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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 25, 2000
REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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ATHEROGENICS, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
GEORGIA 2834 58-2108232
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
8995 WESTSIDE PARKWAY
ALPHARETTA, GEORGIA 30004
(678) 336-2500
(Address, including zip code, and telephone number,including area code,
of Registrant's principal executive offices)
---------------------------
RUSSELL M. MEDFORD, M.D., PH.D.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ATHEROGENICS, INC.
8995 WESTSIDE PARKWAY
ALPHARETTA, GEORGIA 30004
(678) 336-2500
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies to:
<TABLE>
<S> <C>
LEONARD A. SILVERSTEIN, ESQ. ALAN L. JAKIMO, ESQ.
LONG ALDRIDGE & NORMAN LLP BROWN & WOOD LLP
SUNTRUST PLAZA, SUITE 5300 ONE WORLD TRADE CENTER, 58TH FLOOR
303 PEACHTREE STREET NEW YORK, NEW YORK 10048
ATLANTA, GEORGIA 30308-3201 (212) 839-5300
(404) 527-4000
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.
If any of the securities registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act, check
the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
---------------------------
CALCULATION OF REGISTRATION FEE
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<CAPTION>
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PROPOSED MAXIMUM
AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF OFFERING REGISTRATION
SECURITIES TO BE REGISTERED PRICE(1)(2) FEE
<S> <C> <C>
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Common Stock, no par value per share........................ $100,000,000 $26,400.00
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</TABLE>
(1) Includes the dollar value of shares that the underwriters have the
option to purchase to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(o) under the Securities Act.
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> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS
NOT AN OFFER TO SELL THESE SECURITIES, AND WE ARE NOT SOLICITING OFFERS TO
BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED , 2000
PROSPECTUS
SHARES
[LOGO TO COME]
COMMON STOCK
This is an initial public offering of shares of common stock of
AtheroGenics, Inc. AtheroGenics expects that the initial public offering price
will be between $ and $ per share.
We have applied for trading and quotation of our common stock on the Nasdaq
National Market under the symbol "AGIX."
OUR BUSINESS INVOLVES SIGNIFICANT RISKS. THESE RISKS ARE DESCRIBED UNDER
THE CAPTION "RISK FACTORS" BEGINNING ON PAGE 8.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
---------------------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
<S> <C> <C>
Public offering price....................................... $ $
Underwriting discounts and commissions...................... $ $
Proceeds, before expenses, to AtheroGenics.................. $ $
</TABLE>
The underwriters may also purchase up to an additional
shares of common stock at the public offering price, less the underwriting
discounts and commissions, to cover over-allotments.
The underwriters expect to deliver the shares against payment in New York,
New York on , 2000.
---------------------------
SG COWEN
CHASE H&Q
ADAMS, HARKNESS & HILL, INC.
A.G. EDWARDS & SONS, INC.
, 2000
<PAGE> 3
Inside Cover Illustration:
This four-color image/copy will appear on the inside front cover of the
prospectus. The image/copy will depict the inflammatory diseases which
AtheroGenics' v-protectant technology targets in the context of the organs of
the body affected by these diseases. The image will include a full human body
with the following organ (disease) call-outs:
- Lungs (Asthma)
- Kidneys (Solid organ transplant rejection)
- Heart (Restenosis)
- Carotid artery (Atherosclerosis)
- Knee joints (Rheumatoid Arthritis)
<PAGE> 4
TABLE OF CONTENTS
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PAGE
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<S> <C>
Prospectus Summary....................... 3
Risk Factors............................. 8
Special Note Regarding Forward-Looking
Statements.......................... 16
Use of Proceeds.......................... 17
Dividend Policy.......................... 17
Capitalization........................... 18
Dilution................................. 20
Selected Financial Data.................. 21
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.......................... 22
Business................................. 25
</TABLE>
<TABLE>
<CAPTION>
PAGE
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Management............................... 39
Certain Transactions..................... 47
Principal Shareholders................... 49
Description of Capital Stock............. 52
Shares Eligible for Future Sale.......... 55
Underwriting............................. 57
Legal Matters............................ 58
Experts.................................. 58
Where You Can Find Additional
Information......................... 59
Financial Statements..................... F-1
</TABLE>
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT. WE
ARE OFFERING TO SELL AND SEEKING OFFERS TO BUY SHARES OF OUR COMMON STOCK ONLY
IN JURISDICTIONS WHERE OFFERS AND SALES ARE PERMITTED. THE INFORMATION CONTAINED
IN THIS PROSPECTUS IS ACCURATE ONLY AS OF THE DATE OF THIS PROSPECTUS,
REGARDLESS OF THE TIME OF DELIVERY OF THIS PROSPECTUS OR OF ANY SALE OF OUR
COMMON STOCK. IN THIS PROSPECTUS, REFERENCES TO "ATHEROGENICS," "WE," "US" AND
"OUR" REFER TO ATHEROGENICS, INC., A GEORGIA CORPORATION.
---------------------
UNTIL , 2000, ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS REQUIREMENT IS IN ADDITION TO THE DEALERS' OBLIGATION
TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
---------------------
ATHEROGENICS AND ASSOCIATED DESIGN, AGI AND OXYKINE ARE TRADEMARKS OF
ATHEROGENICS, INC. THIS PROSPECTUS ALSO REFERS TO TRADE NAMES AND TRADEMARKS OF
OTHER ORGANIZATIONS.
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PROSPECTUS SUMMARY
The following is only a summary. You should carefully read the more
detailed information contained in this prospectus, including our financial
statements and related notes included in this prospectus. Our business involves
significant risks. You should carefully consider the information under the
heading "Risk Factors" beginning on page 8. Unless otherwise indicated, all
information in this prospectus assumes (1) the conversion of all outstanding
shares of our preferred stock into 13,643,837 shares of common stock immediately
prior to the closing of this offering and (2) no exercise by the underwriters of
the over-allotment option.
THE COMPANY
AtheroGenics is an emerging pharmaceutical company focused on the
discovery, development and commercialization of novel small molecule
therapeutics for the treatment of chronic inflammatory diseases, such as
atherosclerosis, asthma and arthritis. We designed our lead product candidate,
AGI-1067, to benefit patients with coronary artery disease, which is
atherosclerosis of the blood vessels of the heart. In October 1999 we entered
into a worldwide exclusive license agreement with Schering-Plough Corporation to
develop and commercialize AGI-1067. We are currently testing AGI-1067 in a Phase
II clinical trial for the prevention and treatment of restenosis, the
reoccurrence of narrowing of the coronary arteries following angioplasty in
patients with coronary artery disease. Schering-Plough has extensive experience
in developing, manufacturing and commercializing pharmaceutical products.
Schering-Plough's total licensing and milestone payments to us for this initial
indication, excluding royalties and development costs, could reach $189 million.
We have developed a proprietary drug discovery technology platform called
vascular protectant, or v-protectant, technology for treating diseases of
chronic inflammation. Inflammation normally protects the body from infection,
injury and disease, but chronic inflammation often causes damage in a
misdirected attempt at repair and healing. Diseases of chronic inflammation that
we are targeting with our v-protectants include:
- atherosclerosis, including coronary artery disease, which affects
more than 11 million people in the United States and is the leading
cause of death in the United States; physicians perform more than
1.2 million angioplasties annually in North America;
- asthma, which affects more than 17 million people in the United
States; its prevalence and economic impact are both increasing;
- cystic fibrosis, which affects 36,000 children and adults in the
United States, of whom 25% are hospitalized at least once annually;
- rheumatoid arthritis, which affects 2.1 million people in the United
States and is more common in women than men; the economic cost of
rheumatoid arthritis and related diseases exceeds $65 billion
annually in the United States; and
- solid organ transplant rejection, which affects more than 200,000
people in the United States and is a major factor contributing to
organ shortage.
Our v-protectants are therapeutic small molecules that block a class of
signals called oxidant signals. Oxidant signals lead to the production of
selected inflammatory proteins including VCAM-1. These inflammatory proteins
attract white blood cells, or leukocytes, to the site of chronic inflammation.
Leukocytes destroy infective agents and promote healing but can also amplify
chronic inflammation. Diseases marked by chronic inflammation are the
therapeutic targets of several classes of currently available drugs. Some drugs
are directed toward reduction of risk factors for the underlying disease, such
as high blood cholesterol in atherosclerosis. Other drugs provide symptomatic
relief. Among these drugs are anti-inflammatories and immunosuppressants that
decrease chronic inflammation, but increase the risk of infection. None of these
drugs treats the underlying cause of chronic inflammation. In contrast, we
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believe that our v-protectants can suppress chronic inflammation by blocking
production of VCAM-1 without undermining the body's ability to protect itself
against infection.
AGI-1067 is our v-protectant candidate that is most advanced in clinical
development. We are currently managing a Phase II clinical trial, CART-1, to
assess in 315 patients the safety and effectiveness of AGI-1067 for the
treatment of post-angioplasty restenosis. We recruited our first CART-1 patient
in September 1999 and we expect to complete this clinical trial in the first
half of 2001. Our Phase II clinical trial program follows our successful
completion of seven Phase I clinical trials comprising more than 150 men and
women.
We have identified other potential v-protectant product candidates to treat
asthma, cystic fibrosis, rheumatoid arthritis and solid organ transplant
rejection. We are evaluating these v-protectant product candidates to choose
lead product candidates for clinical development. We plan to develop these
v-protectants rapidly and may seek regulatory fast track status to expedite
development and commercialization. We will continue to expand our v-protectant
technology platform with other scientific programs in inflammation using
functional genomics to identify novel therapeutic gene targets.
We base our competitive strategy on our ability to integrate the following
strengths:
- we have pioneered basic discoveries in vascular cell biology that
form the foundation of our v-protectant technology platform;
- our scientific expertise coupled with our clinical and regulatory
expertise has enabled us to be the first company to conduct Phase I
and II clinical trials of an orally-administered, small molecule
v-protectant;
- we expect that our exclusive license agreement with Schering-Plough
will allow us to sustain and extend our competitive advantage; and
- we believe that our scientific, development and licensing expertise
strongly positions us to acquire promising technologies and products
discovered outside AtheroGenics.
We believe that these competitive advantages are important to the success
of our business strategy, which is to:
- develop AGI-1067 for commercialization in collaboration with
Schering-Plough;
- extend our v-protectant technology platform into additional
therapeutic areas that address unmet medical needs;
- create value rapidly through innovative drug discovery coupled with
innovative development to produce useful drugs;
- expand our product candidate portfolio by acquiring complementary
product candidates and technologies; and
- commercialize our products based upon the size and other relevant
characteristics of the patient and physician populations.
We were incorporated in the State of Georgia in November 1993. Our
executive offices are located at 8995 Westside Parkway, Alpharetta, Georgia
30004. Our telephone number at that location is (678) 336-2500 and our Internet
address is www.atherogenics.com. Information contained on our website does not
constitute part of this prospectus.
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THE OFFERING
Common stock we are offering............. shares
Common stock to be outstanding after the
offering................................ shares
Underwriters' over-allotment option..... shares
Use of proceeds......................... We intend to use the net proceeds
for research and development
activities, including clinical
trials, process development and
manufacturing support, potential
licensing and acquisition
opportunities and for general
corporate purposes, including
working capital. See "Use of
Proceeds."
Proposed Nasdaq National Market
symbol.................................. AGIX
The number of shares of our common stock to be outstanding immediately
after this offering is based on the number of shares outstanding on February 18,
2000. This number does not take into account:
- 2,998,325 shares of our common stock issuable upon exercise of options
outstanding under our stock option plans at February 18, 2000 with a
weighted average exercise price of $.32 per share;
- 1,049,578 shares of our common stock available for future grant or
issuance under our benefit plans; and
- 467,503 shares of our common stock issuable upon exercise of outstanding
warrants at February 18, 2000 with an average exercise price of $3.21 per
share.
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SUMMARY FINANCIAL DATA
The following table contains a summary of our statement of operations data.
The pro forma net loss per share data below gives effect to (1) the conversion
of each outstanding share of preferred stock into one share of common stock
immediately prior to the closing of this offering and (2) the pro forma basis of
presentation described in "Selected Financial Data" on page 21. See Note 11 to
Financial Statements.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
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1995 1996 1997 1998 1999
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<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
License fees................. $ -- $ -- $ -- $ -- $ 5,000,000
Research and development..... -- -- -- -- 791,653
----------- ----------- ----------- ------------ -----------
Total revenues -- -- -- -- 5,791,653
Operating expenses:
Research and development..... 780,159 1,776,891 4,656,478 8,954,904 9,041,345
General and administrative... 348,107 548,766 988,230 1,573,807 2,593,017
Amortization of deferred
stock compensation........ -- -- -- -- 85,480
----------- ----------- ----------- ------------ -----------
Total operating
expenses........... 1,128,266 2,325,657 5,644,708 10,528,711 11,719,842
----------- ----------- ----------- ------------ -----------
Operating loss................. (1,128,266) (2,325,657) (5,644,708) (10,528,711) (5,928,189)
Net interest income
(expense).................... 21,547 277,563 485,392 (205,130) (60,617)
----------- ----------- ----------- ------------ -----------
Net loss....................... $(1,106,719) $(2,048,094) $(5,159,316) $(10,733,841) $(5,988,806)
=========== =========== =========== ============ ===========
Basic and diluted net loss per
share........................ $ (0.72) $ (1.10) $ (2.25) $ (4.45) $ (2.45)
Shares used in computing basic
and diluted net loss per
share........................ 1,543,064 1,869,246 2,292,966 2,409,948 2,443,237
Pro forma basic and diluted net
loss per share............... $ (0.47)
Shares used in computing pro
forma basic and diluted net
loss per share............... 12,712,029
</TABLE>
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The following table contains a summary of our balance sheet at December 31,
1999:
- on an actual basis;
- on a pro forma basis to reflect the conversion of all outstanding shares
of preferred stock into 13,643,837 shares of common stock effective
immediately prior to the closing of this offering; and
- on a pro forma as adjusted basis to reflect the conversion of all
outstanding shares of preferred stock into 13,643,837 shares of common
stock effective immediately prior to the closing of this offering and the
sale of shares of common stock offered hereby at an assumed initial
public offering price per share of $ .
<TABLE>
<CAPTION>
DECEMBER 31, 1999
------------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................ $ 13,409,450 $ 13,409,450
Working capital...................................... 12,984,572 12,984,572
Total assets......................................... 15,717,214 15,717,214
Long-term obligations, less current portion.......... 61,854 61,854
Redeemable convertible preferred stock............... 38,711,491 --
Preferred stock warrants............................. 481,875 --
Common stock......................................... 2,209,962 40,921,453
Deferred compensation................................ (1,809,680) (1,809,680)
Accumulated deficit.................................. (25,244,438) (25,244,438)
Total common shareholders' (deficit) equity.......... (24,844,156) 14,349,210
</TABLE>
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RISK FACTORS
You should carefully consider the risks described below before making an
investment decision. You should also refer to the other information in this
prospectus, including our financial statements and the related notes. The risks
and uncertainties described below are those that we currently believe may
materially affect our company. Additional risks and uncertainties that we are
unaware of or that we currently deem immaterial also may become important
factors that affect our company.
RISKS RELATED TO OUR COMPANY AND BUSINESS
AGI-1067 MAY FAIL IN CLINICAL TRIALS.
AGI-1067 is our lead compound and the subject of an exclusive licensing
agreement with Schering-Plough. Failure of the compound to show efficacy, to be
safely tolerated or to progress without major delays in clinical trials would
have a material adverse effect on our ability to generate future revenue.
WE HAVE A HISTORY OF LOSSES AND ANTICIPATE CONTINUED LOSSES.
We have experienced operating losses since we began operations in 1994. As
of December 31, 1999, we had an accumulated deficit of approximately $25.2
million. We expect to incur additional operating losses over the next several
years and expect cumulative losses to increase substantially as our research and
development, pre-clinical, clinical, manufacturing and marketing efforts expand.
Except for an initial licensing fee that Schering-Plough paid to us, we have had
no significant revenue to date. Our ability to generate revenue and achieve
profitability is dependent on our ability, alone or with collaborators, to
complete successfully the development of our product candidates, conduct
clinical trials, obtain the necessary regulatory approvals, and manufacture and
market our product candidates. Physicians, patients, payors or the medical
community in general may be unwilling to accept, utilize or recommend any of our
products. We cannot assure you that we will generate future revenue or achieve
profitability.
OUR OTHER PRODUCT CANDIDATES HAVE A HIGH RISK OF FAILURE BECAUSE THEY ARE IN
EARLY STAGES OF DEVELOPMENT.
All of our other programs are in early stages of development, and we face
the risks of failure inherent in developing drug products based on new
technologies. None of our potential product candidates is expected to be
commercially available until at least 2003. In addition, no other proprietary
product candidates may result from our drug discovery efforts.
WE WILL NOT BE ABLE TO COMMERCIALIZE OUR PRODUCT CANDIDATES IF WE FAIL TO
DEMONSTRATE ADEQUATELY THEIR SAFETY AND EFFICACY.
We will need to conduct significant research, animal testing, referred to
as pre-clinical testing, and human testing, referred to as clinical trials,
before we can file product approval applications with the U.S. Food and Drug
Administration and similar regulatory authorities in other countries.
Pre-clinical testing and clinical trials are long, expensive and uncertain
processes. It may take us several years to complete our testing, and failure can
occur at any stage. The objective of pre-clinical testing and clinical trials is
to demonstrate product safety and efficacy. We cannot assure you that any
product candidate developed by us, alone or with others, will prove to be safe
and effective in clinical trials and will meet all of the applicable regulatory
requirements needed to receive marketing clearance.
We must conduct clinical trials in accordance with the FDA's Good Clinical
Practices. The FDA and institutional review boards at the medical institutions
and healthcare facilities where we conduct clinical trials have authority to
oversee our clinical trials and the FDA may require large numbers of test
subjects. In addition, we must manufacture the product candidates which we use
in our clinical trials under the FDA's Good Manufacturing Practices. The FDA or
we may suspend our clinical trials at any time if either of us believe that the
subjects participating in these trials are being exposed to unacceptable health
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risks. The FDA or institutional review boards may suspend any trial indefinitely
if they find deficiencies in the conduct of these trials.
Even if we achieve positive results in early clinical trials, these results
do not necessarily predict final results. A number of companies in the
pharmaceutical industry have suffered significant setbacks in advanced clinical
trials, even after achieving positive results in earlier trials. Negative or
inconclusive results or adverse medical events during a clinical trial could
cause a clinical trial to be repeated or terminated.
Even if the FDA approves our New Drug Application, we may not achieve
product acceptance. After approval, many drugs have shown a side effect profile
that limited their usefulness or required their withdrawal although the side
effect was not observed in Phase I through Phase III clinical trials.
WE MAY EXPERIENCE DELAYS IN OUR CLINICAL TRIALS THAT COULD ADVERSELY AFFECT OUR
FINANCIAL RESULTS AND OUR COMMERCIAL PROSPECTS.
We do not know whether planned clinical trials will begin on time or
whether we will complete any of our clinical trials on schedule or at all.
Product development costs to us and our collaborators will increase if we have
delays in testing or approvals or if we need to perform more or larger clinical
trials than planned. Significant delays may adversely affect our financial
results and the commercial prospects for our products, and our ability to become
profitable will be delayed. We typically rely on third party clinical
investigators at medical institutions and healthcare facilities to conduct our
clinical trials and, as a result, we may face additional delaying factors
outside our control.
BECAUSE WE MUST OBTAIN REGULATORY APPROVAL, WE CANNOT PREDICT WHETHER OR WHEN WE
WILL BE PERMITTED TO COMMERCIALIZE OUR PRODUCT CANDIDATES.
A pharmaceutical product cannot be marketed in the United States or most
other countries until it has completed a rigorous and extensive regulatory
approval process. Satisfaction of regulatory requirements typically takes many
years, is dependent upon the type, complexity and novelty of the product and
requires the expenditure of substantial resources. Of particular significance
are the requirements covering research and development, testing, manufacturing,
quality control, labeling and promotion of drugs for human use. Regulatory
approval processes outside the United States include all of the risks associated
with the FDA approval process described below. We cannot assure you that for any
product candidate we or our collaborators develop, including AGI-1067, the
regulatory review process will be completed in a timely manner or that
regulatory approval will be obtained.
Before receiving FDA clearance to market a product, we must demonstrate in
adequate and well-controlled clinical trials that the product candidate is safe
and effective for the proposed patient population. We cannot assure you that the
FDA will accept any of our clinical trials as adequate and well controlled or
accept the results of those trials. Data obtained from pre-clinical and clinical
activities are susceptible to varying interpretations that could delay, limit or
prevent regulatory clearances, and the FDA can request that we conduct
additional trials. If we have to conduct further clinical trials, whether for
AGI-1067 or other product candidates we develop in the future, it would
significantly increase our expenses and delay marketing of our product
candidates.
We intend to seek fast track status for some of our product candidates. If
we obtain this status, the time required for the FDA to review those
Investigational New Drug Applications that we submit would be shorter than would
otherwise be the case. We cannot assure you that the FDA will grant fast track
status to any Investigational New Drug Applications that we may submit or that,
if granted, such status will result in faster New Drug Application approval or
any approval at all.
Our failure to comply with applicable FDA or other regulatory requirements
including manufacturing, labeling, safety surveillance, promoting, and reporting
may result in criminal prosecution, civil penalties, recall or seizure of our
products, total or partial suspension of production or an injunction, as well as
other regulatory action against our potential products or us. Discovery of
previously unknown problems with a
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product, supplier, manufacturer or facility may result in restrictions on the
sale of our products, including a withdrawal of such products from the market.
In addition, we may experience delays or rejections based upon additional
government regulation from future legislation or administrative action or
changes in FDA policy during the period of product development, clinical trials
and FDA regulatory review.
SCHERING-PLOUGH MAY DECIDE TO TERMINATE OUR EXCLUSIVE LICENSE AGREEMENT, WHICH
WOULD DENY US ACCESS TO THEIR SUBSTANTIAL DEVELOPMENT, COMMERCIAL AND FINANCIAL
RESOURCES.
Under our exclusive license agreement, Schering-Plough will pay all costs
related to the worldwide development and commercialization of AGI-1067.
Schering-Plough also will pay us significant milestone fees upon attaining
development, regulatory and sales objectives. In addition, the agreement
provides us with access to their substantial product development, manufacturing
and commercialization expertise. Schering-Plough may terminate this agreement
for any reason upon 60 days notice. If Schering-Plough elects to terminate the
agreement, this decision would have a material adverse effect on the development
and commercialization of AGI-1067 and on our ability to generate revenue.
OUR FAILURE TO PROTECT ADEQUATELY OR ENFORCE OUR INTELLECTUAL PROPERTY RIGHTS OR
SECURE RIGHTS TO THIRD PARTY PATENTS COULD MATERIALLY ADVERSELY AFFECT OUR
PROPRIETARY POSITION IN THE MARKETPLACE OR PREVENT THE COMMERCIALIZATION OF OUR
PRODUCTS.
Our commercial success will depend in part on our ability to obtain and
enforce patent protection for our products in the United States and in other
countries. We currently own one U.S. patent, two allowed U.S. patent
applications, six pending U.S. applications, and 50 associated non-U.S. patent
filings. We co-own with Emory University one pending U.S. patent application and
17 associated non-U.S. patent filings. In addition, we hold exclusive licenses
to 14 U.S. patents, one U.S. patent application, and 61 associated non-U.S.
patent filings.
Our patent position, like that of many pharmaceutical companies, is
uncertain and involves complex legal and factual questions for which important
legal principles are unresolved. We may not develop or obtain rights to products
or processes that are patentable. Even if we do obtain patents, they may not
adequately protect the technology we own or in-license. In addition, others may
challenge, seek to invalidate, infringe or circumvent any patents we own or
in-license, and rights we receive under those patents may not provide
competitive advantages to us.
Our commercial success will depend in part on our ability to manufacture,
use, sell and offer to sell our product candidates without infringing patents or
other proprietary rights of others. We may not be aware of all patents or patent
applications that may impact our ability to make, use or sell any of our drug
candidates. For example, U.S. patent applications are confidential while pending
in the Patent and Trademark Office, and patent applications filed in non-U.S.
countries are often first published six months or more after filing. Further, we
may not be aware of published or granted conflicting patent rights. Any
conflicts resulting from patent applications and patents of others could
significantly reduce the coverage of our patents and limit our ability to obtain
meaningful patent protection. If others obtain patents with conflicting claims,
we may be required to obtain licenses to these patents or to develop or obtain
alternative technology. We may not be able to obtain any such license on
acceptable terms or at all. Any failure to obtain such licenses could delay or
prevent us from developing or commercializing our drug candidates, which would
adversely affect our business.
Litigation or patent interference proceedings may be necessary to enforce
any of our patents or other proprietary rights, or to determine the scope and
validity or enforceability of the proprietary rights of others. The defense and
prosecution of patent and intellectual property claims are both costly and time
consuming, even if the outcome is favorable to us. Any adverse outcome could
subject us to significant liabilities, require us to license disputed rights
from others, or require us to cease selling our future products.
Our commercial success will also depend on our ability to manufacture, use,
sell and offer to sell our product candidates without breaching our agreements
with our patent licensees. We have obtained
10
<PAGE> 13
exclusive licenses to technologies from Emory University, covering aspects of
our v-protectant technology, and The Regents of the University of California,
covering aspects of our diagnostic technology. Our exclusive license with Emory
University requires us to take steps to commercialize the licensed technology in
a timely manner. If we fail to meet these obligations, Emory University can
convert our exclusive license to a non-exclusive license, can grant others
non-exclusive rights in the licensed technology or can require us to sublicense
aspects of the licensed technology. Our license agreement with The Regents of
the University of California also includes a requirement that we develop the
licensed technology within certain time limits. If we fail to meet these time
limits, they can terminate our license. Further, The Regents of University of
California are primarily responsible for patent prosecution of the technology
licensed from them, and we are required to reimburse them for the costs they
incur in performing these activities. As a result, we do not have the ability to
control these activities.
We also rely upon trade secrets, proprietary know-how and technological
advances which we seek to protect through agreements with our collaborators,
employees and consultants. These persons and entities could breach our
agreements, for which we may not have adequate remedies. In addition, others
could become aware of our trade secrets or proprietary know-how through
independent discovery or otherwise.
IF OUR COMPETITORS DEVELOP AND MARKET PRODUCTS THAT ARE MORE EFFECTIVE THAN
OURS, OUR COMMERCIAL OPPORTUNITY WOULD BE REDUCED OR ELIMINATED.
Even if we obtain the necessary governmental approvals to market AGI-1067
or other product candidates, our commercial opportunity would be reduced or
eliminated if our competitors were to develop and market products that are more
effective, have fewer side effects or are less expensive than our product
candidates. Our potential competitors include large pharmaceutical companies and
more established biotechnology companies, both of which have significant
resources and expertise in research and development, manufacturing, testing,
obtaining regulatory approvals and marketing. Potential competitors also include
academic institutions, government agencies, and other public and private
research organizations that conduct research, seek patent protection and
establish collaborative arrangements for research, development, manufacturing
and commercialization. It is possible that any of these competitors could
develop technologies or products that would render our technologies or product
candidates obsolete or non-competitive.
WE RELY ON THIRD PARTIES TO SYNTHESIZE AND MANUFACTURE OUR PRODUCT CANDIDATES,
AND THEIR FAILURE TO PERFORM COULD DELAY OUR CLINICAL TRIALS OR HINDER OUR
COMMERCIALIZATION PROSPECTS.
We currently have no manufacturing facilities to synthesize or manufacture
our product candidates, nor do we intend to develop these capabilities in the
near future. Our reliance on third parties for these services exposes us to
several risks that could delay our clinical trials or hinder our
commercialization prospects. These risks include the following:
- A finding that a third party did not comply with applicable
governmental regulations. Manufacturers of pharmaceutical products
are subject to continual review and periodic inspections by
regulatory agencies. Failure of one of our third party manufacturers
to comply with applicable regulatory requirements, whether or not
related to our product candidates, could result in sanctions against
our potential products, including recall or seizure, total or
partial suspension of production or injunction.
- A failure to synthesize and manufacture our product candidates in
accordance with our product specifications. For example, a starting
material used in the manufacturing process of AGI-1067 is probucol,
which physicians previously prescribed as a cholesterol-lowering
agent but which has since been withdrawn from the market for
efficacy reasons. The occurrence of a rare side effect with chronic
dosing of probucol requires that a very low maximal amount of
probucol be permitted in and maintained in the manufacture of
AGI-1067.
- A failure to deliver product candidates in sufficient quantities or
in a timely manner. Any failure by our third party manufacturers to
supply our requirements for clinical trial materials
11
<PAGE> 14
or supply these materials in a timely manner could jeopardize the
scheduled completion of these clinical trials and could have a material
adverse effect on our ability to generate revenue.
In addition, our continued dependence on third parties for the synthesis
and manufacture of our future products may subject us to costs outside of our
control, which could adversely affect our future profitability and our ability
to commercialize products on a timely and competitive basis.
IF WE ARE UNABLE TO CREATE SALES, MARKETING AND DISTRIBUTION CAPABILITIES OR
ENTER INTO AGREEMENTS WITH THIRD PARTIES TO PERFORM THESE FUNCTIONS, WE WILL NOT
BE ABLE TO COMMERCIALIZE OUR FUTURE PRODUCT CANDIDATES.
We currently have no sales, marketing or distribution capabilities.
Therefore, in order to commercialize our product candidates, we must either
develop our own sales, marketing and distribution capabilities or collaborate
with a third party to perform these functions. We have no experience in
developing, training or managing a sales force and will incur substantial
additional expenses in doing so. The cost of establishing and maintaining a
sales force may exceed its cost effectiveness. In addition, we will compete with
many companies that currently have extensive and well-funded marketing and sales
operations. Our marketing and sales efforts may be unable to compete
successfully against these companies.
To the extent we seek sales, marketing and distribution alliances for our
future products, we face risks including the following:
- we may not be able to find collaborators, enter into alliances on
favorable terms or enter into alliances that will be commercially
successful;
- any collaborator might, at its discretion, limit the amount of
resources and time it devotes to marketing our products; and
- any collaborator may terminate its agreement with us and abandon our
products at any time for any reason, regardless of the terms of the
agreement.
