions Agreement dated April 1, 1997 between
BioMarin and Harbor-UCLA Research and Education Institute ("REI"), as amended
---
pursuant to that certain letter agreement dated August 24, 1998 between BioMarin
and REI) and (f) costs relating to the prosecution and maintenance of Patent
Rights which claim, or disclose subject matter relevant to, the manufacture or
use of such Collaboration Product. For purposes of this Section 1.13, "variable
--------
costs" shall be deemed to be the cost of labor, raw materials, supplies and
- -----
other resources directly consumed in the conduct of and in accordance with the
Development Program and the manufacture of the Collaboration Product for use in
preclinical and clinical trials and pre-commercialization activities. For
purposes of this Section 1.13, "fixed costs" shall be deemed to be the cost of
-----------
facilities, utilities, insurance, facility and
-3-
<PAGE>
equipment depreciation and other fixed costs directly related to the conduct of
the Development Program and the manufacture of the Collaboration Product for use
in preclinical and clinical trials and pre-commercialization activities,
allocated based upon the proportion of such costs directly attributable to the
support or performance of the Development Program and the manufacture of the
Collaboration Product for use in preclinical and clinical trials and pre-
commercialization activities or by such other method of cost allocation as may
be approved by the Steering Committee. All cost determinations made hereunder
shall be made in accordance with GAAP.
1.14 "Development Plan" shall mean, with respect to a particular
----------------
Collaboration Product, the comprehensive plan and budget for the development of
such Collaboration Product under the Development Program, as more specifically
described in Section 5.1.2 hereof.
1.15 "Development Program" shall mean, with respect to a particular
-------------------
Collaboration Product, the preclinical and clinical development of such
Collaboration Product including the preparation and filing of all applications
for Regulatory Approvals for such Collaboration Product. Subject to Section
7.2.3 below, the Development Program will include establishment and validation
of facilities for the preclinical, clinical and commercial manufacture and/or
preparation of Collaboration Products.
1.16 "Effective Date" shall mean September 4, 1998.
--------------
1.17 "Field" shall mean any and all therapeutic applications of Alpha-L-
-----
iduronidase for MPS I and other Alpha-L-iduronidase deficiencies.
Notwithstanding the foregoing, the Field shall not include Gene Therapy for MPS
I or other Alpha-L-iduronidase deficiencies. For purposes of this Agreement,
"Gene Therapy" shall mean treatment or prevention of MPS I or other Alpha-L-
------------
iduronidase deficiencies by means of ex vivo or in vivo introduction (via viral
or nonviral gene transfer systems) of nucleotide sequences (including without
limitation, DNA, RNA and complementary and reverse complementary nucleotide
sequences thereto, whether coding or noncoding).
1.18 "FDA" shall mean the United States Food and Drug Administration, any
---
successor agency, or the regulatory authority of any country other than the
United States with responsibilities comparable to those of the United States
Food and Drug Administration.
1.19 "Fully Absorbed Cost of Goods" with respect to units of Collaboration
----------------------------
Product shall mean (a) the variable costs and fixed costs incurred by a Party
associated with the manufacture (inclusive of finishing processes including
filling, packaging, labeling and/or other preparation) quality assurance,
quality control and other testing, storage and shipping of batches of such units
of Collaboration Product or (b) if such units or portions of Collaboration
Product are not manufactured by the Parties, the amounts paid to the vendor plus
costs associated with acquisition from such vendor. For purposes of this
Section 1.19, "variable costs" shall be deemed to be the cost of labor, raw
--------------
materials, supplies and other resources directly consumed in the manufacture,
quality assurance, quality control and other testing, storage and shipping of
batches of such Collaboration Product. For purposes of this Section 1.19,
"fixed costs" shall be deemed to be the cost of facilities, utilities,
-----------
insurance, facility and equipment depreciation and other fixed costs directly
related to the manufacture, quality assurance, quality control and other
testing, storage and shipping of batches of
-4-
<PAGE>
such Collaboration Product, as well as amounts paid to Third Parties under a
Third Party Agreement as a result of the manufacture, use or sale of such units
of Collaboration Products. Fixed costs shall be allocated to such units of
Collaboration Product based upon the proportion of such costs directly
attributable to support of the manufacturing, quality assurance, quality control
and other testing, storage and shipping processes for such Collaboration
Product. If a facility is used to manufacture Collaboration Products and has the
capacity to manufacture products for other programs of either Genzyme or
BioMarin, fixed costs shall be allocated in proportion to the actual use of such
facility for the manufacture of Collaboration Products and the capacity to
manufacture products for such other programs. For the avoidance of doubt, no
idle capacity of a manufacturing facility shall be included in Fully Absorbed
Cost of Goods unless such facility is appropriately sized and dedicated solely
to the manufacture of Collaboration Products. Fully Absorbed Cost of Goods shall
exclude all costs otherwise reimbursed pursuant to this Agreement. In the event
that either BioMarin or Genzyme subcontracts with the other Party to perform any
work on its behalf in connection with the manufacturing responsibilities
assigned to BioMarin or Genzyme, respectively, pursuant to Section 7.2.1 hereof,
BioMarin and Genzyme (i) shall each directly charge BioMarin/Genzyme LLC their
respective Fully Absorbed Cost of Goods and (ii) shall not include any part of
the other Party's Fully Absorbed Cost of Goods in the amount so charged to
BioMarin/Genzyme LLC. Except as otherwise provided in this Agreement, all cost
determinations made hereunder shall be made in accordance with GAAP.
1.20 "GAAP" shall mean the then-current United States generally accepted
----
accounting principles, consistently applied, except when different accounting
principles are required under the terms of the Operating Agreement, in which
case the accounting principles mandated under the Operating Agreement shall
control.
1.21 "Genzyme Patent Rights" shall mean all Patent Rights Controlled by
---------------------
Genzyme during the term of this Agreement to the extent that such Patent Rights
relate to or are useful for the research, development, manufacture or
commercialization of Collaboration Products for use in the Field, including the
Genzyme Patent Rights listed in Schedule 1.21 hereto.
-------------
1.22 "Genzyme Technology" shall mean all Technology Controlled by Genzyme
------------------
during the term of this Agreement to the extent such Technology relates to or is
useful for the research, development manufacture or commercialization of
Collaboration Products for use in the Field.
1.23 "Major Market Country" shall mean [* * *].
--------------------
1.24 "Manufacturing Party" shall have the meaning set forth in Section
-------------------
7.2.1.
1.25 "Manufacturing Know-How" shall mean all information, techniques,
----------------------
inventions, discoveries, improvements, practices, methods, knowledge, skill,
experience and other technology, whether or not patentable or copyrightable, and
any copyrights based thereon, relating to or necessary or useful for the
production, purification, packaging, storage and transportation of Collaboration
Products, including without limitation specifications, acceptance criteria,
manufacturing batch records, standard operating procedures, engineering plans,
installation, operation and process qualification protocols for equipment,
validation records, master files
-5-
[* CONFIDENTIAL TREATMENT REQUESTED]
<PAGE>
submitted to the FDA, process validation reports, environmental monitoring
processes, test data including pharmacological, toxicological and clinical test
data, cost data and employee training materials.
1.26 "Member" shall have the meaning set forth in the Operating Agreement.
------
1.27 "Net Profit" of BioMarin/Genzyme LLC for any period shall be equal
----------
to (a) the sum during such period of all revenues recognized and recorded by
BioMarin/Genzyme LLC during such period, including without limitation (i)
revenues from sales of all Collaboration Products sold directly by
BioMarin/Genzyme LLC and (ii) all revenues received by BioMarin/Genzyme LLC from
Third Parties as consideration for sublicensing the manufacture, use,
distribution or sale of Collaboration Products, less (b) all expenses incurred
----
by BioMarin/Genzyme LLC during such period, including without limitation
expenses incurred in respect of Development Costs and Commercialization Costs
and facility and equipment depreciation costs not otherwise accounted for. All
determinations made hereunder shall be made in accordance with GAAP.
1.28 "Operating Agreement" shall mean the Operating Agreement of
-------------------
BioMarin/Genzyme LLC dated of even date herewith by and between BioMarin and
Genzyme.
1.29 "Patent Rights" shall mean any patents, patent applications,
-------------
certificates of invention, or applications for certificates of invention,
together with any extensions, registrations, confirmations, reissues, divisions,
continuations or continuations-in-part, reexaminations or renewals thereof, that
may be sought throughout the world.
1.30 "Percentage Interest" shall have the meaning set forth in the
-------------------
Operating Agreement.
1.31 "Program" shall mean the collaboration among BioMarin/Genzyme LLC,
-------
BioMarin and Genzyme described in this Agreement.
1.32 "Program Costs" shall mean all Program-related costs, including
-------------
without limitation Development Costs and Commercialization Costs, in each case
as such costs are incurred or accrued by BioMarin/Genzyme LLC on or after the
Effective Date. Notwithstanding anything herein to the contrary, it is
understood that the Parties shall apply mutually agreed upon cost allocation
methods in determining Program Costs hereunder.
1.33 "Program Management Team" shall mean the joint team composed of
-----------------------
representatives of Genzyme and BioMarin described in Section 8.1.1 hereof.
1.34 "Purchase Agreement" shall mean the Purchase Agreement dated of even
------------------
date herewith by and between BioMarin and Genzyme.
1.35 "Regulatory Approvals" shall mean all approvals from regulatory
--------------------
authorities in any country in the Territory required lawfully to manufacture and
market Collaboration Products in any such country, including without limitation
approval of any BLA, any establishment license application filed with the FDA to
obtain approval of the facilities and equipment to be used to manufacture a
Collaboration Product, and any product pricing approvals where applicable.
-6-
<PAGE>
1.36 "Regulatory Scheme" shall mean the United States Public Health Service
-----------------
Act and the regulations, interpretations and guidelines promulgated thereunder
by the FDA or the regulatory scheme applicable to the Collaboration Products in
any country other than the United States, as such statutes, regulations,
interpretations and guidelines or regulatory schemes may be amended from time to
time.
1.37 "Specifications" with respect to a particular Collaboration Product
--------------
shall mean the written specifications for such Collaboration Product determined
by the Program Management Team and approved by the Steering Committee; provided
that such specifications shall at all times comply with the relevant Regulatory
Scheme in the country of sale and in the country of use. The Specifications may
be amended from time to time by the Program Management Team provided that such
amendments are approved by the Steering Committee or the written agreement of
the Parties, as the case may be. Copies of the then-current Specifications shall
be maintained by both BioMarin and Genzyme and shall become a part of this
Agreement as if incorporated herein.
1.38 "Steering Committee" shall mean the governing body of BioMarin/Genzyme
------------------
LLC composed of representatives of BioMarin and Genzyme appointed as described
in Section 8.2.1 hereof.
1.39 "Technology" shall mean inventions, trade secrets, copyrights, know-
----------
how, data and other intellectual property of any kind (including without
limitation any proprietary biological or other materials, compounds or reagents,
but not including Patent Rights).
1.40 "Territory" shall mean the world.
---------
1.41 "Third Party" shall mean any entity other than BioMarin/Genzyme LLC,
-----------
BioMarin or Genzyme and their respective Affiliates.
1.42 "Third Party Agreements" shall mean collectively those agreements
---------------------
between BioMarin and a Third Party existing as of the Date of Execution as
listed on Schedule 1.42 hereto, pursuant to which BioMarin obtained rights
-------------
applicable to the development, manufacture, sale or use of Collaboration
Products hereunder. If after the Date of Execution any of BioMarin, Genzyme
and/or BioMarin/Genzyme LLC enter into an agreement to license or acquire rights
from a Third Party with respect to subject matter to be utilized in connection
with Collaboration Products in accordance with Section 3.1.4 below, such
agreements shall also be included in the definition of Third Party Agreements
for purposes of this Agreement.
ARTICLE II
SCOPE AND STRUCTURE OF THE COLLABORATION
2.1 General. BioMarin has previously formed BioMarin/Genzyme LLC as the
-------
vehicle for a joint venture between BioMarin and Genzyme to develop and
commercialize Collaboration Products in and throughout the Territory. BioMarin
is the sole initial member of BioMarin/Genzyme LLC
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and, immediately following the execution and delivery of this Agreement, will
transfer and assign one percent (1%) of its interest to BioMarin Genetics, and
BioMarin Genetics will be admitted as a member of BioMarin/Genzyme LLC.
Immediately thereafter, BioMarin will sell and assign to Genzyme a fifty percent
(50%) interest in BioMarin/Genzyme LLC (subject to adjustment pursuant to
Section 4.1.4 hereof and pursuant to the Operating Agreement) pursuant to the
Purchase Agreement and Article 4 hereof and, upon execution and delivery of the
Operating Agreement, Genzyme will be admitted as a Member of BioMarin/Genzyme
LLC. BioMarin/Genzyme LLC will undertake the Development Program for each
Collaboration Product, with each of the Parties assuming responsibility for
those portions of the Development Program allocated to it under this Agreement
in accordance with the Development Plan then in effect. Upon receipt of
Regulatory Approval in any country within the Territory, the Manufacturing Party
or Parties will manufacture the Collaboration Products on behalf of
BioMarin/Genzyme LLC and Genzyme will market and sell the Collaboration Products
in such country as exclusive agent for BioMarin/Genzyme LLC all on the terms and
conditions set forth in this Agreement or such other terms and conditions as the
Parties may agree upon. All services provided by or on behalf of BioMarin,
Genzyme or their respective Affiliates for BioMarin/Genzyme LLC in connection
with the Program shall be provided at cost. For avoidance of doubt, "cost" for
services provided by a Third Party on behalf of BioMarin, Genzyme or their
respective Affiliates for BioMarin/Genzyme LLC in connection with the Program
shall be the amount paid for such services plus costs associated with the
acquisition, including quality control, of such services from such Third Party.
2.2 Exclusive Relationship. Except as otherwise expressly provided herein
----------------------
during the term of this Agreement, neither BioMarin/Genzyme LLC, Genzyme nor
BioMarin, nor any of their respective Affiliates shall independently, or with or
through a Third Party, conduct research or development activities regarding, or
engage in the manufacture, marketing, sale or distribution of, Collaboration
Products in the Field and in the Territory other than as part of the Program.
In addition, during the two-year period following termination of this Agreement,
neither (a) the breaching Party and its Affiliates in the case of termination
pursuant to Section 13.2.1 hereof, (b) Genzyme or its Affiliates in the case of
termination pursuant to Section 13.2.2 hereof, (c) the terminating Party and its
Affiliates in the case of termination pursuant to Section 13.2.3 hereof or (d)
the non-terminating Party and its Affiliates in the case of termination pursuant
to Sections 13.2.4 or 13.2.5 hereof shall independently, or with or through a
Third Party, conduct research regarding, or engage in the manufacture,
marketing, sale or distribution of, Collaboration Products in the Field and in
the Territory; provided, however, that in the event that this Agreement is
terminated pursuant to Section 13.2.3 hereof and the non-terminating Party does
not exercise its option under Section 13.3.3(a) hereof, then the restrictions
set forth in this sentence shall not apply. Notwithstanding the foregoing,
except as provided in Section 3.1.5 nothing herein is intended to restrict
BioMarin, Genzyme or their respective Affiliates from conducting research or
development activities regarding, or engaging in the manufacture, marketing,
sale or distribution of Gene Therapy products targeted to MPS I and other Alpha-
L-iduronidase deficiencies.
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ARTICLE III
GRANTS AND RESERVATIONS OF RIGHTS
3.1 Licenses of Rights to BioMarin/Genzyme LLC.
------------------------------------------
3.1.1 Grants from BioMarin. Except as otherwise expressly provided
--------------------
herein, BioMarin hereby grants to BioMarin/Genzyme LLC a worldwide, exclusive,
royalty-free right and license during the term of this Agreement under the
BioMarin Patent Rights, BioMarin Technology, BioMarin/Genzyme Patent Rights and
the BioMarin/Genzyme Technology and Manufacturing Know-How Controlled by
BioMarin to develop, make, have made, use, offer for sale, sell, have sold,
import and export Collaboration Products for use in the Field and in the
Territory.
3.1.2 Grants from Genzyme. Except as otherwise expressly provided
-------------------
herein, Genzyme hereby grants to BioMarin/Genzyme LLC a worldwide, exclusive,
royalty-free right and license during the term of this Agreement under the
Genzyme Patent Rights, Genzyme Technology, BioMarin/Genzyme Patent Rights and
the BioMarin/Genzyme Technology and Manufacturing Know-How Controlled by Genzyme
to develop, make, have made, use, offer for sale, sell, have sold, import and
export Collaboration Products for use in the Field and in the Territory.
3.1.3 BioMarin/Genzyme LLC Undertakings; Sublicenses. In
----------------------------------------------
consideration of the licenses granted under this Section 3.1, BioMarin/Genzyme
LLC hereby undertakes to pay all royalties, sublicense fees and other costs or
expenses payable to Third Parties under a Third Party Agreement associated with
the acquisition or exercise of such licenses by or on behalf of BioMarin/Genzyme
LLC for use in connection with the Program. Schedule 3.1.3 hereto lists all of
--------------
such obligations as of the Date of Execution. The licenses granted or to be
granted under Sections 3.1.1 and 3.1.2 above shall include the right to grant
and further authorize sublicenses within the scope of such licenses; provided,
however, all sublicenses granted by BioMarin/Genzyme LLC (other than those
provided in Section 3.2.1 below) shall be subject to prior approval by the
Steering Committee.
3.1.4 Rights of BioMarin/Genzyme LLC to Patent Rights or
--------------------------------------------------
Technology Developed Outside the Program. In the event that either BioMarin or
- ----------------------------------------
Genzyme develops, acquires or otherwise Controls Patent Rights, Technology or
Manufacturing Know-How after the Date of Execution other than in connection with
the Program and such Patent Rights, Technology or Manufacturing Know-How are
useful in the Field ("Additional Technology"), the Party Controlling such
---------------------
Additional Technology hereby grants to BioMarin/Genzyme LLC an option
exercisable at the discretion of the Steering Committee to obtain an exclusive,
irrevocable (during the term of this Agreement) right and license, with the
right to grant sublicenses, to such Additional Technology limited to use in the
Field and in the Territory to the extent necessary or appropriate to enable
BioMarin/Genzyme LLC to develop, make, have made, use, offer for sale, sell,
have sold, import and export Collaboration Products, in each case subject only
to BioMarin/Genzyme LLC's undertaking to pay (a) a commercially reasonable
portion of all costs incurred by BioMarin or Genzyme, as the case may be, to
acquire or develop such Additional Technology, (b) a commercially reasonable
portion of any and all development costs relating to the Additional Technology
incurred by BioMarin or Genzyme, as
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<PAGE>
the case may be, since the date such Party acquired or developed such Additional
Technology and (c) a pro rata share of all royalties, sublicense fees and other
costs or expenses payable to Third Parties under a Third Party Agreement
associated with the acquisition or exercise of such license by or on behalf of
BioMarin/Genzyme LLC, allocated based upon the proportion of such costs
attributable to the acquisition or use of such Additional Technology by
BioMarin/Genzyme LLC; provided, however, that if BioMarin or Genzyme, as the
case may be, has more limited rights to such Additional Technology that those
described above, the license subject to BioMarin/Genzyme LLC's option hereunder
shall be consistent with the rights held by BioMarin or Genzyme, as the case may
be, with respect to such Additional Technology. Subject to BioMarin/Genzyme LLC
agreeing to pay the appropriate amounts due to a Third Party under an agreement
with a Party as a result of the acquisition of Additional Technology and/or
exercise of the rights therein by or on behalf of BioMarin/Genzyme LLC, the same
shall be a "Third Party Agreement" for purposes of this Agreement.
3.1.5 External Products. If at any time during the term of this
-----------------
Agreement either Genzyme, BioMarin or their respective Affiliates intends to
collaborate with a Third Party regarding the development and/or
commercialization of a Gene Therapy product for the treatment or prevention of
MPS I or other Alpha-L-iduronidase deficiencies (an "External Product"), such
----------------
Party (the "Proposing Party") shall provide written notice of its intent to the
---------------
Steering Committee. The Proposing Party and the Steering Committee shall
negotiate in good faith the terms and conditions upon which the Proposing Party
and BioMarin/Genzyme LLC would be willing to collaborate for such purposes. If
the Proposing Party and the Steering Committee are unable to agree upon such
terms and conditions within sixty (60) days after receipt by the Steering
Committee of the Proposing Party's notice, the Proposing Party shall have the
right to develop or commercialize such External Product with a Third Party.
3.2 Sublicenses of Rights from BioMarin/Genzyme LLC to BioMarin and
---------------------------------------------------------------
Genzyme.
- -------
3.2.1 General. BioMarin/Genzyme LLC hereby grants to each of
-------
BioMarin and Genzyme a worldwide, non-exclusive, royalty-free right and
sublicense during the term of this Agreement under the Patent Rights, Technology
and Manufacturing Know-How licenses granted to BioMarin/Genzyme LLC pursuant to
Section 3.1 solely to the extent required to permit such Party to perform its
duties and obligations under this Agreement. BioMarin/Genzyme LLC also hereby
agrees to grant to each of BioMarin and Genzyme a worldwide, non-exclusive,
royalty-free right and license during the term of this Agreement under any
Additional Technology as to which BioMarin/Genzyme LLC elects to obtain a
license pursuant to Section 3.1.4 above solely to the extent required to permit
such Party to perform its duties and obligations under this Agreement.
BioMarin/Genzyme LLC also hereby grants to Genzyme a worldwide, non-exclusive,
royalty-free right and license during the term of this Agreement to use any and
all present and future trademarks Controlled by BioMarin/Genzyme LLC in
connection with the commercialization of Collaboration Products in the Territory
to the extent required to permit Genzyme to perform its duties and obligations
under this Agreement.
3.2.2 Further Sublicenses. The foregoing licenses granted to
-------------------
Genzyme and BioMarin, respectively, shall include the right to grant and further
authorize sublicenses to Third Parties within the scope of such licenses.
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<PAGE>
3.3 Reservation of Rights.
---------------------
3.3.1 Reservation by BioMarin. Notwithstanding the license grants
-----------------------
set forth in Section 3.1, BioMarin at all times reserves the rights under the
BioMarin Patent Rights, the BioMarin Technology, the BioMarin/Genzyme Patent
Rights, the BioMarin/Genzyme Technology and the Manufacturing Know-How
Controlled by BioMarin (a) to make, have made and use Collaboration Products for
research and development purposes only; (b) to develop, make, have made, use,
offer for sale, sell, have sold, import and export (i) products outside the
Field and (ii) products other than a Collaboration Product; and (c) to grant
licenses to Third Parties for the foregoing purposes.
3.3.2 Reservation by Genzyme. Notwithstanding the license grants
----------------------
set forth in Section 3.1, Genzyme at all times reserves the rights under the
Genzyme Patent Rights, the Genzyme Technology, the BioMarin/Genzyme Patent
Rights, the BioMarin/Genzyme Technology and Manufacturing Know-How Controlled by
Genzyme (a) to make, have made and use Collaboration Products for research and
development purposes only; (b) to develop, make, have made, use, offer for sale,
sell, have sold, import and export (i) products outside the Field and/or outside
the Territory and (ii) products other than a Collaboration Product; and (c) to
grant licenses to Third Parties for the foregoing purposes.
3.4 Assignment of Orphan Drug Designation. Except to the extent prohibited
-------------------------------------
by the applicable Regulatory Scheme, BioMarin hereby assigns and BioMarin and
Genzyme each hereby agree to assign to BioMarin/Genzyme LLC any "Orphan Drug"
(or similar designation outside the United States) for any Collaboration Product
which BioMarin has received or which BioMarin or Genzyme may receive during the
term of this Agreement in the Territory.
ARTICLE IV
PROGRAM FUNDING; LLC INTEREST
4.1 Program Funding Commitments. Genzyme hereby undertakes to make capital
---------------------------
contributions to BioMarin/Genzyme LLC in an amount equal to fifty percent (50%)
of all Program Costs and BioMarin, on behalf of the BioMarin Companies, hereby
undertakes to make capital contributions to BioMarin/Genzyme LLC in an aggregate
amount equal to fifty percent (50%) of all Program Costs. In the event that
either BioMarin, on behalf of the BioMarin Companies, or Genzyme fails to make a
capital contribution pursuant to this Section 4.1 and Section 4.2 below, and the
other Party does not elect to terminate this Agreement pursuant to Section
13.2.1 hereof, then the Percentage Interests in BioMarin/Genzyme LLC and the
future funding responsibility of the Members shall be adjusted as provided in
Section 4.1(b) of the Operating Agreement.
4.2 Program Funding Capital Contributions.
-------------------------------------
4.2.1 Initial Capital Contributions. Within five (5) working days
-----------------------------
after the Effective Date, BioMarin and Genzyme shall each make a capital
contribution to BioMarin/Genzyme LLC in
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an amount equal to one-half of the Program Costs budgeted to be incurred from
the Effective Date through and including September 30, 1998.
4.2.2 Monthly Capital Contributions. With respect to each calendar
-----------------------------
month after September 30, 1998, Genzyme and BioMarin, on behalf of the BioMarin
Companies, shall each make capital contributions to BioMarin/Genzyme LLC,
monthly in advance, not later than the fifteenth (15th) day of the prior
calendar month, in an aggregate amount equal to one-third of the Program Costs
budgeted to be incurred by BioMarin/Genzyme LLC in the then-current Development
Plan or Commercialization Plan for the calendar quarter in which such calendar
month occurs, allocated between such Parties in accordance with the funding
responsibility assumed by Genzyme and BioMarin, on behalf of the BioMarin
Companies, pursuant to Section 4.1 above. Upon receipt of each such capital
contribution from Genzyme or BioMarin, as the case may be, BioMarin/Genzyme LLC
shall promptly pay each of the Parties an amount equal to that portion of the
budgeted Program Costs to which they are respectively entitled in accordance
with this Agreement.
4.2.3 Quarterly Statements; Quarterly Reconciliation. Within
----------------------------------------------
twenty (20) days after the end of each of the first three (3) calendar quarters
of each calendar year and within fifty (50) days after the end of each calendar
year, each of BioMarin and Genzyme shall provide BioMarin/Genzyme LLC with a
detailed itemization of Program Costs actually incurred by such Party during the
previous quarter. Each of BioMarin and Genzyme shall provide the other Party
with estimates of such costs upon the reasonable request of the other Party
prior to the dates such statements are due. Within thirty (30) days following
receipt of the quarterly statement of actual Program Costs provided by each of
BioMarin and Genzyme, BioMarin, on behalf of the BioMarin Companies, and Genzyme
shall each make an additional capital contribution to BioMarin/Genzyme LLC in
the amount of any actual Program Costs shown thereon and not yet paid for which
such Party has assumed funding responsibility pursuant to Section 4.1 above but
only to the extent that such amount, together with all prior capital
contributions to date during such year, does not exceed [ * * *] of the total
Program Costs budgeted year-to-date through the end of the quarter to which such
statement relates (except to the extent such excess is approved by the Steering
Committee pursuant to Section 5.1.3 hereof). If the aggregate amount stated to
be due from BioMarin/Genzyme LLC in such quarterly statements for actual Program
Costs is less than the amount already contributed by the Parties to the capital
of BioMarin/Genzyme LLC with respect to budgeted Program Costs for such calendar
quarter, such excess shall be credited against the next successive monthly
capital contribution(s) due from Genzyme or BioMarin hereunder.
4.3 Distributions. Distributions shall be made semi-annually to each
-------------
Member in amounts determined in accordance with the Operating Agreement. Amounts
available for distribution shall be calculated for each calendar quarter after
the date of the first sale of a Collaboration Product following Regulatory
Approval of such Collaboration Product and shall be reported to each of BioMarin
and Genzyme within ninety (90) days following the end of each such quarter. All
distributions to the Parties will be accompanied by a report setting forth the
basis for such distribution. Such reports shall be subject to audit rights as
set forth in Section 4.5 below, mutatis mutandis.
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4.4 Sale and Purchase of LLC Interest. Immediately after the execution of
---------------------------------
this Agreement and the assignment by BioMarin of one percent (1%) of its
interest in BioMarin/Genzyme LLC to BioMarin Genetics, in accordance with the
terms and conditions of the Purchase Agreement, BioMarin shall sell, assign and
transfer to Genzyme, and Genzyme shall purchase from BioMarin, a fifty percent
(50%) interest in BioMarin/Genzyme LLC (subject to adjustment pursuant to
Section 4.1.4 hereof and pursuant to the Operating Agreement) for an aggregate
amount of twelve million one hundred thousand and ten dollars ($12,100,010)
payable as set forth below:
(a) Genzyme shall pay to BioMarin an amount of ten dollars ($10)
upon execution of the Purchase Agreement; and
(b) Genzyme shall pay to BioMarin an amount of twelve million
one hundred thousand dollars ($12,100,000) on the first approval by the U.S. FDA
of a BLA filed by or on behalf of BioMarin/Genzyme LLC for the use of a
Collaboration Product in the Field. For purposes of the foregoing, "approval"
shall be deemed to occur upon the U.S. FDA's issuance of an approval letter as
set forth in 21 C.F.R. (S)314.105.
Each of the aforementioned payments described in clauses (a) and (b) above shall
be made in United States dollars by certified or bank check or by wire transfer
within seven (7) days following the occurrence and confirmation of each event.
4.5 Books of Account; Audit. Genzyme shall keep and maintain proper and
-----------------------
complete books of account, and shall maintain a bank account, on behalf of
BioMarin/Genzyme LLC. In the event that either BioMarin or Genzyme reasonably
deems the Program to be material to BioMarin or Genzyme, as the case may be, for
financial accounting purposes, then, upon such Party's request, audited
financial statements of BioMarin/Genzyme LLC shall be prepared by an independent
accounting firm to be selected by the Steering Committee. Each of BioMarin and
Genzyme shall keep and maintain proper and complete records and books of account
documenting all Program Costs incurred by such Party. Each of BioMarin/Genzyme
LLC, BioMarin and Genzyme shall permit independent accountants retained by
BioMarin or Genzyme (the "Auditing Party") to have access to its records and
books for the sole purpose of determining the appropriateness of Program Costs
charged by or accrued to the Party being audited hereunder. Such examination
shall be conducted during regular business hours and upon reasonable notice, at
the Auditing Party's own expense and no more than once in each calendar year
during the term of this Agreement and once during the three (3) calendar years
following the expiration or termination hereof. If such examination reveals
that such Program Costs have been misstated, any adjustment shall be promptly
refunded or paid, as appropriate. The Auditing Party shall pay the fees and
expenses of the accountant engaged to perform the audit, unless such audit
reveals an overcharge or accrual [* * *] or more for the period examined, in
which case the Party who received such overpayment shall pay all reasonable
costs and expenses incurred by the Auditing Party in the course of making such
determination, including the fees and expenses of the accountant along with
interest at the rate set forth in Section 14.4.
4.6 Enforceability of Sections 4.1 and 4.2. The agreements regarding
--------------------------------------
capital contributions set forth in Sections 4.1 and 4.2 hereof are by and
between, and for the benefit of, Genzyme and BioMarin only, and are not
enforceable by BioMarin/Genzyme LLC or any Third Party.
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ARTICLE V
THE DEVELOPMENT PROGRAM
5.1 Conduct of the Development Program.
----------------------------------
5.1.1 General. The Parties each agree to collaborate diligently
-------
in the development of Collaboration Products for use in the Field and to use
commercially reasonable and diligent efforts to file for and obtain Regulatory
Approvals for and bring to market Collaboration Products for use in the Field
and in the Territory as soon as practicable, all in accordance with the
Development Plan and the Commercialization Plan for such Collaboration Products.
The Parties agree to use commercially reasonable and diligent efforts to execute
and substantially perform and to cooperate with each other in carrying out the
Development Plan and the Commercialization Plan for each Collaboration Product.
Neither BioMarin nor Genzyme shall be required to undertake activities in
furtherance of the Development Plan or Commercialization Plan in the absence of
funding from BioMarin/Genzyme LLC pursuant to the provisions of this Agreement.
As used in this Agreement, the phrase "commercially reasonable and diligent
------------------------------------
efforts" will mean that level of effort which, consistent with the exercise of
- -------
prudent scientific and business judgment, is applied by the Party in question to
its other therapeutic products at a similar stage of development and with
similar commercial potential.
5.1.2 Development Plan. The Development Program shall be conducted
----------------
by the Parties for BioMarin/Genzyme LLC in accordance with the then-current
Development Plan which shall describe the proposed overall program of
development for each Collaboration Product, including preclinical studies,
toxicology, formulation, manufacturing, clinical trials and regulatory plans and
other key elements necessary to obtain Regulatory Approvals for such
Collaboration Product. Pursuant to the Development Plan, development work may
be subcontracted to Genzyme and BioMarin or their respective Affiliates, at
fully absorbed costs determined by GAAP. The respective charges to
BioMarin/Genzyme LLC for Development Costs incurred by a Party shall be invoiced
following completion of the work, and shall be payable by BioMarin/Genzyme LLC
within a commercially reasonable time thereafter (but in no event later than
forty-five (45) days of the date of invoice therefor). The Development Plan
shall include (i) a summary of estimated Development Costs expected to be
incurred by each Party hereunder in performing activities of the Development
Program assigned to such Party pursuant to Section 5.1.4 below and (ii) a
detailed budget for all development activities proposed for the applicable
period and for each Collaboration Product.
5.1.3 Initial and Updated Development Plan. The Parties have
------------------------------------
agreed to an initial budget for the development and pre-commercialization
activities of BioMarin/Genzyme LLC for the period beginning on the Effective
Date and ending on December 31, 1998. The Program Management Team shall submit
an initial Development Plan for the period beginning on the Effective Date and
ending on December 31, 1998 to the Steering Committee for review and approval
not later than thirty (30) days after the Effective Date. The Development Plan
shall be updated annually by the Program Management Team and submitted to the
Steering Committee for review and approval not later than sixty (60) days prior
to January 1 of each year during the Development Program. Each such updated
Development Plan shall include (a) an overall development plan for
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each Collaboration Product which sets forth all major development tasks
remaining to be accomplished prior to submission of filings for Regulatory
Approvals and (b) a detailed description and budget for the development and pre-
commercialization activities proposed for the forthcoming calendar year. The
Project Management Team shall be primarily responsible for preparing the annual
updates to the Development Plan and, in connection with the preparation of such
updates, shall consult with Genzyme and BioMarin regarding the identification,
timing and execution of and budget for the major tasks and detailed activities
required to perform the updated Development Plan. Each such updated Development
Plan approved by the Steering Committee shall be signed by an authorized
representative of each of BioMarin and Genzyme. The members of the Program
Management Team shall actively consult with one another throughout the term of
the Development Plan so as to adjust the specific work performed under the
Development Plan to conform to evolving developments in technology and the
results of the development work performed. While minor adjustments to the
Development Plan may be made from time to time upon approval of the Program
Management Team, significant changes in the scope or direction of the work and
any changes in funding exceeding [* * *] of the total amount budgeted in any
calendar year for the Development Program must be approved by the Steering
Committee, in the absence of which approval the most recently approved
Development Plan shall remain in effect.
5.1.4 Execution and Performance. The Development Program shall
-------------------------
allocate among the Parties responsibility for each of the activities described
therein. The Parties shall use commercially reasonable and diligent efforts to
conduct the activities described in the Development Plan. The Development Plan
shall be supervised by the Program Management Team. The Program Management Team
will coordinate preclinical and clinical testing of the Collaboration Products
in the Territory and work with designated individuals at BioMarin and Genzyme in
the preparation of Regulatory Approval filings for the Collaboration Products
and filing the same with regulatory agencies designated by the Steering
Committee. The Parties acknowledge and agree that their current intention is
that the Development Program will focus as its first priority on completion of a
clinical development program as necessary to file a BLA for and in the United
States. It is further acknowledged and agreed, however, that when and to the
extent the Steering Committee determines that it is appropriate, complementary
development efforts will be conducted in other countries where such activities
need to be performed in such other countries for Regulatory Approval.
5.1.5 Attendance at Regulatory Meetings; Correspondence. Each
-------------------------------------------------
Party shall provide the others with prior notice of all meetings and
teleconferences between representatives of the notifying Party and regulatory
authorities regarding any Collaboration Product for use in the Territory. Except
as otherwise provided herein, the Party receiving such notice shall have the
right to have representatives participate in all such meetings and
teleconferences. Each Party shall use reasonable efforts to provide the other
Party with a reasonable opportunity to review and comment upon submissions to,
and correspondence with, any regulatory agency in the Territory with respect to
Collaboration Products prior to the filing or delivery of such submissions or
correspondence. Without limiting the foregoing, each Party shall use reasonable
efforts to confirm in writing to the other Party all communications with a
regulatory authority with respect to a Regulatory Approval (including filings
therefor) and to provide to the other Party copies of all documents sent to or
received from such regulatory authority regarding such Regulatory Approvals.
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5.2 Development Information.