FAILURE TO ATTRACT, RETAIN AND MOTIVATE SKILLED PERSONNEL AND CULTIVATE KEY
ACADEMIC COLLABORATIONS COULD MATERIALLY ADVERSELY AFFECT OUR RESEARCH AND
DEVELOPMENT EFFORTS.
We are a small company with less than 50 full-time employees. If we are
unable to continue to attract, retain and motivate highly qualified management
and scientific personnel and to develop and maintain important relationships
with leading academic institutions and scientists, we may not be able to achieve
our research and development objectives. Competition for personnel and academic
collaborations is intense. Loss of the services of any of our key scientific
personnel and, in particular, Dr. Russell M. Medford, our President and Chief
Executive Officer, could adversely affect progress of our research and
development programs. We do not have employment agreements with any of our
employees.
IF WE NEED ADDITIONAL FINANCING AND CANNOT OBTAIN IT, PRODUCT DEVELOPMENT AND
SALES MAY BE LIMITED.
We may encounter increased costs due to unanticipated changes in our
product development or commercialization plans. If these costs exceed our
available funds, we will need to seek additional financing. We may not be able
to obtain additional funds on commercially reasonable terms, or at all. If
additional funds are not available, we may be compelled to delay clinical
studies, curtail operations or obtain funds through collaborative arrangements
that may require us to relinquish rights to certain of our products or potential
markets.
12
<PAGE> 15
IF WE FAIL TO OBTAIN AN ADEQUATE LEVEL OF REIMBURSEMENT OR ACCEPTABLE PRICES FOR
OUR PRODUCTS, OUR REVENUES WILL BE DIMINISHED.
Our ability to commercialize our future products successfully, alone or
with collaborators, will depend in part on the extent to which reimbursement for
the products will be available from:
- government and health administration authorities;
- private health insurers; and
- other third party payors.
Government and other third party payors increasingly are attempting to
contain healthcare costs by limiting both coverage and the level of
reimbursement for new drugs. Third party private health insurance coverage may
not be available to patients for any of our future products.
The continuing efforts of government and other third party payors to
contain or reduce the costs of healthcare through various means may limit our
commercial opportunity. For example, in some countries other than the United
States, pricing and profitability of prescription pharmaceuticals are subject to
government control. In the United States, we expect proposals to implement
similar government control to continue. In addition, increasing emphasis on
managed care in the United States will continue to put pressure on the pricing
of pharmaceutical products. Cost control initiatives could decrease the price
that we or any potential collaborators could receive for any of our future
products and could adversely affect our profitability.
IF PRODUCT LIABILITY LAWSUITS ARE SUCCESSFULLY BROUGHT AGAINST US, WE MAY INCUR
SUBSTANTIAL FINANCIAL LOSS AND MAY BE REQUIRED TO LIMIT THE COMMERCIALIZATION OF
OUR FUTURE PRODUCTS.
The testing and marketing of medical products entail an inherent risk of
product liability. Clinical trial subjects, consumers, healthcare providers, or
pharmaceutical companies or others selling our future products could bring
product liability claims against us. If we cannot successfully defend ourselves
against these claims, we could incur substantial financial loss and may be
required to limit the commercialization of our future products. We cannot assure
you that we will be able to acquire or maintain insurance coverage at a
reasonable cost or in sufficient amounts to protect us.
OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE CAUSING VOLATILITY IN OUR STOCK
PRICE.
Our product candidates are now in research and various stages of
development or clinical trials. Accordingly, we do not receive any revenues from
sales of these product candidates. Our results of operations historically have
fluctuated on a quarterly basis and can be expected to continue to be subject to
quarterly fluctuations. Our results of operations at any given time will be
based primarily on the following factors:
- the status of development of our various product candidates;
- whether we enter into collaboration agreements and the timing and
accounting treatment of payments, if any, to us under those agreements;
- whether and when we achieve specified development or commercialization
milestones; and
- the addition or termination of research programs or funding support.
We believe that quarterly comparisons of our financial results are not
necessarily meaningful and should not be relied upon as an indication of future
performance. These fluctuations may cause the price of our stock to fluctuate,
perhaps substantially.
13
<PAGE> 16
RISKS RELATED TO THIS OFFERING
OUR STOCK PRICE MAY BE VOLATILE, AND YOUR INVESTMENT IN OUR STOCK COULD DECLINE
IN VALUE.
Prior to this offering, there has been no public market for our common
stock and an active public market for our common stock may not develop or be
sustained after the offering. The initial public offering price will be
determined by negotiations between the representatives of the underwriters and
us and may not be indicative of future market prices. Factors to be considered
in determining the initial public offering price of the common stock, in
addition to prevailing market conditions, include:
- estimates of our business potential and earnings prospects;
- an assessment of our management; and
- the consideration of the above factors in relation to market valuations
of companies in related businesses.
The market prices for securities of pharmaceutical and biotechnology
companies in general have been highly volatile and may continue to be highly
volatile in the future. The following factors, in addition to other risk factors
described in this section, may have a significant impact on the market price of
our common stock:
- announcements of technological innovations or new commercial products by
our competitors or us;
- developments concerning proprietary rights, including patents;
- developments concerning any research and development, manufacturing, and
marketing collaborations;
- publicity regarding actual or potential medical results relating to
products under development by our competitors or us;
- regulatory developments in the United States and other countries;
- litigation;
- economic and other external factors, including disasters or crises; or
- period-to-period fluctuations in financial results.
BECAUSE CERTAIN EXISTING SHAREHOLDERS OWN A LARGE PERCENTAGE OF OUR VOTING
STOCK, YOU WILL HAVE MINIMAL INFLUENCE ON SHAREHOLDER DECISIONS.
Upon completion of this offering, we anticipate that our executive
officers, directors and greater than five percent shareholders, along with their
affiliates, will, in the aggregate, own approximately % of our outstanding
common stock. As a result, such persons, acting together, will have the ability
to influence substantially all matters submitted to the shareholders for
approval, including the election and removal of directors and any merger,
consolidation or sale of all or substantially all of our assets. These persons
will also have the ability to control our management and business affairs. This
concentration of ownership may have the effect of delaying, deferring or
preventing a change in control, impeding a merger, consolidation, takeover or
other business combination involving us, or discouraging a potential acquirer
from making a tender offer or otherwise attempting to obtain control of our
business, even if such a transaction would be beneficial to other shareholders.
FUTURE SALES OF OUR COMMON STOCK MAY CAUSE OUR STOCK PRICE TO DECLINE.
The market price for our common stock could fall substantially if our
shareholders sell large amounts of our common stock in the public market
following this offering. These sales, or the possibility that these sales may
occur, could also make it more difficult for us to sell equity or equity related
securities if we need to do so in the future to address then-existing financing
needs. The number of shares of common
14
<PAGE> 17
stock available for sale in the public market is limited by restrictions under
federal securities law requiring the registration or exemption from registration
in connection with the sale of securities. In addition, sales of our common
stock are restricted by lock-up agreements that we, our directors and officers
and substantially all of our existing shareholders have entered into with the
underwriters. The lock-up agreements restrict us, our directors and officers and
substantially all of our existing shareholders, from selling or otherwise
disposing of any shares for a period of 180 days after the date of this
prospectus without the prior written consent of SG Cowen Securities Corporation.
SG Cowen Securities Corporation may, however, in its sole discretion and without
notice, release all or any portion of the shares from the restrictions in the
lock-up agreements.
After this offering, we will have outstanding shares of common stock.
These shares will become eligible for sale in the public market as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES DATE ELIGIBLE FOR PUBLIC RESALE
- ---------------- -------------------------------
<S> <C>
Date of this prospectus (includes the shares sold
in this offering)
180 days after the date of this prospectus
At various times thereafter, subject to applicable holding
period requirements
</TABLE>
We intend to file one or more registration statements to register shares of
common stock subject to outstanding stock options and common stock reserved for
issuance under our stock option plans not less than 30 days after the date of
this prospectus. We expect these additional registration statements to become
effective immediately upon filing. In addition, upon completion of this offering
and the conversion of our outstanding preferred stock into common stock, which
will happen upon the completion of this offering, the holders of 13,643,837
shares of our common stock will have the right to require us to register their
shares for sale to the public and holders of warrants exercisable into 417,503
shares of our common stock would have the right to participate in any such
registration. Substantially all of these shares are subject to the 180-day
lock-up, described above. If these holders cause a large number of shares to be
registered and sold in the public market, our stock price could fall.
ANTI-TAKEOVER PROVISIONS IN OUR CHARTER DOCUMENTS MAY MAKE AN ACQUISITION OF US,
WHICH MAY BE BENEFICIAL TO OUR SHAREHOLDERS, MORE DIFFICULT.
Provisions of our amended and restated articles of incorporation and
amended and restated bylaws could make it more difficult for a third party to
acquire us, even if doing so would benefit our shareholders. These provisions:
- authorize the issuance of "blank check" preferred stock by our board
of directors without shareholder approval, which would increase the
number of outstanding shares and could thwart a takeover attempt;
- limit who may call a special meeting of shareholders;
- require shareholder action by unanimous written consent;
- establish advance notice requirements for nominations for election
to the board of directors or for proposing matters that can be acted
upon at shareholder meetings;
- establish a staggered board of directors whose members can only be
dismissed for cause;
- adopt the fair price requirements and business combinations with
interested shareholders rules set forth in Article II, Parts 2 and 3
of the Georgia Business Corporation Code; and
- require approval by the holders of at least 75% of the outstanding
common stock to amend any of the foregoing provisions.
15
<PAGE> 18
YOU WILL INCUR IMMEDIATE AND SUBSTANTIAL DILUTION AS A RESULT OF THIS OFFERING.
The initial public offering price is substantially higher than the net
tangible book value per share of our outstanding common stock immediately after
this offering. Accordingly, at the initial public offering price of
$ per share, if you purchase common stock in this offering, you will
incur immediate and substantial dilution of approximately $ in the net
tangible book value per share of our common stock from the price you pay for our
common stock. In addition, we have issued options to acquire common stock at
prices significantly below the initial public offering price. To the extent
these outstanding options are ultimately exercised, there will be further
dilution to you in this offering.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
We have made statements under the captions "Prospectus Summary," "Risk
Factors," "Use of Proceeds," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business," and elsewhere in this
prospectus that are forward-looking statements that involve substantial risks
and uncertainty. You can identify these statements by forward-looking words such
as "may," "will," "expect, "intend," "anticipate," "believe," "estimate, "plan,"
"could," "should" and "continue" or similar words. These forward-looking
statements may also use different phrases. We have based these forward-looking
statements on our current expectations and projections about future events.
These forward-looking statements, which are subject to risks, uncertainties, and
assumptions about us, may include, among other things, projections of our future
results of operations or of our financial condition, our anticipated product
commercialization strategies, and anticipated trends in our business.
We believe it is important to communicate our expectations to our
investors. However, there may be events in the future that we are not able to
predict accurately or which we do not fully control that could cause actual
results to differ materially from those expressed or implied in our
forward-looking statements. Because these forward-looking statements involve
risks and uncertainties, there are important factors that could cause actual
results to differ materially from those expressed or implied by these
forward-looking statements, including the following:
- competitive factors;
- general economic conditions;
- the ability to develop safe and effective drugs;
- ability to enter into future collaborative agreements;
- variability of royalty, license and other revenue;
- failure to achieve positive results in clinical trials;
- failure to receive regulatory approval to market our product
candidates;
- uncertainty regarding our owned and our licensed patents and patent
rights, including the risk that we may be forced to engage in costly
litigation to protect such patent rights and the material harm to us
if there were an unfavorable outcome of any such litigation;
- governmental regulation and suspension;
- technological change;
- changes in industry practices; and
- one-time events.
You should also consider carefully the statements under "Risk Factors" and
other sections of this prospectus, which address additional factors that could
cause our results to differ from those set forth in the forward-looking
statements.
16
<PAGE> 19
USE OF PROCEEDS
We estimate that the net proceeds from the sale of the
shares of common stock offered by us at an assumed initial public offering price
of $ per share will be approximately $ million,
after deducting the underwriting discounts and estimated offering expenses. If
the underwriters exercise in full their option to purchase an additional
shares of common stock, we estimate that such net proceeds will
be approximately $ million. We expect to use the net proceeds from
this offering for research and development activities, including clinical
trials, process development and manufacturing support and for general corporate
purposes, including working capital. We may use a portion of the proceeds to
acquire or invest in complementary businesses, products or technologies,
although we are not currently in negotiations concerning any such acquisitions
or investments. Based upon the current status of our product development and
commercialization plans, we believe that the net proceeds of this offering,
together with our cash, cash equivalents and investments, will be adequate to
satisfy our capital needs through at least the calendar year 2002. Pending such
uses, we intend to invest the net proceeds of this offering in interest bearing,
investment grade securities.
DIVIDEND POLICY
We have never declared or paid any dividends on our capital stock. We
currently intend to retain all of our future earnings, if any, to finance our
operations and do not anticipate paying any cash dividends on our capital stock
in the foreseeable future.
17
<PAGE> 20
CAPITALIZATION
The following table sets forth our capitalization at December 31, 1999:
- on an actual basis;
- on a pro forma basis to reflect the conversion of all outstanding
shares of preferred stock into 13,643,837 shares of common stock;
and
- on a pro forma as adjusted basis to reflect the conversion of all
outstanding shares of preferred stock into 13,643,837 shares of
common stock, and the sale of shares of common stock
offered hereby at an assumed initial offering price of
$ , per share, and our receipt of the estimated net
proceeds after deducting underwriting discounts and commissions and
estimated offering expenses.
You should read the following table in conjunction with our financial
statements and related notes included in this prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1999
-------------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------------ ------------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Redeemable convertible preferred stock:
Series A, $1 par and liquidation value:
Authorized -- 1,000,000 shares; issued and
outstanding -- 1,000,000 shares (none pro forma
and pro forma as adjusted)..................... $ 1,000,000 $ --
Series B, $3 par and liquidation value:
Authorized -- 4,804,382 shares; issued and
outstanding -- 4,586,815 shares (none pro forma
and pro forma as adjusted)..................... 13,704,499 --
Series C, $3 par and liquidation value:
Authorized -- 8,500,000 shares; issued and
outstanding -- 8,057,022 shares at December 31,
1999 (none pro forma and pro forma as
adjusted)...................................... 24,006,992 --
Series B-1, $5 par and liquidation value:
Authorized 50,000 shares (none outstanding)....... -- --
Preferred stock warrants.......................... 481,875 --
Common shareholders' equity (deficit):
Common stock, no par value:
Authorized -- 21,100,000 shares; issued and
outstanding -- 2,410,375 and 2,536,543 shares
at December 31, 1998 and 1999, respectively
(16,180,380 shares pro forma; shares pro
forma as adjusted)............................. 2,209,962 40,921,453
Warrants.......................................... -- 481,875
Deferred stock compensation....................... (1,809,680) (1,809,680)
Accumulated deficit............................... (25,244,438) (25,244,438)
------------ -------------
Total common shareholders' equity
(deficit)............................... (24,844,156) 14,349,210
------------ -------------
Total redeemable convertible preferred
stock and common shareholders' equity
(deficit)............................... $ 14,349,210
============ =============
</TABLE>
The information in the table above does not include:
- shares of our common stock issuable upon exercise of options outstanding
under our benefit plans, of which 2,998,325 were outstanding at February
18, 2000, with a weighted average exercise price of $.32 per share, and
approximately $9,000,000 of additional deferred stock compensation
associated with options granted on January 28, 2000;
18
<PAGE> 21
- shares of our common stock available for future grant or issuance under
our benefit plans, of which 1,049,578 were available at February 18,
2000; and
- shares of our common stock issuable upon conversion of preferred stock
issuable upon exercise of outstanding warrants, of which 467,503 were
outstanding at February 18, 2000, with a weighted average exercise price
of $3.21 per share.
19
<PAGE> 22
DILUTION
Our pro forma net tangible book value as of December 31, 1999 was
approximately $ , or $ per share of common stock.
Our pro forma net tangible book value per share represents the amount of total
tangible assets less total liabilities, divided by the shares of common stock
outstanding as of December 31, 1999, assuming the conversion of all outstanding
shares of preferred stock.
After giving effect to the sale of shares of common stock we
are offering hereby at an assumed initial public offering price of
$ per share and after deducting estimated underwriting discounts
and commissions and offering expenses, our pro forma net tangible book value as
of December 31, 1999 would have been approximately $ million, or
$ per share. This represents an immediate increase in pro forma
net tangible book value of $ per share to existing shareholders
and an immediate and substantial dilution of $ per share to new
investors purchasing shares of common stock in this offering. The following
table illustrates this dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Pro forma net tangible book value per share at December 31,
1999...................................................... $
Increase per share attributable to this offering............
----
Pro forma net tangible book value per share after
offering..................................................
----
Dilution per share to new investors......................... $
====
</TABLE>
The following table summarizes, as of December 31, 1999, on the pro forma
basis described above, the number of shares of common stock purchased in this
offering, the aggregate cash consideration paid and the average price per share
paid by existing shareholders for common stock and by new investors purchasing
shares of common stock in this offering:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------ -------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
-------- ------- --------- -------- -------------
<S> <C> <C> <C> <C> <C>
Existing Shareholders.......................... % $ % $
New Investors..................................
-------- --- -------- --- --------
Total................................ % $ % $
======== === ======== === ========
</TABLE>
This discussion and tables above assume no exercise of options outstanding
under our benefit plans. As of February 18, 2000, there were options outstanding
to purchase a total of 2,998,325 shares of common stock at a weighted average
exercise price of $.32 per share and 1,049,578 shares available for future grant
or issuance under our benefit plans. The discussion and tables above also assume
no exercise of any outstanding warrants. As of February 18, 2000, there were
outstanding warrants to purchase 467,503 shares of our common stock, with a
weighted average exercise price of $3.21 per share. To the extent that any of
these options or warrants are exercised, there will be further dilution to new
investors.
20
<PAGE> 23
SELECTED FINANCIAL DATA
The selected financial data set forth below should be read in conjunction
with our financial statements and the related notes and "Management's Discussion
and Analysis of Financial Condition and Results of Operations," included in this
prospectus. The statement of operations data for the years ended December 31,
1997, 1998 and 1999 and the balance sheet data as of December 31, 1998 and 1999,
are derived from, and qualified by reference to, our audited financial
statements included elsewhere in this prospectus. The statement of operations
data for the years ended December 31, 1995 and 1996, and the balance sheet data
as of December 31, 1995, 1996 and 1997 are derived from our audited financial
statements that do not appear in this prospectus. The historical results are not
necessarily indicative of the operating results to be expected in the future.
Unaudited pro forma basic and diluted net loss per share have been
calculated assuming the conversion of all outstanding preferred stock into
common stock, as if the shares had converted immediately upon their issuance.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1995 1996 1997 1998 1999
----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
License fees........................... $ -- $ -- $ -- $ -- $ 5,000,000
Research and development............... -- -- -- -- 791,653
----------- ----------- ----------- ------------ -----------
Total revenues -- -- -- -- 5,791,653
Operating expenses:
Research and development............... 780,159 1,776,891 4,656,478 8,954,904 9,041,345
General and administrative............. 348,107 548,766 988,230 1,573,807 2,593,017
Amortization of deferred stock
compensation......................... -- -- -- -- 85,480
----------- ----------- ----------- ------------ -----------
Total operating expenses 1,128,266 2,325,657 5,644,708 10,528,711 11,719,842
----------- ----------- ----------- ------------ -----------
Operating loss........................... (1,128,266) (2,325,657) (5,644,708) (10,528,711) (5,928,189)
----------- ----------- ----------- ------------ -----------
Net interest income (expense)............ 21,547 277,563 485,392 (205,130) (60,617)
----------- ----------- ----------- ------------ -----------
Net loss................................. $(1,106,719) $(2,048,094) $(5,159,316) $(10,733,841) $(5,988,806)
=========== =========== =========== ============ ===========
Basic and diluted net loss per share..... $ (0.72) $ (1.10) $ (2.25) $ (4.45) $ (2.45)
Shares used in computing basic and
diluted net loss per share............. 1,543,064 1,869,246 2,292,966 2,409,948 2,443,237
Pro forma basic and diluted net loss per
share.................................. $ (0.47)
Shares used in computing pro forma basic
and diluted net loss per share......... 12,712,029
</TABLE>
The following table contains a summary of our balance sheet on an actual
basis at December 31, 1995, 1996, 1997, 1998 and 1999.
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------------------------
1995 1996 1997 1998 1999
----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............... $ 1,491,400 $11,404,142 $ 6,925,364 $ 3,683,423 $ 13,409,450
Working capital (deficiency)............ 1,584,187 11,330,250 6,108,938 (4,259,366) 12,984,572
Total assets............................ 2,266,384 11,965,284 7,612,796 5,341,816 15,717,214
Long-term obligations, less current
portion............................... -- 270,950 281,636 163,262 61,854
Redeemable convertible preferred stock
and warrants.......................... 3,524,236 14,654,604 14,654,626 14,950,624 39,193,366
Deferred compensation................... -- -- -- -- (1,809,680)
Accumulated deficit..................... (1,314,381) (3,362,475) (8,521,791) (19,255,632) (25,244,438)
Total common shareholders' deficit...... (1,260,359) (3,177,653) (8,240,444) (18,973,881) (24,844,156)
</TABLE>
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<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our financial
statements and related notes included in this prospectus. The following
discussion contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those anticipated
in these forward-looking statements as a result of certain factors, including
those discussed below and elsewhere in this prospectus, particularly under the
heading "Risk Factors."
OVERVIEW
Since our operations began in 1994, we have been engaged in the discovery
and development of novel therapeutics for the treatment of acute and chronic
inflammatory diseases. Our lead product candidate, AGI-1067, is currently in
Phase II clinical trials for the treatment and prevention of post-angioplasty
restenosis.
To date, we have devoted substantially all of our resources to research and
development. We have not derived any commercial revenues from product sales and,
excluding the effect of certain license fees of a non-recurring nature received
in connection with entering into an exclusive license agreement, expect to incur
significant losses in most years prior to deriving any such product revenue. We
have incurred significant losses since we began operations in 1994 and, as of
December 31, 1999, had an accumulated deficit of $25.2 million. There can be no
assurance if or when we will become profitable. We expect to continue to incur
significant operating losses over the next several years as we continue to incur
increasing research and development costs. We expect that losses will fluctuate
from quarter to quarter and that such fluctuations may be substantial. Our
ability to achieve profitability depends upon our ability, alone or with others,
to complete the successful development of our product candidates, to obtain
required regulatory clearances, and to manufacture and market our future
products. In October 1999 we entered into an exclusive licensing agreement with
Schering-Plough covering our lead compound, AGI-1067. Under terms of the
agreement, Schering-Plough obtained exclusive worldwide rights to AGI-1067 and
related compounds. Schering-Plough is responsible for all costs of development
and commercialization. Schering-Plough paid us an initial licensing fee and will
pay milestone fees upon achievement of development, regulatory and commercial
milestones. If all milestones are met, total fees paid to us, excluding
royalties and development costs, could reach $189 million.
RESULTS OF OPERATIONS
COMPARISON OF YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
Revenues
Total revenues were $5,791,653 in 1999, compared to zero in 1998 and 1997.
The revenues in 1999 were attributable to licensing fees and research and
development revenues from the exclusive license agreement signed in 1999 with
Schering-Plough.
Expenses
Research and Development. Research and development expenses were
$9,041,345 for the year ended December 31, 1999, compared to $8,954,904 for the
year ended December 31, 1998 and $4,656,478 for the year ended December 31,
1997. The increase of $86,441 or 1%, from 1998 to 1999, reflects higher costs
associated with the AGI-1067 clinical trials. The $4,298,426, or 92%, increase
in research and development expenses from 1997 to 1998 was due primarily to
expansion of the number of clinical trials and pre-clinical testing for our lead
compound AGI-1067. These increased costs principally involved payments to third
party contractors.
General and Administrative. General and administrative expenses for the
years ended December 31, 1999, 1998 and 1997 were $2,593,017, $1,573,807 and
$988,230, respectively. The $1,019,210, or 65%, increase for 1999 compared to
1998 was due primarily to an increase in administrative personnel to support
22
<PAGE> 25
our expanded research and development and licensing programs, and to the costs
of relocating to a larger scientific and administration facility. General and
administrative expenses increased $585,577, or 59%, for 1998 compared to 1997.
The increase in 1998 expense was primarily related to administrative activities
to support our expanded research and development efforts.
Amortization of Deferred Stock Compensation. In 1999 we recorded non-cash
deferred stock compensation of approximately $1,900,000 for options awarded with
exercise prices below the deemed fair value for financial reporting purposes of
our common stock on their respective grant dates. In January 2000, we awarded
options which will result in approximately $9,000,000 of additional non-cash
deferred stock compensation. This deferred stock compensation will be amortized
using a graded vesting method. Amortization of deferred stock compensation was
$85,480 in 1999. There was no amortization of deferred stock compensation in
1998 and 1997.
Net Interest (Expense) Income
Net interest expense was $60,617 and $205,130 for the years ended December
31, 1999 and 1998, respectively. The $144,513, or 70%, decrease in expense in
1999 as compared to 1998 was attributable to an increase in the amount of cash
available for investing from the sale of Series C convertible preferred stock
and conversion of the bridge loan in April 1999. Net interest income was
$485,392 for the year ended December 31, 1997. The $690,522 decrease in net
interest income in 1998 as compared to 1997 was due primarily to a lower level
of invested funds, as well as interest expense related to the bridge loan
entered into in 1998.
Income Taxes
As of December 31, 1999, we had net operating loss carryforwards and
research and development credit carryforwards of $25,031,843 and $1,111,891,
respectively, available to offset future regular and alternative taxable income.
The net operating loss carryforwards will expire between 2009 and 2019. The
research and development credit carryforwards will expire between 2009 and 2014.
The maximum annual use of the net operating loss carryforwards is limited in
situations where changes occur in our stock ownership. Because of our lack of
earnings history, the resulting deferred tax assets have been fully offset by a
valuation allowance. The utilization of the loss and credit carryforwards to
reduce future income taxes will depend on our ability to generate sufficient
taxable income prior to the expiration of the net operating loss carryforwards
and research and development credit carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have financed our operations primarily through private
placements of preferred stock, which have resulted in net proceeds to us of
$38,611,495 through December 31, 1999. We had cash and cash equivalents of
$13,409,450 at December 31, 1999, compared with $3,683,423 at December 31, 1998
and $6,925,364 at December 31, 1997. Working capital at December 31, 1999 was
$12,984,572, compared to a deficit of $4,259,366 at December 31, 1998 and
$6,108,938 at December 31, 1997. Long-term debt was $61,854, $163,262 and
$281,636 for the years ending December 31, 1999, 1998 and 1997, respectively.
Long-term debt consists primarily of capital equipment lease obligations.
Net cash used in operating activities was $6,679,626, $9,102,792 and
$4,259,955 for the years ended December 31, 1999, 1998 and 1997, respectively.
The decrease in net cash used in 1999 compared to 1998 was due to receipt of a
$5,000,000 initial license fee from Schering-Plough. The increase in net cash
used in 1998 compared to 1997 resulted from an increase in net loss from
operations.
Net cash used in investing activities was $1,115,085, $62,586 and $295,284
for the years ended December 31, 1999, 1998 and 1997, respectively. Net cash
used in investing activities consisted primarily of equipment purchases and
leasehold improvements.
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<PAGE> 26
Net cash provided by financing activities was $17,520,738, $5,923,437 and
$76,461 for the years ended December 31, 1999, 1998 and 1997, respectively. Net
cash provided by financing activities consisted primarily of proceeds from the
sale of preferred stock and proceeds from the bridge loan.
Based upon the current status of our product development and
commercialization plans, we believe that the net proceeds of this offering,
together with our existing cash and cash equivalents, will be adequate to
satisfy our capital needs through at least the calendar year 2002. However, our
actual capital requirements will depend on many factors, including:
- the status of product development;
- the time and cost involved in conducting clinical trials and
obtaining regulatory approvals;
- filing, prosecuting and enforcing patent claims;
- competing technological and market developments; and
- our ability to market and distribute our future products and
establish new licensing agreements.
IMPACT OF YEAR 2000
In late 1999 we completed remediation and testing of our computer systems
at a nominal cost. As a result of those planning and implementation efforts, we
have experienced no significant disruptions in our information technology and
non-information technology systems to date and we believe those systems
successfully responded to the Year 2000 date change. We are not aware of any
material problems resulting from Year 2000 issues. We will continue to monitor
our mission critical computer systems and the appropriate systems of our
suppliers and vendors throughout 2000 to ensure that any latent Year 2000
matters which may arise are addressed promptly. To date, we are not aware of any
Year 2000 disruptions in the computer systems of our significant vendors or
service providers.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ON MARKET RISK
The primary objective of our investment activities is to preserve principal
while at the same time maximizing the income we receive from our investments
without significantly increasing risk. Some of the securities that we invest in
may have market risk. This means that a change in prevailing interest rates may
cause the fair value of the principal amount of the investment to fluctuate. For
example, if we hold a security that was issued with a fixed interest rate at the
then-prevailing rate and the prevailing interest rate later rises, the fair
value of the principal amount of our investment will probably decline. To
minimize this risk in the future, we intend to maintain our portfolio of cash
equivalents and short-term investments in a variety of securities, including
commercial paper, money market funds, government and non-government debt
securities. The average duration of all of our investments has generally been
less than one year. Due to the short-term nature of these investments, we
believe we have no material exposure to interest rate risk arising from our
investments.
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<PAGE> 27
BUSINESS
OVERVIEW
AtheroGenics is an emerging pharmaceutical company focused on the
discovery, development and commercialization of novel small molecule
therapeutics for the treatment of chronic inflammatory diseases, such as
atherosclerosis, asthma and arthritis. We designed our lead product candidate,
AGI-1067, to benefit patients with coronary artery disease, which is
atherosclerosis of the blood vessels of the heart. In October 1999 we entered
into a worldwide exclusive license agreement with Schering-Plough to develop and
commercialize AGI-1067. We are currently testing AGI-1067 in a Phase II clinical
trial for the prevention and treatment of restenosis, the reoccurrence of
narrowing of the coronary arteries following angioplasty in patients with
coronary artery disease. Schering-Plough has extensive experience in developing,
manufacturing and commercializing pharmaceutical products. Schering-Plough's
total licensing and milestone payments to us for this initial indication,
excluding royalties and development costs, could reach $189 million.