-----------------------
5.2.1 Reports and Information Exchange. As between the Parties
--------------------------------
hereto, BioMarin/Genzyme LLC shall own all clinical trial data accumulated from
all clinical trials of Collaboration Products conducted as part of the Program
or otherwise funded or partially funded by BioMarin/Genzyme LLC. Each of
BioMarin and Genzyme shall use commercially reasonable and diligent efforts to
disclose to BioMarin/Genzyme LLC and to the other Party all material information
relating to any Collaboration Product promptly after it is learned or its
materiality is appreciated. The Party performing or supervising clinical trials
of Collaboration Products in accordance with the Development Plan shall, on
behalf and in the name of BioMarin/Genzyme LLC, maintain the database of
clinical trial data accumulated from all clinical trials of Collaboration
Products and of adverse reaction information for all such Collaboration
Products. Each Party shall also keep the Program Management Team informed as to
its progress in the Development Plan. All protocols for clinical trials to be
conducted, and all product registration plans, for Collaboration Products for
applications within the Field in the Territory shall be submitted to the Program
Management Team for review and comment by the Program Management Team prior to
filing of such protocols or registrations with any regulatory agency. Within
sixty (60) days following the end of each calendar quarter during the
Development Program, each of BioMarin and Genzyme shall provide the other
Parties with a reasonably detailed written report describing the progress to
date of all activities for which such Party was allocated responsibility during
such quarter under the Development Plan.
5.2.2 Adverse Reaction Reporting. Each of BioMarin and Genzyme
--------------------------
shall notify the other Parties of any Adverse Reaction Information relating to
any Collaboration Product within twenty-four (24) hours of the receipt of such
information and as necessary for compliance with regulatory requirements.
"Adverse Reaction Information" includes without limitation information relating
----------------------------
to any experience that (a) suggests a significant hazard, contraindication, side
effect or precaution, (b) is fatal or life threatening, (c) is permanently
disabling, (d) requires or prolongs inpatient hospitalization, (e) involves a
congenital anomaly, cancer or overdose or (f) is one not identified in nature,
specificity, severity or frequency in the current investigator brochure or the
United States labeling for the Collaboration Product.
5.2.3 Clinical and Regulatory Audits. Each of BioMarin and Genzyme
------------------------------
shall permit BioMarin/Genzyme LLC and the other Party or the representatives of
BioMarin/Genzyme LLC or the other Party to have access during regular business
hours and upon reasonable advance notice, at the auditing Party's own expense
and no more than once in each calendar year during the term of this Agreement,
to the non-auditing Party's records and facilities relating to the Development
Program for the purpose of monitoring compliance with Good Clinical Practice and
other applicable requirements of the Regulatory Scheme.
5.3 Regulatory Approval Filings. Regulatory Approval filings in the
---------------------------
Territory for the Collaboration Products and for the facilities used to
manufacture such Collaboration Products shall be filed in the name of
BioMarin/Genzyme LLC or, if required with respect to filings to be made with
governmental authorities or deemed to be in the best interest of the Parties by
the Steering Committee, in the name of such other entity as may be agreed upon
by the Steering Committee (such as filings with European regulatory
authorities). Prior to submission to the FDA, the Parties, through the Program
Management Team, shall consult, cooperate in preparing and mutually agree on the
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content and scope of the Regulatory Approval filings. In the event that
Regulatory Approvals are required to be filed in the name of an entity other
than BioMarin/Genzyme LLC, the Steering Committee shall ensure that a duly
authorized officer of such entity agrees in writing that (a) such entity shall
hold the licenses issued in respect of such Regulatory Approval filings,
maintain control over the manufacturing facilities, equipment and personnel, and
engage in pharmacovigilence to the extent required by the Regulatory Scheme, (b)
such entity shall maintain compliance with applicable Regulatory Schemes, (c)
such entity shall provide manufacturing and supply services to BioMarin/Genzyme
LLC at the Fully Absorbed Cost of Goods of Collaboration Products so
manufactured and supplied, (d) the Parties shall have an irrevocable right of
access and reference to such Regulatory Approval filings, licenses and
facilities and (e) such entity agrees to comply with the provisions of Article
13 hereof with respect to the ownership and/or disposition of such Regulatory
Approvals in the event this Agreement is terminated and to provide the level of
cooperation described in Section 14.1 hereof in connection therewith.
5.4 Clinical Data. In all agreements with Third Parties or Affiliates
-------------
involving the development of preclinical or clinical data for a Collaboration
Product, Genzyme and BioMarin shall require that such Third Parties and
Affiliates provide BioMarin/Genzyme LLC and the other Party access to all such
data, to the extent such data is required to be obtained from such Third Parties
by the Japanese Ministry of Health and Welfare, the U.S. FDA, the Commission of
Proprietary Medicines of the European Community, the European Medicines
Evaluation Agency or other regulatory agency, in each case with respect to
Regulatory Approvals.
5.5 Facilities Visit. Representatives of BioMarin and Genzyme may visit
----------------
all manufacturing sites and the sites of any clinical trials or other
experiments being conducted by the other Party or BioMarin/Genzyme LLC in
connection with the Development Program. If requested by the other Party,
BioMarin and Genzyme shall cause appropriate individuals working on the
Development Program to be available for meetings at the location of the
facilities where such individuals are employed at times reasonably convenient to
the Party responding to such request.
ARTICLE VI
SALES, MARKETING AND ADMINISTRATIVE SERVICES
6.1 Commercialization Plans.
-----------------------
6.1.1 General. The commercialization of each Collaboration Product
-------
shall be governed by a Commercialization Plan which shall describe the overall
plan for commercializing such Collaboration Product, including without
limitation (a) a comprehensive marketing, sales, pricing, manufacturing,
distribution and licensing strategy for such Collaboration Product in all
applicable countries, including the identification of any Third Parties engaged
or to be engaged in connection with such activities and the arrangements with
them that have been or are proposed to be agreed upon (including policies and
procedures for adjustments, rebates, bundling and the like), (b) estimated
launch date, market and sales forecasts, in numbers of patients and local
currency, and competitive analysis for such Collaboration Product for the
overall Territory and for each Major
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Market Country, (c) a detailed budget for the Commercialization Costs to be
incurred in connection with performing such Commercialization Plan, (d)
reasonable due diligence obligations to be met by Genzyme with respect to
commercialization objectives to be achieved during the calendar year to which
the Collaboration Plan relates (such as minimum annual sales objectives) and (e)
a detailed manufacturing plan.
6.1.2 Initial and Updated Commercialization Plans. No later than
-------------------------------------------
immediately prior to the completion of the submission of all Regulatory Approval
filings for a Collaboration Product in any given country, Genzyme shall develop
and submit to the Steering Committee for review and approval an initial
Commercialization Plan in accordance with its customary standard for a product
of comparable market potential, taking into consideration factors such as market
conditions, regulatory factors, competition and the costs and profits of such
Collaboration Product. Genzyme shall be primarily responsible for developing
each Commercialization Plan and, in connection therewith, shall consult with
BioMarin regarding the identification, timing and execution of and budget for
the major commercialization tasks required to perform the Commercialization
Plan. Each Commercialization Plan shall be updated annually by Genzyme, in
consultation with BioMarin below as herein provided, and shall be submitted to
the Steering Committee for approval not later than sixty (60) days prior to
January 1 of each year. Each Commercialization Plan approved by the Steering
Committee shall be signed by an authorized representative of each of BioMarin
and Genzyme. While minor adjustments to the Commercialization Plan may be
proposed by either of Genzyme or BioMarin from time to time without Steering
Committee approval, significant changes in the scope or direction of the work
and any changes in funding exceeding [* * *] of the total amount budgeted in any
calendar year for the Commercialization Plan must be approved by the Steering
Committee, and in the absence of such approval, the provisions of the most
recently approved Commercialization Plan shall remain in effect. Within sixty
(60) days following the end of each calendar quarter after the filing of the
first application for a Regulatory Approval, each of BioMarin and Genzyme shall
provide the other Parties with a reasonably detailed written report describing
the progress to date of all activities for which such Party was allocated
responsibility during such quarter under the Commercialization Plan.
6.2 Exclusive Engagement; Diligence. Subject to Section 6.7 below,
-------------------------------
BioMarin/Genzyme LLC hereby engages Genzyme as its exclusive agent to market and
sell Collaboration Products within the Territory for use within the Field.
Genzyme hereby accepts such engagement and agrees (by itself or through its
Affiliates) to use commercially reasonable and diligent efforts to establish
each Collaboration Product in the markets, fulfill market demand and meet the
marketing and distribution goals set forth in the Commercialization Plan for
such Collaboration Product. Genzyme will not engage a Third Party to market and
sell Collaboration Products on its behalf without prior approval of the Steering
Committee.
6.3 Orders. Genzyme shall provide written notice to BioMarin/Genzyme LLC
------
of the requirements for the Collaboration Products in the Territory, setting
forth the quantity of Collaboration Products required, the Specifications
therefor and the date required. BioMarin/Genzyme LLC shall use commercially
reasonable and diligent efforts to deliver the Collaboration Products to Genzyme
for sale within the Territory, on the date set forth in the applicable
requirements notice. All freight, insurance, duties and all other charges
associated with
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shipment of the Collaboration Products shall be considered Commercialization
Costs for such Collaboration Products only to the extent such costs are not
charged to Genzyme's customers.
6.4 Marketing and Distribution Expenses. Genzyme's ordinary expenses
-----------------------------------
incurred in the course of performing its marketing and distribution obligations
hereunder shall constitute Commercialization Costs and, as such, shall be
reimbursed by BioMarin/Genzyme LLC, but only to the extent that such amounts,
together with all other Commercialization Costs to date during such calendar
year, do not exceed [* * *] of the Commercialization Costs budgeted therefor in
the Commercialization Plan then in effect for such calendar year (except to the
extent such excess is approved by the Steering Committee pursuant to Section
6.1.2 above). Ordinary marketing and distribution expenses include, but are not
limited to, recruitment costs and salaries and associated expenses for sales and
marketing personnel and support staff, advertising and promotion costs,
transportation expenses including insurance (but only to the extent not charged
to customers and only such proportion of all such costs directly attributable to
support of the Commercialization Plan), duties and taxes, bad debt expense, and
costs associated with cash and other trade discounts and allowances and other
marketing concessions to customers actually allowed and taken.
6.5 Responsibilities of Genzyme. Genzyme shall be solely responsible for
---------------------------
all aspects of the marketing and sale of the Collaboration Products in
accordance with the strategy, policies and procedures established in the
Commercialization Plan, including without limitation the responsibilities
described in this Section 6.5.
(a) Genzyme shall be primarily responsible for the
implementation of each Commercialization Plan, including without limitation
setting all terms of sale, including establishing pricing policies, credit terms
and cash discounts and allowances, formulating marketing plans, providing
patient information, providing customer support services, providing
reimbursement counseling services and conducting sales force training, all in
accordance with good business practices and industry standards.
(b) Genzyme shall employ sufficiently trained and experienced
individuals in numbers adequate to carry out its responsibilities under this
Article 6. Sales and support personnel shall be familiar with the Collaboration
Products and with competitive products and shall respond promptly to customer
requests for support.
(c) Genzyme shall provide instructions and appropriate training
to customers in the proper use and handling of the Collaboration Products and
shall monitor performance of the Collaboration Products.
(d) Genzyme shall have sole responsibility for responding to all
requests for medical information regarding Collaboration Products.
Notwithstanding the foregoing, BioMarin may maintain a website or other
informational resources where it may publish general medical information
relating to MPS I, so long as such website complies in all respects with
applicable laws and regulations, including without limitation regulations of the
FDA regarding "off-label" promotion of Collaboration Products.
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(e) Genzyme shall comply with all laws and government
regulations applicable to the marketing and sale of Collaboration Products
within the Territory.
(f) The Collaboration Products shall be sold under trademarks
selected by the Steering Committee and owned by or licensed to BioMarin/Genzyme
LLC in accordance with Section 9.1.2 hereof.
(g) Genzyme shall maintain complete and accurate records of all
movements and transactions involving Collaboration Products by an appropriate
identifier and by customer so that all such movements and transactions can be
traced quickly and effectively. Upon written request, Genzyme will provide
copies of such records to the other Parties, with access to facilities used by
Genzyme in performing its duties under this Article 6 during normal business
hours and upon reasonable advance notice for the purpose of inspecting such
facilities for compliance with the terms of this Agreement. The records
maintained by Genzyme pursuant to this clause (g) shall be subject to the other
Parties' audit rights under Section 4.5 hereof.
(h) Genzyme shall report promptly to the Steering Committee in
writing the occurrence of each material incident of Collaboration Product
performance required to be reported to regulatory authorities, including without
limitation Adverse Reaction Information in accordance with Section 5.2.2 hereof.
6.6 Responsibilities of BioMarin/Genzyme LLC and BioMarin. BioMarin/
-----------------------------------------------------
Genzyme LLC shall use commercially reasonable and diligent efforts to supply
Collaboration Products to Genzyme in accordance with notices of requirements
pursuant to Section 6.3 above. Neither BioMarin/Genzyme LLC nor BioMarin shall
actively solicit for its own account sales of Collaboration Products in the
Territory. Any solicitations or requests to purchase Collaboration Products
received by BioMarin/Genzyme LLC or BioMarin from any customer or prospective
customer with its principal address or place of business located in the
Territory or who BioMarin/Genzyme LLC or BioMarin, as the case may be, knows
intends to use the Collaboration Products in the Territory or ship such
Collaboration Products into the Territory shall be immediately referred to
Genzyme.
6.7 Commercialization Milestones. The Steering Committee shall establish,
----------------------------
as part of the initial Commercialization Plan, milestones for Genzyme's
marketing and sales of Collaboration Products hereunder (collectively,
"Commercialization Milestones"). The Commercialization Milestones shall
----------------------------
include, without limitation, [* * *]. It is understood and agreed, however, that
such Commercialization Milestones shall be subject to (i) Regulatory Approvals
and reimbursement approvals occurring at the times anticipated by the Parties
and (ii) BioMarin, its Affiliates and Third Parties satisfying their respective
obligations hereunder (e.g., the Manufacturing Party providing an adequate
supply of Collaboration Products to Genzyme). In the event that Genzyme is
unable to meet a Commercialization Milestone for a particular Collaboration
Product in a particular territory for reasons other than those set forth in the
preceding sentence, the Steering Committee shall promptly confer and discuss how
to resolve such issue as soon as possible, including without limitation,
appointing BioMarin or a Third Party as agent to
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market and sell such Collaboration Product in such territory, all as the
Steering Committee deems appropriate under the circumstances.
6.8 General and Administrative Services. General and administrative
-----------------------------------
services required by BioMarin/Genzyme LLC shall be provided at cost by either or
both of BioMarin and Genzyme as determined by the Steering Committee. All such
costs, in addition to general and administrative costs payable to Third Parties
(such as accountants) and general and administrative costs incurred by BioMarin
and Genzyme in satisfying their respective obligations under this Agreement,
shall be considered to be Program Costs.
ARTICLE VII
MANUFACTURE AND SUPPLY
Subject to the terms and conditions of this Agreement, Collaboration
Products shall be manufactured and supplied for preclinical and clinical testing
and for commercial sale upon the following terms and conditions:
7.1 Process Development. The Parties will use commercially reasonable and
-------------------
diligent efforts to develop a process for the manufacture of each Collaboration
Product and to scale up that process to a scale sufficient to manufacture and
supply (a) the anticipated demand for preclinical studies and clinical trials of
such Collaboration Product in accordance with the projections set forth in the
Development Plan and (b) the anticipated market demand for such Collaboration
Product for the Territory at the time Regulatory Approval is obtained for such
Collaboration Product in accordance with the projections set forth in the
Commercialization Plan for such Collaboration Product. The development of the
process for the manufacture of Collaboration Products as well as the scale up of
such process and all material issues incident to the development of the ability
to produce Collaboration Products for commercial purposes in sufficient quantity
and in a timely manner will be within the purview of the Program Management
Team, and all changes to the manufacturing process shall be subject to the
approval of the Program Management Team.
7.2 Manufacture and Supply of Collaboration Product. BioMarin/Genzyme LLC
-----------------------------------------------
shall manufacture (or, subject to Section 7.2.1, have manufactured) and supply
Collaboration Products for preclinical and clinical activities and commercial
sale in the following terms and conditions (and such other terms and conditions
established by the Steering Committee consistent with the provisions of this
Agreement):
7.2.1 General. All decisions relating to the manufacture of
-------
Collaboration Products shall be subject to the approval of, or modification by,
the Steering Committee. Without limiting the foregoing, BioMarin/Genzyme LLC
shall initially contract with BioMarin to manufacture and supply Collaboration
Products (a) for preclinical studies and clinical trials in quantities and
within a time period sufficient to conduct the activities set forth in the
Development Plan and (b) to meet market demand for Collaboration Products
ordered in accordance with the terms hereof, and that BioMarin would so
exclusively manufacture and supply Collaboration Products until such time as the
Steering Committee otherwise deems appropriate. At such time, BioMarin/Genzyme
LLC may
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subcontract with BioMarin, Genzyme and Third Parties for the manufacture,
packaging or other finishing processes of Collaboration Products, as determined
by the Steering Committee. To the extent the Steering Committee determines that
the quantity of Collaboration Product required by the Development Program or the
Commercialization Plan is greater than the quantity which may reasonably be
manufactured by BioMarin, or if the cost per unit of Collaboration Product
exceeds commercially reasonable levels, prior to engaging a Third Party to
manufacture Collaboration Products, BioMarin/Genzyme LLC will offer Genzyme the
opportunity to manufacture and supply Collaboration Products, on terms and
conditions determined by the Steering Committee. Notwithstanding the foregoing
provisions of this Section 7.2.1, to the extent required by the Regulatory
Scheme, any entity selected by the Steering Committee pursuant to Section 5.3
above may be engaged by BioMarin/Genzyme LLC to manufacture Collaboration
Products (whether such entity be a Party or Third Party, each a "Manufacturing
-------------
Party"). Without limiting the foregoing, the Manufacturing Party shall agree to
- -----
use commercially reasonable and diligent efforts to manufacture and supply
Collaboration Products hereunder.
7.2.2 Forecasts. The Program Management Team shall establish a
---------
procedure for providing forecasts of customer orders for Collaboration Products
pursuant to Section 6.3 above, updating such forecasts and ordering
Collaboration Product, in each case within time periods sufficient to enable
BioMarin/Genzyme LLC to manufacture such Collaboration Products to meet such
forecasts in a commercially reasonable and diligent manner.
7.2.3 Facilities. Notwithstanding any provision of this Agreement
----------
to the contrary, the Parties acknowledge and agree that BioMarin/Genzyme LLC
shall not bear any costs relating to the construction of manufacturing
facilities for a Collaboration Product (other than through normal depreciation
and amortization included in Fully Absorbed Cost of Goods).
7.3 Certificates of Analysis. The Manufacturing Party shall perform, or
------------------------
cause its contract manufacturer(s) to perform, quality assurance and control
tests on each lot of Collaboration Products before delivery and shall prepare,
or cause its contract manufacturer(s) to prepare and deliver, a written report
of the results of such tests (for purposes of Sections 7.3, 7.4 and 7.5, such
contract manufacturer(s) shall be included in the definition of the term
"Manufacturing Party"). Each test report shall set forth for each lot delivered
the items tested, specifications and results in a certificate of analysis
containing the types of information which shall have been approved by the
Program Management Team or required by the FDA or other applicable regulatory
authority. The Manufacturing Party shall maintain such certificates for a
period of not less than five (5) years from the date of manufacture or for such
longer period as required under applicable requirements of the FDA or other
applicable regulatory authority.
7.4 Certificates of Manufacturing Compliance. The Manufacturing Party
----------------------------------------
shall prepare, or cause to be prepared and delivered, and maintain for a period
of not less than five (5) years or for such longer period as required under
applicable requirements of the FDA or other applicable regulatory authority for
each lot of Collaboration Products manufactured a certificate of manufacturing
compliance containing the types of information which shall have been approved by
the Program Management Team or required by the FDA or other applicable
regulatory authority, which certificate will certify that the lot of
Collaboration Products was manufactured in accordance with the Specifications
and the Good Manufacturing Practices of the FDA or other applicable
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regulatory authority as the same may be amended from time to time. The
Manufacturing Party shall advise the other Parties immediately if an authorized
agent of the FDA or other regulatory authority visits any of the Manufacturing
Party's manufacturing facilities, or the facilities where the Collaboration
Products are being manufactured, for an inspection with respect to the
Collaboration Products. The Manufacturing Party shall furnish to the other
Parties the report by such agency of such visit, to the extent that such report
relates to Collaboration Products, within ten (10) business days of the
Manufacturing Party's receipt of such report, and the other Parties shall have
the right to comment on any response by the Manufacturing Party to such
inspecting agency.
7.5 Access to Facilities. Each Party shall have the right to inspect those
--------------------
portions of the manufacturing, finish processing or storage facilities of the
Manufacturing Party where Collaboration Products are being manufactured,
finished or stored, or any subcontractor who is manufacturing, finishing or
storing Collaboration Products for the Manufacturing Party, at any time during
regular business hours and upon reasonable advance notice to ascertain
compliance with the Good Manufacturing Practices of the FDA or other applicable
regulatory authority, as the same may be amended from time to time. Subject to
the terms and conditions of Section 10.1 below, confidential information
disclosed to or otherwise gathered by the Party conducting such inspection
during any such inspection shall be maintained as confidential.
ARTICLE VIII
MANAGEMENT
8.1 Program Management Team.
8.1.1 General. The Parties have established a Program Management
-------
Team to oversee and control development of Collaboration Products and to prepare
for and oversee the launch of Collaboration Products. The Program Management
Team is and shall continue to be composed of four (4) representatives appointed
by BioMarin and four (4) representatives appointed by Genzyme. Such
representatives will include individuals with expertise and responsibilities in
such areas as preclinical development, clinical development, manufacturing,
regulatory affairs, marketing, sales management and reimbursement. The Program
Management Team shall meet as needed but not less than monthly. The Program
Management Team shall appoint one of its members to act as Secretary. Such
meetings shall be at times and places or in such form (e.g., telephone or video
conference) as the members of the Program Management Team shall agree. A Party
may change one or more of its representatives to the Program Management Team at
any time. Members of the Program Management Team may be represented at any
meeting by another member of the Program Management Team or by a deputy. Any
approval, determination or other action agreed to by a majority of the members
of the Program Management Team appointed by each of BioMarin and Genzyme or
their deputies present at the relevant Team meeting shall be the approval,
determination or other action of the Program Management Team, provided at least
two (2) representatives of each of BioMarin and Genzyme are present at such
meeting. Representatives of either BioMarin and Genzyme who are not members of
the Program Management Team may attend meetings of the Program Management Team
as agreed to by the representative members of the other Party. The
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Program Management Team may designate project leaders to the extent it deems it
necessary or advisable.
8.1.2 Development Program Functions. During the term of the
-----------------------------
Development Program, the Program Management Team shall coordinate, expedite and
control the development of Collaboration Products to obtain Regulatory
Approvals. The Program Management Team will (a) develop and recommend to the
Steering Committee Development Plans (including annual development budgets), (b)
facilitate the flow of information with respect to development work being
conducted for each Collaboration Product throughout the Territory and (c)
discuss and cooperate regarding the conduct of such development work.
8.1.3 Commercialization Functions. Following submission of filings
---------------------------
for Regulatory Approvals for the first Collaboration Product, the Program
Management Team shall function as the operational staff of BioMarin/Genzyme LLC
and the functions of the Program Management Team shall be expanded to include:
(a) monitoring the commercialization of Collaboration Products pursuant to the
Commercialization Plan, including oversight of planning, annual budgeting,
manufacturing, marketing, sales and distribution, and licensing of Collaboration
Products; (b) monitoring actual expenses incurred in the manufacture, marketing,
sale and distribution of Collaboration Products; (c) overseeing any post-
marketing studies of a Collaboration Product and (d) facilitating cooperation
regarding the commercialization and marketing activities of the Parties.
8.1.4 Minutes. The Program Management Team shall keep accurate
-------
minutes of its deliberations which shall record all proposed decisions and all
actions recommended or taken. The Secretary shall be responsible for the
preparation of draft minutes. Draft minutes shall be sent to all members of the
Program Management Team within five (5) working days after each meeting and
shall be approved, if appropriate, at the next meeting. All records of the
Program Management Team shall at all times be available to all of the Parties.
8.2 Steering Committee.
8.2.1 General. The Parties have established a Steering Committee
-------
to oversee and manage the collaboration contemplated by this Agreement. The
Steering Committee is and shall continue to be composed of three (3)
representatives appointed by BioMarin and three (3) representatives appointed by
Genzyme. Such representatives will be senior officers and/or managers of their
respective companies, except that Barry Frankel may represent BioMarin on the
Steering Committee provided that he executes a Confidentiality Agreement
reasonably acceptable to Genzyme prior to the first meeting of the Steering
Committee. Genzyme and BioMarin shall each designate one (1) of their
respective representatives on the Steering Committee to act as Co-Chairman. The
Steering Committee shall appoint one (1) of its members to act as Secretary.
The Steering Committee will meet as needed but not less than once each calendar
quarter. Such meetings shall be at times and places or in such form (e.g.,
telephone or video conference) as the members of the Steering Committee shall
agree. A Party may change one or more of its representatives to the Steering
Committee at any time. Members of the Steering Committee may be represented at
any meeting by another member of the Steering Committee or by a deputy. Any
approval, determination or
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other action agreed to by unanimous consent of the members of the Steering
Committee or their deputies present at the relevant Steering Committee meeting
shall be the approval, determination or other action of the Steering Committee,
provided at least two (2) representatives of each of BioMarin and Genzyme are
present at such meeting. Representatives of either BioMarin and Genzyme who are
not members of the Steering Committee may attend meetings of the Steering
Committee as agreed to by the representative members of the other Party. Each
Party shall bear its own personnel and travel costs and expenses relating to
Steering Committee meetings, which costs and expenses shall not be included in
the Program Costs.
8.2.2 Functions. The Steering Committee shall perform the
---------
following functions: (a) determine the overall strategy for the Program in the
manner contemplated by this Agreement; (b) coordinate the activities of the
Parties hereunder; (c) settle disputes or disagreements that are unresolved by
the Program Management Team; (d) approve any agreements with Third Parties
regarding a Collaboration Product or which involve the grant of any rights
related to the development, manufacture or marketing of a Collaboration Product;
(e) review and approve each Development Plan, including each significant change
and annual update thereto, submitted to it pursuant to Section 5.1.3 hereof; (f)
review and approve each Commercialization Plan, including each significant
change and annual update thereto, submitted to it for approval pursuant to
Section 6.1.2 hereof; (g) serve as the governing body of BioMarin/Genzyme LLC;
and (h) perform such other functions as appropriate to further the purposes of
this Agreement as determined by the Parties.
8.2.3 Minutes. The Steering Committee shall keep accurate minutes
-------
of its deliberations which shall record all proposed decisions and all actions
recommended or taken. The Secretary shall be responsible for the preparation of
draft minutes. Draft minutes shall be sent to all members of the Steering
Committee within ten (10) working days after each meeting and shall be approved,
if appropriate, at the next meeting. All records of the Steering Committee
shall at all times be available to both BioMarin and Genzyme.
8.3 General Disagreements. All disagreements within the Program Management
---------------------
Team or the Steering Committee shall be subject to the following:
(a) The representatives to the Program Management Team or
Steering Committee (as the case may be) will negotiate in good faith for a
period of not less than thirty (30) days to attempt to resolve the dispute. In
the case of the Program Management Team, any unresolved dispute shall be
referred to the Steering Committee for good faith negotiations for an additional
period of not less than thirty (30) days to attempt to resolve the dispute.
(b) In the event that the dispute is not resolved after the
period specified in clause (a), the representatives shall promptly present the
disagreement to the Chief Executive Officers of BioMarin and Genzyme or a
designee of such Chief Executive Officer reasonably acceptable to the other
Party.
(c) Such executives shall meet or discuss in a telephone or
video conference each of BioMarin and Genzyme's views and explain the basis for
such dispute.
(d) If such executives cannot resolve such disagreement
within thirty (30) days after such issue has been referred to them, then such
dispute shall be referred to arbitration as described in Section 14.10 hereof.
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ARTICLE IX
INTELLECTUAL PROPERTY RIGHTS
9.1 Ownership. The Parties acknowledge that the ownership rights set forth
---------
herein (a) shall not be affected by the participation in the discovery or
development of an Invention (as defined below) by the Program Management Team or
the Steering Committee in the course of discharging their duties hereunder and
(b) are subject to the license grants set forth in Article 3 above.
9.1.1 Ownership and Assignment of Discoveries and Improvements.
--------------------------------------------------------
All right, title and interest in all writings, inventions, discoveries,
improvements and other technology, whether or not patentable or copyrightable,
and any patent applications, patents or copyrights based thereon (collectively,
the "Inventions") that are discovered, made or conceived during and in
----------
connection with the Program solely by employees of BioMarin or others acting on
behalf of BioMarin ("BioMarin Inventions") shall be owned by BioMarin. All
-------- ----------
right, title and interest in all Inventions that are discovered, made or
conceived during and in connection with the Program solely by employees of
Genzyme or others acting on behalf of Genzyme ("Genzyme Inventions") shall be
------------------
owned by Genzyme. All right, title and interest in all Inventions that are
discovered, made or conceived during and in connection with the Program jointly
by employees of BioMarin and Genzyme ("Joint Inventions") shall be jointly owned
----------------
by Genzyme and BioMarin. Each of BioMarin and Genzyme shall promptly disclose to
BioMarin/Genzyme LLC and the other Party the making, conception or reduction to
practice of Inventions by employees or others acting on behalf of such Party.
All BioMarin Inventions, Genzyme Inventions and Joint Inventions shall be
automatically licensed to BioMarin/Genzyme LLC pursuant to Section 3.1 hereof.
Except as expressly provided in this Agreement, it is understood that neither
BioMarin nor Genzyme shall have any obligation to account to the other Party for
profits, or obtain any approval of the other to grant a license or exploit a
Joint Invention outside of the Field by reason of joint ownership of such
Invention or other intellectual property. For avoidance of doubt, in any
jurisdiction where consent of all owners of a Joint Invention is required in
order to grant a license to such Invention, BioMarin and Genzyme each grants the
other Party consent to grant a non-exclusive license to Joint Invention outside
the Field.
9.1.2 Ownership of Trademarks. The Steering Committee shall
-----------------------
select and as between the Parties hereto BioMarin/Genzyme LLC shall own all
trademarks for the sale and use of Collaboration Products in the Territory
(collectively, "Product Marks") and all goodwill therein shall inure to the
-------------
benefit of BioMarin/Genzyme LLC, and all expenses incurred by a Party with
respect thereto shall be considered Program Costs. All Product Marks shall be
registered in the name of BioMarin/Genzyme LLC if and when registered. In the
event that the applicable laws and regulations of any country in which the
Steering Committee elects to register any Product Marks require that such
trademark(s) be registered in the name of an entity other than BioMarin/Genzyme
LLC, or if the Steering Committee determines that it is in the best interests of
the Parties, then the Steering Committee shall select such entity and ensure
that a duly authorized officer of such entity agrees in writing that such entity
shall (a) grant BioMarin/Genzyme LLC a worldwide, exclusive, fully-paid,
royalty-free, irrevocable right and license (with the right to grant and
authorize sublicenses) to use such Product Marks and (b) comply with the
provisions of Article 13 hereof with
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respect to the ownership and/or disposition of such Product Marks in the event
this Agreement is terminated and provide the level of cooperation described in
Section 14.1 hereof in connection therewith. Each Party hereby acknowledges
agrees that at no time during of this Agreement to challenge or assist others to
challenge the Product Marks or the registration thereof or attempt to register
any trademarks, marks or trade names confusingly similar to such Product Marks.
9.1.3 Cooperation of Employees. Each of BioMarin and Genzyme
------------------------
represents and agrees that all employees or others acting on its behalf in
performing its obligations under this Agreement shall be obligated under a
binding written agreement to assign to such Party, or as such Party shall
direct, all Inventions made or conceived by such employee or other person. In
the case of non-employees working for other companies or institutions on behalf
of BioMarin or Genzyme, BioMarin or Genzyme, as applicable, shall have the right
to obtain licenses for all Inventions made by such non-employees on behalf of
BioMarin or Genzyme, as applicable, in accordance with the policies of said
company or institution. BioMarin and Genzyme agree to undertake to enforce such
agreements (including, where appropriate, by legal action) considering, among
other things, the commercial value of such Inventions.
9.2 Filing, Prosecution and Maintenance of Patent Rights.
9.2.1 Filing, Prosecution and Maintenance. Each of BioMarin and
-----------------------------------
Genzyme shall be responsible for the filing, prosecution and maintenance of all
Patent Rights within the BioMarin Patent Rights and Genzyme Patent Rights,
respectively. The Steering Committee shall designate either BioMarin or Genzyme
as the Party responsible for the filing, prosecution and maintenance of Patent
Rights within the BioMarin/Genzyme Patent Rights. For so long as any of the
license grants set forth in Article 3 hereof remain in effect and upon request
of the other Party, each of BioMarin and Genzyme agrees to file and prosecute
patent applications and maintain the Patent Rights for which it is responsible
in all countries in the Territory selected by the Steering Committee. Each of
BioMarin and Genzyme shall consult with and keep the other fully informed of
important issues relating to the preparation and filing (if time permits),
prosecution and maintenance of such patent applications and patents, and shall
furnish to the other Party copies of documents relevant to such preparation,
filing, prosecution or maintenance in sufficient time prior to filing such
document or making any payment due thereunder to allow for review and comment by
the other Party and, to the extent possible in the reasonable exercise of its
discretion, the filing Party shall incorporate all such comments.
9.2.2 Patent Filing Costs. All costs associated with filing,
-------------------
prosecuting and maintaining patent applications and patents covering each of the
BioMarin Patent Rights, Genzyme Patent Rights and BioMarin/Genzyme Patent Rights
specific to the Collaboration Products in the Territory shall be deemed
Development Costs; provided, however, that if any such Patent Rights include
claims directed at subject matter other than Collaboration Products, one-half
(1/2) of the costs incurred for the filing, prosecution and maintaining of such
Patent Rights shall be deemed Development Costs. For purposes of this Section
9.2, "prosecution and maintenance" of Patent Rights shall be deemed to include,
without limitation, the conduct of interferences or oppositions, and/or requests
for re-examinations, reissues or extensions of patent terms.
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9.3 Cooperation. Each of BioMarin and Genzyme shall make available to the
-----------
other Party (or to the other Party's authorized attorneys, agents or
representatives) its employees, agents or consultants to the extent necessary or
appropriate to enable the appropriate Party to file, prosecute and maintain
patent applications and resulting patents with respect to inventions owned by a
Party and for periods of time sufficient for such Party to obtain the assistance
it needs from such personnel. Where appropriate, each of BioMarin and Genzyme
shall sign or cause to have signed all documents relating to said patent
applications or patents at no charge to the other Party.
9.4 Notification of Patent Term Restoration. Each of BioMarin and Genzyme
---------------------------------------
shall notify the other Party of (a) the issuance of each patent included within
the Patent Rights for which the notifying Party is responsible pursuant to
Section 9.2.1 above, giving the date of issue and patent number for each such
patent, and (b) each notice pertaining to any patent included within the Patent
Rights for which the notifying Party is so responsible which it receives as
patent owner pursuant to the Drug Price Competition and Patent Term Restoration
Act of 1984, including notices pursuant to (S)(S)101 and 103 of such Act from
persons who have filed an abbreviated NDA. Such notices shall be given
promptly, but in any event within ten (10) business days after receipt of each
such notice pursuant to such Act. Each of BioMarin and Genzyme shall notify the
other Party of each filing for patent term restoration under such Act, any
allegations of failure to show due diligence and all awards of patent term
restoration (extensions) with respect to the Patent Rights for which the
notifying Party is responsible.
9.5 No Other Technology Rights. Except as otherwise expressly provided in
--------------------------
this Agreement, under no circumstances shall a Party hereto, as a result of this
Agreement, obtain any ownership interest in or other right to the Patent Rights,
Technology or Manufacturing Know-How of the other Party, including items owned,
controlled or developed by the other Party, or transferred by the other Party to
said Party at any time pursuant to this Agreement. It is understood and agreed
that this Agreement does not grant either Party any license or other right in
the Patent Rights of the other Party except as expressly provided in Article 3
hereof and this Article 9.
9.6 Defense of Third Party Infringement Claims. If the manufacture,
------------------------------------------
production, sale or use of any Collaboration Product pursuant to this Agreement
results in a claim, suit or proceeding (collectively, "Actions") alleging patent
-------
infringement against BioMarin or Genzyme (or their respective Affiliates), such
Party shall promptly notify the other Party hereto in writing. The Party
subject to such Action (for purposes of this Section 9.6, the "Controlling
-----------
Party") shall have the exclusive right to defend and control the defense of any
such Action using counsel of its own choice; provided, however, that if such
Action is directed to the subject of the Patent Rights of the other Party (i.e.,
the BioMarin Patent Rights or the Genzyme Patent Rights), such other Party may
participate in the defense and/or settlement thereof at its own expense with
counsel of its choice. Except as agreed in writing by Genzyme and BioMarin, the
Controlling Party shall not enter into any settlement relating to a
Collaboration Product, if such settlement admits the invalidity or
unenforceability of any Patent Rights within the BioMarin Patent Rights or the
Genzyme Patent Rights, as applicable, of the other Party. The Controlling Party
agrees to keep the other Party hereto reasonably informed of all material
developments in connection with any such Action. Any cost, liability or expense
(including amounts paid in settlement) incurred by the Controlling Party as a
result of such Action shall be included in Commercialization Costs for the
Collaboration Product(s)
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that are the subject of such Action (or, if the Action is brought prior to the
first commercial sale of such Collaboration Product(s), such amounts shall be
included in Development Costs incurred by the Controlling Party) and shall not
be subject to the limitations of Sections 1.9, 4.2, 5.1.3, 6.1.2 or 6.4 above
provided that the other Party consents to incurrence of such cost, liability or
expense, with such consent not to be unreasonably withheld.
9.7 Enforcement of Patent Rights.
----------------------------
9.7.1 Enforcement. Subject to the provisions of this Section 9.7,
-----------
in the event that BioMarin or Genzyme reasonably believes that any BioMarin
Patent Rights, BioMarin Technology, Genzyme Patent Rights, Genzyme Technology,
BioMarin/Genzyme Patent Rights or BioMarin/Genzyme Technology necessary for the
manufacture, use or sale of a Collaboration Product in the Field is infringed or
misappropriated by a Third Party or is subject to a declaratory judgment action
arising from such infringement in a country, in each case with respect to the
manufacture, sale or use of a product potentially competitive with a
Collaboration Product within the Field, Genzyme or BioMarin (respectively) shall
promptly notify the other Party hereto. Promptly after such notice the Parties
shall meet to discuss the course of action to be taken with respect to an
Enforcement Action (as defined below) with respect to such infringement or
misappropriation, including the control thereof and sharing of costs and
expenses related thereto, for the purposes of entering into a litigation
agreement setting forth the same ("Litigation Agreement"). If the Parties do
--------------------
not enter such Litigation Agreement, the Party whose Patent Rights or Technology
is so allegedly infringed or misappropriated, or is subject to such declaratory
judgment action, (for purposes of this Section 9.7, the "Owner") shall have the
-----
initial right (but not the obligation) to enforce the intellectual property
rights within such Patent Rights or Technology, or defend any declaratory
judgment action with respect thereto (for purposes of this Section 9.7, an
"Enforcement Action"); provided that the Owner agrees to indemnify the other
------------------
Party for any and all liabilities and expenses (including, without limitation,
reasonable attorneys' fees and other expenses of litigation) incurred by such
other Party as a result of such Enforcement Action.
9.7.2 Information. Absent a Litigation Agreement, the Party
-----------
initiating or defending any such Enforcement Action shall keep the other Party
hereto reasonably informed of the progress of any such Enforcement Action, and
such other Party shall have the right to participate with counsel of its own
choice at its own expense.
9.7.3 Enforcement Costs; Recoveries. Unless otherwise agreed, the
-----------------------------
Party initiating an Enforcement Action shall, at the option of such Party, have
the right to either: (i) assume responsibility for all costs and expenses of
such Enforcement Action, in which case all amounts recovered in the Enforcement
Action (including without limitation amounts resulting from a settlement
thereof) shall be retained by such Party; or (ii) include such costs and
expenses within the Development Costs or Commercialization Costs, as applicable,
in which case all amounts recovered in the Enforcement Action, after reimbursing
the Party initiating the Action for any costs and expenses not previously so
offset, shall be shared by BioMarin and Genzyme in accordance with their
respective Percentage Interests.
9.8 Third Party Rights. The foregoing provisions of this Article 9 shall
------------------
be subject to and limited by any agreements pursuant to which BioMarin and
Genzyme, as the case may be, acquired
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any particular BioMarin Patent Rights, BioMarin Technology or Genzyme Patent
Rights or Genzyme Technology.
9.9 Third Party Agreements--Reports. To the extent that a Party is
-------------------------------
obligated to provide reports to a Third Party pursuant to a Third Party
Agreement as a result of or reporting on the status of activities of the other
Party hereunder, the other Party hereto shall reasonably assist the reporting
Party by providing information in its possession or control and in sufficient
detail to complete and submit such reports as required.
ARTICLE X
CONFIDENTIALITY
10.1 Nondisclosure Obligations. Except as otherwise provided in this
-------------------------
Article 10, during the term of this Agreement and for a period of five (5) years
thereafter, the Parties shall, and BioMarin shall cause BioMarin Genetics to,
maintain in confidence and use only for purposes specifically authorized under
this Agreement any information furnished to it by the other Party hereto
pursuant to this Agreement which if disclosed in tangible form is marked
"Confidential" or with other similar designation to indicate its confidential or
proprietary nature or if disclosed orally or by inspection is indicated orally
to be confidential or proprietary by the Party disclosing such information at
the time of such disclosure and is confirmed in writing as confidential or
proprietary by the disclosing Party (describing in reasonable detail the
information to be treated as confidential) within a reasonable time after such
disclosure (collectively, "Information").
-----------
To the extent it is reasonably necessary or appropriate to fulfill its
obligations or exercise its rights under this Agreement, a Party may disclose
Information of the other Party it is otherwise obligated under this Section 10.1
not to disclose to its Affiliates, permitted sublicensees, consultants, outside
contractors and clinical investigators, on a need-to-know basis and on the
condition that such entities or persons agree to keep the Information
confidential for the same time periods and to substantially the same extent as
such Party is required to keep such Information confidential; and a Party or its
permitted sublicensees may disclose such Information to government or other
regulatory authorities to the extent that such disclosure is reasonably
necessary to obtain patents or authorizations to conduct clinical trials or to
file and maintain Regulatory Approvals with and to market commercially
Collaboration Products. The obligation not to disclose Information shall not
apply to any part of such Information that: (i) is or becomes patented,
published or otherwise becomes publicly known other than by acts of the Party
obligated not to disclose such Information or its Affiliates or sublicensees in
contravention of this Agreement; (ii) can be shown by written documents to have
been disclosed to the receiving Party or its Affiliates or sublicensees by a
Third Party, provided that such Information was not obtained by such Third Party
directly or indirectly from the disclosing Party under this Agreement; (iii)
prior to disclosure under this Agreement, was already in the possession of the
receiving Party or its Affiliates or sublicensees, provided that such
Information was not obtained directly or indirectly from the disclosing Party
under this Agreement; (iv) can be shown by written documents to have been
independently developed by the receiving Party or its Affiliates without breach
of any of the provisions of this Agreement; or (v) is required to
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be disclosed by the receiving Party to comply with applicable laws or
regulations, or with a court or administrative order, provided that the
receiving Party notifies the disclosing Party in writing prior to any such
disclosure and agrees to use reasonable efforts to secure confidential treatment
thereof prior to its disclosure (whether by protective order or otherwise).
10.2 Terms of this Agreement; Press Releases. The Parties agree to seek
---------------------------------------
confidential treatment for any filing of this Agreement with the Securities and
Exchange Commission and shall agree upon the content of the request for
confidential treatment made by each Party in respect of such filing. Except as
permitted by the foregoing provisions or as otherwise required by law, BioMarin
and Genzyme each agree not to disclose any terms or conditions of this Agreement
to any Third Party without the prior consent of the other Party; provided that
each Party shall be entitled to disclose the terms of this Agreement without
such consent to its advisors and potential investors or other financing sources
on the condition that such entities or persons agree to keep such terms
confidential for the same time periods and to the same extent as such Party is
required to keep such terms confidential. The Parties agree that all press
releases related to the Program shall be issued jointly by BioMarin and Genzyme
and that the Party preparing any such press release shall provide the other
Party with a draft thereof reasonably in advance of disclosure so as to permit
the other Party to review and comment on such press release. Notwithstanding
the foregoing, the Parties shall agree upon a press release to announce the
execution of this Agreement, together with a corresponding Question & Answer
outline for use in responding to inquiries about the Agreement; thereafter,
BioMarin and Genzyme may each disclose to Third Parties the information
contained in such press release and Question & Answer outline without the need
for further approval by the other.
10.3 Publications. Each Party recognizes the mutual interest in obtaining
------------
valid patent protection. Consequently, any Party, its employees or consultants
wishing to make a publication (including any oral disclosure made without
obligation of confidentiality) relating to work performed by such Party as part
of the Program (the "Publishing Party") shall transmit to the other Party (the
----------------
"Reviewing Party") a copy of the proposed written publication at least forty-
---------------
five (45) days prior to submission for publication, or an abstract of such oral
disclosure at least fifteen (15) days prior to submission of the abstract or the
oral disclosure, whichever is earlier. The Reviewing Party shall have the right
to (a) request a delay in publication or presentation in order to protect
patentable information, (b) propose modifications to the publication for patent
reasons or (c) request that the information be maintained as a trade secret.
With respect to publications or disclosures by investigators or other Third
Parties, such publications and disclosures shall be subject to review by the
Reviewing Party under this Section 10.3 only to the extent that the submitting
Party has the right to do so.
10.3.1 Patents. If the Reviewing Party requests a delay as described
-------
in clause (a) above, the Publishing Party shall delay submission or presentation
of the publication for a period of ninety (90) days to enable patent
applications protecting each Party's rights in such information to be filed.
Upon the expiration of forty-five (45) days, in the case of proposed written
disclosures, or fifteen (15) days, in the case of an abstract of proposed oral
disclosures, from transmission of such proposed disclosures to the Reviewing
Party, the Publishing Party shall be free to proceed with the written
publication or the oral presentation, respectively, unless the Reviewing Party
has requested the delay described above.
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10.3.2 Other. To the extent possible in the reasonable exercise of
-----
its discretion, the Publishing Party shall incorporate all modifications
proposed under clause (b) above. If a trade secret that is the subject of a
request made under clause (c) above cannot be otherwise protected without
unreasonable expense to the Reviewing Party, such information shall be omitted
from the publication.
ARTICLE XI
REPRESENTATIONS AND WARRANTIES
11.1 Authorization. Each Party warrants and represents to the other
-------------
Parties that (a) it has the legal right and power to enter into this Agreement,
to extend the rights and licenses granted to the other in this Agreement, and to
perform fully its obligations hereunder, (b) this Agreement has been duly
executed and delivered and is a valid and binding agreement of such Party,
enforceable in accordance with its terms, (c) such Party has obtained all
necessary approvals to the transactions contemplated hereby and (d) such Party
has not made and will not make any commitments to others in conflict with or in
derogation of such rights or this Agreement.
11.2 Intellectual Property Rights.
----------------------------
11.2.1 BioMarin hereby represents and warrants that, as of the Date
of Execution, (a) it possesses an exclusive right, title and interest in or to,
the BioMarin Patent Rights and the BioMarin Technology, (b) the BioMarin Patent
Rights and the BioMarin Technology are free and clear of any lien or other
encumbrance and (c) it has the right to (i) enter into the obligations set forth
in this Agreement and (ii) grant the rights and licenses set forth in Article 3
hereof.
11.2.2 BioMarin hereby represents and warrants that it is not aware
of any issued patent that would be infringed by the manufacture and sale of
Collaboration Products as contemplated by this Agreement.
11.2.3 Genzyme hereby represents and warrants that as of the Date
of Execution (a) it possesses an exclusive right, title and interest in the
Genzyme Patent Rights and the Genzyme Technology, (b) the Genzyme Patent Rights
and the Genzyme Technology are free and clear of any lien or other encumbrance
and (c) it has the right to (i) enter into the obligations set forth in this
Agreement and (ii) grant the rights and licenses set forth in Article 3 hereof.
11.3 Warranties.
----------
11.3.1 Genzyme Warranties. Genzyme warrants that (i) the
------------------
Collaboration Products delivered by Genzyme pursuant to Section 7.2 hereof, if
any, will conform in all material respects to the Specifications, the conditions
of any applicable Regulatory Approvals regarding the manufacturing process and
any applicable requirements of the Regulatory Scheme regarding the manufacturing
process and (ii) the Collaboration Products sold pursuant to Section 6.2 hereof
will be
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marketed and sold in all material respects in accordance with the conditions of
any applicable Regulatory Approvals and any applicable labeling claims.
11.3.2 BioMarin Warranties. BioMarin warrants that the
-------------------
Collaboration Products delivered by BioMarin pursuant to Section 7.2 hereof will
conform in all material respects to the Specifications, the conditions of any
applicable Regulatory Approvals regarding the manufacturing process and any
applicable requirements of the Regulatory Scheme regarding the manufacturing
process.
11.4 Disclaimer of Representations and Warranties. EXCEPT AS OTHERWISE
--------------------------------------------
EXPRESSLY SET FORTH IN THIS AGREEMENT, NONE OF BIOMARIN, GENZYME OR
BIOMARIN/GENZYME LLC MAKES ANY REPRESENTATIONS OR EXTENDS ANY WARRANTIES OF ANY
KIND, EITHER EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND THE NON-INFRINGEMENT OF
ANY THIRD-PARTY PATENTS OR PROPRIETARY RIGHTS. ALL UNIFORM COMMERCIAL CODE
WARRANTIES ARE EXPRESSLY DISCLAIMED BY THE PARTIES.
11.5 Limitation of Liability. IT IS AGREED BY THE PARTIES THAT NO PARTY
-----------------------
SHALL BE LIABLE TO ANOTHER PARTY FOR ANY SPECIAL, CONSEQUENTIAL, EXEMPLARY OR
INCIDENTAL DAMAGES (INCLUDING LOST OR ANTICIPATED REVENUES OR PROFITS RELATING
TO THE SAME), ARISING FROM ANY CLAIM RELATING TO THIS AGREEMENT, WHETHER SUCH
CLAIM IS BASED ON CONTRACT, TORT (INCLUDING NEGLIGENCE) OR OTHERWISE, EVEN IF AN
AUTHORIZED REPRESENTATIVE OF SUCH PARTY IS ADVISED OF THE POSSIBILITY OR
LIKELIHOOD OF SAME. Remedies shall be limited to claims for amounts due
hereunder or as otherwise provided in this Agreement, including claims for
indemnification as provided in Section 12.1 hereof.
ARTICLE XII
INDEMNITY
12.1 BioMarin/Genzyme LLC Indemnity Obligations. The Operating Agreement
------------------------------------------
shall provide that BioMarin/Genzyme LLC shall indemnify each of the Members and
its Affiliates, employees and agents (each an "Indemnified Person") for any act
------------------
performed by such Indemnified Person within the scope of the authority conferred
upon such Indemnified Person under this Agreement; provided that it shall be a
condition to such indemnity that (a) the Indemnified Person seeking
indemnification acted in good faith and in a manner reasonably believed to be
in, or not opposed to, the best interests of BioMarin/Genzyme LLC, (b) the act
for which indemnification is sought did not constitute gross negligence or
willful misconduct by such Indemnified Person and (c) payment and
indemnification of any matter disposed of by a compromise payment by such
Indemnified Person, pursuant to consent decree or otherwise, shall have been
approved by the Members, which approval shall not be unreasonably withheld or
delayed, or by a court of competent jurisdiction.
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12.2 Insurance. BioMarin/Genzyme LLC shall maintain clinical trial and
---------
product liability insurance with respect to development, manufacture and sales
of Collaboration Products in an amount reasonably believed by Genzyme and
BioMarin to be adequate and customary for the development, manufacture and sale
of novel therapeutic products. Genzyme and BioMarin shall be named as
additional insureds on any such policy. Genzyme and BioMarin shall each
maintain similar clinical trial and product liability insurance coverage in
amounts reasonably determined by the Steering Committee from time to time.
ARTICLE XIII
TERM AND TERMINATION
13.1 Term. The term of this Agreement shall be perpetual unless terminated
----
pursuant to Section 13.2 below.
13.2 Termination. This Agreement may be terminated in the following
-----------
circumstances:
13.2.1 For Certain Material Breaches. If either BioMarin or
-----------------------------
Genzyme (a) fails to use commercially reasonable and diligent efforts to perform
any material duty imposed upon such Party under this Agreement or a Development
Plan or Commercialization Plan or (b) fails to make [***] or more capital
contributions in accordance with Section 4.2 hereof, and such failure to perform
is not cured within ninety (90) days of written notice thereof from the non-
breaching Party, the non-breaching Party may elect, in its sole discretion, to
(i) in the case of clause (b) above, waive the terms of Article 4 hereof with
respect to any one or more required capital contributions and cause the
respective Percentage Interests and future funding responsibilities of the
Parties to be adjusted in accordance with Section 4.1 of the Operating Agreement
or (ii) terminate this Agreement with the consequences set forth in Section
13.3.1 below. Such 90-day period shall be extended to one hundred eighty (180)
days if the breaching Party has engaged in good faith efforts to remedy such
default within such 90-day period and indicated in writing to the non-breaching
Party prior to the expiration of such 90-day period that it believes that it
will be able to remedy the default within such 180-day period, but such
extension shall apply only so long as the breaching Party is engaging in good
faith efforts to remedy such default.
13.2.2 For Failure to Make the Section 4.4 Payment. In the event
-------------------------------------------
that Genzyme fails to make the payment pursuant to Section 4.4(b) hereof and
such failure is not cured within ten (10) days of written notice thereof from
BioMarin, BioMarin may elect, in its sole discretion, to either (a) enforce the
terms of this Agreement and seek any and all remedies available to it at law and
in equity or (b) terminate this Agreement with the consequences set forth in
Section 13.3.2 below.
13.2.3 For Convenience. Either BioMarin or Genzyme may elect to
---------------
terminate this Agreement for any reason at any time after the earlier of (i)
such time as BioMarin/Genzyme LLC has received U.S. FDA approval for the BLA for
the first Collaboration Product or (ii) December 31, 2000 if BioMarin/Genzyme
LLC has not received U.S. FDA approval of the BLA for the first Collaboration
Product on or before such date upon one (1) year prior written notice to the
other Party
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(during which one-year period the obligations of the Parties, including without
limitation obligations with respect to capital contributions, shall continue in
full force and effect). For purposes of the foregoing, "approval" shall be
deemed to occur upon the U.S. FDA's issuance of an approval letter as set forth
in 21 C.F.R. (S)314.105. If either Party terminates this Agreement pursuant to
clause (ii) above, the Development Plan in effect and the Parties' respective
obligations with respect to capital contributions as of the date notice of
termination is given shall be extended until the effective date of such
termination.
13.2.4 Upon Change of Control. Either BioMarin or Genzyme may
----------------------
terminate this Agreement in the event that the other Party is a party to a
transaction involving (a) a merger or consolidation in which such Party is not
the surviving entity or (b) the sale of all or substantially all of the assets
of such Party to a Third Party. Termination of this Agreement pursuant to this
Section 13.2.4 shall be effective as of the effective date of such transaction.
13.2.5 Upon Bankruptcy. Either BioMarin or Genzyme may terminate
---------------
this Agreement with the consequences set forth in Section 13.3.5 below, if (A)
the other Party fails to meet any material obligation hereunder and: (i) applies
for or consent to the appointment of a receiver, trustee, liquidation or
custodian of itself or of all or a substantial part of its property, (ii)
becomes unable, or admit in writing its inability, to pay its debts generally as
they mature, (iii) makes a general assignment for the benefit of its or any of
its creditors, (iv) is dissolved or liquidated in full or in part (v) commences
a voluntary case or other proceeding seeking liquidation, reorganization or
other relief with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or consent to any
such relief or to the appointment of or taking possession of its property by any
official in an involuntary case or other proceeding commenced against it, or
(vi) takes any action for the purpose of effecting any of the foregoing; or (B)
proceedings for the appointment of a receiver, trustee, liquidator or custodian
of the other Party or of all or a substantial part of the property thereof, or
an involuntary case or other proceedings seeking liquidation, reorganization or
other relief with respect to the other Party or the debts thereof under any
bankruptcy, insolvency or other similar law now or hereafter in effect shall be
commenced and an order for relief entered or such proceeding shall not be
dismissed or discharged within sixty (60) calendar days of commencement.
13.3 Effects of Termination.
----------------------
13.3.1 For Certain Material Breaches. In addition to the rights and
-----------------------------
duties set forth in Sections 13.4 and 13.5 below, BioMarin Genetics shall have
the following rights and BioMarin and Genzyme shall have the following rights
and duties upon termination of this Agreement pursuant to Section 13.2.1 above:
(a) the non-breaching Party shall have an irrevocable right
and license, with the right to grant and authorize sublicenses, under the
breaching Party's Patent Rights, Technology (i.e., the BioMarin Patent Rights
and BioMarin Technology or the Genzyme Patent Rights and Genzyme Technology, as
appropriate) and Manufacturing Know-How Controlled by the breaching Party to
develop, make, have made, use, offer for sale, sell, have sold, import and
export Collaboration Products in the Field and in the Territory, and the
breaching Party shall execute such documents and take all action as may be
necessary or desirable to effect the foregoing; provided, that
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such license shall be for the same level of exclusivity as the rights granted
with respect thereto under Section 3.1 hereof immediately prior to such
termination; provided further that any license granted hereunder shall be
subject to the obligation of the non-breaching Party to use commercially
reasonable and diligent efforts to develop and market Collaboration Products
pursuant to such license;
(b) the breaching Party shall assign and transfer all of
its interest in BioMarin/Genzyme LLC to the non-breaching Party, and the non-
breaching Party may dissolve BioMarin/Genzyme LLC in its sole discretion;
provided that in the event that BioMarin is the breaching Party, it shall also
cause BioMarin Genetics to assign and transfer all of its interest in
BioMarin/Genzyme LLC to Genzyme.
(c) (i) all licenses granted pursuant to Article 3 shall be
revoked, (ii) if BioMarin/Genzyme LLC is dissolved, any applicable Regulatory
Approvals (other than any Regulatory Approvals filed in the name of an entity
other than BioMarin/Genzyme LLC pursuant to Section 5.3 hereof), "Orphan Drug"
designations and clinical data owned or licensed by BioMarin/Genzyme LLC and any
trademarks owned or licensed by BioMarin/Genzyme LLC (other than any trademarks
registered in the name of an entity other than BioMarin/Genzyme LLC pursuant to
Section 9.1.2 hereof) shall be assigned or exclusively licensed to the non-
breaching Party and (iii) any Regulatory Approvals filed and any trademarks
registered in the name of an entity other than BioMarin/Genzyme LLC shall be (A)
exclusively licensed to BioMarin/Genzyme LLC, the non-breaching Party or any
Third Party or Affiliate designated by the non-breaching Party until such time
as BioMarin/Genzyme LLC, the non-breaching Party or its designee is qualified to
hold such Regulatory Approvals or trademarks under the applicable provisions of
the Regulatory Scheme and (B) transferred or assigned to BioMarin/Genzyme LLC,
the non-breaching Party or its designee, as appropriate, as soon as practicable
thereafter;
(d) the non-breaching Party shall become obligated to pay
the breaching Party an amount equal to [* * *] interest thereon at the Base
Rate of interest declared from time to time by BankBoston, N.A. in Boston,
Massachusetts from the date of termination to the date payment is made (the
"Breach Buyout Amount"), payable as follows:
--------------------
(1) if the non-breaching Party elects to sell or
otherwise dispose of all or any portion of its or its Affiliates' right, title
and interest in the Collaboration Products, then the non-breaching Party shall,
upon any such sale or other disposition, pay the breaching Party an amount equal
to [* * *];
(2) for as long as the non-breaching Party
(together, in the case of BioMarin with BioMarin Genetics) has not sold or
otherwise disposed of all or a portion of its (together in the case of BioMarin,
with BioMarin Genetics) right, title and interest in the Collaboration Products
which is equal to or greater than the breaching Party's (together in the case of
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<PAGE>
BioMarin, with BioMarin Genetics) Percentage Interest as of the date of
termination, the non-breaching Party shall pay the breaching Party (and, in the
event that BioMarin is the breaching Party, BioMarin Genetics) [* * *] as
described in the preceding paragraph; and
(3) on the [* * *] of the date of termination, the
non-breaching Party shall pay the breaching Party (and, in the event that
BioMarin is the breaching Party, BioMarin Genetics) the difference between the
aggregate amounts paid pursuant to clauses (1) and (2) above and the Breach
Buyout Amount; provided, that the aggregate amount of all payments made under
clauses (1), (2) and (3) shall not exceed the Breach Buyout Amount; and
(e) if Genzyme has not paid all of the payments described
in Section 4.4 hereof on or before the date of termination, termination of this
Agreement shall not relieve Genzyme of its obligations to pay any such unpaid
amount at such time as it becomes due and payable in accordance with the
schedule set forth in Section 4.4 hereof.
13.3.2 For Failure to Make the Section 4.4 Payment. In addition to
-------------------------------------------
the rights and duties set forth in Sections 13.4 and 13.5 below, BioMarin shall
have the following rights and duties upon termination of this Agreement pursuant
to Section 13.2.2(b) above:
(a) BioMarin shall have an irrevocable right and license,
with the right to grant and authorize sublicenses, under the Genzyme Patent
Rights, Genzyme Technology and Manufacturing Know-How Controlled by Genzyme to
develop, make, have made, use, offer for sale, sell, have sold, import and
export Collaboration Products in the Field and in the Territory, and Genzyme
shall execute such documents and take all action as may be necessary or
desirable to affect the foregoing; provided, that such license shall be for the
same level of exclusivity as the rights granted with respect thereto under
Section 3.1; provided further that any license granted hereunder shall be
subject to the obligation of BioMarin to use commercially reasonable and
diligent efforts to develop and market Collaboration Products pursuant to such
license;
(b) Genzyme shall assign and transfer all of its interest
in BioMarin/Genzyme LLC to BioMarin, and BioMarin may dissolve BioMarin/Genzyme
LLC in its sole discretion;
(c) (i) all licenses granted pursuant to Article 3 shall be
revoked, (ii) if BioMarin/Genzyme LLC is dissolved, any applicable Regulatory
Approvals (other than any Regulatory Approvals filed in the name of an entity
other than BioMarin/Genzyme LLC pursuant to Section 5.3 hereof), "Orphan Drug"
designations and clinical data owned or licensed by BioMarin/Genzyme LLC and any
trademarks owned or licensed by BioMarin/Genzyme LLC (other than any trademarks
registered in the name of an entity other than BioMarin/Genzyme LLC pursuant to
Section 9.1.2 hereof) shall be assigned or exclusively licensed to BioMarin and
(iii) any Regulatory Approvals filed and any trademarks registered in the name
of an entity other than BioMarin/Genzyme LLC shall be (A) exclusively licensed
to BioMarin/Genzyme LLC, BioMarin or
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any Third Party or Affiliate designated by BioMarin until such time as
BioMarin/Genzyme LLC, BioMarin or its designee is qualified to hold such
Regulatory Approvals or trademarks under the applicable provisions of the
Regulatory Scheme and (B) transferred or assigned to BioMarin/Genzyme LLC,
BioMarin or its designee, as appropriate, as soon as practicable thereafter; and
(d) BioMarin shall become obligated to pay Genzyme an
amount equal to [* * *] from the date of termination to the date payment
is made (the "Milestone Breach Buyout Amount"), payable on the terms and
-------------------------------
conditions and in accordance with the schedule of payments set forth in Section
13.3.1(d), mutatis mutandis.
13.3.3 For Convenience. In addition to the rights and duties set
---------------
forth in Sections 13.4 and 13.5 below, BioMarin Genetics shall have the
following rights and BioMarin and Genzyme shall have the following rights and
duties upon termination of this Agreement pursuant to Section 13.2.3 above:
(a) the non-terminating Party shall have an option
exercisable upon written notice to the terminating Party within the one-year
period provided in Section 13.2.3 hereof to obtain from the terminating Party
the irrevocable right and license, with the right to grant and authorize
sublicenses, under the terminating Party's Patent Rights, Technology and
Manufacturing Know-How to develop, make, have made, use, offer for sale, sell,
have sold, import and export Collaboration Products in the Field and in the
Territory, and the terminating Party shall execute such documents and take all
action as may be necessary or desirable to affect the foregoing; provided, that
such license shall be for the same level of exclusivity as the rights granted
with respect thereto under Section 3.1; provided further that any license
granted hereunder shall be subject to the obligation of the non-terminating
Party to use commercially reasonable and diligent efforts to develop and market
Collaboration Products pursuant to such license;
(b) upon exercise of its license option provided in
paragraph (a) of this Section 13.3.3, the terminating Party shall assign and
transfer all of its interest in BioMarin/Genzyme LLC to the non-terminating
Party, and the non-terminating Party may dissolve BioMarin/Genzyme LLC in its
sole discretion;
(c) upon exercise of its license option provided in
paragraph (a) of this Section 13.3.3, (i) all licenses granted pursuant to
Article 3 shall be revoked, (ii) if BioMarin/Genzyme LLC is dissolved, any
applicable Regulatory Approvals (other than any Regulatory Approvals filed in
the name of an entity other than BioMarin/Genzyme LLC pursuant to Section 5.3
hereof), "Orphan Drug" designations and clinical data owned or licensed by
BioMarin/Genzyme LLC and any trademarks owned or licensed by BioMarin/Genzyme
LLC (other than any trademarks registered in the name of an entity other than
BioMarin/Genzyme LLC pursuant to Section 9.1.2 hereof) shall be assigned to the
non-terminating Party and (iii) any Regulatory Approvals filed and any
trademarks registered in the name of an entity other than BioMarin/Genzyme LLC
shall be (A) exclusively licensed to BioMarin/Genzyme LLC, the non-terminating-
Party or any Third Party or Affiliate designated by such Party until such time
as BioMarin/Genzyme LLC, the non-terminating Party or its designee is qualified
to hold such
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Regulatory Approvals or trademarks under the applicable provisions of the
Regulatory Scheme and (B) transferred or assigned to BioMarin/Genzyme LLC, the
non-terminating Party or its designee, as appropriate, as soon as practicable
thereafter;
(d) upon the exercise of its license option provided in
paragraph (a) of this Section 13.3.3, the non-terminating Party shall become
obligated to pay to the terminating Party an amount equal to [* * *] interest
thereon at the Base Rate of interest declared from time to time by BankBoston,
N.A. in Boston, Massachusetts from the date of termination to the date payment
is made (the "Convenience Buyout Amount"), payable on the terms and conditions
-------------------------
and in accordance with the schedule of payments set forth in Section 13.3.1(d),
mutatis mutandis; and
(e) if the license option provided in paragraph (a) of this
Section 13.3.3 is not exercised, then all right, title and interest in the
Collaboration Products shall be sold to the highest bidder within eighteen (18)
months from the date of termination and the proceeds shall be allocated between
the Members in proportion to their Percentage Interests in BioMarin/Genzyme LLC
as of the date of termination and BioMarin/Genzyme LLC shall be dissolved.
(f) Notwithstanding the foregoing provisions of Section
13.3.3(d), if Genzyme terminates this Agreement for convenience prior to
December 31, 2000, the Convenience Buyout Amount shall be equal to [* * *] from
the date of termination to the date payment is made.
13.3.4 Upon a Change of Control. In addition to the rights and
------------------------
duties set forth in Sections 13.4 and 13.5 below, BioMarin and Genzyme shall
have the following rights and duties upon termination of this Agreement pursuant
to Section 13.2.4 above:
(a) the terminating Party shall have the exclusive,
irrevocable and, except as provided in Section 13.3.4(d), royalty-free right and
license, with the right to grant sublicenses, under the non-terminating Party's
Patent Rights, Technology and Manufacturing Know-How to develop, make, have
made, use, offer for sale, sell, have sold, import and export Collaboration
Products in the Territory and in the Field, and the non-terminating Party shall
execute such documents and take all action as may be necessary or desirable to
effect the foregoing; provided, that any license granted hereunder shall be
subject to the obligation of the terminating Party to use commercially
reasonable and diligent efforts to develop and market Collaboration Products
pursuant to such license;
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(b) the non-terminating Party shall assign and transfer all of
its interest in BioMarin/Genzyme LLC to the terminating Party, and the
terminating Party may dissolve BioMarin/Genzyme LLC in its sole discretion;
provided that in the event that BioMarin is the non-terminating Party, it shall
also cause BioMarin Genetics to assign and transfer all of its interest in
BioMarin/Genzyme LLC to Genzyme;
(c) all licenses granted pursuant to Article 3 shall be revoked
and, if BioMarin/Genzyme LLC is dissolved, any applicable Regulatory Approval,
"Orphan Drug" designations and clinical data owned or licensed by
BioMarin/Genzyme LLC and any trademarks owned or licensed by BioMarin/Genzyme
LLC shall be assigned or licensed to the terminating Party; and
(d) the terminating Party (the "Offeror") shall, pursuant to the
-------
conditions set forth in this Section 13.4(d), give the other Party (Genzyme in
the case BioMarin is terminating or the BioMarin Companies in the case Genzyme
is terminating, in either case the "Offeree") at the time of termination written
-------
notice of the Offeror's intention to purchase Offeree's entire interest in and
to (i) the Collaboration Products as of the date of termination and (ii) the
Percentage Interest of the net asset value of BioMarin/Genzyme LLC as of the
date of termination (the "Notice of Offer"). The Notice of Offer shall state
---------------
therein the specific price, terms and conditions under which the Offeror agrees
to purchase Offeree's entire interest in and to (i) the Collaboration Products
as of the date of termination and (ii) the Percentage Interest of the net asset
value of BioMarin/Genzyme LLC as of the date of termination; provided, however,
that the purchase price shall be paid in cash, publicly-traded and registered
securities or as the Parties otherwise agree. The Offeree shall then have ninety
(90) days (the "Acceptance Period") from the receipt of the Notice of Offer to
-----------------
give notice (the "Notice of Acceptance") of the Offeree's intention to accept
--------------------
the offer of the Offeror and shall sell Offeree's entire interest in and to (i)
the Collaboration Products as of the date of termination and (ii) the Percentage
Interest of the net asset value of BioMarin/Genzyme LLC as of the date of
termination to Offeror for the price and upon such terms and conditions as set
forth in the Notice of Offer. In the event the Offeree gives such Notice of
Acceptance, a closing shall be held within ninety (90) days of the receipt of
the Notice of Acceptance by the Offeror. In the event the Offeree elects not to
accept the Offeror's offer to purchase, by giving the Offeror written notice
thereof, or by failing to give the appropriate Notice of Acceptance within the
Acceptance Period, the Offeree shall thereby automatically be bound to purchase
Offeror's entire interest in and to (i) the Collaboration Products as of the
date of termination and (ii) the Percentage Interest of the net asset value of
BioMarin/Genzyme LLC as of the date of termination for the same price (as
adjusted for Percentage Interest, if necessary) and upon such terms and
conditions as specified in the Notice of Offer. In such event, a closing shall
be held within ninety (90) days of the earlier to occur of the expiration of the
Acceptance Period and the date of receipt of the written rejection, whichever is
the first to occur. In addition to any other remedies provided by this
Agreement, in the event the Offeree rejects the offer contained in the Notice of
Offer, but thereafter fails for any reason to timely close as provided herein
above, the Offeree shall, by such failure to close, be deemed to have accepted
the original offer contained in the Notice of Offer, and shall thereafter sell
Offeree's entire interest in and to (i) the Collaboration Products as of the
date of termination and (ii) the Percentage Interest of the net asset value of
BioMarin/Genzyme LLC as of the date of termination to the Offeror pursuant to
the terms of the Notice of Offer. For purposes of Sections 13.3.4 (a)-(c) above,
the Party
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<PAGE>
purchasing the other Party's interest in (i) the Collaboration Products and (ii)
the Percentage Interest of the net asset value of BioMarin/Genzyme LLC shall be
deemed to be the terminating Party and the other Party shall be deemed to be the
non-terminating Party.
13.3.5 Upon Bankruptcy. In addition to the rights and duties set
---------------
forth in Sections 13.4 and 13.5 below, BioMarin and Genzyme shall have the
following rights and duties upon termination of this Agreement pursuant to
Section 13.2.5 above:
(a) the terminating Party shall obtain from the non-
terminating Party the irrevocable right and license, with the right to grant
sublicenses, under the non-terminating Party's Patent Rights, Technology and
Manufacturing Know-How to develop, make, have made, use, offer for sale, sell,
have sold, import and export Collaboration Products in the Field and in the
Territory, and the non-terminating Party shall execute such documents and take
all action as may be necessary or desirable to affect the foregoing; provided,
that such license shall be for the same level of exclusivity as the rights
granted with respect thereto under Section 3.1 hereof; provided further that any
license granted hereunder shall be subject to the obligation of the terminating
Party to use commercially reasonable and diligent efforts to develop and market
Collaboration Products pursuant to such license;
(b) the non-terminating Party shall assign and transfer all
of its interest in BioMarin/Genzyme LLC to the terminating Party, and the
terminating Party may dissolve BioMarin/Genzyme LLC in its sole discretion;
provided that in the event that BioMarin is the non-terminating Party, it shall
also cause BioMarin Genetics to assign and transfer all of its interest in
BioMarin/Genzyme LLC to Genzyme.
(c) all licenses granted to Article 3 shall be revoked and,
if BioMarin/Genzyme LLC is dissolved, any applicable Regulatory Approvals (other
than any Regulatory Approvals filed in the name of an entity other than
BioMarin/Genzyme LLC pursuant to Section 5.3 hereof), "Orphan Drug" designations
and clinical data owned or licensed by BioMarin/Genzyme LLC and any trademarks
owned or licensed by BioMarin/Genzyme LLC (other than any trademarks registered
in the name of an entity other than BioMarin/Genzyme LLC pursuant to Section
9.1.2 hereof) shall be assigned or licensed to the terminating Party and (iii)
any Regulatory Approvals filed and any trademarks registered in the name of an
entity other than BioMarin/Genzyme LLC shall be (A) exclusively licensed to
BioMarin/Genzyme LLC, the terminating Party or any Third Party or Affiliate
designated by such Party until such time as BioMarin/Genzyme LLC, the
terminating Party or its designee is qualified to hold such Regulatory Approvals
or trademarks under the applicable provisions of the Regulatory Scheme and (B)
transferred or assigned to BioMarin/Genzyme LLC, the terminating Party or its
designee, as appropriate, as soon as practicable thereafter;
(d) the terminating Party shall become obligated to pay to
the non-terminating Party an amount equal to [* * *]
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[* * *] from the date of termination to the date payment is made (the
"Bankruptcy Buyout Amount"), payable on the terms and conditions and in
------------------------
accordance with the schedule of payments set forth in Section 13.3.1(d),
mutatis mutandis; and
(e) if Genzyme has not paid all of the payments described in
Section 4.4 hereof on or before the date of termination, termination of this
Agreement shall not relieve Genzyme of its obligations to pay any such unpaid
amount at such time as it becomes due and payable in accordance with the
schedule set forth in Section 4.4 hereof.