We have developed a proprietary drug discovery technology platform called
vascular protectant, or v-protectant, technology for treating diseases of
chronic inflammation. Our v-protectants are therapeutic small molecules that
block the production of selected inflammatory proteins, including VCAM-1. We
believe that an excess number of VCAM-1 molecules on the surface of cells is a
disease state. We believe that v-protectants can suppress chronic inflammation
by blocking production of VCAM-1 without undermining the body's ability to
protect itself against infection.
AGI-1067 is our v-protectant candidate that is most advanced in clinical
development. We are currently managing a Phase II clinical trial, CART-1, to
assess in 315 patients the safety and effectiveness of AGI-1067 for the
treatment of post-angioplasty restenosis. We recruited our first CART-1 patient
in September 1999 and we expect to complete this clinical trial in the first
half of 2001. Our Phase II clinical trial program follows our successful
completion of seven Phase I clinical trials comprising more than 150 men and
women.
We have identified other potential v-protectant product candidates to treat
asthma, cystic fibrosis, rheumatoid arthritis and solid organ transplant
rejection. We are evaluating these v-protectant product candidates to choose
lead product candidates for clinical development. We plan to develop these
v-protectants rapidly and may seek regulatory fast track status to expedite
development and commercialization. We will continue to expand our v-protectant
technology platform using functional genomics to identify novel therapeutic gene
targets.
INFLAMMATION DISEASES
Inflammation is a normal response of the body to protect tissues from
infection, injury or disease. The inflammatory response begins with the
production and release of chemical agents by cells in the infected, injured or
diseased tissue. These agents cause redness, swelling, pain, heat and loss of
function. Inflamed tissues generate additional signals that recruit leukocytes
to the site of inflammation. Leukocytes destroy any infective or injurious
agent, and remove cellular debris from damaged tissue. This inflammatory
response usually promotes healing but, if uncontrolled, may become harmful.
The inflammatory response can be either acute or chronic. Acute
inflammation lasts at most only a few days. The treatment of acute inflammation,
where therapy includes the administration of aspirin and other non-steroidal
anti-inflammatory agents, provides relief of pain and fever for patients. In
contrast, chronic inflammation lasts weeks, months or even indefinitely and
causes tissue damage. In chronic inflammation, the inflammation becomes the
problem rather than the solution to infection, injury or disease. Chronically
inflamed tissues continue to generate signals that attract leukocytes from the
bloodstream. When leukocytes migrate from the bloodstream into the tissue they
amplify the inflammatory
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<PAGE> 28
response. This chronic inflammatory response can break down healthy tissue in a
misdirected attempt at repair and healing. Diseases characterized by chronic
inflammation include, among others:
- atherosclerosis, including coronary artery disease;
- asthma;
- cystic fibrosis;
- rheumatoid arthritis; and
- solid organ transplant rejection.
Atherosclerosis is a common disease that results from inflammation and the
buildup of plaque in arterial blood vessel walls. Plaque consists of
inflammatory cells, cholesterol and cellular debris. Atherosclerosis, depending
on the location of the artery it affects, may result in heart attack, stroke or
amputation. There are no medications available for physicians to treat directly
the underlying chronic inflammation of atherosclerosis.
Atherosclerosis of the blood vessels of the heart is called coronary artery
disease. Treatment for coronary artery disease often progresses to therapeutic
procedures including angioplasty or bypass surgery to re-establish an effective
blood supply to the heart. Angioplasty corrects the blockage by the inflation of
a balloon delivered by catheter, with or without the placement of a stent, at
the site of the obstructing plaque. After angioplasty, the artery opened by the
procedure often re-narrows. Inflammation plays an important role in this
re-narrowing called restenosis. There is no medical treatment for restenosis.
Asthma is a common chronic inflammatory disease of the bronchial tubes,
which are the airways in the lungs. Asthma is marked by episodic airway attacks
that are caused by many stresses, including allergy, cold air, ozone or
exercise. Asthma therapy has concentrated on the use of inhaled corticosteroids
to reduce chronic inflammation and bronchodilators to provide symptomatic
relief. Asthmatic patients, however, continue to experience flare-ups, or
exacerbations, that are not prevented or treated by these medicines.
Cystic fibrosis is an inherited disease that presents in childhood with
blocked glands of various organs, including the lungs, intestines and pancreas.
This chronic blockage leads to chronic inflammation and recurrent lung
infections. Patients with cystic fibrosis develop chronic lung inflammation that
may suddenly flare with severe consequences. Current treatment only attempts to
control infection, primarily with antibiotics.
There is a wide variety of other chronic inflammatory diseases, including
rheumatoid arthritis and solid organ transplant rejection. Physicians regularly
use anti-inflammatory agents, such as aspirin, other non-steroidal
anti-inflammatory drugs and corticosteroids, alone or in combination with
immuno-suppressants, to treat these diseases. However, these diseases may
suddenly flare due to either the tissue inflammation that underlies them or
bacteria that take advantage of the suppressed immune response induced by
present therapies. Treatments for the underlying disease have major side effects
and are not completely effective for these inflammatory exacerbations. For
example, systemic corticosteroids cause major side effects including high blood
pressure, adult-onset diabetes, cataracts, brittle bones and increased risk of
infection.
Many physicians are only now becoming aware of the key role of chronic
inflammation in diverse diseases such as atherosclerosis and asthma for which
existing anti-inflammatory treatments are incomplete and limited in use. As more
physicians recognize that a wide range of chronic diseases are inflammatory in
nature, we believe that these physicians will require safer and more effective
anti-inflammatory treatments. We believe that one of these therapeutic
approaches will be the administration of drugs designed to block the migration
of leukocytes through blood vessel walls into inflamed tissues.
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<PAGE> 29
V-PROTECTANT TECHNOLOGY
We have developed a proprietary drug discovery technology platform for the
treatment of chronic inflammatory diseases. This platform is based on the work
of our scientific co-founders R. Wayne Alexander, M.D., Ph.D., and Russell M.
Medford, M.D., Ph.D. In 1993 Drs. Alexander and Medford discovered a novel
mechanism within arterial blood vessel walls through which the excessive
accumulation of leukocytes could be controlled without affecting the body's
ability to fight infection. This platform is called vascular protectant, or
v-protectant technology. V-protectant technology exploits the observation that
the endothelial cells that line the interior wall of the blood vessel play an
active role in recruiting leukocytes from the blood to the site of chronic
inflammation. V-protectants are therapeutic small molecules that block a class
of signals, called oxidant signals, that are generated within endothelial cells.
These oxidant signals activate genes that produce inflammatory proteins. The
protein products of these selected genes, including VCAM-1, attract leukocytes
to the site of chronic inflammation. We believe that an excess number of VCAM-1
molecules on the surface of cells is a disease state. By blocking this specific
type of inflammation, we believe that AGI-1067 and other v-protectants will not
undermine the body's ability to protect itself against infection.
[Diagram -- This illustration contains an image call-out of the cellular
mechanism of action of v-protectants. The image will be inside of the cell wall
showing a v-protectant icon blocking the oxidized inflammatory signal. This
blocking effect stops the inflammatory cascade and the expression of VCAM-1.]
BUSINESS STRATEGY
Our objective is to become a leading pharmaceutical company focused on
discovering, developing and commercializing novel therapeutics for the treatment
of chronic inflammatory diseases. The key elements of our strategy include the
following:
- Develop AGI-1067 for commercialization in collaboration with
Schering-Plough. We have entered into an exclusive license agreement
with Schering-Plough to develop and commercialize our lead product
candidate, AGI-1067, for the treatment of atherosclerosis. The
collaboration will seek initially to develop AGI-1067 for the treatment
and prevention of restenosis in patients with coronary artery disease who
undergo angioplasty. Schering-Plough's total licensing and milestone
payments to us for this initial indication, excluding royalties and
development costs, could reach $189 million.
- Extend our v-protectant technology platform into additional therapeutic
areas that address unmet medical needs. We believe that our
v-protectants have the potential for treating a wide variety of other
inflammatory diseases and clinical conditions. These indications include
asthma, cystic fibrosis, rheumatoid arthritis, solid organ transplant
rejection and other diseases.
- Create value rapidly through innovative drug discovery coupled with
innovative drug development. We intend to use our capabilities to
identify scientific breakthroughs in inflammation and move these rapidly
through pre-clinical testing to clinical trials. We intend to use our
development expertise to minimize the time required to commercialize our
functional genomics and medicinal and combinatorial chemistry
discoveries.
- Expand our product candidate portfolio. In addition to our existing
discovery programs, we intend to acquire rights to other product
candidates and technologies that complement our existing product
candidate lines or that enable us to capitalize on our scientific and
clinical development expertise. We plan to expand our product candidate
portfolio by in-licensing or acquiring product candidates, technologies
or companies.
- Commercialize our products. We plan to collaborate with large
pharmaceutical companies to commercialize products that we develop which
are targeted at patient or physician populations in broad markets. In
contrast, we plan to develop a sales force to commercialize those of our
products targeted at patient or physician populations in narrow markets.
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<PAGE> 30
PRODUCTS
The table below summarizes our therapeutic programs, their target
indication or disease, development status and commercial strategy.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
THERAPEUTIC PROGRAM DISEASE DEVELOPMENT STATUS(1) COMMERCIAL STRATEGY
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LEAD V-PROTECTANT
AGI-1067 Restenosis Phase II clinical trial Exclusive license to
Schering-Plough
- --------------------------------------------------------------------------------------------------
OTHER V-PROTECTANTS
AGI-series, Exacerbations of asthma Compound selection Internal
intravenous and cystic fibrosis
AGI-series, oral Rheumatoid arthritis Compound selection Collaboration
AGI-series, oral Solid organ transplant Compound selection Internal
rejection
Oral product Chronic asthma Research Collaboration
candidate
Functional genomics Inflammatory diseases Research Collaborations
- --------------------------------------------------------------------------------------------------
DIAGNOSTICS
Oxykine diagnostic Atherosclerosis Clinical testing Collaboration
- --------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
(1) Reference to compound selection means the process by which we are selecting
a lead product candidate for clinical development.
We have established therapeutic programs for product development using
product candidates selected from among our compound libraries. These programs
seek to exploit the value of the products early and to expand their use broadly.
We are developing our lead compound, AGI-1067 and related compounds in
collaboration with Schering-Plough. We are selecting product candidates from
among our AGI-1000 series, AGI-1100 series, AGI-1200 series, AGI-1300 series and
AGI-1400 series for internal development. We are also pursuing novel discovery
targets in chronic inflammation.
AGI-1067
AGI-1067, our lead v-protectant product candidate, is a small molecule that
is orally dosed once per day. In pre-clinical testing, AGI-1067 has shown the
following three biological properties that we believe will benefit patients with
atherosclerosis:
- AGI-1067 blocks expression of VCAM-1. We believe that decreased VCAM-1
expression will diminish atherosclerosis and restenosis.
- AGI-1067 is a potent anti-oxidant. AGI-1067 protects LDL cholesterol
from converting into a harmful inflammatory agent.
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<PAGE> 31
- AGI-1067 lowers LDL cholesterol. LDL cholesterol lowering reduces the
risk of developing atherosclerosis.
According to the American College of Cardiology, more than seven million
people in the United States have coronary artery disease, including 1.5 million
who have heart attacks every year. In order to make a definitive diagnosis in
patients with suspected coronary artery disease, a specially trained
cardiologist or radiologist performs a diagnostic procedure called angiography
in which dye is injected through an intravenous catheter to image the coronary
arteries. Angiography can reveal coronary artery disease that may require an
invasive procedure. For more than one million patients annually in North
America, this invasive therapeutic intervention takes the form of angioplasty.
This procedure consists of placing a balloon-tipped catheter into the coronary
artery and mechanically re-opening the blood vessel by expanding the balloon
under very high pressure. In addition, cardiologists may opt to treat some of
these coronary artery blockages by inserting a small cylindrical mesh device,
called a stent, to keep the blood vessel open after the catheter is removed.
Angioplasty does not cure coronary artery disease, nor does it treat the
underlying chronic inflammation. In fact, angioplasty induces an inflammatory
response that contributes to its failure in approximately 30% of patients who
undergo the procedure. This process of re-narrowing, or post-angioplasty
restenosis, is a major clinical problem that limits the effectiveness of the
procedure. Restenosis following balloon angioplasty occurs due to coronary
artery and endothelial cell damage. The development of stents and the ongoing
research and development activities with respect to catheter improvement have
not eradicated the problem of restenosis, but have introduced the new problem of
in-stent restenosis which is particularly difficult to treat. In-stent
restenosis occurs when the cells that surround the stent proliferate and fill
the opening of the vessel.
Our initial development target is post-angioplasty restenosis. More
significantly, we believe that AGI-1067 may treat all areas of the coronary
artery susceptible to atherosclerosis in a way that cannot be achieved with any
existing therapy.
We have completed pre-clinical testing in multiple species to establish the
therapeutic properties of AGI-1067. Dosed orally, AGI-1067 blocked VCAM-1
expression, prevented atherosclerosis and showed potent anti-oxidant activity.
In addition, AGI-1067 reduced LDL-cholesterol comparably to and in combination
with statins, which are widely used cholesterol lowering drugs.
Based upon our successful completion of pre-clinical testing, we studied
AGI-1067 in seven Phase I clinical trials in more than 150 men and women,
including healthy volunteers and patients up to the age of 85 to assess
tolerability and potential for interaction with other drugs. In addition, we
have given AGI-1067 in combination with other drug classes commonly used in
patients with atherosclerosis. In these clinical trials, six of which we
conducted under the Investigational New Drug Application for cholesterol
lowering, the subjects tolerated AGI-1067 well, with no dose or use-limiting
side effects. These positive results supported our progress to Phase II clinical
trials.
We are presently conducting a Phase II clinical trial in Canada to assess
the tolerability and efficacy of AGI-1067 as an agent to prevent
post-angioplasty restenosis. We opened our Canadian Investigational New Drug
Application in April 1999 for AGI-1067 as an agent to prevent post-angioplasty
restenosis. The Canadian Antioxidant Restenosis Trial, called CART-1, is a
multi-center, randomized, double-blind, safety and efficacy dose-ranging study,
comparing AGI-1067 with placebo and an active control in patients with
established coronary artery disease who undergo elective angioplasty. We plan to
dose 315 patients for six weeks and follow them for a total of six months.
During angiography performed six months after angioplasty, we will assess the
efficacy of AGI-1067 by measuring directly the diameter of the opening of the
treated coronary artery. We enrolled the first patient in CART-1 on September 2,
1999 and the trial is ongoing at four Canadian centers of excellence in
interventional cardiology. An independent data and safety monitoring board
reviews patient data periodically to ensure the continued safety of enrolled
patients.
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<PAGE> 32
We have formed a joint management committee with Schering-Plough to oversee
all aspects of development and commercialization of AGI-1067. The committee
consists of equal numbers of AtheroGenics and Schering-Plough representatives.
Under direction of the joint management committee, we expect to manage further
clinical, pre-clinical and chemical development work for AGI-1067.
AGI-Series for Respiratory Diseases
We are developing an intravenously-dosed, small molecule v-protectant to
treat exacerbations of cystic fibrosis. Based on positive clinical trial
results, we will evaluate our v-protectant for the treatment of patients
hospitalized with exacerbations of asthma. For patients with chronic respiratory
diseases, including cystic fibrosis and asthma, an exacerbation is a sudden
worsening of the patient's breathing that usually requires hospitalization and
intensive therapy.
According to the Centers for Disease Control, asthma afflicts more than 17
million adults and children in the United States. From 1980 to 1994, the
prevalence of this disease increased by over 75%. Asthma morbidity and mortality
continue to rise in spite of massive public health efforts. In 1998, the
combined direct and indirect costs of asthma in the United States was $9.8
billion. Current therapies that target the underlying disease include
corticosteroids and several classes of drugs that relieve symptoms but are not
effective for chronic inflammation. None of these drugs, including inhaled
corticosteroids, is particularly effective for treating exacerbation of asthma
which remains a major unmet medical problem. We believe that v-protectants may
reduce the inflammation associated with the acute exacerbation of asthma and may
be useful in the treatment of up to 1.8 million patients annually who develop
acute exacerbations of asthma and seek emergency room treatment in the United
States.
Cystic fibrosis is a common hereditary disease among Caucasians. According
to the Cystic Fibrosis Foundation, there are 36,000 children and adults with
cystic fibrosis in the United States. Approximately 25% of patients with cystic
fibrosis are hospitalized at least once per year. Physicians treat exacerbations
of cystic fibrosis with antibiotics that treat the associated chronic bacterial
infection of the lungs. These antibiotics, however, do not address the chronic
inflammation that underlies cystic fibrosis. Physicians no longer use
corticosteroids routinely to treat exacerbations because they compromise the
patient's immune response to bacterial infection. We believe that v-protectants
can treat this chronic inflammation without compromising the necessary immune
response to bacteria.
We have identified small molecule, v-protectant product candidates from
among five AGI-series of compounds for intravenous administration to
hospitalized patients with respiratory diseases. We are evaluating these small
molecules based on development criteria such as potency, stability and ease of
formulation. We will use these criteria to choose a lead product candidate for
clinical development that targets one or more respiratory disease indications.
We plan to apply to the FDA for fast track status for this product candidate as
a treatment for exacerbations of cystic fibrosis. We have observed a decrease in
lung inflammation in a pre-clinical model of asthma using a compound discovered
in this effort.
AGI-Series for Rheumatoid Arthritis
We are developing an orally-dosed, small molecule v-protectant to treat
patients with chronic rheumatoid arthritis who have not responded to maximum
current therapy. For patients with rheumatoid arthritis, chronic therapy
progresses from pain relievers to increasingly toxic immunosuppressants, called
disease modifiers. Based on positive clinical trial results, we will evaluate
our v-protectant for the treatment of patients who are receiving moderate
disease modifying therapy.
Rheumatoid arthritis is a common auto-immune disease which affects joints
and arterial blood vessels. According to the Arthritis Foundation, there are 2.1
million people with rheumatoid arthritis in the United States. Rheumatoid
arthritis and related diseases cost the U.S. economy more than $65 billion
annually in direct and indirect costs. Approximately 70% of patients with
rheumatoid arthritis are young and middle-aged women. Physicians treat
rheumatoid arthritis with pain relievers including aspirin and other non-
steroidal anti-inflammatory drugs, and proceed in resistant patients to
treatment with low doses of corticosteroids and immunosuppressants. The recent
successful introduction of new drugs, including
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<PAGE> 33
Celebrex, Enbrel and Vioxx, has highlighted both the market potential and the
size and scope of the unmet medical need of these patients. These drugs are
partially effective but either increase the risk of infection or do not address
the chronic vascular inflammation that marks rheumatoid arthritis. We believe
that v-protectants can treat the chronic inflammation of rheumatoid arthritis
including the direct inflammation of the arteries, without increasing the
patient's risk for infection.
We have identified small molecule, v-protectant product candidates from
among five AGI-series of compounds for oral administration to rheumatoid
arthritis patients who have not responded to therapy. We are evaluating these
small molecules based on development criteria such as potency, stability and
ease of formulation.
AGI-Series for Post-Transplant Late and Chronic Solid Organ Rejection
We are developing an orally-dosed, small molecule v-protectant to treat
late solid organ transplant rejection. Patients' immune systems recognize
transplanted organs as foreign and therefore reject them. Physicians treat these
patients with powerful immuno-suppressants to block all immune and inflammatory
reactions that could cause acute solid organ rejection. These therapies place
patients at risk for life threatening infection. As the body adapts to the
transplanted organ, physicians modify therapy gradually to reduce the likelihood
of infection. During the first year, approximately 25% of patients who receive
solid organ transplants develop a delayed sudden transplant rejection, which is
called late solid organ transplant rejection. We believe that v-protectants will
extend protection to the transplanted organ without increasing the patient's
risk for infection.
Those patients who do not reject the transplanted organ within the first
year remain at risk indefinitely to reject the transplanted solid organ. This
chronic inflammatory process is called chronic solid organ transplant rejection.
The vascular protection provided by our product candidates may protect solid
organs from rejection beyond the first year without increasing the risk of
infection. No other solid organ anti-rejection drug in development has this
profile.
According to the American Society of Transplantation, there are
approximately 30,000 heart, kidney and liver transplant recipients per year in
the United States. Of these, 7,000 develop late transplant rejection. There are
200,000 organ transplant recipients in the United States who are at risk of
chronic transplant rejection. Chronic rejection is a major factor contributing
to organ shortage.
We have identified small molecule, v-protectant product candidates from
among five AGI-series of compounds for oral administration to patients who have
received transplants. We are evaluating these small molecules based on
development criteria such as potency, stability and ease of formulation. We will
use these criteria to choose a lead product candidate for clinical development
that targets late solid organ transplant rejection. We plan to apply to the FDA
for fast track status for this product candidate as an adjunct to current
transplant therapy, which includes immunosuppressant and anti-inflammatory
drugs. Based on positive results, we will seek to expand the indication into
protection from chronic solid organ transplant rejection.
Diagnostic Assay Program
Based on our v-protectant technology platform, we have designed a simple
and proprietary blood test that measures a circulating blood marker for
atherosclerosis. We plan to conduct tests on human blood samples to establish
whether this new marker, called Oxykine, is an accurate and useful diagnostic
tool. We believe Oxykine will allow physicians to determine whether a patient
has active and progressive atherosclerosis and whether the disease is responding
to medical therapy. There are currently no diagnostic tools that meet this
critical need in atherosclerosis disease management.
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RESEARCH PROGRAM
We have built a robust research program using our demonstrated expertise in
functional genomics, molecular biology, cell biology, physiology, pharmacology,
medicine, biochemistry, analytical and synthetic chemistry and bioengineering.
Our research program has three main objectives:
- To discover and develop v-protectants with enhanced potency and improved
therapeutic properties. We are synthesizing novel compounds and testing
them in a variety of biochemical and cell-based assays to discover and
develop new, small molecule v-protectants. We believe that these
v-protectants will have improved therapeutic properties and applicability
across a wide range of chronic inflammatory diseases.
- To identify novel anti-inflammatory therapeutic targets utilizing
functional genomics. We have established a functional genomics program
that exploits our understanding of oxidant signals. We believe our
functional genomics program will enable us to identify novel genes and
their protein products that are critical to the chronic inflammatory
process.
- To develop new classes of small molecule, v-protectant therapeutics based
on the novel therapeutic targets identified by our functional genomics
program. We are identifying enzymes and other molecular targets that
either control or are controlled by oxidant signals. These discoveries
will enable our chemists to synthesize the next generation of
v-protectants. We intend to use these enzymes and other molecular targets
for both internal efforts and as strategic collaboration assets.
PATENTS AND INTELLECTUAL PROPERTY
We have established a patent portfolio of owned and in-licensed patents
that cover our lead v-protectant compounds and their use, as well as methods for
regulating the fundamental biological pathway involved in the production of the
inflammatory protein, VCAM-1. It is our goal to pursue both broad and specific
patent protection in the key areas of our research and development both in the
United States and internationally, and to identify value-added exclusive
in-licensing opportunities.
The patent approval process in the United States progresses through several
steps from filing an application, through review of the application by the U.S.
Patent and Trademark Office, and, if the application is allowed, to an issued
patent. There is a similar regulatory process in most non-U.S. countries. We
currently own one U.S. patent, two allowed U.S. patent applications, six pending
U.S. applications, and 50 associated non-U.S. patent filings. We co-own with
Emory University one pending U.S. patent application and 17 associated non-U.S.
patent filings. In addition, we hold exclusive licenses to 14 U.S. patents, one
U.S. patent application, and 61 associated non-U.S. patent filings.
We have license agreements with Emory University, the University of
Rochester, and The Regents of University of California covering aspects of our
technology. These agreements obligate us to make milestone payments upon
attainment of agreed-upon goals and royalty payments on sale of licensed
products and technology. The licenses with Emory University and The Regents of
the University of California also require us to be diligent in commercializing
the licensed technologies within certain time periods. In addition, we have
collaborative research agreements with Emory University, The Wistar Institute of
Anatomy and Imperial Cancer Research Technology Limited in the United Kingdom.
AGI-1067 Patent Portfolio
Our patent coverage on AGI-1067 is based on patent filings that we own and
patent filings exclusively licensed from Emory University. We own one issued
patent, U.S. Patent 5,262,439, and related filings in Japan, Canada and Europe
that generically cover the compound AGI-1067 as a member of a class of related
compounds. The U.S. Patent and Trademark Office has recently allowed one of our
patent applications that covers the specific compound AGI-1067 and its use to
treat VCAM-1 mediated diseases including, among others, atherosclerosis,
post-angioplasty restenosis and coronary artery disease. The U.S.
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Patent and Trademark Office has allowed another of our patent applications that
covers the use of a class of compounds closely related to AGI-1067 to treat
VCAM-1 mediated diseases. These key applications have also been filed in 20
non-U.S. countries. The patents that we have exclusively licensed from Emory
University include the use of a substance that inhibits a class of oxidant
signals to treat diseases mediated by VCAM-1.
Other V-Protectant Compounds
We have filed patent applications in the United States and non-U.S.
countries that cover the use of a number of compounds identified in our research
program to act as v-protectants, and specifically for use in treating
cardiovascular and inflammatory disease. Some of these compounds are novel and
some represent new uses for known compounds. In addition we have exclusively
licensed patents from Emory University that cover the use of a class of
compounds which act as v-protectants, as well as several patents from the
University of Rochester that are also directed to medical uses of the compounds.
Our patent position, like that of many pharmaceutical companies, is
uncertain and involves complex legal and factual questions for which important
legal principles are unresolved. We may not develop or obtain rights to products
or processes that are patentable. Even if we do obtain patents, they may not
adequately protect the technology we own or in-license. In addition, others may
challenge, seek to invalidate, infringe or circumvent any patents we own or
in-license, and rights we receive under those patents may not provide
competitive advantages to us.
Our commercial success will depend in part on our ability to manufacture,
use, sell and offer to sell our product candidates without infringing patents or
other proprietary rights of others. We may not be aware of all patents or patent
applications that may impact our ability to make, use or sell any of our drug
candidates. For example, U.S. patent applications are confidential while pending
in the Patent and Trademark Office, and patent applications filed in non-U.S.
countries are often first published six months or more after filing. Further, we
may not be aware of published or granted conflicting patent rights. Any
conflicts resulting from patent applications and patents of others could
significantly reduce the coverage of our patents and limit our ability to obtain
meaningful patent protection. If others obtain patents with conflicting claims,
we may be required to obtain licenses to these patents or to develop or obtain
alternative technology. We may not be able to obtain any such license on
acceptable terms or at all. Any failure to obtain such licenses could delay or
prevent us from developing or commercializing our drug candidates, which would
adversely affect our business.
Litigation or patent interference proceedings may be necessary to enforce
any of our patents or other proprietary rights, or to determine the scope and
validity or enforceability of the proprietary rights of others. The defense and
prosecution of patent and intellectual property claims are both costly and time
consuming, even if the outcome is favorable to us. Any adverse outcome could
subject us to significant liabilities, require us to license disputed rights
from others, or require us to cease selling our future products.
Trademarks
We have applications to register the trademarks AtheroGenics and associated
design, AGI and Oxykine pending with the U.S. Patent and Trademark Office. We
cannot assure you that our applications to register these trademarks will be
successful. We have no knowledge of any infringement or any prior claims of
ownership of trademarks that would materially adversely affect our current
operations.
EXCLUSIVE LICENSE AGREEMENT WITH SCHERING-PLOUGH
On October 22, 1999 we entered into a worldwide exclusive license agreement
with Schering-Plough. This agreement consists of contracts with two
Schering-Plough affiliates. Under the agreement we granted to Schering-Plough an
exclusive license under our patents and know-how to make, use and sell AGI-1067
and other specified compounds for the treatment of restenosis, coronary artery
disease and atherosclerosis. During the term of the agreement with
Schering-Plough, we will not develop or commercialize outside the
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agreement any compound for the treatment or prevention of restenosis, coronary
artery disease or atherosclerosis.
Schering-Plough paid us an initial licensing fee upon signing the agreement
and has assumed responsibility for all costs going forward associated with the
development, manufacturing, and commercialization of products containing
AGI-1067 and any other licensed compound. Further, Schering-Plough will make
certain payments to us upon achievement of clinical and regulatory milestones.
Schering-Plough will also pay us a royalty on all net sales of licensed products
and will pay us fees associated with the achievement of certain annual sales
levels. Schering-Plough's total direct payments to us for the initial indication
of restenosis, excluding royalties and development costs, could reach $189
million.
MANUFACTURING
We have entered into an arrangement with a third party manufacturer for the
supply of AGI-1067 bulk drug substance and another third party manufacturer for
the formulated drug product. We believe that we could obtain bulk drug and
formulated drug product from other manufacturers and formulators at competitive
prices, if necessary. The present agreements enable us to focus on our research
and development strengths, minimize fixed costs and capital expenditures, and
gain access to advanced manufacturing process capabilities and expertise. Our
exclusive license agreement with Schering-Plough grants them the right to
manufacture AGI-1067 for late-stage clinical trials and commercialization.
Schering-Plough has extensive experience in manufacturing pharmaceutical
products.
Our supplier of the bulk drug substance for AGI-1067 operates under current
Good Manufacturing Practice guidelines using cost-effective and readily
available materials and reliable processes. The starting material used in the
manufacturing process of AGI-1067 is probucol, which was once widely used in
North America as a cholesterol-lowering agent, but has since been withdrawn from
the North American market due to lack of efficacy. Under the terms of our
contract, our bulk drug supplier is committed to manufacture sufficient
quantities to support development activities for the foreseeable future. This
supplier is currently manufacturing AGI-1067 in development-scale batches.
After manufacture, a third party supplier formulates AGI-1067 into the drug
product under current Good Manufacturing Practice guidelines. We anticipate that
this supplier will be able to provide sufficient formulated drug product to
complete our ongoing and currently planned clinical trials.
We plan to establish manufacturing agreements with third parties that
comply with Good Manufacturing Practice guidelines for bulk drug substance and
oral or intravenous formulations of our other v-protectant product candidates.
SALES AND MARKETING
Under our exclusive license agreement for AGI-1067, Schering-Plough will
handle exclusively, or sublicense, on a worldwide basis, sales, marketing and
distribution of AGI-1067 for any therapeutic indication. Schering-Plough has
extensive experience in marketing pharmaceutical products.