13.3.6 Fair Value. For purposes of this Section 13.3, the "Fair
---------- ----
Value" of a Party's interest in the Collaboration Products shall be [* * *]
- -----
the Fair Value shall be determined by an investment banking firm selected by
mutual agreement of BioMarin and Genzyme, and the costs and expenses incurred in
connection with the engagement of such investment banking firm shall be shared
equally by BioMarin and Genzyme.
13.3.7 Other. In the event that a Party (the "Purchasing Party")
----- ----------------
purchases the other Party's (or in the case of BioMarin, the BioMarin
Companies', in each case the "Selling Party") entire interest in and to (i) the
-------------
Collaboration Products and (ii) the Percentage Interest of the net asset value
of BioMarin/Genzyme LLC pursuant to this Section 13.3, the Purchasing Party
shall be deemed to assume all of the liabilities inuring to the Selling Party's
Percentage Interest being acquired. At closing, the Parties shall execute any
and all documents necessary to effectuate such transfer, including an assignment
of all of the Selling Party's Percentage Interest and mutual releases which
shall have the effect of releasing each Party from all claims or liabilities
pertaining to BioMarin/Genzyme LLC (except for any liabilities specifically
included in the terms of such sale).
13.4 Survival of Rights and Duties. No termination of this Agreement shall
-----------------------------
eliminate any rights or duties of the Parties accrued prior to such termination.
The provisions of Article 1, Sections 3.3, 4.3, 4.5, 9.1.1, 9.3, 9.5, Article
10, Section 11.5, Article 12, Sections 13.3, 13.4, 14.1, 14.3, 14.4, 14.8, 14.9,
14.10 and 14.11 and the first sentence of Section 7.4 and the last sentences of
Sections 2.2, 7.3 and 9.1.3 hereof shall survive any termination of this
Agreement.
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ARTICLE XIV
MISCELLANEOUS
14.1 Cooperation. If either BioMarin or Genzyme (the "Assuming Party")
----------- --------------
shall assume the Program rights from the other Party (the "Responsible Party")
-----------------
in accordance with the provisions of Article 13 hereof, the Responsible Party
shall promptly provide to the Assuming Party (or any Third Party or Affiliate
designated by the Assuming Party) all Technology, Manufacturing Know-How and
access to regulatory filings filed hereunder reasonably necessary to allow the
Assuming Party to perform the duties assumed and otherwise exercise the rights
and licenses granted hereunder. The Responsible Party shall further use its best
efforts to provide reasonable assistance required by the Assuming Party with
respect to such transfer so as to permit the Assuming Party to begin to perform
such duties as soon as possible to minimize any disruption in the continuity of
supply or marketing of Collaboration Products. If the Responsible Party is the
Manufacturing Party for a Collaboration Product, the Responsible Party shall, at
the option of the Assuming Party, supply such Collaboration Product until the
earlier of [* * *]. In addition, if upon the date this Agreement is terminated
Collaboration Products are being manufactured in facilities owned or leased by
the Responsible Party (including facilities subleased by BioMarin/Genzyme LLC
from the Responsible Party), the Responsible Party agrees to lease such
facilities to the Assuming Party on commercially reasonable terms for a period
of up to [* * *] at the option of the Assuming Party.
14.2 Exchange Controls. All payments due hereunder shall be paid in United
-----------------
States dollars. If at any time legal restrictions prevent the prompt remittance
of part or all payments with respect to any country in which Collaboration
Products are sold, payment shall be made through such lawful means or methods as
the Parties may determine in good faith.
14.3 Withholding Taxes. If applicable laws or regulations require that
-----------------
taxes be withheld from payments made hereunder, the Party paying such taxes will
(a) deduct such taxes, (b) timely pay such taxes to the proper authority and (c)
send written evidence of payment to the Party from whom such taxes were withheld
within sixty (60) days after payment. Each Party will assist the other Party or
Parties in claiming tax refunds, deductions or credits at such other Party's
request and will cooperate to minimize the withholding tax, if available, under
various treaties applicable to any payment made hereunder.
14.4 Interest on Late Payments. Any payments to be made hereunder that are
-------------------------
not paid on or before the date such payments are due under this Agreement shall
bear interest, to the extent permitted by applicable law, at the Base Rate of
interest declared from time to time by BankBoston, N.A. in Boston,
Massachusetts, calculated on the number of days payment is delinquent.
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14.5 Force Majeure. Neither Party shall be held liable or responsible to
-------------
the other Party nor be deemed to have defaulted under or breached this Agreement
for failure or delay in fulfilling or performing any term of this Agreement when
such failure or delay is caused by or results from causes beyond the reasonable
control of the affected Party, including without limitation fire, floods,
embargoes, war, acts of war (whether war is declared or not), insurrections,
riots, civil commotions, strikes, lockouts or other labor disturbances, acts of
God or acts, omissions or delays in acting by any governmental authority or the
other Party; provided, however, that the Party so affected shall use
commercially reasonable and diligent efforts to avoid or remove such causes of
non-performance, and shall continue performance hereunder with reasonable
dispatch wherever such causes are removed. Each Party shall provide the other
Parties with prompt written notice of any delay or failure to perform that
occurs by reason of force majeure. The Parties shall mutually seek a resolution
of the delay or the failure to perform in good faith.
14.6 Assignment. This Agreement may not be assigned or otherwise
----------
transferred by any Party without the consent of the other Parties; provided,
however, that either BioMarin or Genzyme may, without such consent, assign its
rights and obligations under this Agreement (a) in connection with a corporate
reorganization, to any member of an affiliated group, all or substantially all
of the equity interest of which is owned and controlled by such Party or its
direct or indirect parent corporation or (b) in connection with a merger,
consolidation or sale of substantially all of such Party's assets to an
unrelated Third Party; provided, however, that such Party's rights and
obligations under this Agreement shall be assumed by its successor in interest
in any such transaction and shall not be transferred separate from all or
substantially all of its other business assets, including without limitation
those business assets that are the subject of this Agreement. Any permitted
assignee shall assume all obligations of its assignor under this Agreement;
accordingly, all references herein to the assigning Party shall be deemed
references to the assignee to whom the Agreement is so assigned. Any purported
assignment in violation of this Section 14.6 shall be void.
14.7 Severability. Each Party hereby agrees that it does not intend to
------------
violate any public policy, statutory or common laws, rules, regulations, treaty
or decision of any government agency or executive body thereof of any country or
community or association of countries. Should one or more provisions of this
Agreement be or become invalid, the Parties hereto shall substitute, by mutual
consent, valid provisions for such invalid provisions which valid provisions in
their economic effect are sufficiently similar to the invalid provisions that it
can be reasonably assumed that the Parties would have entered into this
Agreement with such valid provisions. In case such valid provisions cannot be
agreed upon, the invalidity of one or several provisions of this Agreement shall
not affect the validity of this Agreement as a whole, unless the invalid
provisions are of such essential importance to this Agreement that it is to be
reasonably assumed that the Parties would not have entered into this Agreement
without the invalid provisions. In the event a Party seeks to avoid a material
provision of this Agreement upon an assertion that such provision is invalid,
illegal or otherwise unenforceable, the other Party shall have the right to
terminate this Agreement upon sixty (60) days prior written notice to the
asserting Party, unless such assertion is eliminated and cured within such sixty
(60) day period. Such a termination shall be deemed a termination by such Party
for breach pursuant to Section 13.2.1.
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<PAGE>
14.8 Notices. Any consent, notice or report required or permitted to be
-------
given or made under this Agreement by one of the Parties hereto to the other
shall be in writing, delivered personally or by facsimile (and promptly
confirmed by personal delivery or courier), by a next business day delivery
service of a nationally recognized overnight courier service or by courier,
postage prepaid (where applicable), addressed to such other Party at its address
indicated below, or to such other address as the addressee shall have last
furnished in writing to the addressor in accordance with this Section 14.8 and
shall be effective upon receipt by the addressee.
If to BioMarin: BioMarin Pharmaceutical Inc.
or BioMarin Genetics 11 Pimentel Court
Novato, California 94949
Attention: President
Facsimile: (415) 382-7889
with a copy to: Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Frank Currie
Facsimile: (650) 493-6811
If to Genzyme: Genzyme Corporation
One Kendall Square
Cambridge, Massachusetts 02139
Attention: President
Facsimile: (617) 374-7423
with a copy to: Genzyme Corporation
One Kendall Square
Cambridge, Massachusetts 02139
Attention: Chief Legal Officer
Facsimile: (617) 252-7553
If to BioMarin/Genzyme BioMarin/Genzyme LLC
LLC (if such notice is sent c/o Genzyme Corporation
by BioMarin): One Kendall Square
Cambridge, Massachusetts 02139
Attention: President
Facsimile: (617) 374-7423
with a copy to: Genzyme Corporation
One Kendall Square
Cambridge, Massachusetts 02139
Attention: Chief Legal Officer
Facsimile: (617) 252-7553
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<PAGE>
If to BioMarin/Genzyme BioMarin/Genzyme LLC
LLC (if such notice is sent c/o BioMarin Pharmaceutical Inc.
by Genzyme): 11 Pimentel Court
Novato, California 94949
Attention: President
Facsimile: (415) 382-7889
with a copy to: Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Frank Currie
Facsimile: (650) 493-6811
14.9 Applicable Law. This Agreement shall be governed by and construed
--------------
in accordance with the laws of the Commonwealth of Massachusetts without regard
to any choice of law principle that would dictate the application of the laws of
another jurisdiction.
14.10 Arbitrate. Any disputes arising between the Parties relating to,
---------
arising out of or in any way connected with this Agreement or any term or
condition hereof, or the performance by either Party of its obligations
hereunder, whether before or after termination of this Agreement (a "Dispute"),
-------
which has not resolved in accordance with the provisions of Section 8.3 hereof,
shall be finally resolved by binding arbitration as herein provided.
14.10.1 General. Except as otherwise provided in this Section
-------
14.10, any arbitration hereunder shall be conducted under the commercial rules
of the American Arbitration Association. Each such arbitration shall be
conducted in the English language by a single arbitrator appointed in accordance
with such rules, provided that if either Party requests the arbitration shall be
conducted by a panel of three (3) arbitrators (the "Arbitration Panel"). In the
-----------------
case of three (3) arbitrators, each of BioMarin and Genzyme shall appoint one
(1) arbitrator to the Arbitration Panel and the third arbitrator shall be
appointed by the two (2) arbitrators appointed by BioMarin and Genzyme. The
Arbitration Panel shall be convened upon delivery of the Notice of Arbitration
(as herein defined). Any such arbitration shall be held in Chicago, Illinois.
The Arbitration Panel shall have the authority to grant specific performance,
and to allocate between the Parties the costs of arbitration in such equitable
manner as it shall determine. Judgment upon the award so rendered may be entered
in any court having jurisdiction or application may be made to such court for
judicial acceptance of any award and an order of enforcement, as the case may
be.
14.10.2 Procedure.
---------
(a) Whenever a Party (the "Claimant") shall decide to
--------
institute arbitration proceedings, it shall give written notice to that effect
(the "Notice of Arbitration") to the other Party (the "Respondent"). The Notice
--------------------- ----------
of Arbitration shall set forth in detail the nature of the Dispute, the facts
upon which the Claimant relies and the issues to be arbitrated (collectively,
the "Arbitration Issues"). Within fifteen (15) days of its receipt of the Notice
-------------------
of Arbitration, the Respondent shall send the Claimant and the Arbitration Panel
a written Response (the "Response"). The Response shall set forth in detail the
--------
facts upon which the Respondent relies. In addition, the Response shall
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<PAGE>
contain all counterclaims which the Respondent may have against the Claimant
which are within the Arbitration Issues, whether or not such claims have
previously been identified. If the Response sets forth a counterclaim, the
Claimant may, within fifteen (15) days of the receipt of the Response, deliver
to the Respondent and the Arbitration Panel a rejoinder answering such
counterclaim.
(b) Within fifteen (15) days after the later of (i) the
expiration of the period provided in Section 14.10.2(a) above for the Claimant
to deliver a rejoinder or (ii) the completion of any discovery proceedings
authorized by the Arbitration Panel: (A) the Claimant shall send to the
Arbitration Panel a proposed resolution of the Arbitration Issues and a proposed
resolution of any counterclaims set forth in the Response, including without
limitation the amount of monetary damages, if any, or other relief sought (the
"Claimant's Proposal"); and (B) the Respondent shall send to the Arbitration
-------------------
Panel a proposed resolution of the Arbitration Issues, a proposed resolution of
any counterclaims set forth in the Response and a proposed resolution of any
rejoinder submitted by the Claimant, including without limitation the amount of
monetary damages, if any, or other relief sought (the "Respondent's Proposal").
---------------------
Once both the Claimant's Proposal and the Respondent's Proposal have been
submitted, the Arbitration Panel shall deliver to each Party a copy of the other
Party's proposal.
(c) The Arbitration Panel shall issue an opinion with respect
to any Dispute, which opinion shall explicitly accept either the Claimant's
Proposal or the Respondent's Proposal in its entirety (the "Final Decision").
--------------
The Arbitration Panel shall not have the authority to reach a Final Decision
that provides remedies or requires payments other than those set forth in the
Claimant's Proposal or the Respondent's Proposal. The concurrence of two (2)
arbitrators shall be sufficient for the entry of a Final Decision. The
arbitrators shall issue a Final Decision within one (1) month from the later of
(i) the last day for submission of proposals under Section 14.10.2(b) above or
(ii) the date of the final hearing on any Dispute held by the Arbitration Panel.
A Final Decision shall be binding on both Parties.
14.11 Injunctive Relief. The Parties hereby acknowledge that a breach of
-----------------
their respective obligations under Article 10 hereof may cause irreparable harm
and that the remedy or remedies at law for any such breach may be inadequate.
The Parties hereby agree that, in the event of any such breach, in addition to
all other available remedies hereunder, the non-breaching Party or Parties shall
have the right to seek equitable relief to enforce Article 10 hereof.
14.12 Entire Agreement. This Agreement, the Purchase Agreement and the
----------------
Operating Agreement contain the entire understanding of the Parties with respect
to the subject matter hereof. All express or implied agreements and
understandings, either oral or written, heretofore made are expressly merged in
and made a part of this Agreement, including, but not limited to the
Confidential Disclosure Agreement and modifications thereof dated February 23,
1998, June 25, 1998 and June 29, 1998. This Agreement may be amended, or any
term hereof modified, only by a written instrument duly executed by both Parties
hereto. Each of the Parties hereby acknowledges that this Agreement, the
Purchase Agreement and the Operating Agreement are both the result of mutual
negotiation and therefore any ambiguity in their respective terms shall not be
construed against the drafting Party.
-47-
<PAGE>
14.13 Headings. The captions to the several Articles and Sections
--------
hereof are not a part of this Agreement, but are merely guides or labels to
assist in locating and reading the several Articles and Sections hereof.
14.14 Independent Contractors. It is expressly agreed that BioMarin and
-----------------------
Genzyme shall be independent contractors and that, except as Members of
BioMarin/Genzyme LLC, the relationship between the two Parties shall not
constitute a partnership, joint venture or agency. Neither BioMarin nor Genzyme
shall have the authority to make any statements, representations or commitments
of any kind, or to take any action, which shall be binding on the other, without
the prior consent of the other Party to do so.
14.15 Waiver. Except as expressly provided herein, the waiver by either
------
Party hereto of any right hereunder or of any failure to perform or any breach
by the other Party shall not be deemed a waiver of any other right hereunder or
of any other failure to perform or breach by said other Party, whether of a
similar nature or otherwise, nor shall any singular or partial exercise of such
right preclude any further exercise thereof or the exercise of any other such
right.
14.16 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.
-48-
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first set forth above.
GENZYME CORPORATION
By: /s/ G. Jan van Heek
-------------------
Title: Executive Vice President
-------------------------
Date: September 4, 1998
------------------
BIOMARIN PHARMACEUTICAL, INC.
By: /s/ Grant W. Denison, Jr.
-------------------------
Title: Chief Executive Officer
------------------------
Date: September 4, 1998
-----------------
BIOMARIN/GENZYME LLC
By: BIOMARIN PHARMACEUTICAL, INC.
By: /s/ Grant W. Denison, Jr.
-------------------------
Title: Chief Executive Officer
------------------------
Date: September 4, 1998
-----------------
-49-
<PAGE>
EXHIBIT 10.26
SUBSCRIPTION AGREEMENT
TO: BIOMARIN PHARMACEUTICAL INC.
RE: SUBSCRIPTION FOR AND PURCHASE OF SHARES OF COMMON STOCK
1. SUBSCRIPTION
------------
Genzyme Corporation (the "PURCHASER") hereby irrevocably subscribes for
and agrees to purchase, on and subject to the terms and conditions set forth
herein, from BioMarin Pharmaceutical Inc., a Delaware corporation (the
"CORPORATION"), one million three hundred thirty-three thousand, three hundred
thirty-three (1,333,333) shares of Common Stock of the Corporation (the
"SHARES") at a price of $6.00 per share, having the voting powers, designations,
preferences, rights and qualifications set forth in the Corporation's Restated
Certificate of Incorporation, the form of which is attached hereto as Exhibit
"A" (the "RESTATED CERTIFICATE").
2. PAYMENT
-------
At Closing, as defined below, the aggregate purchase price for the Shares,
$7,999,998 (the "SUBSCRIPTION PRICE"), shall be paid by wire transfer to the
following account: BIOMARIN PHARMACEUTICAL INC., BANK OF AMERICA, 300 LAKESIDE
DRIVE, SUITE 250, OAKLAND, CA 94612; ACCOUNT NUMBER: 1472800983; ROUTING
#121000358; CONTACT PERSON: NANETTE ANDINO.
3. DOCUMENTS TO BE PROVIDED BY PURCHASER
-------------------------------------
The Purchaser must complete, sign and return as soon as possible, two
executed copies of each of this Subscription Agreement, including the Accredited
Investor Questionnaire attached hereto as Exhibit "B", the Amended and Restated
Registration Rights Agreement (the "REGISTRATION RIGHTS AGREEMENT"), and the
Pre-emptive Rights Letter (the "PRE-EMPTIVE RIGHTS LETTER").
4. CLOSING AND DELIVERY OF SHARE CERTIFICATES
------------------------------------------
Delivery and payment for the Shares will be completed in one closing (the
"CLOSING") at the offices of Wilson Sonsini Goodrich & Rosati, 650 Page Mill
Road, Palo Alto, California at 8:00 a.m. (Pacific Daylight Time) (the "CLOSING
TIME") on such date as the Corporation and the Purchaser may agree (the "CLOSING
DATE"), but in any event not later than September 4, 1998 (unless extended by
mutual agreement of the Corporation and the Purchaser).
-1-
<PAGE>
A certificate representing the Shares (the "CERTIFICATE") will be delivered
at Closing against payment to the Corporation of the Subscription Price in the
manner specified in Paragraph 2 above.
5. CONDITIONS TO CLOSING OF THE PURCHASER
--------------------------------------
The Purchaser's obligation to purchase the Shares at the Closing is, at the
option of the Purchaser, subject to fulfillment on or prior to the Closing Date
of the following conditions:
2
<PAGE>
5.1 Representations and Warranties Correct. The representations and
--------------------------------------
warranties made by the Corporation in Section 7 hereof shall be true and correct
when made, and shall be true and correct on the Closing Date with the same force
and effect as if such representations had been made on and as of said date.
5.2 Covenants. All covenants, agreements and conditions contained in this
---------
Subscription Agreement to be performed by the Corporation on or prior to the
Closing Date shall have been performed or complied with in all respects.
5.3 Compliance Certificate. The Corporation shall have delivered to the
----------------------
Purchaser a certificate, executed by the President of the Corporation, dated as
of the Closing Date, and certifying to the fulfillment of the conditions
specified in Sections 5.1 and 5.2 above.
5.4 Secretary's Certificate. The Corporation shall have delivered to the
-----------------------
Purchaser a certificate, executed by the Secretary of the Corporation, dated as
of the Closing Date, and certifying as to the certificate of incorporation, by-
laws, incumbency of officers and authorizing resolutions.
5.5 Opinion of Counsel. Wilson Sonsini Goodrich & Rosati, counsel to the
------------------
Corporation, shall have delivered to the Purchaser an opinion, in form and
substance reasonably satisfactory to Purchaser, in the form attached hereto as
Exhibit "C."
5.6 Blue Sky. The Corporation shall have obtained all permits and
--------
qualifications required by any state in connection with the offer and sale of
the Shares, or secured an exemption therefrom.
5.7 Registration Rights Agreement. The Corporation shall have executed
-----------------------------
and delivered to the Purchaser the Registration Rights Agreement.
5.8 Subscription Agreement. The Corporation shall have executed and
----------------------
delivered to the Purchaser a copy of this Subscription Agreement.
5.9 Pre-emptive Rights Letter. The Corporation shall have executed and
-------------------------
delivered to the Purchaser a copy of the Pre-emptive Rights Letter.
5.10 Collaboration Documents. The Corporation shall have executed and
-----------------------
delivered to the Purchaser three copies of the Collaboration Agreement (the
"Collaboration Agreement"), Operating Agreement and Purchase Agreement of even
date herewith between the Corporation and the Purchaser.
5.11 Waiver of Pre-emptive Rights. The Corporation shall have received
----------------------------
written waivers of the rights triggered by the offer and sale of the Shares
under the letter to Glyko BioMedical Ltd. ("Glyko") dated June 27, 1997,
regarding certain pre-emptive rights dated June 27, 1997 (the "Glyko Pre-emptive
Rights Letter") and under the letter to BB BioVentures L.P., dated December 30,
1997, regarding certain pre-emptive rights (the "BB BioVentures Pre-emptive
Rights Letter").
3
<PAGE>
6. CONDITIONS TO CLOSING OF THE CORPORATION
----------------------------------------
The Corporation's obligation to issue and sell the Shares at the Closing to
the Purchaser is, at the option of the Corporation, subject to the fulfillment
of the following conditions:
6.1 Representations and Warranties. The representations and warranties
------------------------------
made by the Purchaser in Section 9 hereof shall be true and correct when made,
and shall be true and correct on the Closing Date with the same force and effect
as if such representations had been made on and as of said date.
6.2 Blue Sky. The Corporation shall have obtained all permits and
--------
qualifications required by any state in connection with the offer and sale of
the Shares, or secured an exemption therefrom.
6.3 Registration Rights Agreement. The Purchaser shall have executed and
-----------------------------
delivered to the Corporation the Registration Rights Agreement.
6.4 Subscription Agreement. The Purchaser shall have executed and
----------------------
delivered to the Corporation a copy of this Subscription Agreement.
6.5 Payment. The Corporation shall have received from the Purchaser
-------
payment in full for the Subscription Price.
6.6 Pre-emptive Rights Letter. The Purchaser shall have executed and
-------------------------
delivered to the Corporation the Pre-emptive Rights Letter.
6.7 Waiver of Pre-emptive Rights. The Corporation shall have received
----------------------------
written waivers of the rights triggered by the offer and sale of the Shares
under the Glyko Pre-emptive Rights Letter and the BB BioVentures Pre-emptive
Rights Letter by the respective parties thereto.
6.8 Collaboration Documents. The Purchaser shall have executed and
-----------------------
delivered to the Corporation three copies of the Collaboration Agreement, the
Operating Agreement and the Purchase Agreement, each of even date herewith,
between the Corporation and the Purchaser.
7. REPRESENTATIONS AND WARRANTIES OF THE CORPORATION
-------------------------------------------------
The Corporation hereby represents and warrants to the Purchaser that,
except as otherwise set forth on Exhibit "D" hereto, with specific reference to
the subsection of this Section 7 so affected, the following will be true and
correct as of the Closing Date:
4
<PAGE>
7.1 Organization and Standing. The Corporation is a corporation duly
-------------------------
organized and validly existing under, and by virtue of, the laws of the State of
Delaware and is in good standing under such laws. The Corporation has the
requisite corporate power to own and operate its properties and assets and to
carry on its business as presently conducted. The Corporation is qualified to
do business as a foreign corporation in the State of California.
7.2 Corporate Power. The Corporation has all requisite legal and
---------------
corporate power to execute and deliver this Subscription Agreement, the
Registration Rights Agreement and the Pre-emptive Rights Letter, to sell and
issue the Shares hereunder and to carry out and perform its obligations under
the terms of this Subscription Agreement and the Registration Rights Agreement.
7.3 Subsidiaries. The Corporation has no subsidiaries or affiliated
------------
companies other than Glyko, a company incorporated under the federal laws of
Canada. Glyko currently owns 8,666,667 shares of the Corporation's Common
Stock. In connection with the transactions contemplated by the Collaboration
Agreement between the Corporation and Purchaser, of even date herewith, the
Corporation has caused to be incorporated in Delaware a wholly-owned subsidiary,
BioMarin Genetics, Inc. ("BIOMARIN GENETICS"). BioMarin Genetics is validly
existing under, and by virtue of the laws of the State of Delaware and is in
good standing under such laws. BioMarin Genetics has the requisite corporate
power to own and operate its property and assets and to carry on its business as
presently conducted. Other than BioMarin Genetics, the Corporation does not
otherwise own or control, directly or indirectly, any other corporation,
association or business entity.
7.4 Capitalization. The authorized capital stock of the Corporation
--------------
consists of 30,000,000 shares of Common Stock, of which, at the date hereof,
22,581,835 shares are issued and outstanding. All issued and outstanding shares
of Common Stock have been duly authorized and validly issued, and are fully paid
and non-assessable. The Common Stock has the voting power, designations,
preferences, rights and qualifications set forth in the Restated Certificate.
Except as contemplated herein and except for: (i) the pre-emptive rights granted
to BB BioVentures L.P. pursuant to a letter dated December 30, 1997, (ii) the
pre-emptive rights granted to Glyko pursuant to a letter dated June 27, 1997,
(iii) options to purchase 1,949,440 shares of Common Stock of the Corporation
granted under its 1997 Stock Plan, and (iv) warrants to purchase a total of up
to 801,500 shares of Common Stock, there are no options, warrants, conversion
privileges or other rights presently outstanding to purchase or otherwise
acquire any authorized but unissued shares of the capital stock or other
securities of the Corporation, nor any agreements or understandings with respect
thereto.
7.5 Financial Statements. As of the Closing Date, the Corporation will
--------------------
have delivered to the Purchaser the audited financial statements of the
Corporation as at December 31, 1997 and for the period from March 21, 1997 (the
date of inception) to December 31, 1997 (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 consistently applied throughout
the periods covered thereby, and present fairly the financial position of the
Corporation as of their respective dates. Other than as described in the
5
<PAGE>
Financial Statements, the Corporation has no material liabilities and knows of
no material contingent liabilities not disclosed in the Financial Statements,
except current liabilities incurred in the ordinary course of business which are
not, individually or in the aggregate, materially adverse.
7.6 Subsequent Events. Since December 31, 1997, there has not been: (i)
-----------------
a declaration, setting aside or payment of any dividend or other distribution
with respect to, or any direct or indirect redemption or acquisition of, any
shares of the capital stock of the Corporation or any of its subsidiaries; (ii)
a waiver of any material right of the Corporation or any of its subsidiaries or
cancellation of any material debt or claim held by the Corporation or any of its
subsidiaries; (iii) a loan by the Corporation or any of its subsidiaries to any
officer, director, employee or stockholder of the Corporation, or any agreement
or commitment therefor; (iv) a material loss, destruction or damage to any
property of the Corporation or any of its subsidiaries, whether or not insured;
(v) a labor dispute involving the Corporation or any of its subsidiaries or a
material change in the personnel of the Corporation or any of its subsidiaries
or the terms and conditions of their employment; (vi) an acquisition or
disposition of any assets (or any contract or arrangement therefor), or any
transaction by the Corporation or any of its subsidiaries otherwise than for
fair value in the ordinary course of business; (vii) any sale, assignment or
transfer of any patents, trademarks, copyrights, trade secrets or other
intangible assets of the Corporation or any of its subsidiaries or (viii) any
change in any material agreement to which the Corporation or any of its
subsidiaries is a party or by which any of them is bound or any other event or
condition of any character that, either individually or in the aggregate, is
reasonably likely to have a material adverse effect on the business, assets,
condition (financial or otherwise) or results of operations of the Corporation
and its subsidiaries taken as a whole (a "Material Adverse Effect").
7.7 Authorization. All corporate action on the part of the Corporation,
-------------
its directors and stockholders necessary for the authorization, execution,
delivery and performance of this Agreement, the Registration Rights Agreement,
the Pre-emptive Rights Letter, the authorization, sale, issuance and delivery of
the Shares and the performance of the Corporation's obligations hereunder and
thereunder has been taken or will be taken prior to the Closing. This
Agreement, the Registration Rights Agreement and the Pre-emptive Rights Letter,
when fully executed and delivered by the Corporation, shall constitute valid and
binding obligations of the Corporation, enforceable in accordance with their
respective terms, subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of law governing specific
performance, injunctive relief or other equitable remedies. The Shares, when
issued in compliance with the provisions of this Agreement, will be validly
issued, fully paid and non-assessable, and free of any liens or encumbrances;
provided, however, that the Shares may be subject to certain restrictions on
transfer under applicable state and/or Federal securities laws.
7.8 Governmental Consents, etc. No consent, approval or authorization of
--------------------------
or designation, declaration or filing with any state or federal governmental
authority on the part of the Corporation is required in connection with the
valid execution and delivery of this Agreement, the Registration Rights
Agreement, the Pre-emptive Rights Letter or the offer, sale or issuance of the
Shares, or the consummation of any other transaction contemplated hereby, except
qualification (or taking such
6
<PAGE>
action as may be necessary to secure an exemption from qualification, if
available) under the California Corporate Securities Law and other applicable
blue sky laws, of the offer and sale of the Shares, which filing and
qualification, if required, will be accomplished in a timely manner prior to or
promptly after the Closing.
7.9 Agreements; Actions.
-------------------
(a) Except for the agreements explicitly contemplated hereby and
agreements between the Corporation and the purchasers of the Corporation's
Common Stock previously disclosed to the Purchaser in writing, there are no
agreements, understandings or proposed transactions between the Corporation and
any of its officers, directors, affiliates or any affiliate thereof.
(b) There are no agreements, understandings, instruments, contracts,
proposed transactions, judgments, orders, writs or decrees to which the
Corporation or any of its subsidiaries is a party or by which any of them is
bound which may involve (i) obligations (contingent or otherwise) of, or
payments to, the Corporation or any of its subsidiaries in excess of $25,000
(other than obligations of, or payments to, the Corporation or any of its
subsidiaries arising from purchase or sale agreements entered into in the
ordinary course of business), (ii) the license of any BioMarin Technology or
BioMarin Patent Rights, each as defined in the Collaboration Agreement, to or
from the Corporation or any of its subsidiaries (other than licenses arising
from the purchase of "off the shelf" or other standard products), (iii)
provisions restricting or affecting the development, manufacture or distribution
of the products or services of the Corporation or any of its subsidiaries or
(iv) indemnification by the Corporation or any of its subsidiaries with respect
to infringements of proprietary rights (other than indemnification obligations
arising from purchase or sale agreements entered into in the ordinary course of
business).
(c) Neither the Corporation nor any of its subsidiaries has (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 those
incurred in the ordinary course of business or disclosed in the Financial
Statements) in excess of $25,000, (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 the sale of its
inventory in the ordinary course of business.
7.10 Title to Properties and Assets; Liens, etc. The Corporation and each
------------------------------------------
of its subsidiaries has a valid leasehold interest in, or valid title to, its
properties and assets, including without limitation the assets and properties
reflected in the Corporation's balance sheet as of December 31, 1997, in each
case subject to no mortgage, pledge, lien, lease, encumbrance or charge, other
than: (i) as disclosed in such balance sheet except as incurred in the ordinary
course of business since the date of such balance sheet, (ii) the lien of
current taxes not yet due and payable, and (iii) possible minor liens and
encumbrances which do not in any case materially detract from the value of the
property subject thereto or would result in a Material Adverse Effect.
7
<PAGE>
7.11 Litigation.
----------
(a) At the date hereof, there are no actions, suits, proceedings or
investigations pending or threatened against the Corporation or any of its
subsidiaries or any their respective properties before any court or governmental
agency, nor is the Corporation or any of its subsidiaries subject to any writ,
injunction or order of any court or government agency (nor, to the Corporation's
knowledge at the date hereof, is there any basis therefor or threat thereof)
which, either individually or in the aggregate, might result in a Material
Adverse Effect, or in any material impairment of the right or ability of the
Corporation or any of its subsidiaries to carry on their respective businesses
as now conducted or as currently proposed to be conducted, or in any material
liability on the part of the Corporation or any of its subsidiaries, and, to the
Corporation's knowledge at the date hereof, no action, suit, proceeding or
investigation pending or threatened against the Corporation questions the
validity of this Agreement, the Registration Rights Agreement or the Pre-emptive
Rights Letter or any action taken or to be taken in connection herewith or
therewith.
(b) The Corporation has no current plan to initiate any action, writ,
proceeding or investigation before any court or government agency.
7.12 Registration Rights. Except as set forth in the Registration Rights
-------------------
Agreement, the Corporation is not under any obligation to register any of its
presently outstanding securities, or any of its securities which may hereafter
be issued, under the Securities Act of 1933, as amended (the "Securities Act").
7.13 Brokers or Finders. The Corporation has not incurred, and will not
------------------
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement or
any transaction contemplated hereby.
7.14 No Breach. Neither the Corporation nor any of its subsidiaries is:
---------
(i) in breach or violation of any of the terms or provisions of, or in default
under, this Agreement or any indenture, mortgage, deed of trust, loan agreement
or other agreement (written or oral) or instrument to which it is a party or by
which it is bound or to which any of the property or assets of the Corporation
or any of its subsidiaries is subject, which breach or violation or the
consequences thereof would result in a Material Adverse Effect; (ii) in
violation of the provisions of its charter, by-laws or any resolutions or (iii)
in violation of any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over it or any of its assets or
properties, which violation or the consequences thereof would result in a
Material Adverse Effect.
8
<PAGE>
7.15 No Conflict. The offer and sale of the Shares by the Corporation and
-----------
the performance and consummation of the transactions contemplated herein will
not conflict with or result in (i) a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed of
trust, loan agreement or other agreement (written or oral) or instrument to
which the Corporation is bound or to which any of the property or assets of the
Corporation is subject, which breach or violation or the consequences thereof
would result in a Material Adverse Effect, (ii) any violation of the provisions
of the Restated Certificate, the by-laws or any resolutions of the Corporation
or (iii) a violation of any statute or any order, rule or regulation of any
court or governmental agency or body having jurisdiction over the Corporation or
any of its assets or properties, which violation or the consequences thereof
would result in a Material Adverse Effect, except that the offer and sale of the
Shares will trigger rights under the Glyko Pre-emptive Rights Letter and the BB
BioVentures Pre-emptive Rights Letter, each of which rights will be waived on or
before the Closing Date.
7.16 Securities Act. The transactions contemplated by this Agreement shall
--------------
be exempt from the registration requirements of the Securities Act.
7.17 Intellectual Property. The Corporation has rights to the patents,
---------------------
patent applications, trademarks, trade secrets, copyrights and other proprietary
rights and technology referred to in the license agreement between the
Corporation and Glyko dated as of June 26, 1997 (the "License Agreement") on the
basis set forth in the License Agreement. The License Agreement is in full
force and effect. The Corporation and its subsidiaries own or possess adequate
licenses or other rights to use all patents, patent applications, trademarks,
trademark applications, service marks, service mark applications, trade names,
copyrights, manufacturing processes, formulae, trade secrets, customer lists and
know-how (collectively, "Intellectual Property") necessary for the conduct of
their respective businesses as presently conducted and as proposed to be
conducted. There are no claims pending or, to the best of the Corporation's
knowledge as of the date hereof, threatened, to the effect that the operations
of the Corporation or any of its subsidiaries infringe upon or conflict with the
asserted rights of any other person under any Intellectual Property, and, to the
best of the Corporation's knowledge, there is no basis for any such claim
(whether or not pending or threatened). No claim is pending or, to the best of
the Corporation's knowledge, threatened, to the effect that any Intellectual
Property owned or licensed by the Corporation or any of its subsidiaries, or
which the Corporation or any of its subsidiaries otherwise has the right to use,
is invalid or unenforceable by the Corporation or such subsidiary, and, to the
best of the Corporation's knowledge, there is no basis for any such claim
(whether or not pending or threatened).
7.18 Environmental Laws. To the best of the Corporation's knowledge,
------------------
neither the Corporation nor any of its subsidiaries is in violation of any
applicable statute, law or regulation relating to the environment or
occupational health or safety, and to the best of the Corporation's knowledge no
material expenditures are or will be required in order to comply with any such
existing statute, law or regulation.