We plan to collaborate with large pharmaceutical companies to commercialize
product candidates other than AGI-1067 which are for patient or physician
populations in broad markets. We believe that collaborating with large companies
that have significant marketing and sales capabilities provides for optimal
penetration into broad markets, particularly those areas that are highly
competitive. In contrast, we plan to develop a sales force to commercialize the
products targeted at patient and physician populations in narrow markets. By
using our own sales and marketing organization, we believe we can retain a
higher percentage of the profits generated from the sale of our products. We
believe that this sales and marketing strategy will enable us to achieve our
financial goals while maintaining our focus on innovative drug discovery coupled
with innovative drug development.
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COMPETITION
We believe pharmaceutical companies and research institutions will increase
their efforts to define and exploit emerging concepts about vascular cell
biology and oxidant signals for drug discovery programs relating to chronic
inflammation. Many of these companies and institutions have targeted indications
that overlap significantly with our targets and have substantially greater
resources than we do. They may, therefore, succeed in commercializing products
before we do that compete with us on the basis of efficacy, safety and price.
Our ability to compete is predicated on four related factors.
- First, our scientists and their collaborators have pioneered the basic
discoveries and research methodologies linking oxidant signals to
vascular cell inflammation. These discoveries and research methodologies
form the foundation for our proprietary drug discovery programs relating
to chronic inflammation.
- Second, our scientific expertise, coupled with our expertise in clinical
drug development, has enabled us to be the first company to conduct
clinical trials of an orally-administered, small molecule v-protectant.
We believe that our current Phase II clinical trials demonstrate that we
are maintaining this important first-to-clinic competitive advantage.
- Third, we expect that our exclusive license agreement with
Schering-Plough will allow us to sustain and extend our competitive
advantage.
- Fourth, we believe our scientific, development and licensing expertise
strongly positions us to acquire promising technologies and products
discovered outside AtheroGenics.
Our initial target for drug development is restenosis. We are aware of two
orally-dosed drugs that have shown efficacy in prevention of restenosis in
clinical trials. One of these drugs, Tranilast, is currently in a worldwide
Phase II/III clinical trial sponsored by SmithKline Beecham PLC. The rationale
for this clinical trial is based on efficacy in a limited Phase II clinical
trial in Japan. However, another major pharmaceutical company previously
discontinued Tranilast development during Phase II in the United States as a
treatment of asthma due to significant human liver toxicity. The second drug,
Lorelco, decreased the rate of restenosis in a North American clinical trial
undertaken by an independent investigator. This trial confirmed and extended
results from Japan, where Lorelco is still marketed. However, Aventis SA
previously withdrew Lorelco from North American markets as a lipid-lowering drug
due to lack of efficacy. We believe that a rare but potentially fatal side
effect makes Lorelco's return to the marketplace highly unlikely. In addition to
these drugs, some physicians advocate the use of anti-oxidant vitamins or the
use of specially designed catheters or improved angioplasty techniques to
decrease the incidence or severity of restenosis.
In addition to the drugs and devices that may compete with AGI-1067 in the
treatment of restenosis, there are a number of other drugs and compounds in
development for other indications that we target. A number of companies are
pursuing drugs that control aspects of the immune system across the range of
diseases that we target. For example, Genentech, Inc. in collaboration with
Tanox, Inc. and Novartis AG is developing a novel injectable asthma therapy
based on delivery of an anti-IgE monoclonal antibody, which targets the allergic
component of chronic asthma. In addition, a number of companies are pursuing
cystic fibrosis intervention either through gene therapy in children or through
drugs that target the leukocyte response to chronic bacterial infection in
children and adults.
GOVERNMENTAL REGULATION
We plan to develop prescription-only drugs for the foreseeable future. The
FDA is the regulatory agency that is charged to protect people in the United
States who take prescription medicines. Every country has a regulatory body with
a similar mandate. In addition, the European Union has vested centralized
authority in the European Medicines Evaluation Agency and Committee on
Proprietary Medicinal Products to standardize review and approval across member
nations.
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Regulatory agencies have established guidelines and regulations for the
drug development process. This process involves several steps. First, the drug
company must generate sufficient pre-clinical data to support initial human
testing. In the United States, the drug company must submit an Investigational
New Drug Application prior to human testing. The Investigational New Drug
Application contains adequate data on product candidate chemistry, toxicology
and metabolism and, where appropriate, animal research testing to support
initial safety evaluation in humans. In addition, the drug company provides to
the FDA a clinical plan, including proposed use and testing in subjects
comprising healthy volunteers and patients.
Clinical trials for a new product candidate usually proceed through four
phases:
- Phase I clinical trials explore safety, blood levels, metabolism and the
potential for interaction with other drugs. Phase I typically proceeds
from healthy volunteers into patients with the target disease and
comprises up to approximately 200 total subjects.
- Phase II clinical trials establish a dose for future testing and
marketing in an adequate number of patients with the target disease. The
clinical trials may include hundreds of patients who have the target
disease and who are receiving a range of background medications. In
addition, Phase II clinical trials verify the mechanisms of action
proposed pre-clinically.
- Phase III clinical trials usually include two adequate and well
controlled studies in the target population. For most chronic diseases,
drug companies study a few thousand patients to assure a broadly
applicable assessment of safety and efficacy.
At the successful conclusion of Phase III, drug companies may submit a
product license application, called a New Drug Application in the United
States. Upon accepting the submission, the FDA or non-U.S. regulatory
authorities review the file for completeness, accuracy and adherence to
regulations. These authorities may use internal and external consultants
and may convene an expert committee to advise on the safety,
effectiveness and usefulness of the proposed new product candidate prior
to final regulatory judgment. The final step to registration is approval
of the package insert or label that defines what the drug company may
promote to physicians who use the new drug.
- Phase IV clinical trials support marketing of the drug for its approved
indication. Phase IV clinical trials generate data to allow promotion of
the new drug in comparison with other approved drugs and to support
healthcare economics claims. In addition, every pharmaceutical company is
responsible for post-marketing surveillance for safety in the
marketplace.
We must meet regulatory standards prior to exposing subjects to any
candidate drug product. We remain responsible for any of these development
activities whether we perform them internally or contract them to a third party.
The FDA may audit us or our third party contractors at any time to ascertain
compliance with standards. The FDA may halt all ongoing work if it determines
that we or our contractors have deviated significantly from these standards.
These standards include:
- Good Manufacturing Practices, which govern process chemistry,
formulation, labeling and handling of drug throughout its life cycle;
- Good Laboratory Practices, which govern the use of drug in animal studies
to support establishment of safety or the disposition and metabolism of
the administered drug and handling of human or other biological samples
for drug assays; and
- Good Clinical Practices, which govern the exposure of human subjects
under our protocols. Good Clinical Practices set standards for the
constitution and activities of institutional review boards that are
charged with assuring that the appropriate person gives informed consent
prior to study participation and protect patients whether they receive an
experimental drug, an approved drug, or an inactive look-alike called a
placebo.
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Advertising is subject to FDA approval in the United States and national
review elsewhere. In addition, state and local governments and other federal
agencies may control marketing if the drug substance, formulation, package,
intended use or disposal is subject to local regulation.
The FDA has expanded its expedited review process in recognition that
certain severe or life-threatening diseases and disorders have only limited
treatment options. Fast track designation expedites the development process but
places greater responsibility on the drug company during Phase IV clinical
trials. The drug company may request fast track designation for one or more
indications at any time during the Investigational New Drug Application process,
and the FDA must respond within 60 days. Fast track designation allows the drug
company to develop product candidates and to request an accelerated or priority
review of the New Drug Application based on clinical effectiveness in a smaller
number of patients. If the FDA accepts the submission as a priority review, the
time for New Drug Application review and approval is reduced from one year to
six months. We plan to request fast track designation as appropriate for
internal drug development programs.
EMPLOYEES
We currently have 46 full-time employees, including 34 in research and
development. The employee group includes 15 Ph.D.s, four M.D.s and seven
employees with Masters degrees. We believe that our employee relations are good.
FACILITIES
Our scientific and administration facility encompasses approximately 23,000
square feet in Alpharetta, Georgia. We lease our facility pursuant to a
long-term lease agreement that expires in 2009 and may be extended at our option
to 2019.
LEGAL PROCEEDINGS
We are not currently a party to any legal proceedings.
ADVISORY BOARDS
We have established advisory boards to provide guidance and counsel on
aspects of our business. These boards are convened two times a year and
individual members are contacted as required. Members of these boards provide
input on product research and development strategy, education and publication
plans. The advisory board members are paid an annual stipend and receive options
for common stock for their services, and are reimbursed for expenses in
connection with attendance at advisory board meetings. The names and members of
these boards are as follows:
<TABLE>
<S> <C>
Scientific Advisory Board
R. Wayne Alexander, M.D., Ph.D., Chairman.......... Professor and Chairman of the Department of
Medicine, Emory University School of
Medicine
Victor J. Dzau, M.D................................ Chairman, Department of Medicine, Harvard
Medical School
David Harrison, M.D................................ Professor of Medicine, Division of Cardiology,
Emory University School of Medicine
Dennis Liotta, Ph.D................................ Professor of Chemistry and Vice President of
Research, Emory University School of
Medicine
Robert M. Nerem, Ph.D.............................. Parker H. Petit Professor and Director,
Bioengineering and Bioscience, Georgia
Institute of Technology
</TABLE>
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<TABLE>
<S> <C>
Sampath Parthasarathy, Ph.D........................ Professor, Department of Gynecology and
Obstetrics, Emory University School of
Medicine
Robert D. Rosenberg, M.D., Ph.D.................... Professor of Biology, Massachusetts Institute
of Technology and Professor of Medicine,
Harvard Medical School
Clinical Advisory Board
William Virgil Brown, M.D.......................... Professor of Medicine, Director of Division of
Atherosclerosis & Lipid Metabolism, Emory
University School of Medicine
Joseph L. Witzum, M.D.............................. Professor of Medicine, University of
California at San Diego
Oncology Clinical Advisory Board
Harvey M. Golomb, M.D.............................. Professor and Chairman, Department of
Medicine, and Director, Section of
Hematology/Oncology, The University of
Chicago
</TABLE>
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MANAGEMENT
EXECUTIVE OFFICERS, KEY EMPLOYEES AND DIRECTORS
The following table sets forth certain information regarding our executive
officers, key employees and directors as of February 24, 2000:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Russell M. Medford, M.D., Ph.D................. 45 President, Chief Executive Officer and
Director
Mark P. Colonnese.............................. 44 Vice President of Finance and Administration,
Chief Financial Officer and Assistant
Secretary
Mitchell Glass, M.D............................ 48 Vice President, Clinical Development and
Regulatory Affairs
Don Kirksey, Ph.D.............................. 51 Vice President of Business and Corporate
Development
Uday Saxena, Ph.D.............................. 42 Vice President, Pre-Clinical Research
Michael A. Henos (1)........................... 50 Chairman of the Board of Directors
R. Wayne Alexander, M.D., Ph.D................. 58 Director and Secretary
Vaughn D. Bryson............................... 61 Director
T. Forcht Dagi, M.D. (2)....................... 51 Director
Vijay K. Lathi (2)............................. 27 Director
Arda Minocherhomjee (1)........................ 46 Director
Arthur M. Pappas (1)........................... 52 Director
Richard S. Schneider (2)....................... 59 Director
William A. Scott, Ph.D......................... 59 Director
</TABLE>
- ---------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
Russell M. Medford, M.D., Ph.D. is our scientific co-founder, President and
Chief Executive Officer and has served as a member of our board of directors
since our inception in 1993. Dr. Medford has been our President and Chief
Executive Officer since 1995 after serving as Executive Vice President from 1993
to 1995. Since 1989, Dr. Medford has held a number of academic appointments at
the Emory University School of Medicine, most recently as Associate Professor of
Medicine and Director of Molecular Cardiology. Dr. Medford is a molecular
cardiologist whose research has focused on the molecular basis of cardiovascular
disease and holds 11 U.S. patents. Dr. Medford currently serves on advisory
committees to the National Heart, Lung and Blood Institute of the National
Institutes of Health. He is also a director of Inhibitex, Inc., a privately-held
biotechnology company. Dr. Medford received a B.A. from Cornell University, and
an M.D. with Distinction and a Ph.D. in molecular and cell biology from the
Albert Einstein College of Medicine. Dr. Medford completed his residency in
internal medicine at the Beth Israel Hospital and his fellowship in cardiology
at the Brigham and Women's Hospital and Harvard Medical School, where he also
served on the faculty of Medicine.
Mark P. Colonnese has served as our Vice President of Finance &
Administration and Chief Financial Officer since 1999. Prior to joining us, Mr.
Colonnese was at Medaphis Corporation from 1997 to 1998, serving most recently
as Senior Vice President and Chief Financial Officer. Previously, Mr. Colonnese
was Vice President of Finance and Chief Financial Officer and a member of the
executive committee at Applied Analytical Industries, Inc., a pharmaceutical
development company, from 1993 to 1997. Mr. Colonnese served on the board of
directors of Endeavor Pharmaceuticals, Inc. from 1994 to 1997. From 1983 to
1993, Mr. Colonnese held a number of executive and management positions at
Schering-Plough Corporation, culminating as Senior Director of Planning and
Business Analysis. Mr. Colonnese
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holds an M.B.A. from Fairleigh Dickinson University and a B.S. magna cum laude
from Ithaca College, and is a Certified Public Accountant.
Mitchell Glass, M.D. has served as our Vice President, Clinical Development
and Regulatory Affairs since 1997. From 1995 to 1996, Dr. Glass served as Vice
President and Director of Cardiopulmonary Clinical Research, Development and
Medical Affairs at SmithKline Beecham PLC. From 1988 to 1995, Dr. Glass held
various positions at ICI Pharmaceuticals PLC, subsequently Zeneca PLC, where he
was responsible for developing the pulmonary therapeutics group. From 1985 to
1987, Dr. Glass served as an attending physician in Pulmonary Medicine and
Critical Care at Graduate Hospital while maintaining a teaching position at the
University of Pennsylvania. From 1981 to 1984, Dr. Glass was a postdoctoral
Fellow and Research Associate in Pulmonary Medicine and Respiratory Physiology
at the University of Pennsylvania. Dr. Glass received B.A. and M.D. degrees from
the University of Chicago and completed his residency in internal medicine and
clinical fellowship in Pulmonary Medicine at Presbyterian, University of
Pennsylvania Medical Center.
Don Kirksey, Ph.D. has served as our Vice President of Business and
Corporate Development since 1998. Prior to joining us, Dr. Kirksey was Vice
President of Licensing and Business Development at Medco Research, Inc. from
1996 to 1998. From 1989 to 1996, Dr. Kirksey served as Director of Global
Research Alliances at Glaxo Wellcome, Inc. Dr. Kirksey received his Ph.D. from
the University of Mississippi and a B.S. from Delta State University. He was a
National Institutes of Health Neuroscience Fellow and is a member of the
American Association for the Advancement of Science and the Licensing Executive
Society.
Uday Saxena, Ph.D. joined us in 1996 as Director of Pre-Clinical Research
and has served as our Vice President, Pre-Clinical Research since 1997. From
1991 to 1996, Dr. Saxena served as a Senior Scientist and Research Associate in
the Department of Atherosclerosis Therapeutics at Parke-Davis, a division of
Warner-Lambert Company. Dr. Saxena received his Ph.D. in Biochemistry from
Memorial University of Newfoundland, Canada, his M.S. in Biochemistry from
Central University of Hyderabad, India and a B.S. from Osmanian University,
India.
Michael A. Henos has served as Chairman of our board of directors since
1994 and was our Chief Financial Officer from 1994 to 1999. From 1991 to the
present, Mr. Henos has served as managing general partner of Alliance Technology
Ventures, L.P., a venture capital fund formed to invest in technology-based
startup companies located in the Southeastern United States. Mr. Henos served as
a general partner with Aspen Ventures, a $150 million early stage venture
capital partnership from 1986 to 1993. Mr. Henos previously served as a vice
president of 3I Ventures Corporation, the predecessor of Aspen Ventures from
1986 to 1991. From 1984 to 1986, Mr. Henos served as a healthcare consultant
with Ernst & Young, specializing in venture financing of startup medical
technology companies. Before joining Ernst & Young, Mr. Henos served in a
variety of operating management positions and co-founded and served as Chief
Executive Officer of ProMed Technologies, Inc. Mr. Henos previously served as a
director of KeraVision, Inc.
R. Wayne Alexander, M.D., Ph.D. is our scientific co-founder and has served
as a member of our board of directors since our inception in 1993. Dr. Alexander
has been a Professor of Medicine since 1988 and Chairman of the Department of
Medicine of Emory University School of Medicine and Emory University Hospital
since 1999. From 1988 to 1999, Dr. Alexander served as the Director of the
Division of Cardiology at the Emory University School of Medicine and Emory
University Hospital. Prior to his appointment at Emory University School of
Medicine, Dr. Alexander served as Associate Professor of Medicine at Harvard
Medical School from 1982 to 1988. Dr. Alexander received his Ph.D. in physiology
from Emory University and his M.D. from Duke University School of Medicine. Dr.
Alexander completed his residency in internal medicine at the University of
Washington and completed his fellowship in cardiology at Duke University.
Vaughn D. Bryson has served as a consultant to us since 1996 and a member
of our board of directors since February 2000. Mr. Bryson is President of Life
Science Advisors, a consulting firm focused on assisting biopharmaceutical and
medical device companies in building shareholder value. Mr. Bryson was a
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<PAGE> 43
32-year employee of Eli Lilly & Company and served as President and Chief
Executive Officer of Eli Lilly from 1991 to 1993. Mr. Bryson was Executive Vice
President of Eli Lilly from 1986 until 1991 and served as a member of Eli
Lilly's board of directors from 1984 until his retirement in 1993. Mr. Bryson
was Vice Chairman of Vector Securities International from 1994 to 1996. He is
also a director of Amylin Pharmaceuticals Inc., Ariad Pharmaceuticals Inc.,
Boehringer Ingelheim Corporation, the U.S. subsidiary of Boehringer Ingelheim
GmbH, Chiron Corporation and, Quintiles Transnational Corp., and privately-held
Fusion Medical Technologies, Inc. and Molecular Geriatrics, Inc. Mr. Bryson
received a B.S. degree in Pharmacy from the University of North Carolina and
completed the Sloan Program at the Stanford University Graduate School of
Business.
T. Forcht Dagi, M.D., M.P.H., F.A.C.S., F.C.C.M. has served as a member of
our board of directors since 1999. Dr. Dagi joined Cordova Ventures, LLP, a
venture fund with over $250 million under management as a Managing Partner in
1996. Prior to joining Cordova, Dr. Dagi served as director and principal of
Access Partners, an early stage biotechnology fund. Dr. Dagi serves as a
director of the following privately-held companies: AviGenics, Inc., Inhibitex,
Inc., Cogent Neuroscience, Inc., Encelle, Inc., iPhysicianNet Inc., Merix
Biosciences, Inc. and Xanthon, Inc. Dr. Dagi received an A.B. from Columbia
College, an M.D. from the Johns Hopkins School of Medicine, an M.P.H. from the
Johns Hopkins School of Hygiene and Public Health, an M.T.S. from Harvard
University, and an M.B.A. in finance and strategic planning from the Wharton
School of the University of Pennsylvania. Dr. Dagi was trained in neurosurgery
and neurophysiology at the Massachusetts General Hospital and Harvard Medical
School, where he was a Neuroresearch Foundation Fellow. Dr. Dagi is a diplomat
of American Board of Neurological Surgeons and a Fellow of both the American
College of Surgeons and the College of Critical Care Medicine.
Vijay K. Lathi has served as a member of our board of directors since 1999.
Mr. Lathi joined The Sprout Group in 1998 as an associate focused on life
science, medical devices and information technology related to healthcare. Prior
to joining Sprout, Mr. Lathi served as an analyst with the healthcare venture
capital group at Robertson Stephens & Company from 1997 to 1998. From 1995 to
1997, Mr. Lathi served as an analyst at Cornerstone Research, an economic and
financial consulting firm. Mr. Lathi received his B.S. in chemical engineering
from Massachusetts Institute of Technology and his M.S. in chemical engineering
from Stanford University.
Arda M. Minocherhomjee, Ph.D. has served as a member of our board of
directors since 1999. Dr. Minocherhomjee currently serves as Managing Director
of William Blair Capital Partners, LLC. He joined William Blair & Company in
1992 as a Senior Healthcare Analyst. Dr. Minocherhomjee subsequently served as
head of the firm's healthcare research group. Dr. Minocherhomjee serves as a
director of the following privately-held companies: Morton Grove Pharmaceuticals
Inc., Pharma Research Corporation, Cypres Medical Products, Inc. and DJ Pharma,
Inc. He received an M.Sc. in Pharmacology from the University of Toronto and a
Ph.D. in Pharmacology and an M.B.A. from University of British Columbia. Dr.
Minocherhomjee was a post-doctoral fellow in pharmacology at University of
Washington Medical School.
Arthur M. Pappas has served as a member of our board of directors since
June 1995. Mr. Pappas is Chairman and Chief Executive Officer of A.M. Pappas &
Associates, LLC, an international consulting, investment and venture company
that works with life science companies, products and related technologies. Prior
to founding A.M. Pappas & Associates in 1994, Mr. Pappas was a director on the
main board of Glaxo Holdings PLC with executive responsibilities for operations
in Asia Pacific, Latin America, and Canada. In this capacity, Mr. Pappas was
Chairman and Chief Executive of Glaxo Far East (Pte) Ltd. and Glaxo Latin
America Inc., as well as Chairman of Glaxo Canada Inc. Mr. Pappas has held
various senior positions with Abbott Laboratories International Ltd., Merrell
Dow Pharmaceuticals, and the Dow Chemical Company, in the United States and
internationally. Mr. Pappas is a director of KeraVision, Inc., Quintiles
Transnational Corp. and Valentis Inc., and privately-held ArgoMed, Inc. and
Embrex, Inc. Mr. Pappas received a B.S. in biology from Ohio State University
and an M.B.A. in finance from Xavier University.
41
<PAGE> 44
Richard S. Schneider, Ph.D. has served as a member of our board of
directors since 1997. Dr. Schneider served as a Managing Member of Domain
Associates, L.L.C., a venture capital firm that manages over $500 million and
invests in life sciences companies, from 1990 until his retirement in 1998.
Prior to joining Domain Associates, Dr. Schneider served as a Vice President of
3I Ventures Corporation, a venture capital firm, from 1986 to 1990. From 1983 to
1989, Dr. Schneider served as President of Biomedical Consulting Associates Inc.
Dr. Schneider was a founder and Vice President from 1967 to 1983 of Syva
Company, subsequently a division of Syntex Corporation. Dr. Schneider also is a
director of the following privately-held companies: Landec Corporation, Mitokor,
Inc. and Selective Genetics, Inc.
William A. Scott, Ph.D. has served as a member of our board of directors
since 1997. Dr. Scott was Chief Executive Officer and a member of the board of
directors of Physiome Sciences, Inc., a company that specializes in the design
of computer models of human organs, from 1997 to 1999. From 1983 to 1996, Dr.
Scott held numerous positions at the Bristol-Myers Squibb Research Institute,
most recently as Senior Vice President of Drug Discovery from 1990 until 1996.
Dr. Scott has served as an Adjunct Professor at the Rockefeller University since
1983 and as an Associate Dean and Associate Professor at Rockefeller University.
BOARD COMPOSITION
Pursuant to our amended and restated articles of incorporation and amended
and restated bylaws, our board of directors is divided into three classes, with
each director serving a three-year term (after the initial term). Directors are
elected to serve until they resign or are removed, or are otherwise disqualified
to serve, or until their successors are elected and qualified. The directors of
Class I, Mr. Bryson, Mr. Lathi and Dr. Schneider, hold office until the first
scheduled annual meeting of shareholders following the offering. The directors
of Class II, Dr. Alexander, Dr. Dagi, Dr. Minocherhomjee and Dr. Scott hold
office until the second annual meeting of shareholders following the offering.
The Directors of Class III, Mr. Henos, Dr. Medford and Mr. Pappas hold office
until the third scheduled annual meeting of shareholders. Executive officers are
elected by and serve at the discretion of our board of directors. No family
relationships exist among any of our directors or executive officers.
BOARD COMMITTEES
We have established an audit committee, a compensation committee, an
M&A/strategic committee and a science committee.
Audit Committee. The audit committee, which consists of Dr. Dagi, Mr.
Lathi and Dr. Schneider, is responsible for nominating our independent auditors
for approval by the board of directors and reviewing the scope, results and
costs of the audits and other services provided by our independent auditors.
Compensation Committee. The compensation committee, which consists of Mr.
Henos, Dr. Minocherhomjee and Mr. Pappas, reviews and approves the compensation
and benefits for our executive officers, administers our 1995 Stock Option Plan
and 1997 Equity Ownership Plan, and makes recommendations to the board of
directors regarding such matters.
M&A/Strategic Committee. The M&A/strategic committee, which consists of
Drs. Medford, Minocherhomjee and Schneider, is responsible for providing
guidance to us on matters relating to mergers and acquisitions and other
strategic issues.
Science Committee. The science committee, which consists of Drs. Scott and
Alexander, is responsible for providing guidance to us on science-related
matters.
DIRECTOR COMPENSATION
During 1999, we did not provide any compensation to members of our board of
directors for serving on our board or for attendance at committee meetings. We
reimbursed our non-management directors for ordinary and necessary travel
expenses to attend board and committee meetings.
42
<PAGE> 45
In connection with joining our board of directors in February 2000, we have
entered into a four-year consulting agreement with Mr. Bryson pursuant to which
he will assist management in assessing growth opportunities and strategic
direction. Our board of directors has agreed to pay Mr. Bryson for his
consulting services a non-qualified stock option to acquire up to 20,000 shares
of common stock with an exercise price equal to the fair market value of our
common stock on the date of grant. The option vests 25% on the first anniversary
of the date of grant and approximately 2% per month thereafter.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of our executive officers serves as a member of the board of directors
or compensation committee of any entity that has one or more of its executive
officers serving as a member of our board of directors or compensation
committee.
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid to or earned during
the year ended December 31, 1999 by our Chief Executive Officer and four other
most highly compensated executive officers whose total salary and bonus exceeded
$100,000 for services rendered to us in all capacities during 1999. The
executive officers listed in the table below are referred to as the Named
Executive Officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------
SECURITIES
ANNUAL COMPENSATION UNDERLYING ALL OTHER
---------------------- OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION SALARY ($) BONUS ($) (#) ($)(1)
--------------------------- ---------- --------- ---------- ------------
<S> <C> <C> <C> <C>
Russell M. Medford, M.D., Ph.D..................... 237,000 -- 300,000 4,990
President and Chief Executive Officer
Mark P. Colonnese.................................. 182,083 30,000 140,000 3,681(2)
Vice President, Finance and Administration,
Chief Financial Officer and Assistant
Secretary
Mitchell Glass, M.D................................ 210,000 -- 20,000 27,508(3)
Vice President, Clinical Development and
Regulatory Affairs
Don Kirksey, Ph.D.................................. 182,292 -- 50,000 44,914(4)
Vice President, Business and Corporate
Development
Uday Saxena, Ph.D.................................. 120,000 -- -- 3,600
Vice President, Pre-Clinical Research
</TABLE>
- ---------------
(1) Includes for each named executive officer a 401(k) Plan matching
contribution by us as follows: Dr. Medford: $4,990; Mr. Colonnese: $1,420;
Dr. Kirksey: $1,312; Dr. Saxena: $3,600.
(2) Includes $2,256 for consulting services prior to employment.
(3) Represents reimbursement for personal travel.
(4) Represents reimbursement for moving and relocation expenses.
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<PAGE> 46
OPTION GRANTS IN YEAR ENDED DECEMBER 31, 1999
The following table sets forth information concerning the individual grants
of stock options to each of the Named Executive Officers during the fiscal year
ended December 31, 1999. All options were granted under our 1997 Equity
Ownership Plan.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE
AT ASSUMED ANNUAL
INDIVIDUAL GRANT RATES
-------------------------------------------- OF STOCK PRICE
PERCENT OF TOTAL APPRECIATION
NUMBER OF SECURITIES OPTIONS GRANTED EXERCISE FOR OPTION TERM(2)
UNDERLYING OPTIONS TO EMPLOYEES PRICE EXPIRATION ---------------------
NAME GRANTED (#) IN FISCAL YEAR (%)(1) ($/SH) DATE 5%($) 10%($)
- ---- -------------------- --------------------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Russell M. Medford, M.D., Ph.D.... 200,000 26.9 .30 4/28/09
100,000 13.5 .31 12/8/09
Mark P. Colonnese................. 120,000 16.1 .30 2/23/09
20,000 2.7 .31 12/8/09
Mitchell Glass, M.D. ............. 20,000 2.7 .30 4/28/09
Don Kirksey, Ph.D................. 50,000 6.7 .31 12/8/09
Uday Saxena, Ph.D................. -- -- -- --
</TABLE>
- ---------------
(1) In 1999, we granted options to employees to purchase an aggregate of 743,500
shares of common stock.
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock price appreciation of 5% and 10%
compounded annually from the date the respective options were granted to
their expiration date. These assumptions are not intended to forecast future
appreciation of our stock price. The potential realizable value computation
does not take into account federal or state income tax consequences of
option exercises or sales of appreciated stock. The actual gains, if any, on
the stock option exercises will depend on the future performance of the
common stock, the optionee's continued employment through applicable vesting
periods and the date on which the options are exercised and the underlying
shares are sold.
AGGREGATE OPTION EXERCISES IN 1999 AND 1999 YEAR-END OPTION VALUES
The following table provides certain summary information concerning stock
options held as of December 31, 1999, by each of the Named Executive Officers.
None of the Named Executive Officers exercised stock options in 1999.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY OPTIONS
UNEXERCISED OPTIONS AT AT DECEMBER 31,
DECEMBER 31, 1999(#) 1999($)(1)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Russell M. Medford, M.D., Ph.D................... 100,000 300,000
Mark P. Colonnese................................ -- 140,000
Mitchell Glass, M.D.............................. 65,000 85,000
Don Kirksey, Ph.D................................ 25,000 125,000
Uday Saxena, Ph.D................................ 91,300 28,700
</TABLE>
- ---------------
(1) There was no public trading market for our common stock as of December 31,
1999. Accordingly, the value of unexercised in-the-money options as of that
date was calculated on the basis of an assumed initial public offering price
of $ per share, less the aggregate exercise price of the
options.