9
<PAGE>
7.19 Confidentiality. The Corporation and each of its subsidiaries has
---------------
taken all reasonable measures to protect and preserve the confidentiality of all
their respective trade secrets and other non-patented proprietary information,
including without limitation the procurement of proprietary invention
assignments and non-disclosure and non-competition agreements from employees,
consultants, sub-contractors, customers and other persons who have access to
such information. To the best of the Corporation's knowledge as of the date
hereof, the procedures implemented by the Corporation and each of its
subsidiaries are in conformity with the practices of similarly situated
companies in its industry.
7.20 Taxes. The Corporation has filed all necessary Federal, state,
-----
municipal, property, income and franchise tax returns and has paid all taxes
shown as due thereon or otherwise owed by it to any taxing authority and there
is no tax deficiency which has been or, to the best of the knowledge of the
Corporation as of the date hereof, might be asserted against the Corporation
which would result in a Material Adverse Effect. The Corporation has not
received notice of any audit from any taxing authority, and no controversy with
respect to taxes of any type is pending or, to the best knowledge of the
Corporation, threatened. The Corporation has paid all applicable Federal and
state payroll and withholding taxes, including but not limited to FICA, FUTA,
state unemployment taxes and income taxes.
7.21 Employment Matters. There is no collective bargaining or other union
------------------
agreement to which the Corporation or any of its subsidiaries is a party or by
which any of them is bound, or which is currently being negotiated. Neither the
Corporation nor any of its subsidiaries sponsors, maintains or contributes to
any pension, retirement, profit sharing, incentive compensation, bonus or other
employee benefit plan, including without limitation any employee benefit plan
covered by Title 4 of the Employee Retirement Income Security Act of 1974
("ERISA") or any "multi-employer plan" as defined in Section 4001(a)(3) of
ERISA, other than the Corporation's group medical, disability and life insurance
plans (which are not subject to ERISA), and a 401(k) plan to which the Company
makes no contributions. To the best knowledge of the Corporation at the date
hereof: (i) no employee of the Corporation or any of its subsidiaries is a party
to or bound by any agreement, contract or commitment, or subject to any
restrictions, particularly but without limitation in connection with any
previous employment of any such person, which might result in a Material Adverse
Effect, and (ii) no officer has any present intention of terminating his
employment with the Corporation or any of its subsidiaries, and the Corporation
has no present intention of terminating any such employment. The only
employment or consultancy agreements to which the Corporation is a party are the
agreements dated June 26, 1997, with each of Grant W. Denison, Jr., John C.
Klock and Christopher M. Starr and those certain consulting agreements with The
Frankel Group, Dr. Skinner, Axon Research Corporation and employment letters
which have been sent to certain prospective executive officer hires.
7.22 Insurance. The Corporation holds valid policies covering all of the
---------
insurance required to be maintained by it pursuant to Section 11.5 of this
Agreement.
10
<PAGE>
7.23 Full Disclosure. This Agreement and the exhibits hereto, the
---------------
Registration Rights Agreement and the Pre-emptive Rights Letter do not 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, in light
of the circumstances in which they were made, not misleading. To the best
knowledge of the Corporation, there are no facts which (individually or in the
aggregate) material adversely affect the business, assets, liabilities,
financial conditions, prospects or operations of the Corporation that have not
been set forth in this Agreement and the exhibits hereto, the Registration
Rights Agreement and the Pre-emptive Rights Letter.
8. CERTAIN MATTERS RELATING TO THE OFFER AND SALE OF THE SHARES
------------------------------------------------------------
The Purchaser acknowledges and agrees that: (i) it has not been provided
with a registration statement, prospectus or any similar document in connection
with its purchase of the Shares and (ii) its decision to execute this Agreement,
the Registration Rights Agreement, the Pre-emptive Rights Letter and to purchase
the Shares has not been based upon any verbal or written representations as to
fact or otherwise made by or on behalf of the Corporation and that its decision
is based upon the information, representations and covenants of the Corporation
contained in this Agreement, its own review of certain of the Corporation's
documents and records, and publicly available information concerning the
Corporation.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER
----------------------------------------------------------
The Purchaser hereby represents, warrants and covenants to the Corporation
(which representations, warranties and covenants shall survive the Closing) as
of the date hereof and as of the Closing Date as follows:
11
<PAGE>
9.1 Experience; Risk. The Purchaser has such knowledge and experience in
----------------
financial and business matters that it is capable of evaluating the merits and
risks of the purchase of the Shares pursuant to this Agreement and is capable of
protecting its interests in connection herewith. The Purchaser has the ability
to bear the economic risk of the investment, including complete loss of the
investment.
9.2 Investment. The Purchaser is acquiring the Shares for investment for
----------
its own account, not as a nominee or agent, and not with a view to, or for,
resale in connection with any distribution thereof, and the Purchaser has no
present intention to sell, grant any participation in, or otherwise distribute
the Shares. The Purchaser understands that the Shares have not been registered
under the Securities Act and will be issued pursuant to an exemption from the
registration requirements thereof, which exemption depends upon, among other
things, the bona fide nature of the investment intent and the accuracy of such
Purchaser's representations as expressed herein.
9.3 Rule 144. The Purchaser understands that the Shares are "restricted
--------
securities" under Federal securities laws, as they are unregistered and are
being acquired from the Corporation in a transaction not involving a public
offering, and that under such laws and applicable regulations promulgated
thereunder the Shares may be resold without registration under the Securities
Act only in certain limited circumstances. The Purchaser acknowledges that the
Shares must be held indefinitely unless subsequently registered under the
Securities Act or an exemption from such registration is available. The
Purchaser is aware of the provisions of Rule 144 promulgated under the
Securities Act, the provisions of which limit resale of "restricted securities."
9.4 No Public Market. The Purchaser understands that no public market now
----------------
exists for the Shares or for any other securities issued by the Corporation and
that there is no assurance that a public market will ever exist for the Shares.
9.5 Authorization.
-------------
(a) The Purchaser has the full right, power and authority to enter
into and perform its obligations under this Agreement, the Registration Rights
Agreement and the Pre-emptive Rights Letter. This Agreement, the Registration
Rights Agreement and the Pre-emptive Rights Letter, when executed and delivered
by the Purchaser, will constitute valid and binding obligations of the
Purchaser, enforceable in accordance with their respective terms, subject to the
laws of general application relating to bankruptcy, insolvency and the relief of
debtors, rules of law governing specific performance, injunctive relief and
other equitable remedies.
(b) The Purchaser further represents that it is a validly existing
corporation, has the necessary corporate capacity and authority to execute and
deliver this Agreement and to observe and perform its covenants and obligations
hereunder and has taken all necessary corporate action in respect thereof.
12
<PAGE>
9.6 Further Limitations on Disposition. Without in any way limiting the
---------------------------------
representations set forth above, the Purchaser further agrees not to make any
offer or sale of all or any portion of the Shares within the United States or to
a U.S. resident unless and until:
(a) There is then in effect a Registration Statement under the
Securities Act covering such proposed offer or sale and such offer or sale is
made in accordance with such Registration Statement; or
(b) The Purchaser shall have notified the Corporation of the proposed
offer or sale and shall have furnished the Corporation with a statement of the
circumstances surrounding the proposed disposition, and if reasonably requested
by the Corporation, such Purchaser shall have furnished the Corporation with an
opinion of counsel, reasonably satisfactory to the Corporation, that such offer
or sale is exempt from the registration requirements under the Securities Act.
(c) Notwithstanding the provisions of paragraph (b) above, no such
registration statement or opinion of counsel shall be necessary for a transfer
by Purchaser to any transferees in transactions contemplated by paragraph (b)
above, if all such transferees agree in writing to be subject to the terms
hereof to the same extent as if they were Purchasers hereunder.
9.7 Legends. It is understood that each certificate representing the
-------
Shares, and any securities issued in respect thereof or exchange therefor shall
bear legends substantially in the following form (in addition to any legend
required under applicable state securities laws):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH,
THE SALE OR DISTRIBUTION THEREOF. SUCH SECURITIES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION UNLESS THE CORPORATION
RECEIVES AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT STATING
THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT. COPIES OF THE
AGREEMENTS COVERING THE PURCHASE OF THESE SECURITIES AND RESTRICTING
THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY
THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE
CORPORATION AT THE PRINCIPAL EXECUTIVE OFFICES OF THE CORPORATION.
13
<PAGE>
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A LOCKUP
PERIOD OF 180 DAYS FOLLOWING THE EFFECTIVE DATE OF THE FIRST
REGISTRATION STATEMENT OF THE COMPANY FILED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AS SET FORTH IN AN AGREEMENT BETWEEN THE ISSUER
AND THE ORIGINAL HOLDER OF THESE SECURITIES, A COPY OF WHICH MAY BE
OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF
THIS CERTIFICATE TO THE SECRETARY OF THE CORPORATION AT THE PRINCIPAL
EXECUTIVE OFFICES OF THE CORPORATION. SUCH LOCKUP PERIOD IS BINDING
ON TRANSFEREES OF THESE SECURITIES."
9.8 Accredited Investor Status. The Purchaser presently does, and will
--------------------------
as of the Closing Date, qualify as an "accredited investor" within the meaning
of Rule 501(a) promulgated under the Securities Act. Purchaser meets the
relevant criteria indicated on its completed and signed copy of the Accredited
Investor Questionnaire attached hereto as Exhibit "B."
9.9 Brokers or Finders. The Purchaser has not incurred, and will not
------------------
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement or
any transactions contemplated hereby.
9.10 Standstill. The Purchaser will not, for a period of one (1) year from
----------
the Closing Date, without the prior written approval of the Corporation's Board
of Directors: (i) acquire any shares of the capital stock of the Corporation or
of Glyko ("Company Securities") other than as contemplated herein or other than
through the indirect acquisition of any Company Securities as a result of, and
incidental to, the acquisition by the Purchaser of a corporation or other entity
if the primary purpose of such acquisition is not to acquire Company Securities,
(ii) enter into any merger, consolidation or similar transaction with the
Corporation or Glyko, (iii) otherwise attempt to influence the Boards of
Directors of the Corporation or Glyko or the stockholders of the Corporation or
Glyko to effect a merger, consolidation or sale of all or substantially all of
the assets or business of the Corporation or Glyko, as the case may be, or (iv)
make any public announcement relating to the foregoing. Notwithstanding the
foregoing, the restrictions contained in the preceding sentence shall be
suspended during such time as (i) the Boards of Directors of the Corporation or
Glyko determine to accept bids from any responsible bidder to obtain the best
price for the sale of the Corporation or Glyko, as the case may be, but only so
long as the Corporation or Glyko continues to accept such bids or negotiate or
consummate a transaction with any bidder and (ii) any third party makes an
unsolicited offer to acquire more than fifty percent (50%) of the outstanding
voting securities of the Corporation or Glyko, but only so long as such offer is
outstanding.
14
<PAGE>
9.11 Further Equity Investment. On the date of the initial public offering
-------------------------
of the Corporation's capital stock on Form S-1 or such successor form at a price
of at least $6.00 per share (subject to appropriate adjustment for stock
splits, stock dividends, combinations and other similar recapitalizations
affecting such shares) and which results in net proceeds to the Corporation of
at least $20 million, Purchaser hereby agrees to purchase from the Corporation,
for $10,000,000 in cash in a private placement, the nearest whole number of
shares of Common Stock obtained by dividing $10,000,000 by the per share price
paid by the public for such stock in the public offering. Simultaneously,
Purchaser shall enter into the Registration Rights Agreement with regard to
those shares, and will be subject to all of the terms and conditions contained
therein with regard to those shares.
10. RELIANCE UPON REPRESENTATIONS, WARRANTIES AND COVENANTS
-------------------------------------------------------
The Purchaser acknowledges that the representations and warranties and
covenants contained in this Agreement are made with the intent that they may be
relied upon by the Corporation to, among other things, determine its eligibility
to purchase the Shares. The Purchaser further agrees that by accepting the
Shares, the Purchaser shall be representing and warranting that the foregoing
representations and warranties are true as of the Closing with the same force
and effect as if they had been made by the Purchaser at the Closing.
15
<PAGE>
11. COVENANTS OF THE CORPORATION
----------------------------
11.1 Quarterly Financial Statements. Within forty-five (45) days after the
------------------------------
end of each of the first three quarters of each fiscal year, the Corporation
will deliver to the Purchaser copies of the Corporation's unaudited,
consolidated balance sheet as of the end of, and statements of income and cash
flows for, such periods. The Corporation's obligation under this subsection
shall terminate immediately prior to the happening of a firm commitment public
offering of the Corporation's capital stock on Form S-1 or such successor form.
11.2 Annual Financial Statements. Within ninety (90) days after the end of
---------------------------
each fiscal year, the Corporation will deliver to the Purchaser financial
statements similar to those required by Section 11.1 as at the end of and for
such year, accompanied by a certification by independent public accountants of
national repute, that such statements have been prepared in accordance with
generally accepted accounting principles consistently applied. The
Corporation's obligation under this subsection shall terminate immediately prior
to the happening of a firm commitment public offering of the Corporation's
capital stock on Form S-1 or such successor form.
11.3 Maintenance of Corporate Existence. The Corporation shall use its
----------------------------------
best efforts to maintain in full force and effect its corporate existence,
rights and franchises and all licenses and other rights to use patents,
processes, licenses, trademarks, trade names or copyrights owned or possessed by
it and deemed by the Corporation to be necessary for the conduct of its
business.
11.4 Insurance. The Corporation shall maintain insurance with responsible
---------
and reputable insurance companies or associations in such amounts and covering
such risks as the Corporation believes are usually carried by companies engaged
in similar businesses at an equivalent stage of development and using similar
properties in the same general areas in which the Corporation operates.
11.5 Compliance with Laws. The Corporation shall comply with all
--------------------
applicable laws, rules, regulations and orders, noncompliance with which could
result in a Material Adverse Effect.
11.6 Keeping of Records and Books of Account. The Corporation shall keep
---------------------------------------
adequate records and books of account, in which complete entries will be made in
accordance with generally accepted accounting principles consistently applied,
reflecting all financial transactions of the Corporation, and in which, for each
fiscal year, all proper reserves for depreciation, depletion, obsolescence,
amortization, taxes, bad debts and other purposes in connection with its
business shall be made.
16
<PAGE>
12. COSTS
-----
The Purchaser acknowledges and agrees that all costs and expenses incurred by
the Purchaser (including any fees and disbursements of any counsel retained by
the Purchaser) relating to the offer and sale of the Shares to the Purchaser
shall be paid by the Purchaser.
13. GOVERNING LAW
-------------
This Agreement shall be governed in all respects by the laws of the State of
California.
14. SURVIVAL
--------
This Agreement, including without limitation the representations, warranties and
covenants contained herein, shall survive and continue in full force and effect
and be binding upon the parties notwithstanding the completion of the purchase
of the Shares by the Purchaser pursuant hereto, or any subsequent disposition by
the Purchaser of the Shares.
15. ASSIGNMENT
----------
This Agreement is not transferable or assignable by the parties hereto.
16. ENTIRE AGREEMENT; AMENDMENT
---------------------------
This Agreement, the Exhibits hereto, and the other documents delivered pursuant
hereto constitute the full and entire understanding and agreement among the
parties with regard to the subjects hereof and thereof. Neither this Agreement
nor any term hereof may be amended, waived, discharged or terminated other than
by a written instrument signed by the Purchaser and the Corporation.
17. NOTICES, ETC.
-------------
All notices and other communications required or permitted hereunder shall be in
writing and shall be deemed effectively given upon personal delivery; upon
confirmed transmission by telecopy or telex; or seven (7) days following deposit
with the United States Post Office, by registered or certified mail, postage
prepaid, addressed: (a) if to the Purchaser, at One Kendall Square, Cambridge,
Massachusetts 02139, or its telecopy number or telex number, addressed to the
attention of the Chief Legal Officer, or at such other address as such Purchaser
shall have furnished to the Corporation in writing, or (b) if to the
Corporation, at 11 Pimental Court, Novato, California 94949, or its telecopy or
telex number, addressed to the attention of the President, and with a copy to
Wilson Sonsini Goodrich & Rosati, 650 Page Mill Road, Palo Alto, California
94304, Attention: Frank Currie, or at such other address as the Corporation
shall have furnished to the Purchaser in writing.
17
<PAGE>
18. DELAYS OR OMISSIONS.
-------------------
No delay or omission to exercise any right, power or remedy accruing to any
holder of any Common Stock, upon any breach or default of the Corporation under
this Agreement, shall impair any such right, power or remedy of such holder, nor
shall it be construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default thereafter
occurring, nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of any
holder of Common Stock of any breach or default under this Agreement, or any
waiver on the part of such holder 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 or by law or otherwise afforded to any such holder, shall be
cumulative and not alternative.
19. SEVERABILITY
------------
In the event that any provision of this Agreement becomes or is declared by a
court of competent jurisdiction to be illegal, unenforceable or void, this
Agreement shall continue in full force and effect without said provision;
provided that no such severability shall be effective if it materially changes
the economic benefit of this Agreement to any party.
20. COUNTERPARTS
------------
This Agreement may be exercised in counterparts, each of which shall be deemed
to be an original and all of which shall constitute one and the same document.
21. SUBSCRIPTION PARTICULARS
------------------------
(a) The aggregate number of Shares being subscribed for is 1,333,333.
At a price of $6.00 per share, the aggregate purchase price of the
Shares is $7,999,998.
(b) The Purchased Shares are to be registered in the name of Genzyme
Corporation.
18
<PAGE>
(c) The certificate representing the Shares is to be delivered to:
Genzyme Corporation
at its office at:
One Kendall Square, Building 1400, Cambridge, Massachusetts 02139
Contact Name and Number:
Gerald E. Quirk, Esq., Corporate Counsel
(617) 761-8993
19
<PAGE>
DATED at Cambridge, Massachusetts, this 4th day of September, 1998.
GENZYME CORPORATION
By: /s/ G Jan van Heek
-------------------------------------
(Signature of Authorized Representative)
G Jan van Heek
----------------------------------------
(Name of Person Signing)
Executive Vice President
----------------------------------------
Office or Title
20
<PAGE>
ACCEPTANCE
The above-mentioned Subscription Agreement is hereby accepted and agreed to
by BioMarin Pharmaceutical Inc.
DATED at Novato, California, the 31st day of August, 1998.
BIOMARIN PHARMACEUTICAL INC.
By: /s/ John C. Klock
-------------------------------------
John C. Klock
President
21
<PAGE>
EXHIBIT "A"
RESTATED CERTIFICATE OF INCORPORATION
OF
BIOMARIN PHARMACEUTICAL INC.
BioMarin Pharmaceutical Inc., a corporation organized and existing under
the laws of the State of Delaware, hereby certifies as follows:
A. The name of the Corporation is BioMarin Pharmaceutical Inc. The
Corporation was originally incorporated under the same name and the original
Certificate of Incorporation of the Corporation was filed with the Delaware
Secretary of State on October 25, 1996.
B. Pursuant to Sections 241 and 245 of the General Corporation Law of the
State of Delaware, this Restated Certificate of Incorporation restates and
amends the provisions of the Certificate of Incorporation of this Corporation.
C. The Corporation has not received any payment for any of its stock and
does not have any shares issued or outstanding and consequently does not have
any stockholders.
D. The Restated Certificate of Incorporation which follows has been duly
adopted by resolutions adopted by the Board of Directors of the Corporation in
accordance with the provisions of Section 241(b) of the General Corporation Law
of the State of Delaware.
E. The text of the Certificate of Incorporation is hereby amended and
restated in its entirety to read as follows:
ARTICLE I.
The name of the corporation (the "Corporation") is BioMarin Pharmaceutical Inc.
ARTICLE II.
The address of the Corporation's registered office in the State of Delaware
is Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of
New Castle, Delaware 19801. The name of its registered agent at such address is
The Corporation Trust Company.
1
<PAGE>
ARTICLE III.
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
Delaware.
ARTICLE IV.
The Corporation is authorized to issue one class of stock to be designated
as "Common Stock." The number of shares of Common Stock which the corporation
is authorized to issue is Thirty Million (30,000,000) shares, par value $0.001
per share (the "Common Stock"). The shares of Common Stock may be issued from
time to time for such consideration as the Board of Directors may determine.
Each holder of shares of Common Stock shall be entitled to one vote, for each
share of Common Stock held of record on all matters on which the holders of
Common Stock are entitled to vote.
ARTICLE V.
The Corporation reserves the right to amend, alter, change, or repeal any
provisions contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon the stockholders
herein are granted subject to this right.
ARTICLE VI.
The Corporation is to have perpetual existence.
ARTICLE VII.
1. Limitation of Liability. To the fullest extent permitted by the
-----------------------
General Corporation Law of the State of Delaware as the same exists or as my
hereafter be amended, a director of the Corporation shall not be personally
liable to the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director.
2. Indemnification. The corporation shall indemnify to the fullest extent
---------------
permitted by law any person made or threatened to be made a party to an action
or proceeding, whether criminal, civil, administrative or investigative, by
reason of the fact that such person or his or her testator or intestate is or
was a director, officer or employee of the Corporation, or any predecessor of
the corporation, or serves or served at any other enterprise as a director,
officer or employee at the request of the Corporation or any predecessor to the
Corporation.
2
<PAGE>
3. Amendments. Neither any amendment nor repeal of this Article VII, nor
----------
the adoption of any provision of the Corporation's Certificate of Incorporation
inconsistent with this Article VII, shall eliminate or reduce the effect of this
Article VII, in respect of any matter occurring, or any action or proceeding
accruing or arising or that, but for this Article VII, would accrue or arise,
prior to such amendment, repeal, or adoption of an inconsistent provision.
ARTICLE VIII.
Elections of Directors need not be by written ballot unless the Bylaws of
the Corporation shall so provide.
ARTICLE IX.
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, alter, amend or repeal
the Bylaws of the Corporation.
ARTICLE X.
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside of the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the Corporation.
ARTICLE XI.
The name and mailing address of the incorporator are:
Francis S. Currie, Esq.
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
* * *
F. We declare under penalty of perjury under the laws of the State of
Delaware that the matters set forth in the foregoing certificate are true and
correct of our own knowledge.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by John C. Klock, its President and Secretary, this l8th day of April,
1997.
John C. Klock, President and Secretary
3
<PAGE>
EXHIBIT "B"
ACCREDITED INVESTOR QUESTIONNAIRE
Genzyme Corporation, as a purchaser of shares of Common Stock (the
"Securities") of BIOMARIN PHARMACEUTICAL INC. (the "Company"), has represented
in its Subscription Agreement that it is an "accredited investor" as defined in
Rule 501 of Regulation D promulgated under the Securities Act of 1933, as
amended (the "Securities Act"). As part of such representation, it has
indicated below the categories enumerated in Rule 501(a) which it satisfies.
The undersigned understands that the Company is relying on this information
in determining to sell the Securities to the undersigned in a manner exempt from
the registration requirements of the Securities Act and applicable state
securities laws.
ACCREDITED INVESTOR STATUS
Genzyme Corporation represents and warrants that it is [check each
applicable item]:
_____ (i) A bank, as defined in Section 3(a)(2) of the Securities
Act, or a savings and loan association or other
institution as defined in Section 3(a)(5)(A) of the
Securities Act. whether acting in its individual or
fiduciary capacity.
_____ (ii) A broker or dealer registered pursuant to Section 15 of
the Securities Exchange Act of 1934, as amended.
_____ (iii) An insurance company as defined In Section 2(13) of the
Securities Act.
_____ (iv) An investment company registered under the Investment
Company Act of 1940 (the "1940 Act").
_____ (v) A business development company (as defined in Section
2(a)(48) of the 1940 Act).
_____ (vi) A private business development company (as defined in
Section 202(a)(22) of the Investment Advisers Act of
1940).
_____ (vii) A Small Business Investment Company licensed by the Small
Business Administration under Section 301(c) or (d) of the
Small Business Investment Act of 1958.
-4-
<PAGE>
_____ (viii) An employee benefit plan within the meaning of the
Employee Retirement Income Security Act of 1974
("ERISA"), if the investment decision is made by a plan
fiduciary as defined in Section 3(21) of ERISA, which is
either a bank, savings and loan association, insurance
company or registered investment advisor, or if the
employee benefit plan has total assets in excess of
$5,000,000, or, if a self-directed plan, with investment
decisions made solely by persons that are accredited
investors.
_____ (ix) Any plan for the benefit of employees established and
maintained by the U.S. government, a state, its political
subdivisions, or any agency or instrumentality of the
U.S. government, a state or its political subdivisions,
if such plan has total assets in excess of $5,000,000.
_____ (x) An organization described in Section 501(c)(3) of the
Internal Revenue Code, corporation, Massachusetts or
similar business trust, or partnership, not formed for
the specific purpose of acquiring the Securities offered,
having total assets in excess of $5,000,000.
_____ (xi) A director, executive officer or general partner of the
issuer of the Securities, or any director, executive
officer, or general partner of a general partner of the
Company.
_____ (xii) A natural person whose individual net worth, or joint net
worth with that person's spouse, at the time of his
purchase exceeds $1,000,000.
_____ (xiii) A natural person who had an individual income in excess
of $200,000 in each of the two most recent years or a
joint income with that person's spouse in excess of
$300,000 in each of those years, and has a reasonable
expectation of reaching the same income level in the
current year.
_____ (xiv) A trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the
Securities offered hereby, whose purchase is directed by
a sophisticated person as described in Rule 506(b)(2)(ii)
of Regulation D under the Securities Act.
_____ (xv) An entity in which all of the equity owners are
accredited investors.
_____ (xvi) A self-directed IRA, Keogh, or similar plan of which the
individual directing the investments qualifies as an
"accredited investor" under one or more of items (a)-(o)
above. Also check the item(s) (a)-(o) above that applies.
<PAGE>
As used in this questionnaire, the term "net worth" means the excess of
total assets over total liabilities. In computing net worth for the purpose of
this questionnaire, the principal residence of the investor must be valued at
cost, including cost of improvements, or at recently appraised value by an
institutional lender making a secured loan, net of encumbrances. In determining
income, an investor should add to adjusted gross income any amount attributable
to tax exempt income received, losses claimed as a limited partner in any
limited partnership, deductions claimed for depletion, contributions to an IRA
or Keogh retirement plan, alimony payments, and any amount by which income from
long-term capital gains has been reduced in arriving at adjusted gross income.
IN WITNESS WHEREOF, the undersigned has executed this Questionnaire as of
the ______day of August, 1998.
GENZYME CORPORATION
By:_________________________
Name________________________
Title_______________________
Printed or Typed Name and Title of Person
Signing
<PAGE>
EXHIBIT C
September 4, 1998
Genzyme Corporation
Pursuant to the Subscription
Agreement and Purchase Agreement
each dated September 4, 1998
Ladies and Gentlemen:
We have acted as counsel for BioMarin Pharmaceutical, Inc. (the
"Corporation") in connection with the negotiation of the Collaboration
Agreement, dated as of the date hereof, between the Corporation,
BioMarin/Genzyme LLC and you, the Purchase Agreement, dated as of the date
hereof, between the Corporation and you, and the Operating Agreement for
BioMarin/Genzyme LLC, dated as of the date hereof (collectively, the
"Agreements"), the Amended and Restated Registration Rights Agreement, dated as
of the date hereof (the "Amended Registration Rights Agreement"), the
Subscription Agreement (and all Schedules and Exhibits attached thereto), dated
as of the date hereof, between the Corporation and you (the "Subscription
Agreement"), the purchase of 1,333,333 shares of the Corporation's Common Stock
(the "Shares") by you pursuant to the terms of the Subscription Agreement and
the pre-emptive rights letter of even date herewith (the "Pre-emptive Rights
Letter"). As such counsel, we have made such legal and factual examinations as
we have deemed advisable or necessary for the purpose of rendering this opinion.
In addition, we have examined, among other things, originals or copies of such
corporate records of the Corporation and other such documents as we consider
necessary or advisable for the purposes of rendering this opinion. In such
examination we have assumed the genuineness of all signatures by parties thereto
on original documents, the conformity to original documents of all copies
submitted to us, the legal capacity of natural persons and the due execution and
delivery of all documents by parties thereto other than the Corporation where
due execution and delivery are a prerequisite to the effectiveness thereof. In
issuing this opinion we have also assumed that the par value of each share
issued and outstanding has been paid in.
We are admitted to practice law only in the State of California and we
express no opinion herein concerning any laws other than the laws of the State
of California, the corporate law of Delaware and the federal laws of the United
States.
Capitalized terms used herein not otherwise defined shall have the meaning
ascribed to them in the Subscription Agreement.
<PAGE>
To Genzyme Corporation
September 4, 1998
Page 2
As used in this opinion, the expression "to our knowledge" with reference
to matters of fact means that, after an examination of documents made available
to us by the Corporation, and after inquiries of officers of the Corporation,
but without any further independent factual investigation, we find no reason to
believe that the opinions expressed herein are factually incorrect. Further, the
expression "to our knowledge" with reference to matters of fact refers to the
current actual knowledge of the attorneys of this firm who have worked on
matters for the Corporation solely in connection with the Agreements, the
Subscription Agreement, the Amended Registration Rights Agreement, the Pre-
emptive Rights Letter, and the transactions contemplated thereby. Except to the
extent expressly set forth herein or as we otherwise believe to be necessary to
our opinion, we have not undertaken any independent investigation to determine
the existence or absence of any fact, and no inference as to our knowledge of
the existence or absence of any fact should be drawn from our representation of
the Company or the rendering of the opinion set forth below.
For purposes of this opinion, we are assuming that you have all requisite
power and authority, and have taken any and all necessary corporate action, to
execute and deliver, as applicable, the Agreements, the Subscription Agreement,
the Amended Registration Rights Agreement and the Pre-emptive Rights Letter, and
we are assuming that the representations and warranties made by you contained in
the Agreements and in the Subscription Agreement are true and correct. We are
also assuming that you have purchased the Shares for value, in good faith and
without notice of any adverse claims within the meaning of the California
Uniform Commercial Code.
The opinions hereinafter expressed are subject to the following
qualifications:
(a) We express no opinion as to the effect of applicable bankruptcy,
insolvency, reorganization, moratorium or other similar federal or state laws
affecting the rights of creditors generally;
(b) We express no opinion as to the effect or availability of rules of
law governing specific performance, injunctive relief or other equitable
remedies (regardless of whether any such remedy is considered in a proceeding at
law or in equity);
(c) We express no opinion as to compliance or noncompliance with
applicable federal and state anti-fraud statutes and regulations concerning the
issuance of securities;
(d) We express no opinion as to the enforceability of the
indemnification provisions of the Amended Registration Rights Agreement, the
Operating Agreement or the Collaboration Agreement to the extent the provisions
thereof may be subject to limitations of public policy and the effect of
applicable statutes and judicial decisions; and
Based upon and subject to the foregoing, and subject to the
qualifications contained herein, we are of the opinion that, except as set forth
in the Subscription Agreement:
<PAGE>
To Genzyme Corporation
September 4, 1998
Page 3
1. The Corporation is validly existing and in good standing under and by
virtue of the laws of the State of Delaware and has the corporate power and
authority to create, issue and sell the Shares and to carry out its obligations
under the Agreements, the Subscription Agreement, the Amended Registration
Rights Agreement and the Pre-emptive Rights Letter;
2. The authorized capital stock of the Corporation consists of 30,000,000
shares of Common Stock. Immediately prior to the Closing, 22,581,835 shares of
Common Stock are issued and outstanding, all of which have been duly authorized
and validly issued, are fully paid and nonassessable, and prior to the Closing,
free of any pre-emptive or similar rights contained in the Restated Certificate
or Bylaws of the Corporation or, to our knowledge, in any agreement to which the
Company is a party. The Shares issued to you, when issued in accordance with the
terms of the Subscription Agreement, will be duly authorized, validly issued,
fully paid and nonassessable and will be free of any liens, encumbrances or
preemptive or similar rights contained in the Restated Certificate or Bylaws of
the Corporation, or to our knowledge, in any agreement to which the Corporation
is a party, other than those which may be created by or imposed upon the holders
thereof through no action of the Corporation. Warrants to purchase 801,500
shares of Common Stock are currently outstanding. Immediately prior to the
Closing, options to purchase a total of 1,949,440 shares of Common Stock, issued
to outside consultants, directors and employees, are outstanding. To the best of
our knowledge, immediately prior to the Closing, there are no other options,
warrants, conversion privileges, pre-emptive rights (other than the pre-emptive
rights agreement between Glyko Biomedical Ltd. and the Corporation dated June
27, 1997, and the pre-emptive rights agreement between BB BioVentures L.P. and
the Corporation dated December 30, 1997, which rights have been waived in
connection with the transactions contemplated by the Subscription Agreement ) or
other rights presently outstanding to purchase or otherwise acquire any capital
stock or other securities of the Company;
3. Each of the Subscription Agreement, the Amended Registration Rights
Agreement and the Pre-emptive Rights Letter has been duly authorized, executed
and delivered by the Corporation and is a legal, valid and binding obligation of
the Corporation in accordance with their respective terms;
4. All necessary corporate action has been taken by the Corporation, its
directors and shareholders, to authorize the creation, issue, offering and sale
of the Shares on the Closing Date;
5. The execution and delivery of the Subscription Agreement, the Amended
Registration Rights Agreement and the Pre-emptive Rights Letter and the
completion of the transactions contemplated thereby and the creation, issuance
and sale of the Shares, do not conflict with any provisions of the Restated
Certificate or Bylaws of the Corporation;
6. The Shares, when issued on the Closing Date, will have been duly and
validly issued by the Corporation and are outstanding as fully paid and non-
assessable;
<PAGE>
To Genzyme Corporation
September 4, 1998
Page 4
7. The certificate representing the Shares complies with the provisions of
the laws of Delaware and the form of such certificates has been duly and
properly approved by the directors of the Corporation;
8. Assuming compliance by you with the terms of the Subscription
Agreement, the Amended Registration Rights Agreement and the Pre-emptive Rights
Letter and compliance with all applicable securities laws of any jurisdiction
within the United States by any holder of the Shares, except for the filing of
notices that may be required under Federal and state securities laws with regard
to (i) and (ii) below, no further filing, consent, approval, authorization or
qualification is required by the Corporation in connection with: (i) the
execution and delivery of the Subscription Agreement, the Amended Registration
Rights Agreement, or the Pre-emptive Rights Letter, (ii) the valid
authorization, issuance and sale of the Shares to you, and (iii) the resale of
any Shares pursuant to registration under the Securities Act of 1933, as amended
(the "Securities Act"), subject to the restrictions enumerated in Rule 144, or
pursuant to an available exemption from the registration requirements thereunder
to a purchaser who agrees to be bound by the restrictions contained in Rule 144.
9. BioMarin Genetics, Inc. is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and
BioMarin/Genzyme LLC is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Delaware.
BioMarin/Genzyme LLC has full power and authority to enter into the
Collaboration Agreement and to perform its obligations under the Agreements.
BioMarin Genetics, Inc. has full power and authority to enter into and perform
its obligations under the Operating Agreement. BioMarin/Genzyme LLC has applied
for qualification to do business as a foreign limited liability company in the
State of California and the Commonwealth of Massachusetts.
10. The Agreements have been duly authorized by all necessary corporate
action on the part of the Corporation, have been duly executed and delivered by
the Corporation and constitute the valid and binding obligations of the
Corporation in accordance with their terms. The Collaboration Agreement has been
duly authorized by all necessary action on the part of BioMarin/Genzyme LLC, has
been duly executed and delivered by BioMarin/Genzyme LLC and constitutes the
valid and binding obligation of BioMarin/Genzyme LLC. The Operating Agreement
has been duly authorized by all necessary corporate action on the part of
BioMarin Genetics, Inc., has been duly executed and delivered by BioMarin
Genetics, Inc. and constitutes the valid and binding obligation of BioMarin
Genetics, Inc. The execution and delivery of: (a) the Collaboration Agreement by
each of the Corporation, BioMarin/Genzyme LLC and BioMarin Genetics, Inc., (b)
the Purchase Agreement by the Corporation, (c) the Operating Agreement by the
Corporation and BioMarin Genetics, Inc., and the sale and assignment of the LLC
interest by the Corporation as provided in the Purchase Agreement will not: (i)
violate, or result in the breach of any of the terms, conditions or provisions
of, or constitute a default under, the Restated Certificate or Bylaws of the
Corporation, the certificate of incorporation or bylaws
<PAGE>
To Genzyme Corporation
September 4, 1998
Page 5
of BioMarin Genetics, Inc. or the certificate of formation of BioMarin/Genzyme
LLC, (ii) violate any corporate or securities law, ordinance or regulation or,
to our knowledge, any order, judgment, decree or requirement of any court,
arbitrator or governmental or regulatory body applicable to the Corporation,
BioMarin/Genzyme LLC or BioMarin Genetics, Inc. or by which any of its
respective assets or properties are bound, or (iii) require any filing with,
notice to, or permit, consent or approval of, any governmental or regulatory
body.
11. To the best of our knowledge, there is no action, proceeding or
investigation pending or threatened against the Corporation.
12. Assuming the accuracy of Genzyme Corporation's representations and
warranties set forth in the Purchase Agreement and the Subscription Agreement,
the assignment of the LLC interest pursuant to the Purchase Agreement is exempt
from registration under the Securities Act.
This opinion is intended solely for your use and benefit and solely in
connection with the purchase of the Shares and is not to be relied upon by other
persons or entities or by you or any other person or entity for any other
purpose without our prior written consent.