44
<PAGE> 47
EMPLOYEE BENEFIT PLANS
1995 Stock Option Plan
As of February 18, 2000, a total of 433,000 shares of common stock were
reserved for issuance under our 1995 Stock Option Plan, or 1995 Plan, 415,200 of
which were subject to outstanding options. The 1995 Plan provides for the grant
of options to which Internal Revenue Code sec.422, relating generally to
incentive stock options and other options, does not apply. The 1995 Plan
provides for granting stock options to our directors, employees, consultants and
contractors. The 1995 Plan is administered by our board of directors. Subject to
the provisions of the 1995 Plan, the board of directors has the authority and
sole discretion to determine and designate those persons to whom options are
granted, the option price of the shares covered by any options granted, the
manner in and conditions under which options are exercisable, including any
limitations or restrictions thereon, and the time or times at which options
shall be granted. Our board of directors may not grant any options under the
1995 Plan more than ten years after its date of adoption. The maximum term of
options granted under the 1995 Plan is ten years. Unless terminated earlier in
accordance with the provisions of the 1995 Plan, the 1995 Plan will terminate
upon the later of:
- the complete exercise or lapse of the last outstanding option, or
- the last date upon which options may be granted under the 1995 Plan.
1997 Equity Ownership Plan
As of February 18, 2000, a total of 3,614,903 shares of common stock were
reserved for issuance under our 1997 Equity Ownership Plan, or 1997 Plan, of
which options to purchase an aggregate of 2,583,125 shares were outstanding and
1,031,778 shares were available for future grant. No participant in the 1997
Plan may be granted awards in excess of 30% of the total number of shares
authorized for issuance under the 1997 Plan. The 1997 Plan provides for the
grant of incentive stock options within the meaning of Section 422 of the
Internal Revenue Code, nonqualified stock options, shares of restricted stock,
stock appreciation rights and performance awards to our employees, directors,
consultants and advisors. Incentive stock options may be granted only to our
employees. The 1997 Plan is administered by our board of directors or its
designee(s). Subject to the provisions of the 1997 Plan, the administrator has
the authority to determine:
- to whom awards will be granted,
- the time when awards may be granted,
- the number of shares to be covered by an award,
- when an award becomes exercisable,
- the exercise price of an award, which price, in the case of incentive
stock options, shall not be less than the fair market value of our common
stock on the date of grant or, in the case of incentive stock options,
granted to employees who own, directly or indirectly, more than 10% of
our total combined voting power, 110% of the fair market value of our
common stock on the date of grant, and
- any restrictions or conditions on the shares subject to awards.
The maximum term of incentive stock options granted under the 1997 Plan is ten
years. Our board of directors may terminate the 1997 Plan at any time, provided
that no termination without the consent of the holder of an award shall
adversely affect the rights of the participant under the award.
401(k) Plan
We have established a tax-qualified employee savings and retirement plan,
or 401(k) Plan. Under the 401(k) Plan, eligible participating employees may
elect to contribute up to 15% of their salary, up to the
45
<PAGE> 48
maximum amount of tax deferred contribution allowed by the Internal Revenue
Code. The 401(k) Plan permits us to make discretionary matching contributions.
During 1999 we matched 50% of employees' contributions, up to a maximum of 6% of
employees' annual base compensation. The 401(k) Plan is intended to qualify
under Section 401 of the Internal Revenue Code so that contributions by
employees or by us to the 401(k) Plan, and income earned on plan contributions,
are not taxable to employees until withdrawn from the 401(k) Plan, and so that
our contributions will be deductible by us when made. The trustee under the
401(k) Plan, at the direction of each participant, invests the assets of the
401(k) Plan in any number of investment options.
EMPLOYMENT AGREEMENTS
We do not have employment agreements with any of our employees, We expect
to enter into an employment agreement with Dr. Medford within the next 30 days.
46
<PAGE> 49
CERTAIN TRANSACTIONS
Since January 1, 1997, we have engaged in the following transactions with
our directors, officers and 5% shareholders and affiliates of our directors,
officers and 5% shareholders:
In January 1995, we entered into a license agreement with Emory University.
Under the terms of this agreement, Emory granted to us an exclusive right and
license to make, use and sell products utilizing inventions claimed in several
patents developed by employees of Emory. The Emory employees who developed the
licensed patents include Russell M. Medford, M.D., Ph.D., our President, Chief
Executive Officer and director, R. Wayne Alexander, M.D., Ph.D., our Secretary
and a member of our board of directors, and Sampath Parthasarathy, Ph.D., a
member of our scientific advisory board. The license agreement requires us to
make royalty payments to Emory based on certain percentages of net revenue we
derive from sales of products utilizing inventions claimed in the licensed
patents and from sublicensing of the licensed patents. The license agreement
also provides for milestone payments to Emory upon the occurrence of certain
events relating to the development of products utilizing the licensed patents.
Drs. Alexander, Medford and/or Margaret K. Offermann, Dr. Medford's wife, will
receive a portion of our payments to Emory under the license agreement. We paid
a signing fee to Emory upon the execution of this agreement and an additional
amount for achievement of the first milestone under the agreement. We are
required to pay Emory royalties upon sales of products utilizing the patent
technology and milestone payments totaling $250,000, if all sales and milestone
objections are met. We have not made any other royalty or milestone payments to
Emory under this agreement to date.
We are a party to a sponsored research agreement with Emory dated October
14, 1996. Under the terms of this agreement, Emory agrees to collaborate with us
and furnish the facilities necessary to carry out a specified research program.
As discussed above, some of our directors and executive officers are employees
of Emory. We have paid approximately $226,000 to Emory pursuant to this
agreement.
We are a party to a patent purchase agreement dated April 26, 1995 with
Sampath Parthasarathy, Ph.D., a member of our scientific advisory board, whereby
we are obligated to pay to Dr. Parthasarathy royalties based upon the gross
selling price paid to us by a purchaser of any process, service or product that
utilizes one of the claimed inventions of the patents purchased from Dr.
Parthasarathy. We have not made any royalty payments to Dr. Parthasarathy
pursuant to this agreement.
In August 1998 we consummated a bridge financing in which we issued an
aggregate of $6,000,000 principal amount notes bearing interest at a rate per
annum equal to the prime rate as published in The Wall Street Journal plus 2%.
At that time we also issued warrants exercisable for shares of our Series B
convertible preferred stock covering an aggregate of 10% of the original
principal amount of the notes to the purchasers of the notes. We issued $150,000
principal amount notes with the same terms to additional investors in February
1999. In April 1999 we issued warrants exercisable for shares of our Series C
convertible preferred stock covering an aggregate of 10% of the original
principal amount of the notes to the participants in the bridge financing as
consideration for extending the maturity of the notes. The notes and a portion
of the accrued interest on the notes were converted into 2,140,357 shares of our
Series C convertible preferred stock in April 1999. The investors in this
financing consisted principally of the holders of our convertible preferred
stock. These investors included 5% shareholders Alliance Technology Ventures,
L.P. and related entities, Domain Associates, L.L.C. and related entities and
The Sprout Group, as well as Arthur M. Pappas, a member of our board of
directors. Russell M. Medford, our President and Chief Executive Officer and a
member of our board of directors, is a Special Limited Partner of Alliance,
Michael A. Henos, Chairman of our board of directors, is the General Partner of
Alliance, Richard S. Schneider, a member of our board of directors, is a General
Partner of One Palmer Square Associates III, L.P., the General Partner of Domain
Partners III, L.P. and DP III Associates, L.P., and was a Managing Member of
Domain Associates, L.L.C. until 1998, and Vijay K. Lathi, a member of our board
of directors, is an associate with Sprout.
In July 1999, we entered into a sublease agreement with ATV Management
Corp. for certain office space that, unless otherwise extended, will expire in
July 2002. Michael A. Henos, Chairman of our board of directors, is the
President and sole shareholder of ATV Management. The agreement provides for
47
<PAGE> 50
monthly lease payments of approximately $6,200 to us from ATV Management. This
monthly lease payment is substantially equivalent to our monthly lease payment
for equivalent space. To date, we have received approximately $37,200 from ATV
Management pursuant to this agreement.
In April, May and August of 1999, we issued an aggregate of 5,899,999
shares of Series C convertible preferred stock at a price of $3.00 per share.
Investors in this financing included 5% shareholders Alliance, Domain and
Sprout, and their related entities, referred to above.
48
<PAGE> 51
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of our common stock as of January 31, 2000 and as adjusted to reflect
the sale of common stock offered hereby for:
- each person who is known by us to beneficially own more than 5% of
our common stock;
- our Chief Executive Officer and each of our Named Executive
Officers;
- each of our directors; and
- all of our directors and executive officers as a group.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and includes voting and investment power with
respect to the securities. Except as indicated by footnote, and subject to
applicable community property laws, the persons and entities named in the table
below have sole voting and sole investment power with respect to the shares set
forth opposite such person's or entity's name.
The percentage of beneficial ownership before the offering is based on
16,186,380 shares, consisting of 2,542,543 shares of common stock outstanding as
of January 31, 2000, and 13,643,837 shares issuable upon conversion of preferred
stock. The percentage of beneficial ownership after the offering is based on
shares, including the shares to be sold in this offering. Shares of
common stock subject to options or warrants currently exercisable or exercisable
within 60 days of January 31, 2000 are deemed outstanding for purposes of
computing the percentage ownership of the person holding such options or
warrants, but are not deemed outstanding for purposes of computing the
percentage ownership of any other person. The post-offering ownership
percentages in the table below do not take into account any exercise of the
underwriters' over-allotment option. Unless otherwise indicated, the address for
each of the individuals listed in the table is c/o AtheroGenics, Inc., 8995
Westside Parkway, Alpharetta, Georgia 30004.
<TABLE>
<CAPTION>
PERCENT BENEFICIALLY
OWNED
---------------------
SHARES BEFORE AFTER
BENEFICIALLY THE THE
BENEFICIAL OWNER OWNED OFFERING OFFERING
- ---------------- ------------ --------- ---------
<S> <C> <C> <C>
Entities affiliated with Alliance Technology Ventures,
L.P. ..................................................... 2,735,008(1) 16.8%
8995 Westside Parkway
Suite 200
Alpharetta, Georgia 30004
William Blair Capital Partners VI, L.P. .................... 2,666,667 16.5%
232 West Adams Street
Chicago, Illinois 60606
Entities affiliated with Sprout Capital, VII, L.P........... 1,709,212(2) 10.5%
3000 Sand Hill Road
Building 4, Suite 270
Menlo Park, California 94025
Entities affiliated with Domain Associates, L.L.C........... 1,655,557(3) 10.2%
One Palmer Square
Suite 515
Princeton, New Jersey 08542
Michael A. Henos............................................ 2,891,008(4) 17.7%
Arda Minocherhomjee, Ph.D. ................................. 2,678,667(5) 16.5%
Richard S. Schneider, Ph.D. ................................ 1,524,557(6) 9.4%
Russell M. Medford, M.D., Ph.D. ............................ 805,900(7) 4.9%
R. Wayne Alexander, M.D., Ph.D. ............................ 798,900(8) 4.9%
T. Forcht Dagi, M.D. ....................................... 678,666(9) 4.2%
Arthur M. Pappas............................................ 125,301(10) *
</TABLE>
49
<PAGE> 52
<TABLE>
<CAPTION>
PERCENT BENEFICIALLY
OWNED
---------------------
SHARES BEFORE AFTER
BENEFICIALLY THE THE
BENEFICIAL OWNER OWNED OFFERING OFFERING
- ---------------- ------------ --------- ---------
<S> <C> <C> <C>
Uday Saxena, Ph.D........................................... 95,800(11) *
Mitchell Glass, M.D......................................... 77,800(11) *
Vaughn D. Bryson............................................ 61,032(12) *
William A. Scott, Ph.D...................................... 41,000(11) *
Mark P. Colonnese........................................... 34,800(11) *
Don Kirksey, Ph.D........................................... 31,000(11) *
Vijay K. Lathi.............................................. 12,000(11) *
All directors and executive officers as a group (14
persons).................................................. 9,856,431 57.5%
</TABLE>
- ---------------
* Less than one percent (1%) of outstanding shares.
(1) Includes 1,997,131 shares owned and 92,748 shares subject to warrants
exercisable within 60 days by Alliance Technology Ventures, L.P., 457,293
shares owned and 25,718 shares subject to warrants exercisable within 60
days by ATV/GP Parallel Fund, L.P., and 155,090 shares owned and 7,028
shares subject to warrants exercisable within 60 days by ATV/MFJ Parallel
Fund, L.P.
(2) Includes 1,424,388 shares owned and 62,468 shares subject to warrants
exercisable within 60 days by Sprout Capital VII; L.P.; 16,525 shares owned
and 726 shares subject to warrants exercisable within 60 days by Sprout CEO
Fund, L.P., 163,740 shares owned and 7,182 shares subject to warrants
exercisable within 60 days by DLJ First ESC, L.P.; and 32,747 shares owned
and 1,436 shares subject to warrants exercisable within 60 days by DLJ
Capital Corp.
(3) Includes 46,443 shares owned and 2,230 shares subject to warrants
exercisable within 60 days by DP III Associates, L.P.; 1,342,446 shares
owned and 64,438 shares subject to warrants exercisable within 60 days by
Domain Partners III, L.P.; and 200,000 shares owned by Domain Associates,
L.L.C. The shares indicated do not include 906,038 shares owned or 47,874
shares subject to warrants exercisable within 60 days by Biotechnology
Investments Limited and its nominee, Old Court Limited, for whom Domain
Associates serves as U.S. venture capital adviser and with respect to whose
shares Domain Associates has no voting or investment power.
(4) Includes 2,609,514 shares owned and 125,494 shares subject to warrants
exercisable within 60 days by entities affiliated with Alliance Technology
Ventures, L.P. Alliance is a limited partnership of which Mr. Henos is
managing general partner. Because Mr. Henos shares voting and investment
power over the shares owned by Alliance, he is deemed to be the indirect
beneficial owner of those shares. The shares indicated also include 46,000
shares subject to options exercisable by Mr. Henos within 60 days.
(5) Includes 2,666,667 shares owned by William Blair Capital Partners VI, L.P.
Dr. Minocherhomjee is Managing Director of William Blair Capital Partners,
LLC, which is the general partner of William Blair Capital Partners VI,
L.P. Because Dr. Minocherhomjee shares voting and investment power over the
shares owned by William Blair Capital Partners VI, L.P., Dr. Minocherhomjee
is deemed the indirect beneficial owner of those shares. Also includes
12,000 shares subject to options exercisable by Dr. Minocherhomjee within
60 days.
(6) Includes 46,443 shares owned and 2,230 shares subject to warrants
exercisable within 60 days by DP III Associates, L.P.; 1,342,446 shares
owned and 64,438 shares subject to warrants exercisable within 60 days by
Domain Partners III, L.P.; and 48,000 shares held in the name of Domain
Associates, L.L.C. as nominee for Dr. Schneider. Dr. Schneider is a general
partner of One Palmer Square Associates III, L.P., the general partner of
Domain Partners III, L.P. and DP III Associates, L.P. Because Dr. Schneider
shares voting and investment power over the shares owned by DP III
Associates and Domain Partners III, he is deemed to be the indirect
beneficial owner of those shares. Dr. Schneider disclaims beneficial
ownership of those shares except to the extent of his proportionate
interest in them. The shares indicated also include 21,000 shares subject
to options exercisable by Dr. Schneider within 60 days.
(7) Includes 150,000 shares subject to options exercisable within 60 days.
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<PAGE> 53
(8) Includes 139,000 shares subject to options exercisable within 60 days.
(9) Includes 666,666 shares owned by Cordova Technology Partners, L.P. Cordova
is a limited partnership of which Dr. Dagi is both a limited and general
partner. Because Dr. Dagi has voting and investment power over the shares
owned by Cordova, Dr. Dagi is deemed to be an indirect beneficial owner of
those shares. Also includes 12,000 shares subject to options exercisable
within 60 days.
(10) Includes 36,000 shares subject to options exercisable within 60 days and
2,000 shares subject to warrants exercisable within 60 days.
(11) All of the shares indicated are subject to options exercisable within 60
days.
(12) Includes 46,496 shares subject to options exercisable within 60 days and
718 shares subject to warrants exercisable within 60 days.
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<PAGE> 54
DESCRIPTION OF CAPITAL STOCK
GENERAL
Our Fourth Amended and Restated Articles of Incorporation, which will
become effective immediately prior to the closing of this offering, authorizes
the issuance of up to 100 million shares of common stock, no par value, and five
million shares of preferred stock, no par value, the rights and preferences of
which may be established from time to time by our board of directors. As of
February 18, 2000, 2,542,543 shares of common stock were issued and outstanding
and 13,643,837 shares of preferred stock convertible into the same number of
shares of common stock immediately prior to the completion of this offering were
issued and outstanding. As of February 18, 2000, we had 36 common shareholders
of record.
Immediately after the closing of this offering, we will have
shares of common stock outstanding, assuming no exercise of options to acquire
additional shares of common stock or warrants to purchase
additional shares of common stock that are outstanding as of the date of this
prospectus.
The description set forth below gives effect to the filing of the Fourth
Amended and Restated Articles of Incorporation and the adoption of the Third
Amended and Restated Bylaws. The following summary is qualified in its entirety
by reference to our Fourth Amended and Restated Articles of Incorporation and
Third Amended and Restated Bylaws, copies of which will be filed as exhibits to
the registration statement of which this prospectus is a part.
COMMON STOCK
Holders of our common stock have unlimited voting rights. Each shareholder
is entitled to one vote for each share on all matters to be voted upon by the
shareholders. There are no cumulative voting rights and no preemptive or
conversion rights. There are no redemption or sinking fund provisions available
to the common stock. Holders of our common stock are entitled to receive
dividends share for share on a pro rata basis when, as and if declared by the
board of directors out of funds legally available therefor. In the event of a
liquidation, dissolution or winding up of AtheroGenics, holders of common stock
will be entitled to share ratably in all assets remaining after payment of
liabilities of AtheroGenics.
PREFERRED STOCK
Our board of directors is authorized, subject to any limitations prescribed
by law, without shareholder approval, to issue from time to time up to an
aggregate of five million shares of preferred stock, in one or more series, each
series to have such rights and preferences, including voting rights, dividend
rights, conversion rights, redemption privileges and liquidation preferences as
shall be determined by our board of directors. The rights of the holders of
common stock will be subject to, and may be adversely affected by, the rights of
holders of any preferred stock that may be issued in the future. Issuance of
preferred stock, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, could have the effect of
making it more difficult for a third party to acquire, or of discouraging a
third party from attempting to acquire, a majority of our outstanding voting
stock. As of the consummation of the offering, we will have no shares of
preferred stock outstanding and we have no present plans to issue any shares of
preferred stock.
WARRANTS
We have issued and outstanding warrants to purchase an aggregate of 467,503
shares of our capital stock. In February 1996 and October 1997 we issued to
Phoenix Leasing Incorporated warrants to purchase 12,500 shares of Series B
convertible preferred stock at an exercise price of $3.00 per share, which are
exercisable for five years following this offering. Prior to this offering,
these warrants will convert into the right to purchase 12,500 shares of common
stock. In July 1998, we issued to Cousins Properties, Inc. a warrant to purchase
50,000 shares of Series B-1 convertible preferred stock at an exercise price of
52
<PAGE> 55
$5.00 per share, which is exercisable until January 2009. Prior to this
offering, this warrant will convert into the right to purchase 50,000 shares of
common stock. In August 1998, we issued to certain investors warrants to
purchase 200,001 shares of Series B convertible preferred stock at an exercise
price of $3.00 per share, which are exercisable until August 19, 2008. Prior to
this offering, these warrants will convert into the right to purchase 200,001
shares of common stock. In April 1999, we issued to certain investors warrants
to purchase 205,002 shares of Series C convertible preferred stock at an
exercise price of $3.00 per share, which are exercisable until December 31,
2008. Prior to this offering, these warrants will convert into the right to
purchase 205,002 shares of common stock.
REGISTRATION RIGHTS
Demand Registration. According to the terms of the Amended and Restated
Master Rights Agreement dated as of October 31, 1995, as amended, beginning 180
days after the closing of this offering the holders of 13,643,837 shares of
common stock and warrants to acquire 417,503 additional shares of common stock
have the right to require us to effect a registration of their stock on Form
S-1, Form S-2, Form SB-1 or Form SB-2 so that those shares may be resold to the
public. To demand a registration, the holders having such registration rights
must propose to dispose of at least 20% of the common stock subject to
registration or the anticipated aggregate offering price must be at least
$15,000,000. If such a request is made, then the Company must use its best
efforts to effect the registration. We only have to file two registration
statements requested in this manner.
In addition, the holders of common stock having registration rights may
require us to effect a registration of their stock of Form S-3 at any time that
we are eligible to file a registration on that form if those shareholders making
the request propose to dispose of at least $1,000,000 in the offering.
We may delay filing a demand registration if the statement would become
effective within 180 days of an underwritten registration statement filed by us.
We may also defer the filing of a demand registration for a period of up to 90
days once in any 12-month period.
Piggyback Registration. In addition, if we register in an underwritten
offering any securities for public sale, other than a registration relating
solely to employee benefit plans, a registration relating solely to a Rule 145
transaction, or a registration on any form that does not include substantially
the same information as would be required in a registration statement covering
secondary sales of stock, holders of demand registration rights will have the
right to include their shares in the registration statement.
Piggyback registration rights are subject to conditions and limitations,
including the right of the underwriters of an offering to limit the number of
shares of common stock to be included in the registration. We are generally
required to bear the expenses of all registrations, except underwriting
discounts and commissions. The Master Rights Agreement also contains our
commitment to indemnify the holders of registration rights for losses
attributable to statements or omissions by us incurred in connection with
registrations under the agreement.
EFFECTS OF CERTAIN PROVISIONS OF OUR ARTICLES OF INCORPORATION, BYLAWS AND
GEORGIA LAW
Classified Board and Removal of Directors. Our Articles of Incorporation
provide for our board of directors to be elected initially to staggered one, two
and three year terms and, thereafter, for three year terms. In addition, members
of our board of directors may only be removed for cause, which requires the
affirmative vote of the holders of at least 75% of the outstanding shares of our
common stock. The classification of directors, together with the limitation on
the removal of directors, has the effect of making it more difficult for
shareholders to change the composition of our board of directors.
Shareholder Action; Special Meeting of Shareholders. Our shareholders may
not take action, outside of a duly called annual or special meeting, by less
than unanimous consent. Our bylaws further provide that special meetings of our
shareholders may be called only upon the request of the holders of not less than
75% of the shares then outstanding and entitled to vote.
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<PAGE> 56
Advance Notice Requirements for Shareholder Proposals and Director
Nominations. Our bylaws provide that any shareholder proposals or director
nominations must be provided to us in writing at least 60 days before the date
of an annual such meeting of shareholders or, in the case of a special meeting
of shareholders, at least 60 days prior to such meeting or the tenth day
following the day on which public announcement is made of the date of the
meeting. Our bylaws also specify requirements as to form and content of a
shareholder's notice. Such provisions may preclude shareholders from bringing
matters before the shareholders at an annual or special meeting.
Anti-takeover Provisions and Georgia Law. The Georgia Business Corporation
Code, or Georgia Code, generally restricts a corporation from entering into
certain business combinations with an interested shareholder, which is defined
as any person or entity that is the beneficial owner of at least 10% of a
company's voting stock, or its affiliates, for a period of five years after the
date on which the shareholder became an interested shareholder, unless:
- the transaction is approved by the board of directors of the corporation
prior to the date the person became an interested shareholder;
- the interested shareholder acquires 90% of the corporation's voting stock
in the same transaction in which it exceeds 10%; or
- subsequent to becoming an interested shareholder, the shareholder
acquires 90% of the corporation's voting stock and the business
combination is approved by the holders of a majority of the voting stock
entitled to vote on the transaction.
The fair price provisions of the Georgia Code further restrict business
combination transactions with 10% shareholders. These provisions require that
the consideration paid for stock acquired in the business combination must meet
specified tests that are designed to ensure that shareholders receive at least
fair market value for their shares in the business combination.
The interested shareholder and fair price provisions of the Georgia Code do
not apply to a corporation unless the bylaws of the corporation specifically
provide that these provisions are applicable to the corporation. We have elected
to be covered by these provisions in our bylaws, provided, however, that,
notwithstanding anything to the contrary in the provisions, the provisions shall
not apply to any business combination with (1) any shareholder who was an
interested shareholder as of the date we adopted our bylaws or (2) any person or
entity that is at the time of such business combination wholly owned by such
interested shareholder.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for our common stock is .
LISTING
We have applied to have our common stock quoted on the Nasdaq National
Market under the symbol "AGIX."
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<PAGE> 57
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock, and
we cannot assure you that a significant public 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 following this offering could adversely
affect market prices prevailing from time to time and could impair our ability
to raise capital through the sale of our equity securities. As described below,
shares currently outstanding will be available for sale
immediately after this offering.
SALES OF RESTRICTED SECURITIES
Upon completion of this offering, we will have outstanding
shares of common stock, based upon shares outstanding as of February 18, 2000,
assuming no exercise of the underwriters' over-allotment option and no exercise
of outstanding options or warrants that do not expire prior to completion of
this offering. Of these shares, the shares sold in this offering will be freely
tradable without restriction under the Securities Act, except for any shares
purchased by our "affiliates" as defined in Rule 144 under the Securities Act.
The remaining shares of common stock held by existing
shareholders are "restricted shares" as defined in Rule 144. All of these
restricted shares are subject to lock-up agreements providing that for a period
of 180 days after the date of this prospectus, without the prior written consent
of SG Cowen Securities Corporation, the shareholder will not offer to sell,
contract to sell or otherwise sell, dispose of, loan, pledge or grant any rights
with respect to any shares of common stock owned as of the date of this
prospectus or acquired directly from us by the shareholder or with respect to
which they have or may acquire the power of disposition, other than transfers by
individual shareholders to family members or trusts or other legal entities for
the benefit of family members, charitable organizations, or other legal entities
over which such individual shareholder maintains control over the disposition
and voting of such shares; or by non-individual shareholders to equity owners of
that entity provided that such equity owners maintain control over the
disposition and voting of such shares. As a result of these lock-up agreements,
notwithstanding possible earlier eligibility for sale under the provisions of
Rules 144, 144(k) and 701, none of these shares will be resellable until 181
days after the date of this prospectus. SG Cowen Securities Corporation may, in
its sole discretion, and at any time without notice, release all or any portion
of the restricted shares subject to lock-up agreements.
Beginning 181 days after the date of this prospectus, approximately
restricted shares will be eligible for sale in the public market.
All of these shares are subject to volume limitations under Rule 144, except
shares eligible for sale under Rule 144(k) and
shares eligible for sale under Rule 701, subject in some cases to repurchase
rights of us.
In addition, as of February 18, 2000, there were outstanding warrants to
purchase 467,503 shares of common stock.
Rule 144. In general, under Rule 144, as currently in effect, beginning 90
days after the date of this prospectus, a person who has beneficially owned
restricted shares for at least one year, including the holding period of any
prior owner except an affiliate, would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of:
- 1.0% of the number of shares of common stock then outstanding, which will
equal approximately shares immediately after this
offering; or
- 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 availability of current public information
about us. Under Rule 144(k), a person who is not deemed to have been an
affiliate of us 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
55
<PAGE> 58
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. Rule 701, as currently in effect, permits resales of shares in
reliance upon Rule 144 but without compliance with certain restrictions of Rule
144. Any employee, officer or director of or consultant to us who purchased
shares pursuant to a written compensatory plan or contract may be entitled to
rely on the resale provisions of Rule 701. Rule 701 permits affiliates to sell
their Rule 701 shares under Rule 144 without complying with the holding period
requirements of Rule 144. Rule 701 further provides that non-affiliates may sell
their Rule 701 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 are required to wait until 90 days
after the date of this prospectus before selling their Rule 701 shares. However,
certain Rule 701 shares 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
agreements or the receipt of the written consent of SG Cowen Securities
Corporation more than 90 days after the date of this prospectus.
After this offering, we intend to file a registration statement on Form S-8
registering shares of common stock subject to outstanding options or reserved
for future issuance under our benefit plans. As of February 18, 2000, options to
purchase a total of 2,998,325 shares were outstanding and 1,049,578 shares were
reserved for future issuance under our benefit plans. Any shares of common stock
issued upon exercise of outstanding vested options, other than common stock
issued to our affiliates or subject to lock-up agreements, will be available for
immediate resale in the open market following the effectiveness of such
registration statement.
LOCK-UP AGREEMENTS
We, all of our executive officers and directors, all principal shareholders
and other existing shareholders who, upon the closing of this offering, will
beneficially own an aggregate of outstanding shares of common
stock, together with holders of options to purchase shares of
common stock and holders of warrants to purchase shares of common
stock, have agreed that for a period of 180 days following the date of this
prospectus, without the prior written consent of SG Cowen Securities
Corporation, they will not:
- directly or indirectly, offer, sell, assign, transfer, encumber, pledge,
contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to
purchase, lend or otherwise dispose of, other than by operation of law,
any shares of common stock or any securities convertible into or
exercisable or exchangeable for common stock, including, without
limitation, common stock which may be deemed to be beneficially owned in
accordance with the rules and regulations promulgated under the
Securities Act; or
- enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of common
stock whether any such transaction described above is to be settled by
delivery of common stock or such other securities, in cash or otherwise.
Notwithstanding the foregoing, our shareholders who have agreed to sign the
lock-up agreement have the right, without the prior written consent of SG Cowen
Securities Corporation, to transfer shares held by individual shareholders to
family members, trusts, charitable organizations, or other legal entities over
which such individual shareholder maintains control over the disposition and
voting of such shares; or by non-individual shareholders to equity owners of
that entity provided that such equity owners maintain control over the
disposition and voting of such shares.
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<PAGE> 59
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement dated
, 2000, the underwriters named below, through their representatives SG
Cowen Securities Corporation, Chase Securities Inc., Adams, Harkness & Hill,
Inc. and A.G. Edwards & Sons, Inc. have severally agreed to purchase from us the
number of shares of common stock set forth opposite their names at the public
offering price less the underwriting discounts and commissions set forth on the
cover page of this prospectus.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
SG Cowen Securities Corporation.............................
Chase Securities Inc........................................
Adams, Harkness & Hill, Inc.................................
A.G. Edwards & Sons, Inc....................................
--------
Total.............................................
========
</TABLE>
The underwriting agreement provides that the obligations of the
underwriters are conditional and may be terminated at their discretion based on
their assessment of the state of the financial markets. The obligations of the
underwriters may also be terminated upon the occurrence of other events
specified in the underwriting agreement. The underwriters are severally
committed to purchase all of the common stock to be offered by us if any shares
are purchased, other than those covered by the over-allotment option described
below.
At our request, the underwriters have reserved up to 10% of the shares of
common stock for sale at the initial public offering price to our employees,
friends and family members of our employees and employees of companies with
which we do business. The number of shares available for sale to the general
public will be reduced to the extent that any reserved shares are purchased. Any
reserved shares which are not so purchased will be offered by the underwriters
to the general public on the same basis as the shares sold hereby.
The underwriters propose to offer the common stock directly to the public
at the public offering price set forth on the cover page of this prospectus. The
underwriters may offer the common stock to securities dealers at that price less
a concession not in excess of $ per share. Securities dealers may
reallow a concession not in excess of $ per share to other dealers.
After the shares of the common stock are released for sale to the public, the
underwriters may vary the offering price and other selling terms from time to
time.
We have granted to the underwriters an option to purchase up to an
aggregate of additional shares of common stock at the public
offering price set forth on the cover of this prospectus to cover
over-allotments, if any. The option is exercisable for a period of 30 days. If
the underwriters exercise the over-allotment option, the underwriters have
severally agreed to purchase shares in approximately the same proportion as
shown in the tables above.
The following table shows the per share and total public offering price,
the underwriting discount to be paid by us to the underwriters and the proceeds
from the sale of shares to the underwriters before our expenses. This
information is presented assuming either no exercise or full exercise by the
underwriters of their over-allotment option.
<TABLE>
<CAPTION>
WITHOUT WITH
PER SHARE OPTION OPTION
--------- -------- --------
<S> <C> <C> <C>
Public offering price..................................
Underwriting discount..................................
Proceeds, before expenses, to AtheroGenics.............
</TABLE>
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<PAGE> 60
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act, and to contribute to payments
that the underwriters may be required to make in respect of those liabilities.
We, our directors and executive officers, all principal shareholders and
other existing shareholders who hold an aggregate of shares,
together with holders of options to purchase shares of common
stock and holders of warrants to purchase shares of common stock,
have agreed, subject to certain limited exceptions, that for a period of 180
days following the date of this prospectus, without the prior written consent of
SG Cowen Securities Corporation, not to directly or indirectly, offer, sell,
assign, transfer, pledge, contract to sell, or otherwise dispose of, other than
by operation of law, any shares of common stock or any securities convertible
into or exercisable or exchangeable for common stock, including, without
limitation, common stock which may be deemed to be beneficially owned in
accordance with rules and regulations promulgated under the Securities Act.
The representatives may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation M
under the Securities Exchange Act of 1934. 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 common stock in the open market after the
distribution has been completed in order to cover syndicate short positions.
Penalty bids permit the representatives to reclaim a selling concession from a
syndicate member when the common stock originally sold by such syndicate member
is purchased in a syndicate covering transaction to cover syndicate short
positions. These stabilizing transactions, syndicate covering transactions and
penalty bids may cause the price of the common stock to be higher than it would
otherwise be in the absence of these transactions. These transactions may be
effected on the Nasdaq National Market or otherwise and, if commenced, may be
discontinued at any time.
The underwriters have advised us that they do not intend to confirm sales
in excess of 5% of the common stock offered hereby to any account over which
they exercise discretionary authority.
Prior to this offering, there has been no public market for the common
stock. Consequently, the initial public offering price range will be determined
by negotiations between us and the underwriters. Among the factors considered in
these negotiations will be prevailing market conditions, the market
capitalizations and the stages of development of other companies that we and the
underwriters believe to be comparable to us, estimates of our business
potential, our results of operation in recent periods, the present state of our
development and other factors deemed relevant.
We estimate that our out of pocket expenses for this offering, not
including the underwriting discount, will be approximately $ .
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon for us by Long Aldridge & Norman LLP, Atlanta, Georgia. Certain legal
matters will be passed upon for the Underwriters by Brown & Wood LLP, New York,
New York. As of the date of this prospectus, Long Aldridge & Norman LLP is the
beneficial owner of 33,332 shares of our common stock.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our financial
statements at December 31, 1999 and 1998, and for each of the three years in the
period ended December 31, 1999, as set forth in their report. We've included our
financial statements in the prospectus and elsewhere in the registration
statement in reliance on Ernst & Young LLP's report, given on their authority as
experts in accounting and auditing.
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<PAGE> 61
King & Spalding is our patent counsel. The statements in this prospectus
under the captions "Our failure to adequately protect or enforce our
intellectual property rights or secure rights to third party patents could
materially adversely affect our proprietary position in the marketplace or
prevent the commercialization of our products" in the risk factors section, and
"Patents and Intellectual Property" in the business section have been reviewed
and approved by King & Spalding, as experts in such matters. We have included
these statements in reliance upon that review and approval.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the
Securities Act, and the rules and regulations promulgated thereunder, with
respect to the shares of common stock offered buy this prospectus. This
prospectus, which constitutes part of the registration statement, does not
contain all of the information set forth in the registration statement and the
exhibits thereto. Statements contained in this prospectus as to the contents of
any contract or other document that is filed as an exhibit to the registration
statement are not necessarily complete and each such statement is qualified in
all respects by reference to the full text of such contract or document.
You may read and copy all or any portion of the registration statement and
the exhibits at the SEC's public reference room at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the SEC located at Seven
World Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. You can request
copies of these documents, upon payment of a duplication fee, by writing to the
SEC. Please call the SEC at 1-800-SEC-0330 for further information on the
operation of the SEC's public reference rooms. Also, the SEC maintains a World
Wide Web site on the Internet at http://www.sec.gov that contains reports, proxy
and information statements and other information regarding registrants that file
electronically with the SEC.
As a result of this offering, we will become subject to the information and
periodic reporting requirements of the Securities Exchange Act of 1934 and, in
accordance therewith, will file periodic reports, proxy and information
statements and other information with the SEC. These periodic reports, proxy and
information statements and other information will be available for inspection
and copying at the public reference facilities, regional offices and SEC's
website referred to above.
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<PAGE> 62
ATHEROGENICS, INC.
AUDITED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors.............................. F-2
Audited Financial Statements
Balance Sheets............................................ F-3
Statements of Operations.................................. F-4
Statements of Redeemable Convertible Preferred Stock
and Common Shareholders' Deficit....................... F-5
Statements of Cash Flows.................................. F-6
Notes to Financial Statements............................. F-7
</TABLE>
F-1
<PAGE> 63
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
AtheroGenics, Inc.
We have audited the accompanying balance sheets of AtheroGenics, Inc. as of
December 31, 1998 and 1999, and the related statements of operations, redeemable
convertible preferred stock and common shareholders' deficit and cash flows for
each of the three years in the period ended December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of AtheroGenics, Inc. at
December 31, 1998 and 1999, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1999, in conformity
with generally accepted accounting principles in the United States.
/s/ Ernst & Young LLP
Atlanta, Georgia
February 18, 2000
F-2
<PAGE> 64
ATHEROGENICS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
PRO FORMA COMMON
DECEMBER 31, SHAREHOLDERS' EQUITY
--------------------------- AT
1998 1999 DECEMBER 31, 1999
------------ ------------ ----------------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 3,683,423 $ 13,409,450
Unbilled receivables...................................... -- 791,653
Interest and other receivables............................ 62,160 32,708
Reimbursable expenditures under operating lease........... 1,153,440 --
Prepaid expenses.......................................... 43,422 56,911
------------ ------------
Total current assets................................ 4,942,445 14,290,722
Equipment and leasehold improvements:
Leasehold improvements.................................... 369,627 1,137,868
Lab equipment............................................. 796,683 904,599
Computer and office equipment............................. 54,701 168,899
Construction in progress.................................. -- 124,730
------------ ------------
1,221,011 2,336,096
Less accumulated depreciation and amortization............ 821,640 1,101,463
------------ ------------
399,371 1,234,633
Long-term note receivable................................... -- 191,859
------------ ------------
Total assets........................................ $ 5,341,816 $ 15,717,214
============ ============
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK
AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable.......................................... $ 1,449,553 $ 679,142
Accrued liabilities....................................... 46,755 285,600
Accrued development costs................................. 1,291,514 240,000
Accrued interest.......................................... 215,753 --
Current portion of capitalized lease obligation........... 198,236 101,408
Bridge loan............................................... 6,000,000 --
------------ ------------
Total current liabilities........................... 9,201,811 1,306,150
Long-term portion of capitalized lease obligation........... 163,262 61,854
Redeemable convertible preferred stock:
Series A, $1 par and liquidation value:
Authorized -- 1,000,000 shares; issued and
outstanding -- 1,000,000 shares (none pro forma)........ 1,000,000 1,000,000 $ --
Series B, $3 par and liquidation value:
Authorized -- 4,804,382 shares; issued and
outstanding -- 4,586,815 shares (none pro forma)........ 13,704,499 13,704,499 --
Series C, $3 par and liquidation value:
Authorized -- 8,500,000 shares; issued and
outstanding -- 8,057,022 shares at December 31, 1999
(none pro forma)........................................ -- 24,006,992 --
Series B-1, $5 par and liquidation value:
Authorized 50,000 shares (none outstanding)............... -- -- --
Preferred stock warrants.................................. 246,125 481,875 --
Common shareholders' equity (deficit):
Common stock, no par value:
Authorized -- 21,100,000 shares; issued and
outstanding -- 2,410,375 and 2,536,543 shares at
December 31, 1998 and 1999, respectively (16,180,380
shares pro forma)....................................... 281,751 2,209,962 40,921,453
Warrants.................................................. -- -- 481,875
Deferred stock compensation............................... -- (1,809,680) (1,809,680)
Accumulated deficit....................................... (19,255,632) (25,244,438) (25,244,438)
------------ ------------ ------------
Total common shareholders' equity (deficit)......... (18,973,881) (24,844,156) 14,349,210
------------ ------------
Total liabilities, redeemable convertible preferred
stock and shareholders' deficit................... $ 5,341,816 $ 15,717,214
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 65
ATHEROGENICS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1997 1998 1999
----------- ------------ -----------
<S> <C> <C> <C>
Revenues:
License fees......................................... $ -- $ -- $ 5,000,000
Research and development............................. -- -- 791,653
----------- ------------ -----------
Total revenues............................... -- -- 5,791,653
Operating expenses:
Research and development............................. 4,656,478 8,954,904 9,041,345
General and administrative........................... 988,230 1,573,807 2,593,017
Amortization of deferred stock compensation.......... -- -- 85,480
----------- ------------ -----------
Total operating expenses..................... 5,644,708 10,528,711 11,719,842
----------- ------------ -----------
Operating loss......................................... (5,644,708) (10,528,711) (5,928,189)
Net interest income (expense).......................... 485,392 (205,130) (60,617)
----------- ------------ -----------
Net loss............................................... $(5,159,316) $(10,733,841) $(5,988,806)
=========== ============ ===========
Net loss per share -- basic and diluted................ $ (2.25) $ (4.45) $ (2.45)
=========== ============ ===========
Weighted average shares outstanding -- basic and
diluted.............................................. 2,292,966 2,409,948 2,443,237
=========== ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 66
ATHEROGENICS, INC.
STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND COMMON SHAREHOLDERS'
DEFICIT
<TABLE>
<CAPTION>
REDEEMABLE CONVERTIBLE PREFERRED STOCK
--------------------------------------------------------------------------------------
SERIES A SERIES B SERIES C PREFERRED
---------------------- ----------------------- ----------------------- STOCK
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT WARRANTS
--------- ---------- --------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1997 1,000,000 $1,000,000 4,570,149 $13,654,501 -- $ -- $ 103
Issuance of stock for exercise of stock
options at $.10 to $.30 per share........ -- -- -- -- -- -- --
Issuance of warrants in relation to
capital lease............................ -- -- -- -- -- -- 22
Issuance of stock options for consulting
services at fair value of $.08 per
share.................................... -- -- -- -- -- -- --
Net loss.................................. -- -- -- -- -- -- --
--------- ---------- --------- ----------- --------- ----------- --------
BALANCE AT DECEMBER 31, 1997 1,000,000 1,000,000 4,570,149 13,654,501 -- -- 125
Issuance stock for exercise of stock
options at $.30 per share................ -- -- -- -- -- -- --
Issuance of 50,000 Series B-1 convertible
preferred stock warrant in relation to
building agreement....................... -- -- -- -- -- -- 4,000
Issuance of 200,001 Series B convertible
preferred stock warrants in relation to
bridge loan agreement.................... -- -- -- -- -- -- 242,000
Issuance of stock for legal services at $3
per share................................ -- -- 16,666 49,998 -- -- --
Net loss.................................. -- -- -- -- -- -- --
--------- ---------- --------- ----------- --------- ----------- --------
BALANCE AT DECEMBER 31, 1998.............. 1,000,000 1,000,000 4,586,815 13,704,499 -- -- 246,125
Issuance of stock for exercise of stock
options at $.10 to $.30 per share........ -- -- -- -- -- -- --
Issuance of stock at $3 per share, net of
issuance cost of $164,074................ -- -- -- -- 5,899,999 17,535,923 --
Issuance of 205,002 Series C convertible
preferred stock warrants in relation to
extension of bridge loan agreement....... -- -- -- -- -- -- 235,750
Issuance of stock for the conversion of
the bridge loan and accrued interest at
$3 per share............................. -- -- -- -- 2,140,357 6,421,071 --
Issuance of stock for legal services at $3
per share................................ -- -- -- -- 16,666 49,998 --
Deferred stock compensation related to
stock option grants...................... -- -- -- -- -- -- --
Amortization of deferred stock
compensation............................. -- -- -- -- -- -- --
Net loss.................................. -- -- -- -- -- -- --
--------- ---------- --------- ----------- --------- ----------- --------
BALANCE AT DECEMBER 31, 1999.............. 1,000,000 $1,000,000 4,586,815 $13,704,499 8,057,022 $24,006,992 $481,875
========= ========== ========= =========== ========= =========== ========
<CAPTION>
COMMON SHAREHOLDERS' DEFICIT
----------------------------------------------------------------------
COMMON STOCK TOTAL COMMON
---------------------- DEFERRED STOCK ACCUMULATED SHAREHOLDERS'
SHARES AMOUNT COMPENSATION DEFICIT DEFICIT
--------- ---------- -------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1997 2,287,946 $ 244,822 $ -- $ (3,362,475) $ (3,117,653)
Issuance of stock for exercise of stock
options at $.10 to $.30 per share........ 121,084 12,325 -- -- 12,325
Issuance of warrants in relation to
capital lease............................ -- -- -- -- --
Issuance of stock options for consulting
services at fair value of $.08 per
share.................................... -- 24,200 -- -- 24,200
Net loss.................................. -- -- -- (5,159,316) (5,159,316)
--------- ---------- ----------- ------------ ------------
BALANCE AT DECEMBER 31, 1997 2,409,030 281,347 -- (8,521,791) (8,240,444)
Issuance stock for exercise of stock
options at $.30 per share................ 1,345 404 -- -- 404
Issuance of 50,000 Series B-1 convertible
preferred stock warrant in relation to
building agreement....................... -- -- -- -- --
Issuance of 200,001 Series B convertible
preferred stock warrants in relation to
bridge loan agreement.................... -- -- -- -- --
Issuance of stock for legal services at $3
per share................................ -- -- -- -- --
Net loss.................................. -- -- (10,733,841) (10,733,841)
--------- ---------- ----------- ------------ ------------
BALANCE AT DECEMBER 31, 1998.............. 2,410,375 281,751 -- (19,255,632) (18,973,881)
Issuance of stock for exercise of stock
options at $.10 to $.30 per share........ 126,168 33,051 -- -- 33,051
Issuance of stock at $3 per share, net of
issuance cost of $164,074................ -- -- -- -- --
Issuance of 205,002 Series C convertible
preferred stock warrants in relation to
extension of bridge loan agreement....... -- -- -- -- --
Issuance of stock for the conversion of
the bridge loan and accrued interest at
$3 per share............................. -- -- -- -- --
Issuance of stock for legal services at $3
per share................................ -- -- -- -- --
Deferred stock compensation related to
stock option grants...................... -- 1,895,160 (1,895,160) -- --
Amortization of deferred stock
compensation............................. -- -- 85,480 -- 85,480
Net loss.................................. -- -- -- (5,988,806) (5,988,806)
--------- ---------- ----------- ------------ ------------
BALANCE AT DECEMBER 31, 1999.............. 2,536,543 $2,209,962 $(1,809,680) $(25,244,438) $(24,844,156)
========= ========== =========== ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 67
ATHEROGENICS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1997 1998 1999
----------- ------------ -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss............................................... $(5,159,316) $(10,733,841) $(5,988,806)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................ 186,055 250,095 279,823
Amortization of deferred stock compensation.......... -- -- 85,480
Amortization of debt discount........................ -- 242,000 235,750
Stock issued for services............................ 24,200 49,998 49,998
Stock issued for interest............................ -- -- 271,071
Changes in operating assets and liabilities:
Interest and other receivables.................... 20,073 (1,181,362) 991,033
Unbilled receivable............................... -- -- (791,653)
Prepaid expenses.................................. (37,134) 22,892 (13,489)
Accounts payable.................................. 706,167 693,404 (770,411)
Accrued liabilities............................... -- 1,554,022 (1,028,422)
----------- ------------ -----------
Net cash used in operating activities........ (4,259,955) (9,102,792) (6,679,626)
INVESTING ACTIVITIES
Purchases of equipment and leasehold improvements...... (295,284) (62,586) (1,115,085)
----------- ------------ -----------
Net cash used in investing activities........ (295,284) (62,586) (1,115,085)
FINANCING ACTIVITIES
Proceeds of capital lease.............................. 192,872 99,984 --
Payments on capital lease.............................. (128,758) (180,951) (198,236)
Proceeds from the issuance of preferred stock, Series
C.................................................... -- -- 17,535,923
Proceeds from the issuance of preferred stock
warrants............................................. 22 246,000 --
Proceeds from the issuance of common stock............. 12,325 404 33,051
Proceeds from bridge loan financing, net of warrants... -- 5,758,000 150,000
----------- ------------ -----------
Net cash provided by financing activities.... 76,461 5,923,437 17,520,738
----------- ------------ -----------
Increase (decrease) in cash and cash equivalents....... (4,478,778) (3,241,941) 9,726,027
Cash and cash equivalents at beginning of year......... 11,404,142 6,925,364 3,683,423
----------- ------------ -----------
Cash and cash equivalents at end of year............... $ 6,925,364 $ 3,683,423 $13,409,450
=========== ============ ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid.......................................... $ 40,567 $ 32,622 $ 28,317
Conversion of bridge loan and accrued interest to
preferred stock...................................... -- -- 6,421,071
Warrants issued for extension of bridge loan........... -- -- 235,750
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 68
ATHEROGENICS, INC.
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Description of Business
AtheroGenics, Inc. (the "Company") was incorporated on November 23, 1993
(date of inception) in the State of Georgia to focus on the discovery,
development and commercialization of novel small molecule therapeutics for the
treatment of chronic inflammatory diseases, such as atherosclerosis, asthma, and
arthritis. Prior to 1999, the Company's operations were focused on
organizational activities, obtaining financing, recruiting personnel and
conducting research and development; therefore, through 1998, the Company was
considered to be a development stage company for financial reporting purposes.
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
The Company's cash equivalents consist primarily of money market accounts
on deposit with several financial institutions and the carrying amounts reported
in the balance sheets approximate their fair value.
At December 31, 1999, $5,489,334, $5,662,567, and $1,915,026 of cash and
cash equivalents were on deposit at three individual financial institutions.
Equipment and Leasehold Improvements
Equipment and leasehold improvements are stated at cost. Depreciation of
computer and lab equipment is computed using the straight-line method over the
estimated useful lives of three and five years, respectively. Amortization of
leasehold improvements is recorded over the shorter of: (a) the estimated useful
lives of the related assets; or (b) the lease term.
Revenue Recognition
License fees are recorded upon receipt when the related license agreements
specify that no further efforts or obligations are required of the Company.
Revenues under research and development arrangements are recognized as earned
under the terms of the related agreements (see Note 2).
Research and Development and Patent Costs
Research and development costs, including all clinical trial expenses and
expenditures related to obtaining patents, are charged to expense when incurred.
Stock-Based Compensation
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued To Employees" ("APB 25"), in accounting for its
stock-based employee compensation plans, rather than the alternative fair value
accounting method provided for under Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), as SFAS 123
requires the use of option valuation models that were not developed for use in
valuing employee stock options.
F-7
<PAGE> 69
ATHEROGENICS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Income Taxes
The liability method is used in accounting for income taxes; deferred
income assets and liabilities are determined based on differences between
financial reporting and tax bases of assets and liabilities and are measured
using the enacted tax rates and laws that are expected to be in effect when the
differences are anticipated to reverse.
2. LICENSE AGREEMENT
On October 22, 1999 the Company entered into an exclusive license agreement
(the "Agreement"), consisting of contracts with each of Schering Corporation and
Schering-Plough Ltd. (collectively, "Schering-Plough"). The Agreement provides
for license fees and milestone payments to be made by Schering-Plough to the
Company which could reach up to $189,000,000, excluding royalties and
development costs.
In November 1999 the Company received a $5,000,000 non-refundable license
fee for the exclusive worldwide license to patent rights and licensor know-how
held by the Company. Under the Agreement, the Company granted to Schering-Plough
rights to develop, make, have made, import, export, use, distribute, market,
promote, offer for sale and sell AGI 1067, the Company's lead product candidate,
and specified compounds.
The Agreement provides for payments to the Company by Schering-Plough
related to development and sales milestones. Development milestone payments to
the Company will be based on the successful achievement by Schering-Plough of
certain trials and regulatory approvals. Sales milestone payments shall be based
on the achievement of certain sales levels of licensed product by
Schering-Plough. Schering-Plough is also to make royalty payments to the Company
based on licensed product sales, as defined, by Schering-Plough and its
affiliates.
The milestone payments discussed above will be paid to the Company
regardless of the Company's involvement, if any, in the development of the
licensed product as the related milestones are achieved. The Agreement states
that Schering-Plough shall be responsible, at its cost and expense, and in its
sole judgment, for all research and development activities necessary to obtain
regulatory approval for a licensed product. Schering-Plough may choose to
complete the development of the licensed product without additional help from
the Company. To the extent that the Company performs additional research and
development at Schering-Plough's request, the Company is to be paid for
performing such research and development. The Company recognized research and
development revenues of $791,653 during 1999 in relation to such requests.
Either the Company or Schering-Plough shall have the unilateral right to
terminate the Agreement at any time (giving 60 days notice to the other party).
The Company may also terminate the Agreement if: (a) no licensed product is in
clinical trials on a specified date; and/or (b) if a New Drug Application has
not been filed with the U.S. Food and Drug Administration by a specified date.
Should the Agreement be terminated by either party for any reason other than a
breach thereof, all right, title and interest in the licensed product, licensed
compounds, licensed patents and regulatory approvals and applications and
know-how relating to the preceding shall revert to the Company.
3. NET LOSS PER SHARE
Net loss per share has been computed according to the SFAS No. 128,
"Earnings Per Share" ("SFAS 128"), which requires disclosure of basic and
diluted earnings per share. Basic earnings per share excludes any dilutive
effects of options, shares subject to repurchase, warrants, and convertible
securities. Diluted earnings per share includes the impact of potentially
dilutive securities. The Company's potentially dilutive securities are
antidilutive and, therefore, are not included in the computation of weighted
average
F-8
<PAGE> 70
ATHEROGENICS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
shares used in computing diluted loss per share. Following the guidance given by
the Securities and Exchange Commission, common stock and preferred stock that
has been issued or granted for nominal consideration prior to the anticipated
effective date of the initial public offering must be included in the
calculation of basic and diluted net loss per common share as if these shares
had been outstanding for all periods presented. The Company has not issued or
granted shares for nominal consideration since its formation.
The following is a reconciliation of the numerator and denominator of basic
and diluted net loss per share amounts:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1997 1998 1999
----------- ------------ -----------
<S> <C> <C> <C>
Basic and diluted:
Net loss..................................... $(5,159,316) $(10,733,841) $(5,988,806)
=========== ============ ===========
Weighted average shares used in computing
basic and diluted net loss per share...... 2,292,966 2,409,948 2,443,237
=========== ============ ===========
Basic and diluted net loss per share......... $ (2.25) $ (4.45) $ (2.45)
=========== ============ ===========
Pro forma basic and diluted:
Shares used above............................ 2,443,237
Pro forma adjustment to reflect weighted
average effect of assumed conversion of
preferred stock........................... 10,268,792
-----------
Pro forma weighted average shares of common
stock outstanding......................... 12,712,029
===========
Basic and diluted pro forma loss per share... $ (.47)
===========
</TABLE>
During all periods presented the Company had securities outstanding which
could potentially dilute basic earnings per share in the future, but were
excluded from the computation of diluted net loss per share, as their effect
would have been antidilutive. These outstanding securities consist of the
following at the dates indicated:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------
1997 1998 1999
---------- ---------- -----------
<S> <C> <C> <C>
Convertible (at one share for one share) preferred
stock........................................... 5,570,149 5,586,815 13,643,837
Options........................................... 1,089,750 1,235,875 1,785,325
Warrants.......................................... 12,500 262,501 467,503
---------- ---------- -----------
Total............................................. 6,672,399 7,085,191 15,896,665
========== ========== ===========
Weighted average exercise price of options per
share........................................... $ .26 $ .26 $ .28
========== ========== ===========
Weighted average exercise price of warrants per
share........................................... $ 3.00 $ 3.38 $ 3.21
========== ========== ===========
</TABLE>
4. BRIDGE LOAN
The Company entered into a $6,000,000 bridge loan agreement on August 24,
1998 with various lenders, under which the Company had an obligation in the form
of unsecured promissory notes (some of the lenders are also shareholders of the
Company). The initial maturity date was December 31, 1998.
The Company issued the lenders warrants for 200,001 shares of Series B
Redeemable Convertible Preferred Stock. These warrants became exercisable
January 1, 1999 for $3.00 per share and expire on August 19, 2008. The warrants
have been valued at approximately $1.21 per share based on an
F-9
<PAGE> 71
ATHEROGENICS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
independent appraisal, and the principal balance of the bridge loan payable has
been discounted in an amount equal to such value. Such discount was amortized as
additional interest expense over the original term of the bridge loan.
On February 24, 1999 the bridge loan was increased to $6,150,000. In
addition, as an inducement to extend the loan maturity date from December 31,
1998 to April 30, 1999, the Company issued the lenders additional warrants to
purchase 205,002 shares of Series C Redeemable Convertible Preferred Stock.
These warrants became exercisable April 13, 1999 for $3.00 per share and expire
on December 31, 2008. The warrants have been valued at approximately $1.15 per
share based on an independent appraisal, and the principal balance of the bridge
loan payable has been discounted in an amount equal to such value. Such discount
was amortized as additional interest expense over the extended term of the
bridge loan.
Accordingly, 200,001 shares of Series B Redeemable Convertible Preferred
Stock and 205,002 shares of Series C Redeemable Convertible Preferred Stock have
been reserved for issuance under these warrants.
On April 13, 1999 the promissory notes were converted to 2,050,000 shares
of Series C Redeemable Convertible Preferred Stock. On the date of conversion,
accrued interest totaling $382,799 was paid by a combination of $111,728 in cash
and the issuance of 90,357 additional shares of Series C Redeemable Convertible
Preferred Stock based on the fair market value.
The weighted average interest rate for the bridge loan for August 24
through December 31, 1998 was 10.1%, and such rate for the period from January 1
through April 13, 1999 was 9.75%.
5. SHAREHOLDERS' EQUITY
Redeemable Convertible Preferred Stock
The Series A, Series B, Series B-1 and Series C Redeemable Convertible
Preferred Stock are convertible into common stock at the option of each holder,
or automatically upon the completion of an underwritten public offering of the
Company's common stock providing net proceeds of at least $15,000,000 or an
offering price of at least $7.50 per share, at a conversion rate of one-to-one,
which rate is to be adjusted in the event of a subdivision or combination of
stock or reorganization, consolidation, merger or sale of the Company. Any
outstanding shares of Series A, Series B, Series B-1 and Series C Redeemable
Convertible Preferred Stock are redeemable at the option of the holder on April
15, 2004 and on each subsequent October 15 and April 15 thereafter for the
Series C Redeemable Convertible Preferred Stock, at the greater of the fair
value of the shares of the Series A, Series B, Series B-1 and Series C
Redeemable Convertible Preferred Stock on that date, or $1.00, $3.00, $5.00 and
$3.00 per share, respectively, plus declared and accrued but unpaid dividends.
The holders of shares of Series A, Series B, Series B-1 and Series C Redeemable
Convertible Preferred Stock have voting rights equal to the number of shares of
common stock into which such preferred shares are then convertible, and the
holders of the common shares and each such Series of Redeemable Convertible
Preferred Stock are each entitled to elect two members of the Board of
Directors. The remaining member of the Board of Directors shall be elected by a
plurality of the holders of preferred and common stocks, with each share of
preferred having voting rights equal to the number of shares of common stock
into which such preferred shares are then convertible. Dividends are payable as
declared by the Board of Directors. In the event of liquidation of the Company,
the Series A, Series B, Series B-1 and Series C Redeemable Convertible Preferred
Shareholders are entitled to receive, prior to and in preference to the holders
of common stock, an amount equal to $1.00, $3.00, $5.00 and $3.00 per share,
respectively, plus any declared and accrued but unpaid dividends. In the event
that funds are not adequate to pay the stated liquidation prices, the preferred
shareholders shall be paid on a pro rata basis.
On April 13, 1999 the Company authorized 5,000,000 and issued 2,333,333
shares of Series C Redeemable Convertible Preferred Stock for cash at $3.00 per
share, net of issuance costs of $58,000. On
F-10
<PAGE> 72
ATHEROGENICS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
May 11, 1999 the Company authorized the issuance of an additional 2,500,000
shares of Series C Redeemable Convertible Preferred Stock of which 899,999
shares were issued for cash at $3.00 per share, net of issuance costs of
$45,000. On August 30, 1999 the Company authorized an additional 1,000,000 and
issued 2,666,667 shares of Series C Redeemable Convertible Preferred Stock for
cash at $3.00 per share, net of issuance costs of approximately $61,000.