Very truly yours,
WILSON SONSINI GOODRICH & ROSATI Professional
Corporation
<PAGE>
"EXHIBIT "D"
SCHEDULE OF EXCEPTIONS
7.5 See Item 7.6 of this Exhibit D.
7.6 The Corporation intends to acquire Glyko Inc. from Glyko BioMedical, Ltd.,
at a price negotiated by the parties, based, in part, upon an independent
valuation determined by an investment bank, which price shall be paid in
Common Stock of the Corporation, including the value of options to purchase
Glyko BioMedical Ltd. capital stock which the Corporation shall assume in
connection with such acquisition.
The Corporation has entered into an amendment dated August ___, 1998, of
the Grant Terms and Conditions Agreement with Harbor-UCLA Research and
Education Institute dated April 1, 1997.
The Corporation will sublicense certain of its intellectual property to the
BioMarin/Genzyme LLC.
7.9 (a) The Corporation has entered into employment agreements, some of which
are in the form of counter-signed offer letters, with Dr. Klock, Dr.
Starr, Mr. Denison, Raymond W. Anderson, Dr. Swiedler and Dr. Kakkis.
The Corporation may extend full recourse 18 month loans to certain
executive officers and employees of Glyko, Inc. to allow them to
exercise certain of their stock options, in connection with the
Corporation's acquisition of Glyko, Inc.
7.9 (b)(i) See Item 7.10 of this Exhibit D. See also Item 7.6 of this
Exhibit D.
(b)(ii) License Agreement with Glyko BioMedical Ltd. dated June 26,1997.
The Company has entered into a Grant Terms and Conditions
Agreement with Harbor-UCLA Research and Education Institute dated
April 1, 1997. The Corporation will also license certain of its
intellectual property to the BioMarin/Genzyme LLC.
(c)(ii) Assignment of Deposit Account between the Corporation and the
Bank of Marin dated August 12, 1998, in the principal amount of
$114,000.00.
(c)(iii) Notes with Dr. Klock, Dr. Starr and Mr. Denison totaling
$2,500,000 in connection with Founders' Stock Purchase
Agreements, each dated October 1, 1997. See also Item 7.9(a) of
this Exhibit D.
7.9 (c)(iv) See Item 7.6 of this Exhibit D.
-7-
<PAGE>
7.10 The Corporation has entered into Lease Agreements for the following
properties:
11 Pimentel Court, Novato, CA
110 Digital Drive, Novato, CA
46 Galli Drive, Novato, CA
1123 West Carson Street, Torrance, CA
371 Bel Marin Keys, Novato, CA
7.21 The Corporation has also entered into Employment Agreements with Dr.
Swiedler, Raymond W. Anderson and Dr. Emil Kakkis. The Corporation has
also entered into Consulting Agreements with Gerit Mulder, Jeff Yuen,
Jacobs Engineering, and Chitra Mishra.
-8-
<PAGE>
EXHIBIT 10.27
BIOMARIN PHARMACEUTICAL INC.
CONVERTIBLE NOTE PURCHASE AGREEMENT
This Convertible Note Purchase Agreement (the "AGREEMENT") is made as of
April 12, 1999, by and between BioMarin Pharmaceutical Inc., a Delaware
corporation (the "COMPANY"), and the individuals listed on the Schedule of
Purchasers attached hereto as Exhibit A (the "PURCHASERS").
---------
1. PURCHASE AND SALE OF NOTE. In consideration of ________ dollars
-------------------------
($_____), the receipt of which is hereby acknowledged by the Company, and
subject to the terms and conditions of this Agreement, the Company hereby agrees
to sell to Purchasers and Purchasers hereby agree to purchase from the Company,
Convertible Promissory Notes, in the form attached hereto as Exhibit B (the
---------
"NOTES"), in the principal amounts set forth opposite each Purchaser's name on
Exhibit A.
- ---------
2. REGISTRATION RIGHTS. Purchasers shall become parties to the Amended
-------------------
and Restated Registration Rights Agreement between the Company and certain
holders of the Company's Common Stock, a copy of which is attached hereto as
Exhibit C. Under the terms of this Amended and Restated Registration Rights
- ---------
Agreement, upon conversion of the Notes into shares of the Company's Common
Stock pursuant to the terms of the Notes, the Purchasers shall be entitled to
certain registration rights and shall be subject to certain other restrictions
contained therein with regard to the shares of Common Stock issued upon
conversion of the Notes held by each Purchaser.
3. CLOSING AND DELIVERY OF NOTES. Payment for and delivery of the Notes
-----------------------------
may be completed in more than one closing, with the first such closing (each a
"CLOSING") to occur at the offices of Wilson Sonsini Goodrich & Rosati, 650 Page
Mill Road, Palo Alto, California at 8:00 a.m. (Pacific Daylight Time) (the
"CLOSING TIME") on such date as the Company and the Purchaser may agree (the
"CLOSING DATE"), but in any event no Closing shall be held later than JUNE 30,
1999 (unless extended by mutual agreement of the Company and the Purchaser).
The Notes will be delivered at each Closing against payment to the Company
by each Purchaser of their respective principal amount enumerated on the
Schedule of Purchasers attached hereto as Exhibit A. The principal amount shall
---------
be paid by each Purchaser by wire transfer to the following account: BIOMARIN
PHARMACEUTICAL INC., BANK OF AMERICA, 300 LAKESIDE DRIVE, SUITE 250, OAKLAND, CA
94612; ACCOUNT NUMBER: 1472800983; ROUTING #121000358; CONTACT PERSON: NANETTE
ANDINO, or such other means as Purchaser and the Company shall mutually agree.
Each Purchaser purchasing the Notes pursuant to the exemption from the
registration requirements of the Securities Act of 1933, as amended, contained
in Regulation S (as discussed in Section 8(i) hereto), on its own behalf or on
behalf of others for whom it is contracting hereunder, hereby appoints the
Agent, with full power of substitution, as its true and lawful attorney and
agent with the full power and authority in its place and stead to swear,
execute, file and record any document necessary to give effect to the delivery
of the Notes to the Agent, to terminate this Agreement on its behalf in the
event that any condition precedent to the Closing has not been satisfied, to
execute a receipt for the Notes, and to modify or waive any conditions or grant
any waivers on its behalf in connection with the transactions contemplated by
this Agreement, the Agency Agreement between LaMont Asset Management S.A. (the
"AGENT") and the Company dated
-1-
<PAGE>
April 12, 1999 (the "AGENCY AGREEMENT") and the Amended and Restated
Registration Rights Agreement.
4. CONDITIONS TO CLOSING OF THE PURCHASER. The Purchaser's obligation to
--------------------------------------
purchase the Notes at the Closing is, at the option of the Purchaser, subject to
fulfillment on or prior to the Closing Date of the following conditions:
(a) Representations and Warranties Correct. The representations and
--------------------------------------
warranties made by the Company in Section 6 hereof shall be true and correct on
the applicable Closing Date with the same force and effect as if such
representations had been made on and as of said date.
(b) Covenants. All covenants, agreements and conditions contained in
---------
this Agreement to be performed by the Company on or prior to the applicable
Closing Date shall have been performed or complied with in all respects.
(c) Compliance Certificate. The Company shall have delivered to the
----------------------
Purchaser a certificate, executed by the President of the Company, dated as of
the applicable Closing Date, and certifying to the fulfillment of the conditions
specified in Sections 4(a) and 4(b) above.
(d) Secretary's Certificate. The Company shall have delivered to the
-----------------------
Purchaser a certificate, executed by the Secretary of the Company, dated as of
the applicable Closing Date, and certifying as to the authenticity of the
Amended and Restated Certificate of Incorporation and the Bylaws, the
resolutions of the Board authorizing the transactions contemplated hereby and
the incumbency of the Company's officers.
(e) Opinion of Counsel. Wilson Sonsini Goodrich & Rosati, counsel to
------------------
the Company, shall have delivered to the Purchaser an opinion, in form and
substance reasonably satisfactory to Purchaser, in the form attached hereto as
Exhibit D.
- ---------
(f) Blue Sky. The Company shall have obtained all permits and
--------
qualifications required by any state in connection with the offer and sale of
the Notes and the shares of Common Stock issuable upon conversion thereof, or
secured an exemption therefrom.
(g) Convertible Note Purchase Agreement. The Company shall have
-----------------------------------
executed and delivered to the Purchaser a copy of this Agreement.
(h) Waiver of Pre-emptive Rights. The Company shall have received
----------------------------
written waivers of the rights triggered by the offer and sale of the Notes and
the shares of Common Stock issuable upon conversion thereof under: (i) the
letter to Glyko BioMedical Ltd. dated June 27, 1997, regarding certain pre-
emptive rights (the "GLYKO PRE-EMPTIVE RIGHTS LETTER"), (ii) the letter to
Genzyme Corporation dated September 4, 1998 regarding certain pre-emptive rights
(the "GENZYME PRE-EMPTIVE RIGHTS LETTER"), and (iii) the letter to BB
BioVentures L.P., dated December 30, 1997, regarding certain pre-emptive rights
(the "BB BIOVENTURES PRE-EMPTIVE RIGHTS LETTER").
5. CONDITIONS TO CLOSING OF THE COMPANY. The Company's obligation to
------------------------------------
issue and sell the Notes at the Closing to the Purchaser is, at the option of
the Company, subject to the fulfillment of the following conditions:
-2-
<PAGE>
(a) Representations and Warranties. The representations and
------------------------------
warranties made by the Purchaser in Section 8 hereof shall be true and correct
when made, and shall be true and correct on the applicable Closing Date with the
same force and effect as if such representations had been made on and as of said
date.
(b) Blue Sky. The Company shall have obtained all permits and
--------
qualifications required by any state in connection with the offer and sale of
the Notes and the shares of Common Stock issuable upon conversion thereof, or
secured an exemption therefrom.
(c) Registration Rights Agreement. The Purchaser shall have executed
-----------------------------
and delivered to the Company the Amended and Restated Registration Rights
Agreement.
(d) Convertible Note Purchase Agreement. The Purchaser shall have
-----------------------------------
executed and delivered to the Company a copy of this Agreement.
(e) Payment. The Company shall have received from or on behalf of the
-------
Purchaser written confirmation by facsimile transmission that instructions have
been given to initiate a wire to the Company's account specified in Section 3
hereof of payment in full for the principal amount set forth opposite such
Purchaser's name on the Schedule of Purchasers attached hereto as Exhibit A.
---------
(f) Waiver of Pre-emptive Rights. The Company shall have received
----------------------------
written waivers of the rights triggered by the offer and sale of the Notes and
the shares of Common Stock issuable upon conversion thereof under the Glyko Pre-
emptive Rights Letter, the Genzyme Pre-emptive Rights Letter and the BB
BioVentures Pre-emptive Rights Letter by the respective parties thereto.
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
---------------------------------------------
represents and warrants to the Purchaser that, except as otherwise set forth on
the Schedule of Exceptions attached hereto as Exhibit E, with specific reference
---------
to the subsection of this Section 6 so affected, the following will be true and
correct as of the applicable Closing Date:
(a) Organization and Standing. The Company is a Company duly
-------------------------
organized and validly existing under, and by virtue of, the laws of the State of
Delaware and is in good standing under such laws. The Company has the requisite
corporate power to own and operate its properties and assets and to carry on its
business as presently conducted. The Company is qualified to do business as a
foreign Company in the State of California.
(b) Corporate Power. The Company has all requisite legal and
---------------
corporate power to execute and deliver this Agreement, the Notes, to issue the
shares of Common Stock issuable upon conversion of the Notes and to carry out
and perform its obligations under the terms of this Agreement, the Notes and the
Amended and Restated Registration Rights Agreement.
(c) Subsidiaries. The Company has no subsidiaries or affiliated
------------
companies other than: (i) Glyko, Inc., (ii) BioMarin Genetics, Inc., and (iii)
BioMarin/Genzyme LLC. Glyko, Inc. is duly organized and validly existing under
the laws of the State of Delaware. Glyko, Inc. has the requisite corporate power
to own and operate its property and assets and to carry on its business as
presently conducted. BioMarin/Genzyme LLC is duly organized and validly existing
under and by virtue of the laws of the State of Delaware and is in good standing
under such laws. BioMarin/Genzyme LLC has the requisite power to own and operate
its property and assets and to carry on its business as
-3-
<PAGE>
presently conducted. BioMarin Genetics, Inc. is duly organized and validly
existing under, and by virtue of the laws of the State of Delaware and is in
good standing under such laws. BioMarin Genetics, Inc. has the requisite
corporate power to own and operate its property and assets and to carry on its
business as presently conducted. Immediately prior to the Closing, Glyko
BioMedical Ltd. owns 10,925,706 shares of the Company's Common Stock.
(d) Capitalization. The authorized capital stock of the Company
--------------
consists of 50,000,000 shares of Common Stock, of which, at the date hereof,
26,176,180 shares are issued and outstanding. All issued and outstanding shares
of Common Stock have been duly authorized and validly issued, and are fully paid
and non-assessable. The Common Stock has the voting power, designations,
preferences, rights and qualifications set forth in the Amended and Restated
Certificate of Incorporation. Except as contemplated herein and except for: (i)
the pre-emptive rights granted to BB BioVentures L.P. pursuant to BB BioVentures
Pre-emptive Rights Letter, (ii) the pre-emptive rights granted to Glyko
BioMedical Ltd. pursuant to the Glyko Pre-emptive Rights Letter, (iii) the pre-
emptive rights granted to Genzyme Corporation pursuant to the Genzyme Pre-
emptive Rights Letter, (iv) options to purchase 3,406,254 shares of Common Stock
of the Company granted under its 1997 Stock Plan, as amended, and the 1998
Directors Plan, (v) warrants to purchase a total of up to 801,500 shares of
Common Stock, (vi) Genzyme Corporation's obligation to purchase up to $10
million worth of Common Stock of the Company in a private placement simultaneous
with an initial public offering of the Company's Common Stock (subject to
certain qualifications) and (vii) the obligation to issue up to 255,222 shares
of BioMarin Common Stock to employees of Glyko, Inc. upon exercise of certain of
their outstanding options to purchase capital stock of Glyko BioMedical Ltd.,
which options were assumed by the Company in connection with the acquisition of
Glyko, Inc. in October 1998, there are no options, warrants, conversion
privileges or other rights presently outstanding to purchase or otherwise
acquire any authorized but unissued shares of the capital stock or other
securities of the Company, nor any agreements or understandings with respect
thereto. The Company has reserved 2,600,000 shares of its Common Stock for
issuance upon conversion of the Notes.
(e) Financial Statements. As of the Closing Date, the Company will
--------------------
have delivered to the Purchaser the unaudited financial statements of the
Company as at December 31, 1998 (the "FINANCIAL STATEMENTS"). The Financial
Statements are complete and correct in all material respects, have been prepared
in accordance with generally accepted accounting principles (except that they do
not contain footnotes) consistently applied throughout the periods covered
thereby, and present fairly the financial position of the Company as of their
respective dates, subject to final year-end adjustments. Other than as described
in the Financial Statements, the Company has no material liabilities and knows
of no material contingent liabilities not disclosed in the Financial Statements,
except current liabilities incurred in the ordinary course of business which are
not, individually or in the aggregate, materially adverse. Within approximately
10 business days following the Closing, the Company will deliver to Purchaser
audited Financial Statements for the year ended December 31, 1998.
-4-
<PAGE>
(f) Subsequent Events. Since December 31, 1998, there has not been:
-----------------
(i) a declaration, setting aside or payment of any dividend or other
distribution with respect to, or any direct or indirect redemption or
acquisition of, any shares of the capital stock of the Company or any of its
subsidiaries; (ii) a waiver of any material right of the Company or any of its
subsidiaries or cancellation of any material debt or claim held by the Company
or any of its subsidiaries; (iii) a loan by the Company or any of its
subsidiaries to any officer, director, employee or stockholder of the Company,
or any agreement or commitment therefor; (iv) a material loss, destruction or
damage to any property of the Company or any of its subsidiaries, whether or not
insured; (v) a labor dispute involving the Company or any of its subsidiaries or
a material change in the personnel of the Company or any of its subsidiaries or
the terms and conditions of their employment; (vi) an acquisition or disposition
of any assets (or any contract or arrangement therefor), or any transaction by
the Company or any of its subsidiaries otherwise than for fair value in the
ordinary course of business; (vii) any sale, assignment or transfer of any
patents, trademarks, copyrights, trade secrets or other intangible assets of the
Company or any of its subsidiaries or (viii) any change in any material
agreement to which the Company or any of its subsidiaries is a party or by which
any of them is bound or any other event or condition of any character that,
either individually or in the aggregate, is reasonably likely to have a material
adverse effect on the business, assets, condition (financial or otherwise) or
results of operations of the Company and its subsidiaries taken as a whole (a
"MATERIAL ADVERSE EFFECT").
(g) Authorization. All corporate action on the part of the Company,
-------------
its directors and stockholders necessary for the authorization, execution,
delivery and performance of this Agreement, the Amended and Restated
Registration Rights Agreement, the authorization, sale, issuance and delivery of
the Notes and the reservation of the shares of Common Stock issuable upon
exercise of the Notes and the performance of the Company's obligations hereunder
and thereunder has been taken or will be taken prior to the Closing. This
Agreement, the Registration Rights Agreement and the Notes, when fully executed
and delivered by the Company, shall constitute valid and binding obligations of
the Company, enforceable in accordance with their respective terms, subject to
laws of general application relating to bankruptcy, insolvency and the relief of
debtors and rules of law governing specific performance, injunctive relief or
other equitable remedies. The shares of Common Stock issuable upon conversion of
the Notes, when issued in compliance with the provisions of this Agreement and
the Notes, will be validly issued, fully paid and non-assessable, and free of
any liens or encumbrances; provided, however, that the shares of Common Stock
issuable upon conversion of the Notes may be subject to certain restrictions on
transfer under applicable state and/or United States Federal securities laws.
(h) Governmental Consents, etc. No consent, approval or authorization
--------------------------
of or designation, declaration or filing with any state or United States Federal
governmental authority on the part of the Company is required in connection with
the valid execution and delivery of this Agreement, the Amended and Restated
Registration Rights Agreement, the Notes or the issuance of the shares of Common
Stock issuable upon conversion of the Notes, or the consummation of any other
transaction contemplated hereby, except qualification (or taking such action as
may be necessary to secure an exemption from qualification, if available) under
the California Corporate Securities Law and other applicable blue sky laws, of
the offer and sale of the Notes and the shares of Common Stock issuable upon
conversion of the Notes, which filing and qualification, if required, will be
accomplished in a timely manner prior to or promptly after the Closing.
-5-
<PAGE>
(i) Title to Properties and Assets; Liens, etc. The Company and each
------------------------------------------
of its subsidiaries has a valid leasehold interest in, or valid title to, its
properties and assets, including without limitation the assets and properties
reflected in the Company's balance sheet as of December 31, 1998, in each case
subject to no mortgage, pledge, lien, lease, encumbrance or charge, other than:
(i) as disclosed in such balance sheet except as incurred in the ordinary course
of business since the date of such balance sheet, (ii) the lien of current taxes
not yet due and payable, and (iii) possible minor liens and encumbrances which
do not in any case materially detract from the value of the property subject
thereto or would result in a Material Adverse Effect.
(j) Litigation.
----------
(i) At the Closing Date, there are no actions, suits,
proceedings or investigations pending or threatened against the Company or any
of its subsidiaries or any their respective properties before any court or
governmental agency, nor is the Company or any of its subsidiaries subject to
any writ, injunction or order of any court or government agency (nor, to the
Company's knowledge at the date hereof, is there any basis therefor or threat
thereof) which, either individually or in the aggregate, might result in a
Material Adverse Effect, or in any material impairment of the right or ability
of the Company or any of its subsidiaries to carry on their respective
businesses as now conducted or as currently proposed to be conducted, or in any
material liability on the part of the Company or any of its subsidiaries, and,
to the Company's knowledge at the date hereof, no action, suit, proceeding or
investigation pending or threatened against the Company questions the validity
of this Agreement, the Amended and Restated Registration Rights Agreement, the
Notes or any action taken or to be taken in connection herewith or therewith.
(ii) The Company has no current plan to initiate any action,
writ, proceeding or investigation before any court or government agency.
(k) Registration Rights. Except as set forth in the Amended and
-------------------
Restated Registration Rights Agreement, the Company is not under any obligation
to register any of its presently outstanding securities, or any of its
securities which may hereafter be issued, under the Securities Act of 1933, as
amended (the "SECURITIES ACT").
(l) Brokers or Finders. The Company has not incurred, and will not
------------------
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement or
any transaction contemplated hereby, except such brokers or finders' fees owed
to Agent in connection with the transactions contemplated hereby pursuant to the
term of the Agency Agreement.
(m) No Breach. Neither the Company nor any of its subsidiaries is:
---------
(i) in breach or violation of any of the terms or provisions of, or in default
under, this Agreement or any indenture, mortgage, deed of trust, loan agreement
or other agreement (written or oral) or instrument to which it is a party or by
which it is bound or to which any of the property or assets of the Company or
any of its subsidiaries is subject, which breach or violation or the
consequences thereof would have a Material Adverse Effect; (ii) in violation of
the provisions of its Amended and Restated Certificate of Incorporation or
Bylaws or (iii) in violation of any statute or any order, rule or regulation of
any court or governmental agency or body having jurisdiction over it or any of
its
-6-
<PAGE>
assets or properties, which violation or the consequences thereof would result
in a Material Adverse Effect.
(n) No Conflict. The offer and sale of the Notes and the issuance of
-----------
the shares of Common Stock issuable upon conversion of the Notes by the Company
and the performance and consummation of the transactions contemplated herein or
therein will not conflict with or result in (i) a breach or violation of any of
the terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement (written or oral) or
instrument to which the Company is bound or to which any of the property or
assets of the Company is subject, which breach or violation or the consequences
thereof would result in a Material Adverse Effect, (ii) any violation of the
provisions of the Amended and Restated Certificate of Incorporation or the
Bylaws of the Company or (iii) a violation of any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction over
the Company or any of its assets or properties, which violation or the
consequences thereof would result in a Material Adverse Effect, except that the
offer and sale of the Notes and the shares of Common Stock issuable upon
conversion thereof will trigger rights under the Glyko Pre-emptive Rights
Letter, the Genzyme Pre-emptive Rights Letter and the BB BioVentures Pre-emptive
Rights Letter, each of which rights will be waived on or before the Closing
Date.
(o) Securities Act. Assuming compliance by the Agent with its
--------------
agreements set forth in the Agency Agreement, the transactions contemplated by
this Agreement shall be exempt from the registration requirements of the
Securities Act.
(p) Intellectual Property. The Company and its subsidiaries own or
---------------------
possess adequate licenses or other rights to use all patents, patent
applications, trademarks, trademark applications, service marks, service mark
applications, trade names, copyrights, manufacturing processes, formulae, trade
secrets, customer lists and know-how (collectively, "INTELLECTUAL PROPERTY")
necessary for the conduct of their respective businesses as presently conducted.
There are no claims pending or, to the best of the Company's knowledge as of the
date hereof, threatened, to the effect that the operations of the Company or any
of its subsidiaries infringe upon or conflict with the asserted rights of any
other person under any Intellectual Property, and, to the best of the Company's
knowledge, there is no basis for any such claim (whether or not pending or
threatened). No claim is pending or, to the best of the Company's knowledge,
threatened, to the effect that any Intellectual Property owned or licensed by
the Company or any of its subsidiaries, or which the Company or any of its
subsidiaries otherwise has the right to use, is invalid or unenforceable by the
Company or such subsidiary, and, to the best of the Company's knowledge, there
is no basis for any such claim (whether or not pending or threatened).
(q) Environmental Laws. To the best of the Company's knowledge,
------------------
neither the Company nor any of its subsidiaries is in violation of any
applicable statute, law or regulation relating to the environment or
occupational health or safety, and to the best of the Company's knowledge no
material expenditures are or will be required in order to comply with any such
existing statute, law or regulation.
(r) Confidentiality. The Company and each of its subsidiaries has
---------------
taken all reasonable measures to protect and preserve the confidentiality of all
their respective trade secrets and other non-patented proprietary information,
including without limitation the procurement of
-7-
<PAGE>
proprietary invention assignments and non-disclosure and non-competition
agreements from employees, consultants, sub-contractors, customers and other
persons who have access to such information. To the best of the Company's
knowledge as of the date hereof, the procedures implemented by the Company and
each of its subsidiaries are in conformity with the practices of similarly
situated companies in its industry.
(s) Taxes. The Company has filed all necessary United States Federal,
-----
state, municipal, property, income and franchise tax returns and has paid all
taxes shown as due thereon or otherwise owed by it to any taxing authority and
there is no tax deficiency which has been or, to the best of the knowledge of
the Company as of the date hereof, might be asserted against the Company which
would have a Material Adverse Effect. The Company has not received notice of any
audit from any taxing authority, and no controversy with respect to taxes of any
type is pending or, to the best knowledge of the Company, threatened. The
Company has paid all applicable United States Federal and state payroll and
withholding taxes, including but not limited to FICA, FUTA, state unemployment
taxes and income taxes.
(t) Employment Matters. There is no collective bargaining or other
------------------
union agreement to which the Company or any of its subsidiaries is a party or by
which any of them is bound, or which is currently being negotiated. Neither the
Company nor any of its subsidiaries sponsors, maintains or contributes to any
pension, retirement, profit sharing, incentive compensation, bonus or other
employee benefit plan, including without limitation any employee benefit plan
covered by Title 4 of the Employee Retirement Income Security Act of 1974
("ERISA") or any "multi-employer plan" as defined in Section 4001(a)(3) of
ERISA, other than the Company's group medical, disability and life insurance
plans (which are not subject to ERISA), and a 401(k) plan to which the Company
makes no contributions. To the best knowledge of the Company at the date hereof:
(i) no employee of the Company or any of its subsidiaries is a party to or bound
by any agreement, contract or commitment, or subject to any restrictions,
particularly but without limitation in connection with any previous employment
of any such person, which might have a Material Adverse Effect, and (ii) no
officer has any present intention of terminating his employment with the Company
or any of its subsidiaries, and the Company has no present intention of
terminating any such employment.
(u) Full Disclosure. This Agreement and the exhibits hereto, the
---------------
Amended and Restated Registration Rights Agreement and the Notes do not 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, in light
of the circumstances in which they were made, not misleading. To the best
knowledge of the Company, there are no facts which (individually or in the
aggregate) material adversely affect the business, assets, liabilities,
financial conditions, prospects or operations of the Company that have not been
set forth in this Agreement and the exhibits hereto, the Amended and Restated
Registration Rights Agreement and the Notes.
-8-
<PAGE>
7. CERTAIN MATTERS RELATING TO THE OFFER AND SALE OF THE SHARES. The
------------------------------------------------------------
Purchaser, on its own behalf or, for Purchasers acquiring Regulation S exempt
Notes (or on behalf of others for whom it is contracting hereunder) acknowledges
and agrees that: (a) it (or others for whom it is contracting hereunder) has not
been provided with a registration statement, prospectus or any similar document
in connection with its purchase of the Notes and the shares of Common Stock
issuable upon conversion of the Notes; (b) its decision to execute this
Agreement and the Amended and Restated Registration Rights Agreement and to
purchase the Notes and the shares of Common Stock issuable upon conversion of
the Notes (on its own behalf or on behalf of others for whom it is contracting
hereunder) has not been based upon any verbal or written representations as to
fact or otherwise made by or on behalf of the Agent or the Company and that its
decision (or the decision of others for whom it is contracting hereunder) is
based upon the information, representations and covenants of the Company
contained in this Agreement and publicly available information concerning the
Company (any such information having been delivered to it without independent
investigation or verification by the Agent); and (c) the Agent and its
directors, officers, employees, agents and representatives assume no
responsibility or liability of any nature whatsoever for the accuracy or
adequacy of any of the information, representations and covenants of the Company
contained in this Agreement or any such publicly available information or as to
whether all information concerning the Company required to be disclosed by it
has been generally disclosed.
8. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER. The
----------------------------------------------------------
Purchaser hereby represents, warrants and covenants to the Company (which
representations, warranties and covenants shall survive the Closing) as of the
Closing Date as follows:
(a) Experience; Risk. The Purchaser has such knowledge and experience
----------------
in financial and business matters that it is capable of evaluating the merits
and risks of the purchase of the Notes pursuant to this Agreement and the shares
of Common Stock of the Company issuable upon conversion of the Notes and is
capable of protecting its interests in connection herewith. The Purchaser has
the ability to bear the economic risk of the investment, including complete loss
of the investment.
(b) Investment.
----------
(i) In the case of a Purchaser purchasing the Notes as a
principal, the Purchaser is acquiring the Notes and the shares of Common Stock
of the Company issuable upon conversion of the Notes for investment for its own
account, not as a nominee or agent, and not with a view to, or for, resale in
connection with any distribution thereof, and the Purchaser has no present
intention to sell, grant any participation in, or otherwise distribute the Notes
and the shares of Common Stock of the Company issuable upon conversion of the
Notes. The Purchaser understands that the Notes and the shares of Common Stock
of the Company issuable upon conversion of the Notes have not been registered
under the Securities Act and will be issued pursuant to an exemption from the
registration requirements thereof, which exemption depends upon, among other
things, the bona fide nature of the investment intent and the accuracy of such
Purchaser's representations as expressed herein.
(ii) In the case of a purchase of Notes and shares of Common
Stock issuable upon exercise of the Notes made in reliance upon Regulation S
promulgated under the Securities Act ("REGULATION S") where the Purchaser is
acting as agent for a disclosed principal, each
-9-
<PAGE>
beneficial purchaser of the Notes and shares of Common Stock issuable upon
exercise of the Notes for whom the Purchaser is acting is purchasing as
principal for its own account and not for the benefit of any other person and
the Purchaser is an agent with due and proper authority to execute this
Agreement and all other documentation in connection with the purchase of the
Notes and shares of Common Stock issuable upon exercise of the Notes on behalf
of the beneficial purchaser, and this Agreement has been duly authorized,
executed and delivered by or on behalf of, and constitutes the legal, valid and
binding agreement of, the disclosed principal.
(iii) In the case of a purchase of Notes and shares of Common
Stock issuable upon exercise of the Notes made in reliance upon Regulation S
where the Purchaser is acting as trustee or as agent for a principal which is
undisclosed or identified by account number only, this Agreement has been duly
authorized, executed and delivered by, and constitutes a legal, valid and
binding agreement of, the undersigned acting in such capacity.
(c) Restricted Securities.
---------------------
(i) Rule 144. The Purchaser understands that the Notes and the
shares of Common Stock of the Company issuable upon conversion of the Notes are
"restricted securities" under United States Federal securities laws, as they are
unregistered and are being acquired from the Company in a transaction not
involving a public offering, and that under such laws and applicable regulations
promulgated thereunder the Notes and the shares of Common Stock of the Company
issuable upon conversion of the Notes may be resold without registration under
the Securities Act only in certain limited circumstances. The Purchaser
acknowledges that the Notes and the shares of Common Stock of the Company
issuable upon conversion of the Notes must be held indefinitely unless
subsequently registered under the Securities Act or an exemption from such
registration is available. The Purchaser is aware of the provisions of Rule 144
promulgated under the Securities Act, the provisions of which limit resale of
"restricted securities."
(ii) Regulation S. The Purchaser understand that if the Notes
and the shares of Common Stock of the Company issuable upon conversion of the
Notes are being acquired on a basis exempt from registration under Regulation S,
the Notes and the shares of Common Stock of the Company issuable upon conversion
of the Notes may only be resold in accordance with the provisions of Regulation
S, pursuant to registration under the Securities Act or pursuant to an available
exemption from registration thereunder.
(iii) Denial of Registration of Transfer. The Purchaser further
acknowledges and understand that if the Notes and the shares of Common Stock of
the Company issuable upon conversion of the Notes are being acquired in reliance
upon the exemption from registration contained in Regulation S the Company will
refuse to register any transfer of the Notes and the shares of Common Stock of
the Company issuable upon conversion of the Notes not made in accordance with
the provisions of Regulation S, pursuant to registration under the Securities
Act or pursuant to an available exemption from registration.
(d) No Public Market. The Purchaser understands that no public market
----------------
now exists for the Notes or the shares of Common Stock of the Company issuable
upon conversion of the Notes or for any other securities issued by the Company
and that the Company cannot assure the Purchaser that a public market will ever
exist for any securities issued by the Company.
-10-
<PAGE>
(e) Authorization. The Purchaser has the full right, power and
-------------
authority to enter into and perform its obligations under this Agreement and the
Amended and Restated Registration Rights Agreement. This Agreement and the
Amended and Restated Registration Rights Agreement, when executed and delivered
by the Purchaser, will constitute valid and binding obligations of the
Purchaser, enforceable in accordance with their respective terms, subject to the
laws of general application relating to bankruptcy, insolvency and the relief of
debtors, rules of law governing specific performance, injunctive relief and
other equitable remedies.
(f) Government Consents. No consent, approval or authorization of or
-------------------
designation, declaration or filing with any state, United States Federal, or
foreign governmental authority on the part of the Purchaser is required in
connection with the valid execution and delivery of this Agreement and the
Amended and Restated Registration Rights Agreement by the Purchaser, and the
consummation by the Purchaser of the transactions contemplated hereby and
thereby.
(g) Further Limitations on Disposition. Without in any way limiting
---------------------------------
the representations set forth above, the Purchaser further agrees not to make
any offer or sale of all or any portion of the Notes or the shares of Common
Stock of the Company issuable upon conversion of the Notes within the United
States or to a U.S. resident unless and until:
(i) There is then in effect a Registration Statement under the
Securities Act covering such proposed offer or sale and such offer or sale is
made in accordance with such Registration Statement; or
(ii) The Purchaser shall have notified the Company of the
proposed offer or sale and shall have furnished the Company with a statement of
the circumstances surrounding the proposed disposition, and if reasonably
requested by the Company, such Purchaser shall have furnished the Company with
an opinion of counsel, reasonably satisfactory to the Company, that such offer
or sale is exempt from the registration requirements under the Securities Act.
(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 Purchaser to any transferees in transactions contemplated by
paragraph (ii) above, if all such transferees agree in writing to be subject to
the terms hereof to the same extent as if they were Purchasers hereunder.
(h) Legends. It is understood that each Note and each certificate
-------
representing the shares of Common Stock issued upon conversion of the Notes, and
any securities issued in respect thereof or exchange therefor shall bear legends
substantially in the following form (in addition to any legend required under
applicable state securities laws):
(i) In the case of Regulation S exempt securities,
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (THE "1933 ACT")
AND MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION ONLY (A) TO THE CORPORATION,
(B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 903 OR
904 OF
-11-
<PAGE>
REGULATION S UNDER THE 1933 ACT, OR (C) PURSUANT TO AN
AVAILABLE EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS,
PROVIDED IN SUCH LATTER CASE THAT THE HOLDER UPON REQUEST
PRIOR TO SUCH SALE FURNISHES TO THE CORPORATION AN OPINION
OF COUNSEL OF RECOGNIZED STANDING TO THAT EFFECT REASONABLY
SATISFACTORY TO THE CORPORATION. COPIES OF THE AGREEMENT
COVERING THE PURCHASE OF THESE SECURITIES AND RESTRICTING
THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST
MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE
SECRETARY OF THE CORPORATION AT THE PRINCIPAL EXECUTIVE
OFFICES OF THE CORPORATION.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO A LOCKUP PERIOD OF 180 DAYS FOLLOWING THE EFFECTIVE DATE
OF A REGISTRATION STATEMENT OF THE COMPANY FILED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AS SET FORTH IN AN
AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF
THESE SECURITIES, A COPY OF WHICH MAY BE OBTAINED AT THE
PRINCIPAL OFFICE OF THE CORPORATION. SUCH LOCKUP PERIOD IS
BINDING ON TRANSFEREES OF THESE SECURITIES."
(ii) Or in the case of Regulation D exempt securities:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH
A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION
THEREOF. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION UNLESS THE COMPANY RECEIVES
AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT STATING
THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION
AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT. COPIES OF
THE AGREEMENTS COVERING THE PURCHASE OF THESE SECURITIES AND
RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY
WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS
CERTIFICATE TO THE SECRETARY OF THE COMPANY AT THE PRINCIPAL
EXECUTIVE OFFICES OF THE COMPANY.
(i) Status.
------
(i) Exemption from Registration. The Purchaser is acquiring
the Notes and the shares of Common Stock issuable upon conversion of the Notes
in reliance upon the exemption from the registration requirements under the
Securities Act contained in:
-12-
<PAGE>
(1) Regulation S (___________); OR
[CHECK ONE]
(2) Regulation D (___________).
(ii) Non-U.S. Status. If not resident of the United States, the
Purchaser, whether acting as principal, trustee or agent, is neither a U.S.
person (as defined in Rule 902(o) of Regulation S promulgated under the
Securities Act) nor purchasing the Notes and the shares of Common Stock issuable
upon conversion of the Notes for the account of a U.S. person or for resale in
the United States, and the Purchaser confirms that the Notes and the shares of
Common Stock issuable upon conversion of the Notes have not been offered to the
Purchaser in the United States and that this Agreement has not been signed in
the United States.