At December 31, 1999, the Company has reserved a total of 14,111,340 shares
of common stock for the conversion of the Series A, Series B, Series B-1 and
Series C Redeemable Convertible Preferred Stock and warrants.
Common Stock
On January 11, 1995 the Company entered into a license agreement with Emory
University (the "License Agreement") under which the Company received the
exclusive rights to certain patents as to which key employees of the Company
were named as the inventors. In addition, the Company has an option to obtain
the exclusive rights to additional patents which are currently pending. In
consideration for entering into the License Agreement, the Company paid Emory
University a signing fee and will be required to pay royalties upon sales of
products utilizing the patented technology, and milestone payments totaling
$250,000 upon the occurrence of certain specified events. In addition, the
Company agreed to issue Emory University common stock up to specified limits.
The Company issued 188,108 shares of common stock at $.10 per share on January
19, 1995, and, on October 31, 1995, the Company issued 54,038 shares of common
stock at $.30 per share in connection with the closing of the Series B
Redeemable Convertible Preferred Stock purchase agreement. These issuances
completed the Company's equity obligation under the terms of the License
Agreement.
6. STOCK OPTIONS
During 1995 the Company established a stock option plan (the "1995 Plan")
which, as amended, provides that options to purchase the Company's common stock
may be granted to employees, directors, consultants or contractors at prices not
less than 75% of the fair values of the shares on the dates of grant.
The 1995 Plan, as amended, authorizes the grant of options for up to
1,264,084 shares of the Company's common stock, and as of December 31, 1999, the
Company has reserved 433,000 shares of common stock for future issuance under
the 1995 Plan. Options granted under the 1995 Plan vest immediately, but,
pursuant to the terms of an equity ownership agreement, the Company may, if it
chooses to do so, repurchase a declining percentage of shares issued pursuant
the exercise of options during the four-year period following the grant date if
the optionee's employment or affiliation with the Company is terminated. A
summary of stock option activity under the 1995 Plan follows:
<TABLE>
<CAPTION>
WEIGHTED
SHARES PRICE RANGE AVERAGE PRICE
-------- ----------- -------------
<S> <C> <C> <C>
Outstanding at January 1, 1997.............................. 564,250 $.10-.30 $.15
Granted................................................... 342,750 .30 .30
Exercised................................................. (121,084) .10-.30 .10
Canceled.................................................. (328,916) .10-.30 .26
--------
Outstanding at January 1 and
December 31, 1998......................................... 457,000 .10-.30 .20
Exercised................................................. (24,000) .10 .10
Canceled.................................................. (17,800) .30 .30
--------
Outstanding at December 31, 1999............................ 415,200 .10-.30 .20
========
</TABLE>
F-11
<PAGE> 73
ATHEROGENICS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes information concerning outstanding and
exercisable options under the 1995 Plan as of December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ------------------------------------------------------------------------------- ------------------------------
WEIGHTED AVERAGE
NUMBER REMAINING WEIGHTED AVERAGE NUMBER WEIGHTED AVERAGE
EXERCISE PRICE OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- -------------- ----------- ---------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
$.10........................ 206,000 5.5 $.10 206,000 $.10
.30........................ 209,200 7.3 .30 209,200 .30
------- -------
415,200 6.4 .20 415,200 .20
======= =======
</TABLE>
Effective July 30, 1997, the Company established an equity ownership plan
(the "1997 Plan") whereby options to purchase the Company's common stock may be
granted to employees, directors, consultants or contractors at prices not less
than the fair values of the shares on the dates of grant. The 1997 Plan
authorizes the grant of options for up to 1,474,416 shares of the Company's
common stock, and as of December 31, 1999, the Company has reserved 1,370,903
shares of common stock for issuance under the 1997 Plan. Non-qualified options
granted under the 1997 Plan vest immediately, but, pursuant to the terms of an
equity ownership agreement, the Company may, if it chooses to do so, repurchase
a declining percentage of shares issued pursuant the exercise of options during
the four-year period following the grant date if the optionee's employment or
affiliation with the Company is terminated. Incentive stock options generally
vest over four years.
A summary of stock option activity under the 1997 Plan follows:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
SHARES PRICE RANGE PRICE
--------- ----------- ----------------
<S> <C> <C> <C>
Outstanding at January 1, 1997................... -- $ -- $ --
Granted........................................ 632,750 .30 .30
---------
Outstanding at December 31, 1997................. 632,750 .30 .30
Granted........................................ 151,500 .30 .30
Exercised...................................... (1,345) .30 .30
Canceled....................................... (4,030) .30 .30
---------
Outstanding at December 31, 1998................. 778,875 .30 .30
Granted........................................ 748,000 .30-.31 .30
Exercised...................................... (102,168) .30 .30
Canceled....................................... (54,582) .30 .30
---------
Outstanding at December 31, 1999................. 1,370,125 .30-.31 .30
=========
</TABLE>
The following table summarizes information concerning currently outstanding
and exercisable options granted under the 1997 Plan as of December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ------------------------------------------------------------------------ ------------------------------
WEIGHTED AVERAGE
NUMBER REMAINING WEIGHTED AVERAGE NUMBER WEIGHTED AVERAGE
EXERCISE PRICE OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- -------------- ----------- ---------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
$.30................. 1,073,125 8.25 $.30 452,801 $.30
.31................. 297,000 9.8 .31 -- --
---------
1,370,125 8.5 .30 452,801 .30
=========
</TABLE>
During 1999, in connection with the grant of certain options to employees,
the Company recorded non-cash deferred stock compensation of $1,895,160
representing the difference between the exercise price and the deemed fair value
of the Company's common stock on the dates these stock options were granted.
F-12
<PAGE> 74
ATHEROGENICS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Deferred stock compensation is included as a reduction of shareholders' equity
and is being amortized to expense using a graded vesting method. During 1999,
the Company recorded amortization of deferred stock compensation of $85,480. At
December 31, 1999, the Company had a total of approximately $1,800,000 remaining
to be amortized over the corresponding vesting period of each respective option,
generally four years. Such amortization will approximate $900,000 in 2000,
$500,000 in 2001, $300,000 in 2002, and $100,000 in 2003.
On January 28, 2000 the Company's board of directors authorized an
additional 2,250,000 shares to be granted under the 1997 Plan and granted
options as to 1,222,000 shares of common stock, at an exercise price of $.38 per
share, to certain employees and directors. This grant resulted in additional
non-cash deferred stock compensation of approximately $9,000,000. The Company
will amortize such deferred stock compensation using a graded vesting method in
the approximate amounts of: $5,000,000 in 2000; $2,400,000 in 2001; $1,100,000
in 2002; and $500,000 in 2003.
Pro forma information regarding net income is required by FASB 123, which
also requires that the information be determined as if the Company has accounted
for its employee stock options granted subsequent to December 31, 1994 under the
fair value method. The fair value for these options (which are granted with an
exercise price equal to fair market value as determined by the Board of
Directors on the grant date) was estimated at the date of grant using the
minimum value method with the following weighted-average assumptions for 1997,
1998 and 1999: risk-free interest rates of 6.01%, 4.65% and 5.75%, respectively;
no dividend yield; and a weighted-average expected life of the options of 5
years.
For purposes of pro forma disclosures, the estimated fair values of the
options are amortized to expense over the options' vesting periods. The weighted
average fair values of options granted during 1997, 1998 and 1999 equal $.08,
$.06 and $2.54, respectively. The amount for 1999 was determined after giving
consideration to the above mentioned $1,895,160 of deferred stock compensation.
Pro forma net loss and net loss per share are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1997 1998 1999
----------- ------------ -----------
<S> <C> <C> <C>
Net loss....................................... $(5,168,000) $(10,744,826) $(6,059,549)
Net loss per share (basic and diluted)......... (2.25) (4.45) (2.48)
</TABLE>
Options granted to non-employees of the Company during 1997 generated
$24,200 of operating expense which is included in the statement of operations.
Since FASB 123 is applicable only to options granted subsequent to December
31, 1994, its pro forma effect was not fully reflected until 1999.
F-13
<PAGE> 75
ATHEROGENICS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
7. INCOME TAXES
At December 31, 1999 the Company has net operating loss carryforwards and
research and development credit carryforwards of $25,031,843 and $1,111,891
respectively, for income tax purposes which both begin to expire in 2009. The
significant components of the Company's deferred tax assets are:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1998 1999
---------- -----------
<S> <C> <C>
Net operating loss carryforwards............................ $7,205,452 $ 9,512,100
Research credits............................................ 777,000 1,111,891
---------- -----------
Total deferred tax assets......................... 7,982,452 10,623,991
Deferred compensation....................................... -- (687,678)
Total deferred tax liabilities.................... -- (687,678)
---------- -----------
Total............................................. 7,982,452 9,936,313
Valuation allowance......................................... 7,982,452 9,936,313
---------- -----------
Net deferred tax assets..................................... $ -- $ --
========== ===========
</TABLE>
Because of the Company's lack of earnings history, the deferred tax assets
have been fully offset by a valuation allowance. The valuation allowance
increased $2,063,400, $4,827,312 and $1,953,861 in 1997, 1998 and 1999,
respectively.
The Company's net operating loss carryforwards may be subject to certain
limitations on annual utilization in the event of changes in ownership of the
Company. These limitations could significantly reduce the amount of the net
operating loss carryforwards available to the Company in the future.
8. LEASES
Rent expense under operating leases amounted to $86,939 in both 1997 and
1998 and $712,658 in 1999.
On June 19, 1998 the Company entered into an operating lease for office and
laboratory space through March 1, 2009. Monthly lease payments of approximately
$60,400 began March 2, 1999 and will increase for each successive twelve-month
period by the lesser of: the change in the Consumer Price Index times five; or
2.5%. The Company may extend the lease agreement for two successive five-year
periods. The Company's other operating lease obligations are not significant.
As of December 31, 1998 the Company had incurred directly approximately
$1,153,000 of laboratory and office construction costs which were refunded to
the Company by the lessor during 1999. The Company will also make additional
lease payments to the lessor of approximately $29,000 per month through March 1,
2009 related to additional expenditures for leasehold improvements and
equipment.
In conjunction with the above-described lease, the Company issued the
lessor a warrant for 50,000 shares of Series B-1 Redeemable Convertible
Preferred Stock. The warrant has been valued at $.08 per share based on an
independent professional appraisal. The warrant became exercisable on January 1,
1999 for $5 per share and expires on January 1, 2009.
On March 25, 1999 the Company entered into a sublease agreement for a
portion of its new office and laboratory space with Inhibitex, Inc. and monthly
lease payments of $11,923 began March 26, 1999. The lease term ends on March 31,
2009.
On July 31, 1999 the Company entered into a sublease agreement for a
portion of its new office space with ATV Management Corp. and monthly lease
payments of approximately $6,200 began on September 1, 1999. The lease term ends
on July 31, 2002.
F-14
<PAGE> 76
ATHEROGENICS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1999, the Company's aggregate commitments (net of sublease
income) under long-term, non-cancelable operating leases (after increasing the
office and laboratory lease rental by 2.5% per year and amortizing the increased
amount on a straight-line basis) are as follows:
<TABLE>
<CAPTION>
GROSS SUBLEASE INCOME NET
----------- --------------- ----------
<S> <C> <C> <C>
2000........................................... $ 1,118,606 $ 217,848 $ 900,758
2001........................................... 1,109,136 217,848 891,288
2002........................................... 1,096,106 186,693 909,413
2003........................................... 1,084,681 143,076 941,605
Thereafter..................................... 5,674,609 751,149 4,923,460
----------- ---------- ----------
$10,083,138 $1,516,614 $8,566,524
=========== ========== ==========
</TABLE>
In February 1996 the Company entered into a sale leaseback agreement for up
to $750,000 of equipment. Equipment in the cumulative amount of $750,000 was
sold to the lessor and leased back to the Company for four-year lease terms
commencing on various dates during 1996 through 1998. The capital leases have
been recorded using the financing method. In addition, in February 1996, the
Company issued the lessor warrants to purchase 12,500 shares of Series B
Redeemable Convertible Preferred Stock at $3 per share.
Equipment and leasehold improvements include the following amounts for
leases which have been capitalized at December 31, 1998 and 1999:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1999
-------- --------
<S> <C> <C>
Lab equipment............................................... $750,000 $750,000
Less accumulated amortization............................... 412,000 600,000
-------- --------
$338,000 $150,000
======== ========
</TABLE>
Amortization of leased assets is included in depreciation and amortization
expense. The equipment leases provide for one-year extensions at the end of the
lease terms.
Shares of preferred stock and common stock have been reserved for the
exercise and conversion, respectively, of the above-described warrants.
Future minimum lease payments under capital leases consist of the following
at December 31, 1999:
<TABLE>
<S> <C>
2000........................................................ $114,625
2001........................................................ 57,241
2002........................................................ 2,449
--------
Total minimum lease payments...................... 174,315
Less amounts representing interest and warrants............. 11,053
--------
Present value of net minimum lease payments................. 163,262
Less current portion........................................ 101,408
--------
$ 61,854
========
</TABLE>
The amounts recorded as capital lease obligations approximate the estimated
fair market values.
9. EMPLOYEE BENEFIT PLAN
The Company has a defined contribution plan covering eligible employees
which is qualified under Section 401(k) of the Internal Revenue Code. Under the
provisions of the plan, eligible participating
F-15
<PAGE> 77
ATHEROGENICS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
employees may elect to contribute up to 15% of their salary (up to the maximum
amount of tax deferred contribution allowed by the Internal Revenue Code). The
Company may make a discretionary contribution. During 1999 the Company matched
50% of employees' contributions, up to a maximum of 6% of the employees' annual
base compensation. The Company's contribution to the plan for 1998 and 1999
aggregated $33,932 and $37,703, respectively.
10. CONCENTRATIONS OF SUPPLIERS
The Company has contracts with two third party manufacturers which serve as
sole source suppliers of bulk drug substance and formulated drug product. The
Company believes that it could obtain bulk drug and formulated drug product from
other manufacturers and formulators at competitive prices, if necessary.
11. INITIAL PUBLIC OFFERING
In January 2000 the Board of Directors authorized the officers of the
Company to proceed with the preparation and filing of a registration statement
with the Securities and Exchange Commission to register shares of its common
stock in connection with a proposed Initial Public Offering. If the offering
contemplated by this prospectus is consummated, the preferred stock outstanding
as of the closing date will be converted into shares of the Company's common
stock. The unaudited pro forma shareholders' equity in the accompanying balance
sheet as of December 31, 1999 reflects conversion of the outstanding preferred
stock into 13,643,837 shares of common stock. Unaudited pro forma net loss per
share (see Note 3) is computed as if the outstanding preferred stock had been
converted into common stock on the date of issuance.
F-16
<PAGE> 78
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHARES
[LOGO TO COME]
COMMON STOCK
---------------------------
PROSPECTUS
---------------------------
SG COWEN
CHASE H&Q
ADAMS, HARKNESS & HILL, INC.
A.G. EDWARDS & SONS, INC.
, 2000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 79
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the expenses in connection with the issuance
and distribution of the securities being registered hereby:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $26,400
National Association of Securities Dealers, Inc. filing
fee....................................................... 10,500
Nasdaq National Market listing fee.......................... *
Printing fees............................................... *
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Blue sky fees and expenses.................................. *
Transfer agent and registrar fees........................... *
Miscellaneous fees.......................................... *
-------
Total............................................. $
=======
</TABLE>
- ---------------
* To be completed by amendment.
The foregoing, except for the Securities and Exchange Commission
registration fee, the National Association of Securities Dealers, Inc. filing
fee and the Nasdaq National Market listing fee, are estimates.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our Fourth Amended and Restated Articles of Incorporation eliminate, as
permitted by Section 14-2-202(b)(4) of the Georgia Business Corporation Code,
the personal liability of directors and officers for monetary damages to the
corporation or its shareholders for breach of their duty of care and other
duties; provided, however, that our Articles of Incorporation and Section
14-2-202(b)(4) of the Georgia Code do not permit us to eliminate or limit
liability for (1) a breach of duty involving appropriation of a business
opportunity of ours; (2) an act or omission which involves intentional
misconduct or a knowing violation of law; (3) any transaction from which an
improper personal benefit is derived; or (4) any payments of a dividend or any
other type of distribution that is illegal under Section 14-2-832 of the Georgia
Code. In addition, if at any time the Georgia Code is amended to authorize
further elimination or limitation of personal liability, then the liability of
each of our directors and officers shall be eliminated or limited to the fullest
extent permitted by such provisions, as so amended, without further action by
the shareholders, unless the provisions of the Georgia Code require such action.
Sections 14-2-850 to 14-2-859, inclusive, of the Georgia Code govern the
indemnification of directors, officers, employees and agents. Section 14-2-851
of the Georgia Code provides for indemnification of any of our directors for
liability incurred by him in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative,
arbitrative or investigative and whether formal or informal, in which he may
become involved by reason of being a member of our board of directors. Section
14-2-851 also provides such indemnity for directors who, at our request, act as
directors, officers, partners, trustees, employees or agents of another foreign
or domestic corporation, partnership, joint venture, trust, employee benefit
plan or another enterprise. Section 14-2-851 permits indemnification if the
director acted in a manner he believed in good faith to be in or not opposed to
our best interest and, in addition, in criminal proceedings, if he had no
reasonable cause to believe his conduct was unlawful. If the required standard
of conduct is met, indemnification may include judgments, settlements,
penalties, fines or reasonable expenses, including attorneys' fees, incurred
with respect to a proceeding. However, if the director is adjudged liable to us
in a derivative action or on the basis that personal benefit was
II-1
<PAGE> 80
improperly received by him, the director will only be entitled to such
indemnification for reasonable expenses as a court finds to be proper in
accordance with the provisions of Section 14-2-854.
Section 14-2-852 of the Georgia Code provides that directors who are
successful with respect to any claim brought against them, which claim is
brought because they are or were directors, are entitled to indemnification
against reasonable expenses as of right. Conversely, if the charges made in any
action are sustained, the determination of whether the required standard of
conduct has been met will be made, in accordance with the provisions of Section
14-2-855 of the Georgia Code, as follows: (1) if there are two or more
disinterested members of the board of directors, by the majority vote of a
quorum of the disinterested members of the board of directors, (2) by a majority
of the members of a committee of two or more disinterested directors, (3) by
special legal counsel or (4) by the shareholders, but, in such event, the shares
owned by or voted under the control of directors seeking indemnification may not
be voted.
Section 14-2-857 of the Georgia Code provides that an officer who is not a
director has the mandatory right of indemnification granted to directors under
Section 14-2-852, as described above. In addition, we may, as provided by our
Articles, Bylaws, general or specific actions by our board of directors, or by
contract, indemnify and advance expenses to an officer, employee or agent who is
not a director to the extent that such indemnification is consistent with public
policy.
We plan to enter into indemnification agreements with each of our directors
and certain executive officers. The indemnification agreements set forth certain
procedural matters relating to indemnification, including the manner in which an
indemnified party may make a claim and the right of an indemnified party to
court adjudication of his or her claim if we deny such indemnification.
Our officers and directors are presently covered by insurance which (with
certain exceptions and within certain limitations) indemnifies them against any
losses or liabilities arising from any alleged "wrongful act," including any
alleged breach of duty, neglect, error, misstatement, misleading statement,
omissions or other act done or wrongfully attempted. We pay the cost of such
insurance as permitted by our Bylaws and the laws of the State of Georgia.
Reference is hereby made to Section of the underwriting agreement,
the form of which will be filed as Exhibit 1.01 hereto, in which the
underwriters agree to indemnify our directors and officers and certain other
persons against certain civil liabilities.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In the three years preceding the filing of this registration statement, we
have sold and issued the following securities:
1. In April, May and August 1999, we issued an aggregate of 5,899,999
shares of Series C convertible preferred stock to 21 investors for
a consideration of $3.00 per share, or an aggregate of $17,699,997
before expenses of the private placements of approximately
$164,000. In accordance with the terms of the Series C convertible
preferred stock, each share of Series C convertible preferred stock
will be converted into one share of our common stock immediately
prior to the consummation of the public offering.
2. In August and December 1998, we issued $6,150,000 principal amount
notes bearing interest at a rate per annum equal to the prime rate
as published in The Wall Street Journal plus 2%. At that time we
also issued warrants exercisable for 200,001 shares of our Series B
convertible preferred stock. In April 1999 we issued warrants
exercisable for 205,002 shares of our Series C convertible stock to
the noteholders as consideration for extending the maturity of the
notes. The notes and, at the option of the noteholders, the accrued
and unpaid interest on the notes were converted into 2,140,357
shares of our Series C convertible preferred stock in April 1999.
In accordance with the terms of the Series B convertible preferred
stock and the Series C convertible preferred stock, each share of
convertible preferred stock will be converted into one share of our
common stock immediately prior to the consummation of the public
offering.
II-2
<PAGE> 81
3. From January 1, 1997 through February 18, 2000, we granted
incentive stock options and nonqualified stock options to purchase
an aggregate of 3,097,000 shares of our common stock at exercise
prices ranging from $.30 to $.38 per share to employees and
directors under our 1995 Stock Option Plan and our 1997 Equity
Ownership Plan, and issued an aggregate of 254,597 shares upon the
exercise of these and previously granted options. Of these options
granted, options to purchase 408,328 shares of common stock have
been canceled.
4. In July 1998, we issued to Cousins Properties, Inc. a warrant to
purchase 50,000 shares of our Series B-1 convertible preferred
stock at an exercise price of $5.00 per share. This warrant will be
converted into a warrant to purchase 50,000 shares of our common
stock at an exercise price of $5.00 per share immediately prior to
the consummation of the public offering in accordance with the
terms of the Series B-1 convertible preferred stock.
5. In December 1998, we issued to Long Aldridge & Norman LLP 16,666
shares of Series B convertible stock for consideration of $3.00 per
share or an aggregate of $49,998 in legal fees incurred by
AtheroGenics in 1998. In accordance with the terms of the Series B
convertible preferred stock, each share of Series B convertible
preferred stock will be converted into one share of our common
stock prior to the consummation of the public offering.
6. In April 1999, we issued to Long Aldridge & Norman LLP 16,666
shares of Series C convertible stock for consideration of $3.00 per
share or an aggregate of $49,998 in legal fees incurred by
AtheroGenics in 1998. In accordance with the terms of the Series C
convertible preferred stock, each share of Series C convertible
preferred stock will be converted into one share of our common
stock prior to the consummation of the public offering.
7. In October 1997, we issued to Phoenix Leasing Incorporated a
warrant to purchase 2,200 shares of Series B convertible preferred
stock at an exercise price of $3.00 per share in connection with
the Master Lease Agreement between Phoenix Leasing and us dated
November 1, 1995. This warrant will be converted into a warrant to
purchase 2,200 shares of our common stock at an exercise price of
$3.00 per share immediately prior to the consummation of the public
offering in accordance with the terms of the Series B convertible
preferred stock.
No underwriters were involved in the foregoing sales of securities. The
issuance of the above securities were deemed to be exempt from registration
under the Securities Act in reliance on Section 4(2) of such Securities Act as
transactions by an issuer not involving any public offering, or, in the case of
some options to purchase common stock, Rule 701 of the Securities Act. The
recipients of securities in each such transaction represented their intentions
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 warrants issued in such transactions. All
recipients had adequate access, through their relationships with us, to
information about us.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following exhibits are filed herewith:
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S> <C>
1.01* -- Form of Underwriting Agreement.
3.01* -- Form of Fourth Amended and Restated Articles of
Incorporation of AtheroGenics, Inc.
3.02* -- Form of Third Amended and Restated Bylaws of AtheroGenics,
Inc.
4.01* -- Form of Common Stock Certificate.
</TABLE>
II-3
<PAGE> 82
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S> <C>
4.02 -- Amended and Restated Master Rights Agreement dated October
31, 1995, as amended by First Amendment dated November 1,
1995; Second Amendment dated July 30, 1996; Third Amendment
dated April 13, 1999; Fourth Amendment dated May 11, 1999;
and Fifth Amendment dated August 30, 1999.
4.03 -- Applicable provisions of Fourth Amended and Restated
Articles of Incorporation and Third Amended and Restated
Bylaws of AtheroGenics, Inc. (to be incorporated by
reference to Exhibits 3.01 and 3.02).
5.01* -- Opinion of Long Aldridge & Norman LLP (including consent).
10.01*+ -- Exclusive License Agreements dated October 22, 1999 by and
between AtheroGenics, Inc. and each of Schering-Plough Ltd.
and Schering Corporation.
10.02*+ -- Exclusive License Agreement dated July 17, 1998 between The
Regents of the University of California and AtheroGenics,
Inc. for Therapeutic and Diagnostic Uses of Monoclonal
Antibodies against Oxidized LDL in Atherosclerosis and Other
Diseases.
10.03*+ -- Exclusive License Agreement dated November 20, 1997 by and
between the University of Rochester and AtheroGenics, Inc.
10.04*+ -- License Agreement dated January 11, 1995 between Emory
University and AtheroGenics, Inc.
10.05*+ -- Patent Purchase Agreement dated April 26, 1995 between
AtheroGenics, Inc. and Sampath Parthasarathy, together with
Services Agreement dated April 26, 1995 between
AtheroGenics, Inc. and Sampath Parthasarathy.
10.06*+ -- Sponsored Research Agreement dated October 14, 1996 between
Emory University and AtheroGenics, Inc.
10.07 -- AtheroGenics, Inc. 1995 Stock Option Plan, together with
form of nonqualified stock option agreement.
10.08 -- AtheroGenics, Inc. 1997 Equity Ownership Plan, together with
form of nonqualified and incentive stock option agreements.
10.09 -- Preferred Shares Purchase Warrant dated August 24, 1998
between AtheroGenics, Inc. and certain Lenders named
therein.
10.10 -- Series C Convertible Preferred Stock Purchase Warrants of
AtheroGenics, Inc.
10.11 -- Promissory Note dated April 1, 1999 between Inhibitex, Inc.
and AtheroGenics, Inc.
10.12++ -- Lease Agreement dated June 19, 1998 between Cousins
Properties, Inc. and AtheroGenics, Inc.
10.13++ -- Master Equipment Lease dated November 1, 1995 between
Phoenix Leasing Incorporated and AtheroGenics, Inc.
23.01 -- Consent of Ernst & Young LLP.
23.02 -- Consent of Long Aldridge & Norman LLP (to be contained in
Exhibit 5.01).
23.03 -- Consent of King & Spalding.
24.01 -- Powers of Attorney (see signature pages to this registration
statement).
27.01 -- Financial Data Schedule (for SEC use only).
</TABLE>
- ---------------
* To be filed by amendment.
+ Certain confidential information contained in this document will be omitted
and filed separately with the Commission pursuant to Rule 406 of the
Securities Act of 1933, as amended.
++ We agree to furnish supplementally to the Commission a copy of any omitted
schedule or exhibit to this agreement upon request by the Commission.
(b) Financial Statement Schedules
No financial statement schedules are provided, because the information
called for is not required or is shown either in the financial statements or the
notes thereto.
II-4
<PAGE> 83
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information which may be omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A and
contained in a form or 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.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-5
<PAGE> 84
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Atlanta, State of
Georgia, on February 25, 2000.
ATHEROGENICS, INC.
By: /s/ RUSSELL M. MEDFORD, M.D., PH.D
------------------------------------
RUSSELL M. MEDFORD, M.D., PH.D.
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Russell M. Medford and Mark P. Colonnese, and
each of them, as his true and lawful attorneys-in-fact and agents, with full
power of substitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to sign any registration statement for the
same offering covered by this Registration Statement that is to be effective
upon filing pursuant to Rule 462(b) promulgated under the Securities Act of
1933, and all post-effective amendments thereto, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or either of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
PRINCIPAL EXECUTIVE OFFICER:
/s/ RUSSELL M. MEDFORD President and Chief Executive February 25, 2000
- ------------------------------------------------ Officer, Director
RUSSELL M. MEDFORD
PRINCIPAL FINANCIAL AND PRINCIPAL
ACCOUNTING OFFICER:
/s/ MARK P. COLONNESE Vice President of Finance and February 25, 2000
- ------------------------------------------------ Administration and Chief
MARK P. COLONNESE Financial Officer
ADDITIONAL DIRECTORS:
/s/ MICHAEL A. HENOS Director February 25, 2000
- ------------------------------------------------
MICHAEL A. HENOS
/s/ R. WAYNE ALEXANDER Director February 25, 2000
- ------------------------------------------------
R. WAYNE ALEXANDER
/s/ VAUGHN D. BRYSON Director February 25, 2000
- ------------------------------------------------
VAUGHN D. BRYSON
[Signatures continued on following page]
</TABLE>
II-6
<PAGE> 85
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
/s/ T. FORCHT DAGI Director February 25, 2000
- ------------------------------------------------
T. FORCHT DAGI
/s/ VIJAY K. LATHI Director February 25, 2000
- ------------------------------------------------
VIJAY K. LATHI
/s/ ARDA MINOCHERHOMJEE Director February 25, 2000
- ------------------------------------------------
ARDA MINOCHERHOMJEE
/s/ ARTHUR M. PAPPAS Director February 25, 2000
- ------------------------------------------------
ARTHUR M. PAPPAS
/s/ RICHARD S. SCHNEIDER Director February 25, 2000
- ------------------------------------------------
RICHARD S. SCHNEIDER
/s/ WILLIAM A. SCOTT Director February 25, 2000
- ------------------------------------------------
WILLIAM A. SCOTT
</TABLE>
II-7
<PAGE> 1
EXHIBIT 4.02
AMENDED AND RESTATED
MASTER RIGHTS AGREEMENT
This Master Rights Agreement (the "Agreement") is made and
entered into as of the 31st day of October, 1995 by and among AtheroGenics,
Inc., a Georgia corporation (the "Company"), Alliance Technology Ventures,
Limited Partnership, a Delaware limited partnership ("Alliance"), ATV/GP
Parallel Fund, Limited Partnership, a Delaware limited partnership ("ATV/GP"),
ATV/MFJ Parallel Fund, Limited Partnership, a Delaware limited partnership
("ATV/MFJ"), Intelligent Systems Corporation, a Georgia corporation
("Intelligent Systems"), International Murex Technologies Corp., a company
organized under the laws of British Columbia, Canada ("Murex"), Sanderling III
Limited, a Cayman Islands limited partnership ("Sanderling Limited"), Sanderling
Venture Partners III, a California limited partnership, ("Sanderling Venture"),
Sanderling III Biomedical, a California limited partnership ("Sanderling
Biomedical"), Sanderling Ventures Management, a California limited partnership,
("Sanderling Management") and New York Life Insurance Company, a New York
corporation ("NY Life").