(j) Accredited Investor Status. If the Purchaser is acquiring the
--------------------------
Notes and the shares of Common Stock issuable upon conversion of the Notes in
reliance upon the exemption from the registration requirements under the
Securities Act contained in Regulation D, then the Purchaser presently does, and
will as of the Closing Date, qualify as an "accredited investor" within the
meaning of Rule 501(a) promulgated under the Securities Act. Purchaser meets the
relevant criteria indicated on its completed and signed copy of the Accredited
Investor Questionnaire attached hereto as Exhibit F.
---------
(k) Brokers or Finders. The Purchaser has not incurred, and will not
------------------
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement or
any transactions contemplated hereby.
(l) Non-Contravention of Foreign Laws. The purchase of the Notes and
---------------------------------
the shares of Common Stock issuable upon conversion of the Notes by the
Purchaser does not contravene any of the applicable securities legislation in
the jurisdiction in which the Purchaser is resident and does not trigger (i) any
obligation to prepare and file a registration statement, prospectus or similar
document, or any other report with respect to such purchase, and (ii) any
registration or other obligation on the part of the Agent.
9. RELIANCE UPON REPRESENTATIONS, WARRANTIES AND COVENANTS. The Purchaser
-------------------------------------------------------
acknowledges that the representations and warranties and covenants contained in
this Agreement are made with the intent that they may be relied upon by the
Company to, among other things, determine its eligibility to purchase the Notes
and the shares of Common Stock issuable upon conversion of the Notes. The
Purchaser further agrees that by accepting the Notes, the Purchaser shall be
representing and warranting that the foregoing representations and warranties
are true as of the Closing with the same force and effect as if they had been
made by the Purchaser at the Closing.
10. ENTIRE AGREEMENT; AMENDMENT. This Agreement, the Exhibits hereto, and
---------------------------
the other documents delivered pursuant hereto constitute the full and entire
understanding and agreement among the parties with regard to the subjects hereof
and thereof. Neither this Agreement nor any term hereof may be amended, waived,
discharged or terminated other than by a written instrument signed by the
Purchaser and the Company.
-13-
<PAGE>
11. LOCKUP AGREEMENT. Purchasers hereby agree that if so requested by the
----------------
Company or any representative of the underwriters (the "MANAGING UNDERWRITER")
in connection with any registration of the offering of any securities of the
Company under the Securities Act, Purchasers shall not sell or otherwise
transfer any shares of Common Stock issuable upon conversion of the Notes during
the 180-day period following the effective date of a registration statement of
the Company filed under the Securities Act (the "MARKET STANDOFF PERIOD"). The
Company may impose stop-transfer instructions with respect to securities subject
to the foregoing restrictions until the end of such Market Standoff Period.
12. MISCELLANEOUS.
-------------
(a) The parties agree to execute such further instruments and to take
such further action as may reasonably be necessary to carry out the intent of
this Agreement.
(b) This Agreement shall inure to the benefit of the successors and
assigns of the Company and, subject to the restrictions on transfer herein set
forth, be binding upon Purchasers, their heirs, executors, administrators,
successors and assigns.
(c) A waiver by either party of any of the terms and conditions of
this Agreement in any instance shall not be deemed or construed to be a waiver
of such terms or conditions for the future, or of any subsequent breach thereof.
(d) Any and all notices required or permitted to be given hereunder
shall be in writing and shall be deemed given and received upon personal
delivery, or seven (7) business days after deposit in the United States mail, by
certified or registered mail, postage prepaid and addressed as follows or, if by
facsimile transmission, on the same day as such facsimile transmission is
confirmed received at the applicable number enumerated below:
To the Purchasers: At their respective addresses and facsimile numbers
enumerated on the Schedule of Purchasers attached
hereto as Exhibit A or at such other address as
---------
Purchaser shall have furnished the Company in writing.
with a copy to: Blake, Cassels & Graydon
7th Floor, 10 Lloyd's Avenue
London, England EC3N3AX
Fax: 0171-680-4646
To the Company: BioMarin Pharmaceutical Inc.
371 Bel Marin Keys Boulevard
Novato, CA 94949
Attn: Corporate Secretary
Fax: 415-382-7889
-14-
<PAGE>
with a copy to: Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, California 94304
Attn: Francis S. Currie, Esq.
Fax: 650-320-4842
Either party may change by notice the address to which notices to it are to be
addressed.
(e) If any provision of this Agreement as applied to either party or
to any circumstances shall be adjudged by a court of competent jurisdiction to
be illegal, void, voidable or unenforceable, the same shall in no way affect the
other provisions of this Agreement which shall continue and remain in full force
and effect; provided that no such severability shall be effective if it
materially changes the economic benefit of this Agreement to any party.
(f) This Agreement has been entered into and shall be interpreted in
accordance with the internal laws of the State of California, applied to
contracts entered into in the State of California, without regard to conflict of
law provisions.
(g) This Agreement may be signed and delivered in counterparts, and
by facsimile, with the same effect as if the signatures thereto and hereto were
upon the same instrument and delivered in person.
-15-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first written above.
"COMPANY"
BIOMARIN PHARMACEUTICAL INC.
a Delaware corporation
By: /s/ John C. Klock
----------------------------------
Name: John C. Klock
---------------------------------
Title: President and Secretary
--------------------------------
"PURCHASER"
By: __________________________________
Name: ________________________________
Title: _______________________________
-16-
<PAGE>
EXHIBIT A
SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
Name and Address Principal Amount
<S> <C>
- ----------------------------------------------------------------------------------
A&A Actienbank GmbH $7,000,000.00
- ----------------------------------------------------------------------------------
Glyko Biomedical Ltd. $4,300,000.00
- ----------------------------------------------------------------------------------
LaMont Asset Management SA $ 9,700,00.00
- ----------------------------------------------------------------------------------
Mr. Thomas Schmidheiny $5,000,000.00
- ----------------------------------------------------------------------------------
GRAND TOTAL: $ 26,000,000
- ----------------------------------------------------------------------------------
</TABLE>
-17-
<PAGE>
EXHIBIT B
[APPLICABLE REGULATION D OR REGULATION S LEGEND SPECIFIED IN NOTE PURCHASE
AGREEMENT]
CONVERTIBLE PROMISSORY NOTE
April 12, 1999
$_______________ Novato, California
FOR VALUE RECEIVED, BioMarin Pharmaceutical Inc. a Delaware corporation
(the "COMPANY") promises to pay to or to the order of ____________________
("HOLDER"), or its registered assigns, the principal sum of __________ dollars
($_________), or such lesser amount as shall equal the outstanding principal
amount hereof, together with interest from the date of this Note on the unpaid
principal balance at a rate equal to ten percent (10.00%) per annum, computed on
the basis of the actual number of days elapsed and a year of 365 days. All
unpaid principal, together with any then unpaid and accrued interest and other
amounts payable hereunder, shall be due and payable on the earliest of (i) April
12, 2002 (the "MATURITY DATE"), (ii) immediately prior to a sale of all or
substantially all of the assets of the Company or a merger or acquisition of the
Company with or into another entity in which the holders of the voting capital
stock of the Company immediately prior to such merger or acquisition hold less
than fifty percent (50%) of the voting capital stock of the successor entity
following such transaction, (iii) the effective date of the final prospectus
relating to an initial public offering of the Company's capital stock, which
securities are to be listed on a foreign or a United States exchange or
exchanges or the Nasdaq national market, with net proceeds to the Company (after
deducting underwriters' discounts and expenses) of at least $20 million, or (iv)
when, upon or after the occurrence of an Event of Default (as defined below),
such amounts are declared due and payable by Holder or made automatically due
and payable in accordance with the terms hereof. This Note is one of the "Notes"
issued pursuant to the Convertible Note Purchase Agreement of even date herewith
(the "NOTE PURCHASE AGREEMENT") between Company and the Purchasers (as defined
in the Convertible Note Purchase Agreement).
The following is a statement of the rights of Holder and the conditions to
which this Note is subject, and to which Holder, by the acceptance of this Note,
agrees:
1. DEFINITIONS. As used in this Note, the following capitalized terms
-----------
have the following meanings:
(a) "Financial Statements" shall mean, with respect to any accounting
period for the Company, statements of operations, retained earnings and cash
flow of the Company for such period, and balance sheets of the Company as of the
end of such period, setting forth in each case in comparative form figures for
the corresponding period in the preceding fiscal year if such period is less
than a full fiscal year or, if such period is a full fiscal year, corresponding
figures from the preceding fiscal year, all prepared in reasonable detail and in
accordance with GAAP.
<PAGE>
(b) "GAAP" shall mean generally accepted accounting principles as in
effect in the United States of America from time to time.
(c) "Majority in Interest" shall mean, more than 50% of the aggregate
outstanding principal amount of the Notes issued pursuant to the Note Purchase
Agreement.
(d) "Obligations" shall mean and include all loans, advances, debts,
liabilities and obligations, howsoever arising, owed by the Company to the
Holder of every kind and description (whether or not evidenced by any note or
instrument and whether or not for the payment of money), now existing or
hereafter arising under or pursuant to the terms of this Note, the Note Purchase
Agreement and the other Transaction Documents, including, all interest, fees,
charges, expenses, attorneys' fees and costs and accountants' fees and costs
chargeable to and payable by the Company hereunder and thereunder, in each case,
whether direct or indirect, absolute or contingent, due or to become due, and
whether or not arising after the commencement of a proceeding under Title 11 of
the United States Code (11 U. S. C. Section 101 et seq.), as amended from time
-- ---
to time (including post-petition interest) and whether or not allowed or
allowable as a claim in any such proceeding.
(e) "Transaction Documents" shall mean this Note, each of the other
Notes issued under the Note Purchase Agreement and the Note Purchase Agreement
itself.
2. CERTAIN COVENANTS. While any amount of principal is outstanding under
-----------------
this Note:
(a) Information Rights: Notices. The Company shall furnish to Holder
the following:
(i) Quarterly Financial Statements. Within forty-five (45) days
------------------------------
after the last day of each of the Company's first three fiscal quarters of each
year, a copy of the Financial Statements of Company for such quarter and for the
fiscal year to date, certified by the chief financial officer or controller of
Company to present fairly the financial condition, results of operations and
other information presented therein and to have been prepared in accordance with
GAAP consistently applied, subject to normal year end adjustments and except
that no footnotes need be included with such Financial Statements, and
(ii) Annual Financial Statements. Within one hundred twenty (120)
---------------------------
days after the close of each fiscal year of Company, (i) copies of the audited
Financial Statements of Company for such year, audited by nationally recognized
independent certified public accountants, (ii) copies of the unqualified
opinions and management letters delivered by such accountants in connection with
such Financial Statements, and (iii) a report containing a description of
projected business prospects (including capital expenditures) and management's
discussion and analysis of financial condition and results of operation of
Company.
(b) Inspection Rights. Holder and its representatives shall have the
right, at any time during normal business hours, upon reasonable prior notice,
to visit and inspect the properties of Company and its corporate, financial and
operating records, and make abstracts therefrom, and to
-2-
<PAGE>
discuss Company's affairs, finances and accounts with its directors, officers
and independent public accountants.
3. EVENTS OF DEFAULT. The occurrence of any of the following shall
-----------------
constitute an "Event of Default" under this Note and the other Transaction
Documents:
(a) Voluntary Bankruptcy or Insolvency Proceedings. The Company shall
(i) apply for or consent to the appointment of a receiver, trustee, liquidator
or custodian of itself or of all or a substantial part of its property, (ii) be
unable, or admit in writing its inability, to pay its debts generally as they
mature, (iii) make a general assignment for the benefit of its or any of its
creditors, (iv) be dissolved or liquidated, (v) become insolvent (as such term
may be defined or interpreted under any applicable statute), (vi) commence a
voluntary case or other proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or consent to any such relief or to
the appointment of or taking possession of its property by any official in an
involuntary case or other proceeding commenced against it, or (vii) take any
action for the purpose of effecting any of the foregoing; or
(b) Involuntary Bankruptcy or Insolvency Proceedings. Proceedings for
the appointment of a receiver, trustee, liquidator or custodian of Company or of
all or a substantial part of its property, or an involuntary case or other
proceedings seeking liquidation, reorganization or other relief with respect to
the Company or its debts under any bankruptcy, insolvency or other similar law
now or hereafter in effect shall be commenced and an order for relief entered or
such proceeding shall not be dismissed or discharged within thirty (30) days of
commencement.
(c) Representations and Warranties Untrue. The representations and
warranties made by the Company in Section 6 of the Convertible Note Purchase
Agreement dated April 12, 1998 shall be found to have been, as of the Closing
Date (as defined therein), false, incorrect, incomplete or misleading in a
material respect when made.
4. RIGHTS OF HOLDER UPON DEFAULT. Upon the occurrence or existence of any
-----------------------------
Event of Default, immediately and without notice, all outstanding Obligations
payable to the Holder by the Company hereunder shall automatically become
immediately due and payable in cash pursuant to Section 13 hereof, without
presentment, demand, protest or any other notice of any kind, all of which are
hereby expressly waived, anything contained herein or in the other Transaction
Documents to the contrary notwithstanding. In addition to the foregoing
remedies, upon the occurrence or existence of any Event of Default, the Holder
may exercise any other right power or remedy granted to it by the Transaction
Documents or otherwise permitted to it by law, either by suit in equity or by
action at law, or both.
5. CONVERSION.
----------
(a) Voluntary Conversion. The Company has the right, at the Company's
option, on the Maturity Date, to convert the amounts owed to Holder under this
Note, in accordance with the provisions of Section 5(c) hereof, in whole or in
part, into fully paid and nonassessable shares of
-3-
<PAGE>
Common Stock of Company. The number of shares of Common Stock into which this
Note may be converted shall be determined by dividing the aggregate principal
amount by the Conversion Price (as defined below) in effect at the time of such
conversion. The initial "Conversion Price" shall be equal to $10.00.
(b) Automatic Conversion. At any time prior to the Maturity Date, the
entire principal amount of this Note and any interest accrued thereon pursuant
to the terms hereof shall be automatically converted into shares of Common Stock
of the Company (at the Conversion Price then in effect) immediately prior to:
(i) any merger or acquisition of the Company with or into another entity in
which the holders of the voting capital stock of the Company immediately prior
to such merger or acquisition hold less than fifty percent (50%) of the voting
capital stock of the successor entity following such transaction, or (ii) a sale
of all or substantially all of the assets of Company, or (iii) the effective
date of the final prospectus relating to the initial public offering of the
Company's capital stock, which securities are to be listed on foreign or United
States exchange or exchanges or the Nasdaq national market, with net proceeds to
the Company (after deducting underwriters' discounts and expenses) of at least
$20,000,000.
(c) Conversion Procedure. If this Note is automatically converted
into Common Stock pursuant to this Section 5, written notice shall be delivered
to Holder at the address last shown on the records of Company for Holder or
given by Holder to Company for the purpose of notice or, if no such address
appears or is given, at the place where the principal executive office of
Company is located, notifying Holder of the conversion to be effected,
specifying the Conversion Price, the principal amount and any interest accrued
thereon pursuant hereto to be converted, the date on which such conversion is
expected to occur and calling upon such Holder to surrender to the Company, in
the manner and at the place designated, the Note. Upon such conversion of this
Note, the Holder shall surrender this Note, duly endorsed, at the principal
office of the Company. At its expense, the Company shall, as soon as practicable
thereafter, but in any event within ten (10) business days, issue and deliver to
such Holder at such principal office a certificate or certificates for the
number of shares of Common Stock to which the Holder shall be entitled upon such
conversion (bearing such legends as are required by the Note Purchase Agreement
and applicable state and Federal securities laws in the opinion of counsel to
Company), together with any other securities and property to which the Holder is
entitled upon such conversion under the terms of this Note, including a check
payable to the Holder for any cash amounts payable as described in Section 5(d).
The certificate or certificates representing the shares of Common Stock issuable
upon conversion of this Note shall be issued in the name of the Holder. Any
conversion of this Note pursuant to Section 5 shall be deemed to have been made
immediately prior to the closing of the issuance and sale of shares as described
in Section 5 and on and after such date Holder shall be treated for all purposes
as the record holder of such shares and a purchaser of such shares under the
Note Purchase Agreement and shall be bound by the terms of the Note Purchase
Agreement.
(d) Fractional Shares; Interest; Effect of Conversion. No fractional
shares shall be issued upon conversion of this Note. In lieu of the Company
issuing any fractional shares to the Holder upon the conversion of this Note,
the Company shall pay to the Holder an amount equal to the product obtained by
multiplying the Conversion Price by the fraction of a share of Common
-4-
<PAGE>
Stock not issued pursuant to the previous sentence. In addition, the Company
shall pay to Holder any interest accrued on the amount to be paid by the Company
pursuant to the previous sentence. Upon conversion of this Note in full and the
payment of the amounts specified in this Section 5(d), the Company shall be
forever released from all its obligations and liabilities under this Note,
including but not limited to the covenants enumerated in Section 2.
6. CONVERSION PRICE ADJUSTMENTS.
----------------------------
(a) Adjustments for Stock Splits and Subdivisions. In the event the
---------------------------------------------
Company should at any time or from time to time after the date of issuance
hereof fix a record date for the effectuation of a split or subdivision of the
outstanding shares of Common Stock or the determination of holders of Common
Stock entitled to receive a dividend or other distribution payable in additional
shares of Common Stock or other securities or rights convertible into, or
entitling the holder thereof to receive directly or indirectly, additional
shares of Common Stock (hereinafter referred to as "COMMON STOCK EQUIVALENTS")
without payment of any consideration by such holder for the additional shares of
Common Stock or the Common Stock Equivalents, then, as of such record date (or
the date of such dividend distribution, split or subdivision if no record date
is fixed), the Conversion Price shall be appropriately decreased so that the
number of shares of Common Stock issuable upon conversion of this Note shall be
increased in proportion to such increase of outstanding shares.
(b) Adjustments for Reverse Stock Splits. If the number of shares of
------------------------------------
Common Stock outstanding at any time after the date hereof is decreased by a
combination of the outstanding shares of Common Stock, then, following the
record date of such combination, the Conversion Price shall be appropriately
increased so that the number of shares of Common Stock issuable on conversion
hereof shall be decreased in proportion to such decrease in outstanding shares.
(c) Redemption of Common Stock. Should any or all of the Company's
--------------------------
Common Stock be redeemed at any time prior to full payment of all amounts due
under this Note then this Note shall immediately become convertible into that
number of shares of the Company's Common Stock equal to the number of shares of
the Common Stock that would have been received if this Note had been converted
in full and the Conversion Price shall be immediately adjusted to equal the
quotient obtained by dividing (x) the aggregate Conversion Price of the maximum
number of shares of Common Stock into which this Note was convertible
immediately prior to such redemption, by (y) the number of shares of Common
Stock for which this Note is convertible immediately after such redemption.
(d) Adjustment for Dilutive Issuances. In addition to the adjustment
---------------------------------
of the respective Conversion Prices provided in Sections 6(a), 6(b) and 6(c)
above, the Conversion Price shall be subject to further adjustment from time to
time as follows:
(i) Special Definitions. For purposes of this Section 6(d), the
-------------------
following definitions shall apply:
-5-
<PAGE>
(1) Options shall mean rights, options or warrants to
-------
subscribe for, purchase or otherwise acquire either Common Stock or Convertible
Securities.
(2) Original Issue Date shall mean the date of this Note.
-------------------
(3) Convertible Securities shall mean securities
----------------------
convertible into or exchangeable for Common Stock.
(4) Additional Shares of Common Stock shall mean all shares
---------------------------------
of Common Stock issued (or, pursuant to Section 6(d)(i)(6), deemed to be issued)
by the Company after the Original Issue Date other than shares of Common Stock
issued (or, pursuant to Section 6(d)(i)(6), deemed to be issued):
(a) to officers, directors and employees of, and
consultants to the Company pursuant to plans and arrangements approved by the
Board of Directors;
(b) by way of dividend or other distributions on
securities referred to in clause 6(a) above.
(c) in connection with an initial public offering of
the Company's capital stock, which securities are to be listed on a foreign or
United States exchange or exchanges.
(5) No Adjustment of Conversion Prices. No adjustment in
----------------------------------
the Conversion Price shall be made in respect of the issuance of Additional
Shares of Common Stock unless the consideration per share for an Additional
Share of Common Stock issued or deemed to be issued by the Company is less than
the Conversion Price on the date of, and immediately prior, to such issue.
(6) Deemed Issue of Additional Shares of Common Stock.
-------------------------------------------------
(a) Options and Convertible Securities. Except as
----------------------------------
otherwise provided in Sections 6(d)(i)(4)(a)-(c) and 6(d)(i)(5), in the event
the Company at any time or from time to time after the Original Issue Date shall
issue any Options or Convertible Securities or shall fix a record date for the
determination of any holders of any class of securities entitled to receive any
such Options or Convertible Securities, then the maximum number of shares (as
set forth in the instrument relating thereto without regard to any provisions
contained therein for a subsequent adjustment of such number) of Common Stock
issuable upon the exercise of such Options or, in the case of Convertible
Securities and Options therefor, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock issued as of
the time of such issue or, in case such a record date shall have been fixed, as
of the close of business on such record date, provided that in any such case in
which additional shares of Common Stock are deemed to be issued:
-6-
<PAGE>
(i) no further adjustment in the Conversion
Price shall be made upon the subsequent issue of Convertible Securities or
shares of Common Stock upon the exercise of such Options or conversion or
exchange of such Convertible Securities;
(ii) if such Options or Convertible Securities by
their terms provide, with the passage of time or otherwise, for any increase or
decrease in the consideration payable to the Company, or increase or decrease in
the number of shares of Common Stock issuable, upon the exercise, conversion or
exchange thereof, the Conversion Prices computed upon the original issue thereof
(or upon the occurrence of a record date with respect thereto), and any
subsequent adjustments based thereon, shall, upon any such increase or decrease
becoming effective, be recomputed to reflect such increase or decrease insofar
as it affects such Options or the rights of conversion or exchange under such
Convertible Securities;
(iii) upon the expiration of any such Options or
any rights of conversion or exchange under such Convertible Securities which
shall not have been exercised, the Conversion Prices computed upon the original
issue thereof (or upon the occurrence of a record date with respect thereto),
and any subsequent adjustments based thereon, shall, upon such expiration, be
recomputed as if:
(1) in the case of Convertible Securities or
Options for Common Stock, the only additional shares of Common Stock issued were
shares of Common Stock, if any, actually issued upon the exercise of such
Options or the conversion or exchange of such Convertible Securities, and the
consideration received therefor was the consideration actually received by the
Company for the issue of all such Options, whether or not exercised, plus the
consideration actually received by the Company upon such exercise, or for the
issue of all such Convertible Securities which were actually converted or
exchanged, plus the additional consideration, if any, actually received by the
Company upon such conversion or exchange, and
(2) in the case of Options for Convertible
Securities, only the Convertible Securities, if any, actually issued upon the
exercise thereof were issued at the time of issue of such Options and the
consideration received by the Company for the Additional Shares of Common Stock
deemed to have been then issued was the consideration actually received by the
Company for the issue of all such Options, whether or not exercised, plus the
consideration deemed to have been received by the Company upon the issue of the
Convertible Securities with respect to which such Options were actually
exercised;
(iv) no readjustment pursuant to clause (1) or
(2) above shall have the effect of increasing the Conversion Price to an amount
which exceeds the lower of (i) the Conversion Price on the original adjustment
date, or (ii) the Conversion Price that would have resulted from any issuance of
Additional Shares of Common Stock between the original adjustment date and such
readjustment date; and
-7-
<PAGE>
v) in the case of any Options which expire by
their terms not more than thirty (30) days after the date of issue thereof, no
adjustment of the Conversion Price shall be made until the expiration or
exercise of all such Options.
(ii) Adjustment of Conversion Prices Upon Issuance of Additional
-----------------------------------------------------------
Shares of Common Stock. In the event the Company shall issue Additional Shares
- ----------------------
of Common Stock (including Additional Shares of Common Stock deemed to be issued
pursuant to Section 6(d)(i)(6)) without consideration or for a consideration per
share less than the Conversion Price in effect on the date of, and immediately
prior to such issue, then and in such event, such Conversion Price shall be
reduced, concurrently with such issue, to a price (calculated to the nearest
cent) determined by multiplying such Conversion Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such issue plus the number of shares of Common Stock which
the aggregate consideration received by the Company for the total number of
Additional Shares of Common Stock so issued would purchase at the Conversion
Price; and the denominator of which shall be the number of shares of Common
Stock outstanding immediately prior to such issue plus the number of such
Additional Shares of Common Stock so issued; and provided further that, for the
purposes of this Section 6(d)(ii), all shares of Common Stock issuable upon or
conversion of outstanding Convertible Securities shall be deemed to be
outstanding, and immediately after any Additional Shares of Common Stock are
deemed issued pursuant to Section 6(d)(i)(6), such Additional Shares of Common
Stock shall be deemed to be outstanding.
(iii) Determination of Consideration. For purposes of this
------------------------------
Section 6(d), the consideration received by the Company for the issue of any
Additional Shares of Common Stock shall be computed as follows:
(1) Cash and Property: Such consideration shall:
-----------------
(a) insofar as it consists of cash, be computed at the
aggregate amount of cash received by the Company prior to amounts paid or
payable for accrued interest or accrued dividends and prior to any commissions
or expenses paid by the Company;
(b) insofar as it consists of property other than
cash, be computed at the fair value thereof at the time of such issue, as
determined in good faith by the Board of Directors, except that any securities
so delivered shall be valued as provided herein; and
(c) in the event Additional Shares of Common Stock are
issued together with other shares or securities or other assets of the Company
for consideration which covers both, the consideration paid for the Additional
Shares of Common Stock be the proportion of the total of such consideration so
received, computed as provided above, as determined in good faith by the Board
of Directors.
(2) Options and Convertible Securities. The consideration
----------------------------------
per share received by the Company for Additional Shares of Common Stock deemed
to have been issued pursuant to Section 6(d)(i)(6), relating to Options and
Convertible Securities, shall be determined by dividing
-8-
<PAGE>
(x) the total amount, if any, received or
receivable by the Company as consideration for the issue of such Options or
Convertible Securities, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent adjustment of such
consideration) payable to the Company upon the exercise of such Option or the
conversion or exchange of such Convertible Securities, or in the case of Options
for Convertible Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible Securities, by
(y) the maximum number of shares of Common Stock
(as set forth in the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such number) issuable
upon the exercise of such Options or the conversion or exchange of such
Convertible Securities.
(iv) No Impairment. The Company will not, by amendment of its
-------------
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Company but will at all
times in good faith assist in the carrying out of all the provisions of this
Section 6 and in the taking of all such action as may be necessary or
appropriate in order to protect rights of the Holder hereunder against
impairment.
(v) Certificate as to Adjustments. Upon the occurrence of each
-----------------------------
adjustment or readjustment of the Conversion Price pursuant to this Section 6,
the Company at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to the Holder a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. The Company
shall, upon the written request at any time of the Holder, furnish or cause to
be furnished to such Holder a like certificate setting forth (i) such
adjustments and readjustments, (ii) the Conversion Price at the time in effect,
and (iii) the number of shares of Common Stock and the amount, if any, of other
property which at the time would be received upon the conversion of the Note.
(e) Notices of Record Date, etc. In the event of:
---------------------------
(i) Any taking by the Company of a record of the holders of any
class of securities of the Company for the purpose of determining the holders
thereof who are entitled to receive any dividend (other than a cash dividend
payable out of earned surplus at the same rate as that of the last such cash
dividend theretofore paid) or other distribution or any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right; or
(ii) Any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of Company or any
transfer of all or substantially all of the assets of Company to any other
person or entity or any consolidation or merger involving the Company; or
-9-
<PAGE>
(iii) Any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
The Company will mail to Holder of this Note at least twenty (20) days
prior to the earliest date specified therein, a notice specifying (A) the date
on which any such record is to be taken for the purpose of such dividend,
distribution or right and the amount and character of such dividend,
distribution or right; and (B) the date on which any such reorganization,
reclassification, transfer, consolidation, merger, dissolution, liquidation or
winding-up is expected to become effective and the record date for determining
stockholders entitled to vote thereon.
(f) 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
this Note such number of its shares of Common Stock as shall from time to time
be sufficient to effect the conversion of this Note. If at any time the number
of authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of the entire outstanding principal amount of this Note
and interest accrued thereon pursuant hereto, without limitation of such other
remedies as shall be available to the holder of this Note, the Company will use
its best efforts to take such corporate action as may, in the opinion of
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purposes.
7. SUCCESSORS AND ASSIGNS. Subject to the restrictions on transfer
----------------------
described in Sections 9 and 10 below, the rights and obligations of the Company
and the Holder under this Note shall be binding upon and benefit the successors,
assigns, heirs, administrators and transferees of the parties.
8. WAIVER AND AMENDMENT. Any provision of this Note may be amended,
--------------------
waived or modified upon the written consent of the Company and holders of a
Majority in Interest of all then-outstanding Notes issued pursuant to the Note
Purchase Agreement.
9. TRANSFER OF THIS NOTE OR COMMON STOCK ISSUABLE ON CONVERSION HEREOF.
-------------------------------------------------------------------
With respect to any offer, sale or other disposition of this Note or the Common
Stock into which this Note may be converted, the Holder will give written notice
to the Company prior thereto, describing briefly the manner thereof, together
with a written opinion of Holder's counsel (if required by the Company), to the
effect that such offer, sale or other distribution may be effected without
registration or qualification (under any Federal or state law then in effect).
Upon receiving such written notice and reasonably satisfactory opinion, if so
requested, the Company, as promptly as practicable, shall notify Holder that
Holder may sell or otherwise dispose of this Note or such Common Stock, all in
accordance with the terms of the notice delivered to the Company. If a
determination has been made pursuant to this Section 9 that the opinion of
counsel for Holder is not reasonably satisfactory to the Company, the Company
shall so notify Holder promptly after such determination has been made. Each
Note thus transferred and each certificate representing the Common Stock thus
transferred shall bear a legend as to the applicable restrictions on
transferability in order to ensure compliance with the Securities Act of 1933,
as amended (the "ACT"), unless in the
-10-
<PAGE>
opinion of counsel for the Company such legend is not required in order to
ensure compliance with the Act. The Company may issue stop transfer instructions
to its transfer agent in connection with such restrictions. Subject to the
foregoing, transfers of this Note shall be registered upon registration books
maintained for such purpose by or on behalf of the Company as provided in the
Note Purchase Agreement. Prior to presentation of this Note for registration of
transfer, the Company shall treat the registered holder hereof as the owner and
holder of this Note for the purpose of receiving all payments of principal and
interest hereon and for all other purposes whatsoever, whether or not this Note
shall be overdue and the Company shall not be affected by notice to the
contrary.
10. ASSIGNMENT BY COMPANY. Neither this Note nor any of the rights,
---------------------
interests or obligations hereunder may be assigned, by operation of law or
otherwise, in whole or in part, by the Company without the prior written consent
of the Holder except in connection with an assignment in whole to a successor
corporation to the Company, provided that such successor corporation acquires
all or substantially all of the Company's property and assets.
11. TAXES.
-----
(a) The Company shall pay or cause to be paid all present and future
taxes, duties, fees and other charges of whatsoever nature, if any, now or in
the future levied or imposed by the United States of America (or any state or
possession thereof) or an authority of the United States of America (or any
state or possession thereof) or any jurisdiction through or out of which a
payment is made on or in connection with the payment of any and all amounts due
under this Note.
(b) All payments of principal, interest and other amounts due under
this Note shall be made without deduction for or on account of any such taxes,
duties, fees or other charges.
(c) If the Company is prevented by operation of law or otherwise from
making or causing to be made such payments without deduction, the principal or
(as the case may be) interest or other amounts due under this Note shall be
increased to such amount as may be necessary so that the Purchaser receives the
full amount it would have received (taking into account any such taxes, duties,
fees or other charges payable on amounts payable by the Company under this
subsection) had such payments been made without such deduction.
(d) If subsection (c) above applies and the Purchaser so requires,
the Company shall deliver to the Purchaser official tax receipts evidencing
payment (or certified copies of them) within thirty (30) days of the date of
payment.
12. NOTICES. Any notice, request or other communication required or
-------
permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or mailed by registered or certified mail, postage
prepaid, or by recognized overnight courier or personal delivery at the
respective addresses of the parties as set forth on Exhibit A of the Note
Purchase Agreement or on the register maintained by the Company three (3)
business days following such mailing or, if sent by facsimile transmission, on
the same date as such confirmed facsimile transmission was made. Any party
hereto may by notice so given change its address for future notice hereunder.
Notice shall conclusively be deemed to have been given when received.
-11-
<PAGE>
13. PARI PASSU NOTES. Holder acknowledges and agrees that the payment of
----------------
all or any portion of the outstanding principal amount of this Note and all
interest hereon shall be pari passu in right of payment and in all other
respects to the other Notes issued pursuant to the Note Purchase Agreement or
pursuant to the terms of such Notes. In the event Holder receives payments in
excess of its pro rata share of the Company's payments to the holders of all of
the Notes, then such Holder shall hold in trust all such excess payments for the
benefit of the holders of the other Notes and shall pay such amounts held in
trust to such other holders upon demand by such holders.
14. PAYMENT. Payment by the Company of the principal amount under the Note
-------
and any interest accrued thereon pursuant hereto shall be made in lawful tender
of the United States.
15. DEFAULT RATE; USURY. In the event any interest is paid on this Note
-------------------
which is deemed to be in excess of the then legal maximum rate, then that
portion of the interest payment representing an amount in excess of the then
legal maximum rate shall be deemed a payment of principal and applied against
the principal of this Note.
16. EXPENSES; WAIVERS. If action is instituted to collect this Note, the
-----------------
Company promises to pay all costs and expenses, including, without limitation,
reasonable attorneys' fees and costs, incurred in connection with such action.
The Company hereby waives notice of default, presentment or demand for payment,
protest or notice of nonpayment or dishonor and all other notices or demands
relative to this instrument.
17. GOVERNING LAW. This Note and all actions arising out of or in
-------------
connection with this Note shall be governed by and construed in accordance with
the laws of the State of California, without regard to the conflicts of law
provisions of the State of California, or of any other state.
-12-
<PAGE>
IN WITNESS WHEREOF, Company has caused this Note to be issued as of the
date first written above.
BIOMARIN PHARMACEUTICAL INC.
a Delaware corporation
By: /s/ John C. Klock
----------------------------------
Name: John C. Klock
--------------------------------
Title: President and Secretary
-------------------------------
-13-
<PAGE>
EXHIBIT D
LEGAL OPINION OF COMPANY COUNSEL
-20-
<PAGE>
April 12, 1999
Purchasers of Convertible Notes Pursuant
to Convertible Note Purchase Agreements dated
April 12, 1999, and LaMont Asset Management, S.A.
Pursuant to the Agency Agreement
dated April 12, 1999
Ladies and Gentlemen:
We have acted as counsel for BioMarin Pharmaceutical, Inc. (the
"Corporation") in connection with the negotiation of the Agency Agreement, dated
April 12, 1999, between the Corporation and LaMont Asset Management, S.A. (the
"Agency Agreement"), the Amended and Restated Registration Rights Agreement,
dated as of the date hereof (the "Amended Registration Rights Agreement"), the
Convertible Note Purchase Agreement (and all Schedules and Exhibits attached
thereto), dated as of the date hereof, between the Corporation and you (the
"Purchase Agreement"), the form of Convertible Promissory Note (the "Note") and
the purchase of the Notes by you pursuant to the terms of the Purchase
Agreement. As such counsel, we have made such legal and factual examinations as
we have deemed advisable or necessary for the purpose of rendering this opinion.
In addition, we have examined, among other things, originals or copies of such
corporate records of the Corporation and other such documents as we consider
necessary or advisable for the purposes of rendering this opinion. In such
examination we have assumed the genuineness of all signatures by parties thereto
on original documents, the conformity to original documents of all copies
submitted to us, the legal capacity of natural persons and the due execution and
delivery of all documents by parties thereto other than the Corporation where
due execution and delivery are a prerequisite to the effectiveness thereof. In
issuing this opinion we have also assumed that the par value of each share of
the Corporation's capital stock issued and outstanding has been paid in.
We are admitted to practice law only in the State of California and we
express no opinion herein concerning any laws other than the laws of the State
of California, the corporate law of the State of Delaware and the Federal laws
of the United States.
As used in this opinion, the expression "to our knowledge" with reference
to matters of fact means that, after an examination of documents made available
to us by the Corporation, and after inquiries of officers of the Corporation,
but without any further independent factual investigation, we find no reason to
believe that the opinions expressed herein are factually incorrect. Further,
the expression "to our knowledge" with reference to matters of fact refers to
the current actual knowledge of the attorneys of this firm who have worked on
matters for the Corporation solely in
<PAGE>
Convertible Note Financing
April 12, 1999
Page 2
connection with the Agency Agreement, the Purchase Agreement and the Amended
Registration Rights Agreement, the Notes and the transactions contemplated
thereby. Except to the extent expressly set forth herein or as we otherwise
believe to be necessary to our opinion, we have not undertaken any independent
investigation to determine the existence or absence of any fact, and no
inference as to our knowledge of the existence or absence of any fact should be
drawn from our representation of the Company or the rendering of the opinion set
forth below.
For purposes of this opinion, we are assuming that you have all requisite
power and authority, and have taken any and all necessary partnership action, to
execute and deliver, as applicable, the Agency Agreement, the Purchase Agreement
and the Amended Registration Rights Agreement, and we are assuming that the
representations and warranties made by you, as applicable, contained in the
Agency Agreement and in the Purchase Agreement are true and correct. We are
also assuming that, as applicable, you have purchased the Notes for value, in
good faith and without notice of any adverse claims within the meaning of the
California Uniform Commercial Code.
The opinions hereinafter expressed are subject to the following
qualifications:
(a) We express no opinion as to the effect of applicable bankruptcy,
insolvency, reorganization, moratorium or other similar federal or state laws
affecting the rights of creditors generally;
(b) We express no opinion as to the effect or availability of rules
of law governing specific performance, injunctive relief or other equitable
remedies (regardless of whether any such remedy is considered in a proceeding at
law or in equity);
(c) We express no opinion as to compliance or noncompliance with
applicable Unites States Federal and state anti-fraud statutes and regulations
concerning the issuance of securities;
(d) We express no opinion as to the enforceability of the
indemnification provisions of the Amended Registration Rights Agreement to the
extent the provisions thereof may be subject to limitations of public policy and
the effect of applicable statutes and judicial decisions; and
Based upon and subject to the foregoing, and subject to the
qualifications contained herein, we are of the opinion that, except as set forth
in the Purchase Agreement:
1. The Corporation is validly existing and in good standing under and by
virtue of the laws of the State of Delaware and has the corporate power and
authority to create, issue and sell the
<PAGE>
Convertible Note Financing
April 12, 1999
Page 3
Notes, to issue the shares of the Corporation's Common Stock issuable upon
conversion of the Notes, and to carry out its obligations under the Agency
Agreement, the Purchase Agreement, the Notes and the Amended Registration Rights
Agreement;
2. The authorized capital stock of the Corporation consists of 50,000,000
shares of Common Stock. Immediately prior to the Closing, 26,176,180 shares of
Common Stock are issued and outstanding, all of which have been duly authorized
and validly issued, are fully paid and nonassessable, and free of any pre-
emptive or similar rights contained in the Amended And Restated Certificate of
Incorporation or Bylaws of the Corporation or, to our knowledge, in any
agreement to which the Corporation is a party. The Corporation has reserved a
total of 2,600,000 shares of its Common Stock for issuance upon conversion of
the Notes. The shares of the Corporation's Common Stock issuable upon
conversion of the Notes, if issued as of the date hereof, and in accordance with
the terms of the Agency Agreement, the Purchase Agreement and the Notes, would
be duly authorized, validly issued, fully paid and nonassessable and free of any
liens, encumbrances or preemptive or similar rights contained in the Restated
Certificate or Bylaws of the Corporation, or to our knowledge, in any agreement
to which the Corporation is a party, other than those which may be created by
or imposed upon the holders thereof through no action of the Corporation.
Warrants to purchase 801,500 shares of Common Stock are currently outstanding.
Options to purchase a total of 3,406,254 shares of Common Stock had been granted
and are outstanding under the 1997 Stock Plan, as amended, and the 1998
Directors Plan. The Corporation has undertaken the obligation to issue up to
255,222 shares of its Common Stock to employees of Glyko, Inc. upon the exercise
of certain of their outstanding options to purchase capital stock of Glyko
Biomedical Ltd., which options were assumed by the Corporation in connection
with its acquisition of Glyko, Inc. in October 1998. Genzyme Corporation is
contractually obligated to purchase $10 million worth of the Corporation's
capital stock in a private placement to take place immediately prior to the
initial public offering of the Corporation's capital stock (subject to certain
qualifications) at the same price per share at which such securities are offered
and sold to the public in connection with the initial public offering. To the
best of our knowledge there are no other options, warrants, conversion
privileges, pre-emptive rights (other than those pursuant to: (i) the pre-
emptive rights agreement between Glyko Biomedical Ltd. and the Corporation dated
June 27, 1997, (ii) the pre-emptive rights agreement between the Corporation and
Genzyme Corporation dated September 4, 1998, and (iii) the pre-emptive rights
agreement between BB BioVentures L.P. and the Corporation dated December 30,
1997 ) or other rights presently outstanding to purchase or otherwise acquire
any capital stock or other securities of the Company;
3. The Agency Agreement, the Purchase Agreement, the Notes and the
Amended Registration Rights Agreement have each been duly authorized, executed
and delivered by the Corporation and are each a legal, valid and binding
obligation of the Corporation in accordance with their respective terms;
<PAGE>
Convertible Note Financing
April 12, 1999
Page 4
4. All necessary corporate action has been taken by the Corporation, its
directors and its stockholders to authorize the creation, issue, offering and
sale of the Notes and, if such issuance were made today, to authorize and
reserve a sufficient number of shares of the Corporation's Common Stock for
issuance upon conversion of the Notes and the issuance of shares of Common Stock
upon issuance of the Notes;
5. The execution and delivery of the Agency Agreement, the Purchase
Agreement, the Notes, the Amended Registration Rights Agreement and the
completion of the transactions contemplated thereby, including the authorization
and reservation of a sufficient number of shares for future issuance upon the
conversion of the Notes, do not conflict with any provisions of the Amended and
Restated Certificate of Incorporation or Bylaws of the Corporation;
6. Assuming compliance by LaMont Asset Management, S.A. with the terms of
the Agency Agreement, and compliance with all applicable securities laws of any
jurisdiction within the United States by any holder of the Notes or the shares
of the Corporation's Common Stock issuable upon conversion of the Notes, except
for the filing of notices that may be required under United States Federal and
state securities laws with regard to (i) and (ii) below, no further filing,
consent, approval, authorization or qualification is required by the Corporation
in connection with: (i) the execution and delivery of the Agency Agreement, the
Subscription Agreement, the Amended Registration Rights Agreement or the Notes,
(ii) the valid authorization, issuance and sale of the Notes and the
authorization and reservation of a sufficient number of shares of the
Corporation's Common Stock for issuance upon conversion of the Notes, or, if
such shares were issued as of the date hereof, the issuance of such shares, to:
(a) persons who are not "U.S. persons," as defined in Regulation S promulgated
under the Securities Act, who are purchasing in "offshore transactions," as
defined in Regulation S, or (b) to U.S. persons who are "accredited investors"
as defined in Rule 501(a) of Regulation D promulgated under the Securities Act,
(iii) the resale of any the shares of the Corporation's Common Stock issuable
upon conversion of Notes which were issued in reliance on the exemption from
registration provided in Regulation S: (a) outside the United States, as defined
in Regulation S, to a person who is not a U.S. person, is not acquiring the
shares of the Corporation's Common Stock issuable upon conversion of the Notes
for the account or benefit of any U.S. person, who certifies to that effect, and
who agrees in writing to resell the shares of the Corporation's Common Stock
issuable upon conversion of the Notes only in accordance with the provisions of
Regulation S, pursuant to registration under the Securities Act or pursuant to
an available exemption from the registration requirements thereunder, or (b)
inside the United States, as defined in Regulation S, after the expiration of
one year from the date of issuance of the Notes, to a U.S. person who
acknowledges, in writing, that the shares of the Corporation's Common Stock
issuable upon conversion of the Notes are considered "restricted securities"
under Rule 144 promulgated under the Securities Act, and must be sold in
accordance therewith, and who agrees, in writing, to resell the securities only
in accordance with the provisions of Regulation S, pursuant to registration
under the Securities Act or pursuant to an available exemption from the
registration requirements thereunder,
<PAGE>
Convertible Note Financing
April 12, 1999
Page 5
and (iv) the resale of any of the shares of the Corporation's Common Stock
issuable upon conversion of Notes which were issued in reliance on the exemption
from registration provided in Regulation D pursuant to registration under the
Securities Act (subject to the restrictions enumerated in Rule 144) or pursuant
to an available exemption from the registration requirements thereunder to a
purchaser who agrees to be bound by the restrictions contained in Rule 144.
This opinion is intended solely for your use and benefit and solely in
connection with the purchase of the Shares and is not to be relied upon by other
persons or entities or by you or any other person or entity for any other
purpose without our prior written consent.
Very truly yours,
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
<PAGE>
EXHIBIT E
SCHEDULE OF EXCEPTIONS
6. (f) As of April 12, 1999, BioMarin believes that it is in the final stages
of a negotiation to acquire certain assets and intellectual property rights
related to the research reagents business of Oxford GlycoSciences plc ("OGS"),
Abingdon, England. Based on current discussions, the purchase will require the
payment of $750,000 upon signing, $750,000 upon successful transfer of
technology, and a contingent amount of up to $600,000 based upon the sales
performance of the product lines acquired from OGS over the two year period
after signing. The contingent amount will be paid at the end of the two year
period.
-21-
<PAGE>
EXHIBIT F
ACCREDITED INVESTOR QUESTIONNAIRE
The undersigned, as a purchaser of a Note convertible into shares of common
stock (the "Securities") of BIOMARIN PHARMACEUTICAL INC. (the "Company"), has
represented in its Convertible Note Purchase Agreement that it is an "accredited
investor" as defined in Rule 501 of Regulation D promulgated under the
Securities Act of 1933, as amended (the "Securities Act"). As part of such
representation, it has indicated below the categories enumerated in Rule 501(a)
which it satisfies.
The undersigned understands that the Company is relying on this information
in determining to sell the Securities to the undersigned in a manner exempt from
the registration requirements of the Securities Act and applicable state
securities laws.
ACCREDITED INVESTOR STATUS
The undersigned represents and warrants that it is [check each applicable
item]:
______ (i) A bank, as defined in Section 3(a)(2) of the Securities
Act, or a savings and loan association or other institution
as defined in Section 3(a)(5)(A) of the Securities Act.
whether acting in its individual or fiduciary capacity.
______ (ii) A broker or dealer registered pursuant to Section 15 of the
Securities Exchange Act of 1934, as amended.
______ (iii) An insurance company as defined In Section 2(13) of the
Securities Act.
______ (iv) An investment company registered under the Investment
Company Act of 1940 (the "1940 Act").
______ (v) A business development company (as defined in Section
2(a)(48) of the 1940 Act).
______ (vi) A private business development company (as defined in
Section 202(a)(22) of the Investment Advisers Act of 1940).
______ (vii) A Small Business Investment Company licensed by the Small
Business Administration under Section 301(c) or (d) of the
Small Business Investment Act of 1958.
<PAGE>
______ (viii) An employee benefit plan within the meaning of the
Employee Retirement Income Security Act of 1974 ("ERISA"),
if the investment decision is made by a plan fiduciary as
defined in Section 3(21) of ERISA, which is either a bank,
savings and loan association, insurance company or
registered investment advisor, or if the employee benefit
plan has total assets in excess of $5,000,000, or, if a
self-directed plan, with investment decisions made solely
by persons that are accredited investors.
______ (ix) Any plan for the benefit of employees established and
maintained by the U.S. government, a state, its political
subdivisions, or any agency or instrumentality of the U.S.
government, a state or its political subdivisions, if such
plan has total assets in excess of $5,000,000.
______ (x) An organization described in Section 501(c)(3) of the
Internal Revenue Code, corporation, Massachusetts or
similar business trust, or partnership, not formed for the
specific purpose of acquiring the Securities offered,
having total assets in excess of $5,000,000.
______ (xi) A director, executive officer or general partner of the
issuer of the Securities, or any director, executive
officer, or general partner of a general partner of the
Company.
______ (xii) A natural person whose individual net worth, or joint net
worth with that person's spouse, at the time of his
purchase exceeds $1,000,000.
______ (xiii) A natural person who had an individual income in excess of
$200,000 in each of the two most recent years or a joint
income with that person's spouse in excess of $300,000 in
each of those years, and has a reasonable expectation of
reaching the same income level in the current year.
______ (xiv) A trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the
Securities offered hereby, whose purchase is directed by a
sophisticated person as described in Rule 506(b)(2)(ii) of
Regulation D under the Securities Act.
______ (xv) An entity in which all of the equity owners are accredited
investors.
______ (xvi) A self-directed IRA, Keogh, or similar plan of which the
individual directing the investments qualifies as an
"accredited investor" under one or more of items (a)-(o)
above. Also check the item(s) (a)-(o) above that applies.
<PAGE>
As used in this questionnaire, the term "net worth" means the excess of
total assets over total liabilities. In computing net worth for the purpose of
this questionnaire, the principal residence of the investor must be valued at
cost, including cost of improvements, or at recently appraised value by an
institutional lender making a secured loan, net of encumbrances. In determining
income, an investor should add to adjusted gross income any amount attributable
to tax exempt income received, losses claimed as a limited partner in any
limited partnership, deductions claimed for depletion, contributions to an IRA
or Keogh retirement plan, alimony payments, and any amount by which income from
long-term capital gains has been reduced in arriving at adjusted gross income.
IN WITNESS WHEREOF, the undersigned has executed this Questionnaire as of
the ______day of April, 1999.
PURCHASER
By: ______________________________
Name _____________________________
Title ____________________________
Printed or Typed Name and Title of Person
Signing
<PAGE>
EXHIBIT 10.28
ASTRO LICENSE AGREEMENT
<PAGE>
ASTRO LICENSE AGREEMENT
-----------------------
This Agreement is entered into as of December 18, 1990 among Glyko, Inc.
("Glyko"), a Delaware Corporation with its principal office at 81 Digital Drive,
Novato, California 94949, Astromed, Ltd. ("Astromed"), a United Kingdom
corporation with its principal office at Cambridge Science Park, Milton Road,
Cambridge CB4 465 England, and Astroscan, Ltd. ("Astroscan"), a Manx corporation
with its principal offices at Ballabeg House, Crankbourne Village, Bradden, Isle
of Man, British Isles.
RECITALS
--------
Astromed and Astroscan are the owners of the patents and patents
applications listed in Exhibit A relating to techniques to facilitate analysis
of carbohydrate and glycoconjugate molecules. Glyko wishes to obtain a license
to use those patents, and Astromed and Astroscan have agreed to license those
patents and associated know-how to Glyko.
AGREEMENT
---------
1. Definitions.
------------
Reference is hereby made to the Joint Venture Agreement dated December 18 ,
1990 (the "Joint Venture Agreement") among Glyko, Astromed, Astroscan, Millipore
Corporation ("Millipore") , Glycomed, Inc., Gwynn R. Williams, and John Klock.
Terms defined in the Joint Venture Agreement and not otherwise defined herein
shall have the meanings so defined. As used in this Agreement, the following
terms shall have the meanings defined below:
1.1 "FACE" shall mean the technique known as Fluorescence Assisted
----
Carbohydrate Electrophoresis.
1.2 The "Field" shall mean all aspects of and applications for the
-----
analysis, manipulation, and synthesis of carbohydrates and glycoconjugates, and
molecules containing carbohydrates and glycoconjugates, including separation,
sequencing, compositional analysis and diagnostic applications.
1.3 "Licensed Current Patents" shall mean the patents and patent
------------------------
applications throughout the world listed in Exhibit A hereto, and patents
hereafter issued throughout the world on patent applications listed on Exhibit A
hereto.
1.4 "Future Patents" shall mean patents, patent applications, and patent
--------------
rights throughout the world that Astromed or Astroscan file or obtain in the
future and which
<PAGE>
Astromed and Astroscan are obligated to disclose and license to Glyko pursuant
to Section 2.4 hereof.
1.5 "Licensed Patents" shall mean Licensed Current Patents and Future
----------------
Patents.
1.6 "Astromed and Astroscan Current Know-how" shall mean the technical
---------------------------------------
information, know-how, and technology possessed by Astromed and Astroscan on the
date hereof relating to or useful in the Field.
1.7 "Future Know-how" shall mean technical information, know-how, and
---------------
technology that Astromed or Astroscan develop or obtain in the future and which
Astromed or Astroscan are obligated to disclose and license to Glyko pursuant to
Section 2.4 hereof.
1.8 "Licensed Know-how" shall mean Astromed and Astroscan Current Know-how
-----------------
and Future Know-how.
1.9 "Rights Licensed to Astromed or Astroscan" shall mean any patents,
----------------------------------------
patent applications, technical information, know-how or other technology owned
by third parties and licensed to Astromed or Astroscan with the right to grant
sublicenses that relates to or is useful in the Field.
1.10 "Licensed Technology" shall mean the Licensed Patents, Licensed Know-
-------------------
how, and Rights Licensed to Astromed or Astroscan collectively.
1.11 "Glyko Improvements" shall mean any and all improvements made by Glyko
------------------
to Licensed Technology.
2. Grant of Rights: Exclusivity.
-----------------------------
2.1 License Grant. Subject to all of the provisions hereof, Astromed and
-------------
Astroscan hereby grant to Glyko a royalty-free, perpetual, worldwide license to
make, have made, use, sell, or otherwise dispose of any products, equipment,
components, or systems for use in the Field based upon, embodying, or otherwise
using the Licensed Technology, and to otherwise practice the Licensed Technology
in the Field.
2.2 Exclusivity. Except as provided below, the license granted herein
-----------
shall be exclusive to Glyko in the Field and Astromed and Astroscan shall not
practice the Licensed Technology to market, or license others to market products
or services that compete with Glyko in the Field.
2.3 Right to Sublicense. Astromed and Astroscan hereby grant to Glyko the
-------------------
perpetual right to sublicense the Licensed Technology for use in the Field.
-2-
<PAGE>
2.4 Future Developments. Astromed and Astroscan will disclose to Glyko
-------------------
promptly after creation any and all inventions, patents, patent applications and
technology relating to FACE, including know-how, developed or acquired by them
during the term of this Agreement.
2.5 Glyko Improvements. Glyko hereby grants to Astromed and Astroscan a
------------------
non-exclusive, royalty-free, perpetual worldwide license, including the right to
sublicense, under the Glyko Improvements to make, have made, use, sell, or
otherwise dispose of any products, equipment, components, or systems for use
outside the Field and to otherwise practice Glyko Improvements outside the Field
3. Representations and Warranties. Astromed and Astroscan represent and
------------------------------
warrant that, as of the date hereof,
(a) To the best of their knowledge, the Licensed Technology licensed
by it to Glyko hereunder did not infringe any proprietary rights of any
third parties;
(b) Their license and transfer of the Licensed Technology does not
breach any of their duties toward any third party, nor did such license and
transfer impose any obligations on Glyko other than those expressed in this
Agreement; and
(c) The Licensed Technology can be freely used and exploited by Glyko
in the Field without any liability of any nature to third parties.
4. Defense of Licensed Rights. If during the term of this Agreement Glyko
--------------------------
becomes aware of an infringement of any Licensed Technology in the Field, it
shall notify Astromed and Astroscan. and Glyko, Astromed, and Astroscan will
confer and determine what actions may be taken to protect Glyko's rights under
the Licensed Technology. The prosecution of such infringers shall be at the
direction and expense of Glyko. Astroscan and Astromed shall have no obligation
to prosecute any such infringer but shall join as nominal plaintiffs, at Glyko's
expense, if requested to do so by Glyko. If Glyko determines not to prosecute an
infringer, Astroscan and Astromed may do so, in which event Astroscan and
Astromed shall pay all expenses of and may retain all recovery in any such
proceeding.
5. Term and Termination.
---------------------
5.1 Perpetual Term. Unless sooner terminated in accordance with the terms
--------------
hereof, this Agreement, and the license herein granted to Glyko, shall continue
in effect perpetually.
-3-
<PAGE>
5.2 Breach and Remedies. If either party commits a breach of any of the
-------------------
terms of this Agreement, the other party may notify the defaulting party in
writing, specifying the nature of the breach or the obligation that the
defaulting party has failed to meet. If the defaulting party fails to cure the
breach or meet the obligation specified within a period of thirty (30) days
after service of such written notice, then the party not in default may
terminate this Agreement forthwith by serving written notice of such termination
upon the defaulting party.
5.3 Bankruptcy. If Glyko should become bankrupt or make any arrangement
----------
or assignment for the benefit of its creditors, Astromed and Astroscan each
shall have the right to terminate this Agreement forthwith by serving written
notice of such termination.
5.4 Default on Obligation to Fund. In the event that Millipore defaults in
-----------------------------
its obligation to fund Glyko pursuant to Section 2.4 of the Joint Venture
Agreement, and the Joint Venture Agreement is terminated pursuant to Section 8.3
thereof, Astromed and Astroscan each shall have the right to terminate this
Agreement forthwith by serving written notice of such termination to Glyko.
6. Effective Date. This Agreement shall become effective as of the date the
--------------
Joint Venture Agreement is signed.
7. Applicable Law. As this Agreement relates to the Joint Venture Agreement to
--------------
which Glyko, Astromed, and Astroscan are all parties and as the Joint Venture
Agreement is governed by the laws of the State of Delaware, this Agreement and
the relationships between the parties shall be governed in all respects by the
laws of the State of Delaware.
8. Notices. All notices required or permitted by this Agreement shall be given
-------
in writing and shall be deemed effective when personally delivered or when
delivered by registered or certified mail, addressed as follows:
-4-
<PAGE>
If to Glyko: If to Astromed:
Glyko, Inc. Astromed, Ltd.
81 Digital Drive Cambridge Science Park
Novato, CA 94949 Milton Road
Attn: Chief Executive Cambridge CB4 465 England
Officer Attn: Gwynn Williams
If to Astroscan:
Astroscan, Ltd.
Ballabeg House
Crankbourne Village, Bradden
Isle of Man, British Isles
Attn: Gwynn R. Williams
Such notices may also be sent by telex, telegram, or facsimile
transmission, and shall be deemed effective upon receipt by the other party if
confirmed in writing by the sender via registered or certified mail delivered
within ten (10) days 'thereafter. Either party may at any time during this
Agreement designate a different person or address for notices by notice to the
other in the manner prescribed herein.
9. Amendments. No modification or waiver of any provision of this Agreement
----------
shall be valid unless it is in writing and signed by all the parties hereto.
10. Assignment. Neither party may assign its rights or obligations under this
----------
Agreement without the prior written consent of the other, except that a party
may assign its rights and obligations to a party acquiring the business and
assets of the party with which the license is used, provided the acquiror agrees
in writing to be bound by the provisions hereof. All provisions of this
Agreement shall be binding upon and inure solely to the benefit of the parties
hereto, their heirs, legal representatives, successors (whether by
consolidation, merger, or otherwise), and assigns.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be bound hereby, have
caused this Agreement to be executed by their duly authorized representatives as
of the___ day of December, 1990.
GLYKO, INC.
By:
---------------------------
ASTROMED, LTD.
By:____________________________
ASTROSCAN, LTD.
By:____________________________
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto , intending to be bound
hereby, have caused this Agreement to be executed by their duly authorized
representatives as of the ____ day of December, 1990.
GLYKO, INC.
By:____________________________
ASTROMED, LTD.
By:
---------------------------
ASTROSCAN, LTD.
By:____________________________
<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be bound hereby, have
caused this Agreement to be executed by their duly authorized representatives as
of the ____ day of December, 1990.
GLYKO, INC.
By:____________________________
ASTROMED, LTD.
By:____________________________
ASTROSCAN, LTD.
By: /s/ Gwynn R. Williams
---------------------------
<PAGE>
EXHIBIT A
---------
LICENSED PATENTS
Astromed Patents
1. Charge coupled device detection and electrophoresis
PN May 29, 1985
US #4,874,492 Issued 17 Oct 89
Japan Pending
UK Granted
Astroscan Patents and Patent Applications
1. Carbohydrate sequencing (Basic PCT)
PCT 9B88/00472
US Office Action 9/90
Europe Office Action 9/90
UK Office Action 9/90
Japan Pending
2. Aminonaphthalene sulfonic acid labeling of carbohydrates
PN Sept. 27, 1989
UK Pending
3. Electrophoretic blotting of ANTS-labeled carbohydrates
PN Sept. 27, 1989
PCT Application filed 9/90
4. Lucifer yellow fluorophore-labeling of carbohydrates for electrophoresis
PN June 26, 1990
UK Pending
PCT Application filed 9/90
5. Method of quenching unlabeled ANTS for electrophoresis of carbohydrates
PN June 26, 1990
UK Pending
PCT Application filed 9/90
<PAGE>
6. Updated ANTS application
PN June 26, 1990
UK Pending
PCT Application filed 9/90
<PAGE>
EXHIBIT 10.29
GLYCOMED LICENSE AGREEMENT
<PAGE>
GLYCOMED LICENSE AGREEMENT
--------------------------
This Agreement is entered into as of December 18, 1990 between Glyko, Inc.,
a Delaware Corporation with its principal office at 81 Digital Drive, Novato,
California 94949 ("Glyko), and Glycomed, Inc., a California corporation with its
principal office at 860 Atlantic Avenue, Alameda, California 94501 ("Glycomed").
RECITALS
--------
Glycomed is the owner of the patents and trademarks listed in Exhibit A
relating to applications for a technique to facilitate analysis of carbohydrate
and glycoconjugate molecules. Glyko wishes to obtain a license to use those
patents and trademarks, and Glycomed has agreed to license those patents and
trademarks and associated know-how to Glyko in consideration for shares of Glyko
Common Stock.
AGREEMENT
---------
1. Definitions.
------------
Reference is hereby made to the Joint Venture Agreement dated December 18,
---
1990 (the "Joint Venture Agreement") among Glyko, Glycomed, Millipore
Corporation ("Millipore") , Astromed, Ltd., Astroscan, Ltd., Gwynn R. Williams
and John Klock. Terms defined in the Joint Venture Agreement and not otherwise
defined herein shall have the meanings so defined. As used in this Agreement,
the following terms shall have the meanings defined below:
1.1 The "Field" shall mean all aspects of and applications for the
-----
analysis, manipulation and synthesis of carbohydrates and glycoconjugates, and
molecules containing carbohydrates and glycoconjugates, including separation,
sequencing, compositional analysis and diagnostic applications, but excluding
other applications such as therapeutics.
1.2 "Licensed Current Patents" shall mean the patents and patent
------------------------
applications throughout the world listed in Exhibit A hereto, and patents
hereafter issued throughout the world on patent applications listed on Exhibit A
hereto.
1.3 "Future Patents" shall mean patents, patent applications and patent
--------------
rights throughout the world that Glycomed files or obtains in the future that
are related to Glycomed's Fluorescence Assisted Carbohydrate Electrophoresis
("FACE") technique and which Glycomed is obligated to disclose and license to
Glyko pursuant to Section 2.4 hereof.
<PAGE>
1.4 "Licensed Patents" shall mean Licensed Current Patents and Future
----------------
Patents.
1.5 "Glycomed Current Know-how" shall mean the FACE-related technical
-------------------------
information, know-how, and technology possessed by Glycomed on the date hereof
relating to or useful in the Field.
1.6 "Future Know-how" shall mean the FACE-related technical information,
---------------
know-how and technology that Glycomed develops or obtains in the future and
which Glycomed is obligated to disclose and license to Glyko pursuant to Section
2.4 hereof
1.7 "Licensed Know-how" shall mean Glycomed Current know-how and Future
-----------------
Know-how".
1.8 "Rights Licensed to Glycomed" shall mean any FACE-related patents,
---------------------------
patent applications, technical information, know-how or other technology owned
by third parties and licensed to Glycomed with the right to grant sublicenses
that relates to or is useful in the Field.
1.9 "Licensed Technology" shall mean the Licensed Patents, Licensed Know-
-------------------
how and Rights Licensed to Glycomed, collectively.
1.10 "Licensed Trademarks" shall mean the trademarks and tradenames "FACE",
-------------------
"Glycokits" and other "Glyco-" expressions, exclusive of "Glycomed".
1.11 "Glyko Improvements" shall mean any and all improvements made by Glyko
------------------
to Licensed Technology.
2. Grant of Rights; Exclusivity.
-----------------------------
2.1 License Grant. Subject to all of the provisions hereof, Glycomed
-------------
hereby grants to Glyko a royalty-free, perpetual worldwide license to make, have
made, use, sell, or otherwise dispose of any products, equipment, components, or
systems -for use in the Field based upon, embodying, or otherwise using the
Licensed Technology, and to otherwise practice the Licensed Technology in the
Field.
2.2 Exclusivity. Except as provided below, the licenses granted herein
-----------
shall be exclusive to Glyko in the Field, and Glycomed shall not practice the
Licensed Technology to market, or license others to market, products or services
that compete with Glyko in the Field. Glycomed reserves the right to practice
and license others to practice the Licensed Technology for therapeutic
applications, products and services. Glycomed further reserves the right to
practice synthesis techniques included in the Licensed Technology in order to
develop and manufacture products within and without the Field, but may not
-2-
<PAGE>
market or license others to market products or services performing systhesis
functions within the Field.
2.3 Right to Sublicense. Glycomed hereby grants to Glyko the perpetual
------------------
right to sublicense the Licensed Technology for use in the Field; provided,
---------
however, that Glycomed shall have the right to consent to each sublicensee,
- ---------
which consent shall not be unreasonably withheld or delayed. Glycomed may not
require any royalty or other economic compensation for any such consent.
2.4 Future Developments. Glycomed will disclose to Glyko promptly after
-------------------
creation any and all inventions, patents, patent applications and technology
relating to FACE, including know-how, developed or acquired by it during the
term of this Agreement; provided, however that, Glycomed shall not be obligated
-------- --------
to disclose or license technology or patents relating solely to synthesis; and
provided, further, that Glycomed shall not be obligated to disclose or license
- -------- -------
any other confidential future technology (but shall be obligated to license
Future Patents) that would be useful to competitors of Glycomed in the area of
therapeutics if such technology were to be discernable from products sold by
Glyko, for so long as such technology remains confidential.
2.5 Glyko Improvements. Glyko hereby grants to Glycomed a non-exclusive,
------------------
royalty-free, perpetual, worldwide license, including the right to sublicense,
under the Glyko Improvements to make, have made, use, sell or otherwise dispose
of any products, equipment, components or systems for use outside the Field and
to otherwise practice Glyko Improvements outside the Field.
2.6 Restriction on Therapeutic Agents. Glyko may not practice the
---------------------------------
Licensed Technology to produce, and may not use the Licensed Trademarks in
connection with, therapeutic agents or other therapeutic products. Glycomed
understands that Glyko's customers shall be free to use products purchased from
Glyko for any purpose.
3. Grant of Trademark Rights.
--------------------------
3.1 License Grant. Subject to all of the provisions hereof, Glycomed
-------------
hereby grants to Glyko royalty-free, perpetual rights to use the Licensed
Trademarks in relation to all goods or services for which such respective
trademarks and tradenames may be used in the Field. Such license shall be
exclusive to Glyko in the Field, except that Glycomed reserves the right to use
and license others to use the Licensed Trademarks other than "FACE" for
therapeutic applications, products and services.
3.2 Right to Sublicense. Glycomed hereby grants to Glyko the perpetual
-------------------
right to sublicense the Licensed Trademarks for use
-3-
<PAGE>
in the Field to any permitted sublicensee of the Licensed Technology.
3.3 Quality Controls. Glycomed shall have the right, at all reasonable
----------------
times, to inspect the products in relation to which the Licensed Trademarks are
proposed to be used, as well as the method of manufacture of such products, on
the premises of Glyko, and elsewhere, as Glycomed considers necessary to carry
out the purposes of inspection as part of appropriate quality control. Glycomed
shall have the right to receive from time to time, without charge, a reasonable
number of samples of the goods.
3.4 Recognition of Ownership. Glyko recognizes Glycomed's title to the
------------------------
Licensed Trademarks and shall not at any time do or suffer to be done any act or
thing which will in any way impair the rights of Glycomed in and to the Licensed
Trademarks. It is understood that Glyko shall not acquire and shall not claim
any title to the Licensed Trademarks adverse to Glycomed by virtue of the
license granted by Glyko, or through Glyko's use of the Licensed Trademarks.
4. Payments. Upon licensing of the Licensed Technology and Licensed Trademarks
--------
to Glyko, Glyko shall deliver to Glycomed, in consideration for Glycomed's
licensing of the Licensed Technology and Licensed Trademarks to Glyko, 1294
shares of Common Stock of Glyko.
5. Representations and Warranties. Glycomed represents and warrants that, as
------------------------------
of the date hereof, to the best of its knowledge:
(a) The Licensed Technology does not infringe any proprietary rights
of any third parties; and
(b) Its license of the Licensed Technology and Licensed Trademarks
does not breach any of its duties toward any third party, nor did such
license and transfer impose any obligations on Glyko other than those
expressed in this Agreement; and
(c) The Licensed Technology and Licensed Trademarks can be freely
used and exploited by Glyko in the Field without any liability of any
nature to third parties.
6. Defense of Licensed Rights. If during the term of this Agreement Glyko
--------------------------
becomes aware of an infringement of any Licensed
-4-
<PAGE>
Technology or Licensed Trademark in the Field, it shall notify Glycomed, and
Glycomed and Glyko will confer and determine what actions may be taken to
protect Glyko's rights under the Licensed Technology and Licensed Trademarks.
The prosecution of infringers shall be at the direction and expense of Glyko.
Glycomed shall have no obligation to prosecute any such infringer but shall join
as a nominal plaintiff, at Glyko's expense, if requested to do so by Glyko. If
Glyko determines not to prosecute an infringer, Glycomed may do so, in which
event Glycomed shall pay all expenses of and may retain all recovery in any such
proceeding.
7. Term and Termination.
---------------------
7.1 Perpetual Term. Unless sooner terminated in accordance with the terms
-------------
hereof, this Agreement, and the license herein granted to Glyko, shall continue
in effect perpetually.
7.2 Breach and Remedies. If either party commits a breach of any of the
-------------------
terms of this Agreement, the other party may notify the defaulting party in
writing, specifying the nature of the breach or the obligation that the
defaulting party has failed to meet. If the defaulting party fails to cure the
breach or meet the obligation specified within a period of thirty (30) days
after service of such written notice, then the party not in default may
terminate this Agreement forthwith by serving written notice of such termination
upon the defaulting party.
7.3 Bankruptcy. if Glyko should become bankrupt or make any arrangement
----------
or assignment for the benefit of its creditors, Glycomed shall have the right to
terminate this Agreement forthwith by serving written notice of such
termination.
7.4 Default on Obligation to Fund. In the event that Millipore defaults in
-----------------------------
its obligation to fund Glyko pursuant to Section 2.4 of the Joint Venture
Agreement, and the Joint Venture Agreement is terminated pursuant to Section 8.3
thereof, Glycomed shall have the right to terminate this Agreement forthwith by
serving written notice of such termination on Glyko.
8. Effective Date. This Agreement shall become effective as of the date the
--------------
Joint Venture Agreement is signed.
9. Applicable Law. As this Agreement relates to the Joint Venture Agreement in
--------------
which both parties are participant and as the Joint Venture Agreement is
governed by the laws of the State of Delaware, this Agreement and the
relationships between the parties shall be governed in all respects by the laws
of the State of Delaware.
10. Notices. All notices required or permitted by this Agreement shall be
-------
given in writing and shall be deemed effective
-5-
<PAGE>
when personally delivered or when delivered by registered or certified mail,
addressed as follows:
If to Glyko: If to Glycomed:
Glyko, Inc. Glycomed, Inc.
81 Digital Drive 81 Atlantic Avenue
Novato, CA 94949 Alameda, CA 94501
Attn: Chief Executive Officer Attn:
With a copy to:
Cooley Godward Castro
Huddleson & Tatum
One Maritime Plaza, 20th Floor
San Francisco, Ca 94111
Attn: Frederick T. Muto, Esq.
Such notices may also be sent by telex, telegram, or facsimile
transmission, and shall be deemed effective upon receipt by the other party if
confirmed in writing by the sender via registered or certified mail delivered
within ten (10) days thereafter. Either party may at any time during this
Agreement designate a different person or address for notices by notice to the
other in the manner prescribed herein.
11. Amendments. No modification or waiver of any provision of this Agreement
----------
shall be valid unless it is in writing and signed by all the parties hereto.
12. Assignment. Neither party may assign its rights or obligations under this
----------
Agreement without the prior written consent of the other, except that a party
may assign its rights and obligations to a party acquiring the business and
assets of the party with which the license is used, provided the acquiror agrees
in writing to be bound by the provisions hereof. All provisions of this
Agreement shall be binding upon and inure solely to the benefit of the parties
hereto, their heirs, legal representatives, successors (whether by
consolidation, merger, or otherwise), and assigns.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be bound hereby, have
caused this Agreement to be executed by their duly authorized representatives as
of the _____ day of December, 1990.
GLYKO, INC.
By: /s/ John C. Klock
----------------------------
GLYCOMED, INC.
By:_____________________________
-7-
<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be bound hereby, have
caused this Agreement to be executed by their duly authorized representatives as
of the _____ day of December, 1990.
GLYKO, INC.
By:_____________________________
GLYCOMED, INC.
By:
----------------------------
<PAGE>
EXHIBIT A
---------
LICENSED CURRENT PATENTS
1. US Pat. # 4,975,165
Glycomed
Two dimensional electrophoretic separation
of carbohydrates
Filed 16 Feb 90
Issued 4 Dec 90
2. USPA Ser. # 07/481,367
Glycomed
Electroblotting of electrophoretically resolved fluorescent labelled
saccharides and detection of active structures of protein probes
US Filed 16 Feb 90
3. USPA Set. # 07/483,043
Glycomed
Fluorescent tag for sugar electrophoresis
US Filed 16 Feb 90
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
registration statement.
/s/ Arthur Andersen LLP
June 14, 1999
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<PERIOD-START> JAN-01-1998
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<SECURITIES> 1,975,800
<RECEIVABLES> 691,318
<ALLOWANCES> (10,205)
<INVENTORY> 71,730
<CURRENT-ASSETS> 12,818,519
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