AGREEMENT
In consideration of the following mutual covenants and
agreements, and subject to the terms and conditions set forth herein, the
parties hereto agree as follows:
ARTICLE I.
1.1 Definitions. The following definitions shall be applicable to
the terms set forth below as used in this Agreement:
(a) "Affiliates." The term "Affiliate" shall mean, with
respect to any Person, any other Person which directly, or indirectly through
one or more intermediaries, controls, is controlled by or is under common
control with such Person.
(b) "Articles." The term "Articles" shall mean the
Company's Articles of Incorporation, as amended from time to time.
(c) "Board." The term "Board" shall mean the Board of
Directors of the Company.
(d) "Budget." The term "Budget" shall have the meaning
set forth in Section 2.1(d) hereof.
<PAGE> 2
(e) "Commission." The term "Commission" shall mean the
Securities and Exchange Commission or any other federal agency at the time
administering the federal securities laws.
(f) "Common Stock." The term "Common Stock" shall mean
the Company's Common Stock as constituted on the date hereof.
(g) "Company's Notice." The term "Company's Notice" shall
have the meaning set forth in Section 3.3 hereof.
(h) "Conversion Shares." The term "Conversion Shares"
shall mean any Common Stock issued or issuable upon conversion of the Preferred
Stock held by the Investors.
(i) "Equity Securities." The term "Equity Securities"
shall have the meaning set forth in Section 2.3 hereof.
(j) "GAAP." The term "GAAP" shall mean generally accepted
accounting principles (as such principles are applied in the United States of
America as of the date of the financial statement with respect to which the term
is used), consistently applied.
(k) "Initiating Holders." The term "Initiating Holders"
shall mean the holders of Registrable Stock initially requesting registration of
Registrable Stock pursuant to Section 3.1 of this Agreement.
(l) "Investors." The term "Investors" shall mean
Alliance, ATV/GP, ATV/MFJ, Intelligent Systems, Murex, Sanderling Limited,
Sanderling Venture, Sanderling Biomedical, Sanderling Management and NY Life,
their respective successors and assigns and any other holder of Preferred Stock
or of warrants, options or other rights to acquire Preferred Stock who by
amendment is added as a party to this Agreement.
(m) "Investors' Notice." The term "Investors' Notice"
shall have the meaning set forth in Section 3.3 hereof.
(n) "Long-Form Registration Statement." The term
"Long-Form Registration Statement" shall mean a registration statement on Form
S-1, Form S-2, Form SB-1 or Form SB-2, or any similar form of registration
statement adopted by the Commission from and after the date hereof.
(o) "Permitted Transferees." The term "Permitted
Transferees" of an Investor shall mean (i) any other Investor; (ii) any
Affiliate of any Investor; (iii) any one or more members of a class consisting
of the spouse, children and grandchildren of an Investor, or a trust for the
benefit of any one or more members of such class; or (iv) any shareholder or
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<PAGE> 3
partner of any non-natural Investor upon a pro rata distribution by a
partnership to its partners or otherwise upon the dissolution or liquidation of
the non-natural Investor.
(p) "Person." The term "Person" shall mean any
individual, firm, corporation, partnership, trust, joint venture, governmental
authority or other entity, and shall include any successor (by merger or
otherwise) of such entity.
(q) "Preferred Stock." The term "Preferred Stock" shall
mean the Company's Series A Convertible Preferred Stock and Series B Convertible
Preferred Stock.
(r) "Prospective Sellers." The term "Prospective Sellers"
shall have the meaning set forth in Section 3.6(a)(ii) hereof.
(s) "Register." The terms "register," "registered" and
"registration" refer to a registration effected by preparing and filing a
registration statement in compliance with the Securities Act.
(t) "Registrable Stock." The term "Registrable Stock"
shall mean (i) any Common Stock issued or issuable upon conversion of the
Preferred Stock held or acquired by any of the Investors; (ii) any Common Stock
issued or issuable with respect to the Conversion Shares by reason of a stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization, and (iii) any
other shares of Common Stock now held or hereafter acquired by Persons holding
the securities described in clauses (i) and (ii) above. A Person shall be deemed
to be a holder of Registrable Stock when such Person has a right to acquire such
Registrable Stock (whether by conversion or otherwise) regardless of whether
such acquisition has actually been effected. Each share of Registrable Stock
shall continue to be Registrable Stock in the hands of each subsequent holder
thereof subject to the limitations set forth in Section 3.14 hereof; provided
that each share of Registrable Stock shall cease to be Registrable Stock when
transferred (x) to any Person who is not a Permitted Transferee or if the
transfer does not comply with the terms of this Agreement, (y) pursuant to a
registered public offering, or (z) in accordance with Rule 144 promulgated by
the Commission under the Securities Act.
Notwithstanding anything to the contrary herein, the term
"Registrable Stock" (solely for the purposes of Sections 3.3 to 3.8, inclusive,
3.10 and 3.13) shall include (i) any Common Stock outstanding on the date hereof
and (ii) any Common Stock issued out of the Reserved Shares. Moreover, the
registration rights for such Registrable Stock described in the immediately
preceding sentence shall not be transferable, except in a transfer to a
Permitted Transferee.
3
<PAGE> 4
(u) "Requesting Holders." The term "Requesting Holders"
shall have the meaning set forth in Section 3.1(c) hereof.
(v) "Reserved Shares." The term "Reserved Shares" shall
mean shares of Common Stock reserved for issuance to directors, officers,
employees and consultants upon the exercise of outstanding or future options of
the Company.
(w) "Securities Act." The term "Securities Act" shall
mean the Securities Act of 1933, as amended.
(x) "Short-Form Registration Statement." The term
"Short-Form Registration Statement" shall mean a registration statement on Form
S-3 or any similar form of registration statement adopted by the Commission from
and after the date hereof.
1.2 Additional Definitions. In addition to the foregoing,
capitalized terms used in this Agreement and not otherwise defined in this
Article I shall have the meanings so given to such terms herein.
ARTICLE II.
COVENANTS OF THE COMPANY AND THE INVESTORS
2.1 Accounting; Financial Statements and Other Information;
Inspection Rights.
(a) Accounting. The Company shall maintain and cause each
of its subsidiaries to maintain a system of accounting established and
administered in accordance with GAAP and shall set aside on its books and cause
each of its operating subsidiaries to set aside on its books all such proper
reserves as shall be required by GAAP.
(b) Financial Statements. So long as there are any shares
of Preferred Stock outstanding and an Investor holds not less than 7.5% of the
outstanding Preferred Stock, the Company shall deliver to each such Investor,
within 90 days after the end of each fiscal year of the Company, a consolidated
and consolidating balance sheet of the Company and its subsidiaries as of the
end of such year and consolidated and consolidating statements of operations,
cash flows and stockholders' equity (deficit) of the Company and its
subsidiaries for such year, setting forth in each case comparisons to the Budget
and the previous fiscal year, all in reasonable detail and accompanied by the
opinion thereon of independent public accountants of national standing, which
opinion shall not be qualified and shall state that the financial statements
were prepared in accordance with GAAP applied on a basis consistent with that of
the previous fiscal year, fairly present the consolidated financial condition of
the Company as of the date thereof and for the periods covered thereby and that
the audit by such accountants in
4
<PAGE> 5
connection with such financial statements has been made in accordance with
generally accepted auditing standards.
(c) Additional Information. So long as there are any
shares of Preferred Stock outstanding and an Investor Stock holds not less than
7.5% of the outstanding Preferred, the Company shall deliver to each such
Investor:
(i) within 30 days after the end of each of (A)
the monthly accounting periods, and (B) the quarterly accounting periods in each
fiscal year of the Company, a consolidated and consolidating balance sheet of
the Company and its subsidiaries as of the end of each such period, and
consolidated and consolidating statements of operations, cash flows and
stockholders' equity (deficit) of the Company and its subsidiaries and changes
in consolidated and consolidating financial position of the Company and its
subsidiaries for each such period and for the period from the beginning of the
current fiscal year to the end of such monthly or quarterly period, setting
forth in each case comparisons to the Budget and the corresponding periods of
the previous fiscal year, all in reasonable detail and certified by the chief
financial officer of the Company;
(ii) concurrently with the delivery of each of
the financial statements referred to in Sections 2.1(b) and 2.1(c)(i) above, an
executed written report by the chief executive officer of the Company with
respect to the operations of the Company during the period covered by such
statements, including a discussion, in reasonable detail, of operating results
versus Budget and of problems and achievements versus goals and milestones and
setting forth goals and milestones for the ensuing month, quarter and year;
(iii) within 90 days after the end of each fiscal
year of the Company, a copy of any management letter delivered to the Company by
its independent public accountants with respect to such year;
(iv) promptly (but in any event within ten days)
after any material adverse event or circumstance affecting the Company or any of
its subsidiaries (including, but not limited to, the filing of any material
litigation against the Company or any of its subsidiaries and the discovery that
the Company or any of its subsidiaries is not, or with the passage of time will
not be, in compliance with any provision of this Agreement, its Bylaws, the
Articles or any other material agreement of the Company or any of its
subsidiaries), a notice specifying the nature and period of existence thereof,
and the actions the Company has taken and/or proposes to take with respect
thereto; and
(v) promptly (but in any event within ten days)
after transmission thereof, copies of any general communication from the Company
or any of its subsidiaries to its stockholders, directors or the financial
community at large, and any reports filed by the Company or any of its
subsidiaries with any securities exchange, the National Association of
Securities Dealers, Inc., any state official or agency charged with securities
regulation, the
5
<PAGE> 6
Commission or any other governmental agency, domestic or foreign (including,
without limitation, any correspondence between the Company or any of its
subsidiaries and any of the foregoing which contains information materially
adverse to the Company or any of its subsidiaries).
(d) Annual Budget.
(i) Prior to each December 31, the Company shall
prepare a Budget (the "Budget") for each succeeding 12-month period commencing
each subsequent January 1, which shall meet the approval of the Board. The
initial draft of the Budget will be prepared by the chief executive officer of
the Company and submitted to all Board members at least 15 days prior to the
meeting at which it is to be considered and in no event later than November 1st
of each year. The Budget shall contain the current business and marketing plans
of the Company for the 12-month period covered by it, including but not limited
to, cash flow and pro forma profit and loss statements for each month included
in such period. The Company agrees to use its best efforts to conduct its
business in conformity with the Budget.
(ii) At each meeting of the Board, operating
management will report on the receipts and expenditures of the Company as of a
date reasonably close to the date of the meeting and will recommend for action
by the Board any changes in the Budget which it considers necessary or
appropriate. Unless provided for in the Budget, no expenditure may be made by or
on behalf of the Company without action by the Board.
(iii) The Budget may be amended or otherwise
modified by the Board at such time or times as the Board deems appropriate.
(iv) So long as there are any shares of Preferred
Stock outstanding and an Investor holds not less than 7.5% of the outstanding
Preferred Stock, the Company shall furnish to each such Investor (in person or
by first-class mail) a copy of such Budget at least 30 days prior to the
commencement of the period covered by such Budget.
(e) Inspection Rights. The Company shall permit any
Investor or any representative designated by any Investor, at such Investor's
expense, to visit and inspect any of the properties of the Company or any of its
subsidiaries, including its and their books of account (and to make copies
thereof and to take extracts therefrom), and to discuss its and their affairs,
finances and accounts with its and their officers or employees and with
representatives of the Company's lenders, all at such reasonable times and as
often as may be reasonably requested; provided that such rights shall be
exercised in a manner so as not to materially and adversely disrupt the ordinary
course of business of the Company or any of its subsidiaries.
(f) Limitation of Rights. The rights of the Investors to
receive the information and conduct any inspections provided for in this Section
2.1 are subject to the right of the Company, prior to any such receipt of
information or inspection by any person, to demand
6
<PAGE> 7
that such person hold all such information confidential and sign a
confidentiality agreement in a form mutually acceptable to the Company and the
Investors ("Confidentiality Agreement"). The receipt by any third person of such
information shall be subject to the prior receipt by the Company of a signed
Confidentiality Agreement from that third person.
2.2 Right of First Refusal for Issuance of Equity
Securities.
(a) If the Company determines to issue any
additional shares of its capital stock, or warrants, options, rights or other
securities convertible into its capital stock (collectively, the "Equity
Securities"), from and after the date of this Agreement for the purpose of
financing its business, the Company shall first give each of the Investors then
holding Preferred Stock the right to purchase such Equity Securities by
delivering to them a written offer which shall state the price and other terms
and conditions of the proposed issuance. If the Company proposes to issue the
Equity Securities for consideration other than solely cash and/or promissory
notes, the offer to the Investors then holding Preferred Stock shall, to the
extent of such consideration, permit such Investors to pay in lieu thereof, cash
equal to the fair market value of such consideration, and the offer shall state
the Company's estimate of such fair market value. The Board shall fix the period
of the offer which shall be a minimum of 30 days or such longer period as is
necessary to determine the fair market value of the consideration referred to in
the preceding sentence. Each Investor then holding Preferred Stock shall have
the right to assign any of the rights such Investor may have to purchase Equity
Securities under this Section 2.2 to any Permitted Transferee.
(b) An Investor then holding Preferred Stock may
accept an offer only by giving written notice to the Company before the offer
expires that such Investor has accepted the offer to purchase some or all of the
securities offered (the "Accepted Securities"); provided, however, that the
maximum number or amount of securities such Investor shall be entitled to
purchase shall be equal to that number or amount of securities to be issued
multiplied by a fraction, the numerator of which shall be the aggregate number
of Conversion Shares to which such Investor is entitled and the denominator of
which shall be the aggregate number of shares of voting capital stock of the
Company then outstanding. Notwithstanding the foregoing, any such Investor may,
at the time it accepts the offer, subscribe to purchase any or all securities
offered ("Oversubscription Securities") which may be available as a result of
the rejection, or partial rejection, of the offer by other such Investors. All
Oversubscription Securities shall be allocated on a pro rata basis among those
Investors subscribing to purchase them. If any such Investor declines to
purchase all or part of such Investor's pro rata allocation of Oversubscription
Securities, any remaining Oversubscription Securities shall be offered, on a pro
rata basis, to those Investors electing to purchase Oversubscription Securities.
The sale of Oversubscription Securities shall continue pursuant to the process
set forth in the immediately preceding sentence until all of the Equity
Securities have been purchased by the Investors or until no Investor desires to
purchase any remaining Oversubscription Securities.
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<PAGE> 8
Promptly following the expiration of the offer, the Company
shall allocate the securities subscribed for among the Investors then holding
Preferred Stock accepting or partially accepting the offer (the "Subscribing
Holders") in the manner described in the immediately preceding paragraph and
shall by written notice (the "Acceptance Notice") advise all Subscribing Holders
of the number or amount of securities allocated to each of the Subscribing
Holders. Within ten days following receipt of the Acceptance Notice, each of the
Subscribing Holders shall deliver to the Company payment in full for the
Accepted Securities purchased by it against delivery by the Company to each
Subscribing Holder of a certificate or certificates evidencing the Accepted
Securities purchased by it.
To the extent the offer is not subscribed in full by the
Investors then holding Preferred Stock, the Company may, for a period of 90 days
thereafter, issue and sell the unaccepted securities, or any of them, at the
same price, and upon the other terms and conditions specified in such offer, to
any Person or Persons.
(c) Notwithstanding the provisions of this Section 2.2,
the Company shall not be required to first offer the Equity Securities to
Investors holding Preferred Stock if:
(i) the issuance is pursuant to the conversion
of any shares of the Preferred Stock;
(ii) the Company proposes to issue Reserved
Shares, or nontransferable options to purchase Common Stock, for cash only, to
its officers or employees, or officers or employees of any of its subsidiaries,
or to outside consultants or contractors in connection with services performed
for the Company, pursuant to employment or compensation plans or other
arrangements approved by the Company's Board, provided the total of all such
shares does not exceed 800,000 shares;
(iii) the issuance is in connection with any stock
split, stock dividend or recapitalization of the Company;
(iv) the issuance is pursuant to an underwritten
public offering;
(v) the issuance is pursuant to the acquisition
of another company;
(vi) the issuance is to Pheonix Growth Capital
Corp., or its Affiliate or assignee, in connection with an equipment lease
facility for the Company, provided the total of all such shares does not exceed
12,500 shares;
(vii) the issuance is to International Murex
Technologies Corporation, or its Affiliate or assignee, in connection with the
Company's rental obligations under that certain Sublease Agreement dated March
1, 1995 or in connection with certain capital
8
<PAGE> 9
leasehold improvements made to the leased premises pursuant to that certain
Letter Agreement dated September 11, 1995, provided the total of all such shares
does not exceed 200,294 shares;
(viii) the issuance is to Emory University pursuant
to the terms of that certain Common Stock Purchase Agreement dated January 11,
1995; or
(ix) the issuance is to one or more of the
holders of the Preferred Stock upon the exercise of warrants to purchase shares
of Series B Convertible Preferred Stock issued pursuant to that certain Series B
Convertible Preferred Stock Purchase Agreement of even date herewith.
2.3 Reserved Shares.
(a) The Reserved Shares shall be issued from
time to time to directors, officers, employees and consultants of the Company
under such arrangements, contracts or plans as are recommended by the management
of the Company and approved by the unanimous consent of those members of the
Board of Directors elected by the holders of Preferred Stock.
(b) Unless otherwise approved by the unanimous
consent of those members of the Board of Directors elected by the holders of
Preferred Stock, any such arrangements, contracts or plans with respect to the
Reserved Shares shall not provide for a vesting schedule at a rate in excess of
20% per annum from the date of issuance. Unless otherwise approved by the
unanimous consent of those members of the Board of Directors elected by the
holders of Preferred Stock, holders of the Reserved Shares shall be required to
execute Stock Restriction Agreements substantially in the form of Exhibit 2.3.
2.4 Patent, Copyright and Nondisclosure Agreement. Unless
otherwise approved by the unanimous consent of those members of the Board of
Directors elected by the holders of Preferred Stock, the Company shall require
all present and future officers, directors and technical employees of, and
consultants to, the Company and its subsidiaries to execute and deliver a
Patent, Copyright and Nondisclosure Agreement substantially in the form of
Exhibit 2.4.
2.5 Stock Restriction and Optionee Restriction
Agreements. Unless otherwise approved by the unanimous consent of those members
of the Board of Directors elected by the holders of Preferred Stock, the Company
shall cause all future purchasers of, and all future holders of options to
purchase, the Company's Common Stock who are employees or consultants of the
Company to execute and deliver a Stock Restriction Agreement or Optionee
Restriction Agreement substantially in the form of Exhibits 2.3 and 2.5,
respectively.
2.6 Termination of Company Agreements. The provisions of
Sections 2.1 through 2.5 above shall remain in full force and effect so long as
any Preferred Stock remains outstanding.
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<PAGE> 10
2.7 Board of Directors. Unless otherwise approved by the
holders of a majority of the outstanding shares of Preferred Stock, the Articles
shall, for so long as any shares of Preferred Stock remain outstanding, provide
for a Board of Directors of up to seven members. The Investors hereby agree (a)
not to exercise their right to vote to enlarge the Board from its current four
members to seven members prior to April 1, 1996 and (b) not to take any action,
prior to April 1, 1996, to remove or replace any of the current directors unless
holders of more than fifty percent (50%) of the outstanding shares of Preferred
Stock agree to such action.
ARTICLE III.
REGISTRATION RIGHTS
3.1 Required Registrations.
(a) If, at any time after the earlier to occur
of January 1, 2001 or six months after the effective date of the first
registration statement filed by the Company covering an offering of the
Company's securities (other than a registration relating either to the sale of
securities to employees of the Company pursuant to a stock option, stock
purchase or similar plan or a transaction under Rule 145 of the Securities Act,
or a registration on any form which does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of Registrable Stock), holders of at least 40% of the
Registrable Stock then outstanding propose to dispose of at least 20% of the
Registrable Stock then outstanding or any lesser percentage if the anticipated
aggregate offering price would exceed $15,000,000, then such holders may request
the Company in writing to effect such registration, stating the form of
registration statement under the Securities Act to be used (subject to the
Company being eligible to use such registration statement), the number of shares
of Registrable Stock to be disposed of and the intended method of disposition of
such shares.
(b) If, at any time at which the Company is
eligible to file a registration statement on a Short-Form Registration
Statement, holders of Registrable Stock propose to dispose of shares of
Registrable Stock which such holders in their good faith discretion determine
would have an anticipated aggregate offering price of at least $1,000,000
pursuant to a Short-Form Registration Statement, then such holders may request
the Company in writing to effect such registration on a Short-Form Registration
Statement, stating the form of such registration statement under the Securities
Act to be used, the number of shares of Registrable Stock to be disposed of and
the intended method of disposition of such shares.
(c) Upon receipt of the request of the holders
pursuant to Section 3.1(a) or Section 3.1(b) above (in the case of Section
3.1(a) or Section 3.1(b), hereinafter referred to as the "Initiating Holders"),
the Company shall give prompt written notice thereof to all other holders of
Registrable Stock. Subject to the provisions of Section 3.2 below, the Company
shall (i) with respect to Section 3.1(a), use its best efforts promptly to
effect, and (ii) with respect to Section 3.1(b) shall promptly effect, the
registration under the Securities Act of all shares of Registrable Stock
specified in the requests of the Initiating Holders and the requests (stating
the
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number of shares of Registrable Stock to be disposed of and the intended method
of disposition of such shares) of other holders of shares of Registrable Stock
("Requesting Holders") given within 30 days after receipt of such notice from
the Company.
3.2 Limitations on Required Registration.
(a) The Company shall not be required to prepare
and file more than two Long-Form Registration Statements, which actually become
or are declared effective, at the request of the Initiating Holders pursuant to
Section 3.1(a) hereof. The two required filings shall include any Long-Form
Registration Statement filed and subsequently withdrawn at the request of the
Initiating Holders unless such request is prompted by market conditions. Nothing
contained herein, however, shall limit the Company's obligation from time to
time to prepare and file a Short-Form Statement requested by the Initiating
Holders pursuant to Section 3.1(b) hereof.
(b) Only Common Stock may be included in a
registration, and, whenever a registration requested by holders of Registrable
Stock is for a firm commitment underwritten offering, if the Initiating Holders
determine that the number of shares of Common Stock so included which are to be
sold by the holders of Registrable Stock is limited due to market conditions,
the holders (including both the Initiating Holders and the Requesting Holders)
of Registrable Stock proposing to sell their shares in such underwriting and
registration shall share pro rata in the available portion of the registration
in question, such sharing to be based upon the number of shares of Registrable
Stock then held by such holders, respectively. If any holder of Registrable
Stock disapproves of the terms of the underwriting, such holder may elect to
withdraw therefrom by written notice to the Company, the underwriter and the
Initiating Holders. The Registrable Stock so withdrawn shall also be withdrawn
from registration; provided, however, that, if by the withdrawal of such
Registrable Stock, a greater number of shares of Registrable Stock held by other
holders of Registrable Stock may be included in such registration (up to the
maximum of any limitation imposed by the Initiating Holders), then the Company
shall offer to all holders of Registrable Stock who have included Registrable
Stock in the registration the right to include additional Registrable Stock in
the same proportion used in determining the limitation imposed by the provisions
of this Section 3.2(b).
(c) The Company shall not be required to prepare
and file a registration statement pursuant to Section 3.1 hereof which could
become effective within 180 days following the effective date of any
registration statement filed by the Company with the Commission pertaining to an
underwritten public offering of securities for cash for the account of the
Company if the Initiating Holders' request for registration is received by the
Company subsequent to such time as the Company in good faith gives written
notice to the holders of Registrable Stock that the Company is commencing to
prepare a Company-initiated registration statement and the Company is actively
employing in good faith all reasonable efforts to cause such registration
statement to become effective.
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(d) Notwithstanding the foregoing, if the
Company shall furnish to the Initiating Holders and Requesting Holders a
certificate signed by the president of the Company stating that, in the good
faith judgment of the Board, it would be seriously detrimental to the Company
and its stockholders for such registration statement to be filed and it is
therefore essential to defer the filing of such registration statement, the
Company shall have the right to defer such filing for a period of not more than
90 days after receipt of the request of the Initiating Holders; provided,
however, that the Company may not utilize this right more than once in any
12-month period.
3.3 Incidental Registration . If the Company at any time
proposes to register any of its securities for sale for its own account or for
the account of any other Person (other than a registration relating either to
the sale of securities to employees of the Company pursuant to a stock option,
stock purchase or similar plan or a Rule 145 transaction, or a registration on
any form which does not include substantially the same information as would be
required to be included in a registration statement covering the sale of
Registrable Stock), it shall each such time give written notice (the "Company's
Notice"), at its expense, to all holders of Registrable Stock of its intention
to do so at least 45 days prior to the filing of a registration statement with
respect to such registration with the Commission. If any holder of Registrable
Stock desires to dispose of all or part of its Registrable Stock, it may request
registration thereof in connection with the Company's registration by delivering
to the Company, within 30 days after receipt of the Company's Notice, written
notice of such request (the "Investors' Notice") stating the number of shares of
Registrable Stock to be disposed of and the intended method of disposition of
such shares by such holder or holders. The Company shall use its best efforts to
cause all shares of Registrable Stock specified in the Investors' Notice to be
registered under the Securities Act so as to permit the sale or other
disposition (in accordance with the intended methods thereof as aforesaid) by
such holder or holders of the shares so registered, subject, however, to the
limitations set forth in Section 3.4 hereof.
3.4 Limitations on Incidental Registration.
(a) If the registration of which the Company
gives notice pursuant to Section 3.3 above is for the purpose of permitting a
disposition of securities by the Company pursuant to a firm commitment
underwritten offering, the notice shall so state, and the Company shall have the
right to limit the aggregate size of the offering or the number of shares to be
included therein by stockholders of the Company if requested to do so in good
faith by the managing underwriter of the offering and only securities which are
to be included in the underwriting may be included in the registration.
(b) Whenever the number of shares which may be
registered pursuant to Section 3.3 is limited by the provisions of Section
3.4(a) above, the holders of Registrable Stock shall have priority as to sales
over the other holders of the Company's securities and the Company shall cause
such other holders to withdraw from such offering to the extent necessary to
allow all requesting holders of Registrable Stock to include all of the shares
so requested to be
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included within such registration. Whenever the number of shares which may be
registered pursuant to Section 3.3 is still limited by the provisions of Section
3.4(a) above, after the withdrawal of the other holders of the Company's
securities, the Company shall have priority as to sales over the holders of
Registrable Stock and each holder hereby agrees that it shall withdraw its
securities from such registration to the extent necessary to allow the Company
to include all the shares which the Company desires to sell for its own account
to be included within such registration; provided, that, except with respect to
the first Long-Form Registration Statement effected by the Company on its own
initiative, in no event shall the Registrable Stock requested to be included
pursuant to Section 3.3 above be reduced below 20% of the total amount of
securities included in such offering. The holders of Registrable Stock given
rights by Section 3.3 above shall share pro rata in the available portion of the
registration in question, such sharing to be based upon the number of shares of
Registrable Stock then held by each of such holders, respectively.
3.5 Designation of Underwriter. In the case of any
registration initiated by the Initiating Holders pursuant to the provisions of
Section 3.1 hereof which is proposed to be effected pursuant to a firm
commitment underwriting and, subject to the approval of the Company, which
approval shall not be unreasonably withheld, the Initiating Holders shall have
the right to designate the managing underwriter, and all holders of Registrable
Stock participating in the registration shall sell their shares only pursuant to
such underwriting.
3.6 Registration Procedures.
(a) If and when the Company is required by the
provisions of this Agreement to use its best efforts to effect the registration
of shares of Registrable Stock, the Company shall:
(i) prepare and file with the
Commission a registration statement (the form and substance of which shall be
subject to the approval of the holders of a majority of the Registrable Stock to
be included in such registration) with respect to such shares and use its best
efforts to cause such registration statement to become and remain effective for
a period described in Section 3.15 hereof;
(ii) prepare and file with the
Commission such amendments and supplements to such registration statement and
the prospectuses used in connection therewith as may be necessary to keep such
registration statement effective and current and to comply with the provisions
of the Securities Act with respect to the sale or other disposition of all
shares covered by such registration statement, including such amendments and
supplements as may be necessary to reflect the intended method of disposition
from time to time of the holder or holders of Registrable Stock who have
requested that any of their shares be sold or otherwise disposed of in
connection with the registration (the "Prospective Sellers");
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(iii) furnish to each Prospective Seller
such number of copies of each prospectus, including preliminary prospectuses, in
conformity with the requirements of the Securities Act, and such other
documents, as the Prospective Seller may reasonably request in order to
facilitate the public sale or other disposition of the shares owned by it;
(iv) use its best efforts to register or
qualify the shares covered by such registration statement under such other
securities or blue sky or other applicable laws of such jurisdictions as each
Prospective Seller shall reasonably request to enable such seller to consummate
the public sale or other disposition of the shares owned by such seller,
provided that the Company shall not be required in connection therewith or as an
election thereto to qualify to do business or to file a general consent to
service of process in any such jurisdiction;
(v) upon written request, furnish to
each Prospective Seller a signed counterpart, addressed to the Prospective
Sellers and their underwriters, if any, of: (A) an opinion of counsel for the
Company, dated the effective date of the registration statement; and (B) a
"comfort" letter signed by the independent public accountants who have certified
the Company's financial statements included in the registration statement;
covering substantially the same matters with respect to the registration
statement (and the prospectus included therein) and (in the case of the
accountants' letter) with respect to the events subsequent to the date of the
financial statements, as are customarily covered (at the time of such
registration) in the opinions of issuers' counsel and in accountants' letters
delivered to the underwriters in connection with underwritten public offerings
of securities;
(vi) cause all such Registrable Stock to
be listed on each securities exchange or other securities trading market on
which similar securities issued by the Company are then listed;
(vii) provide a transfer agent and
registrar for all such Registrable Stock not later than the effective date of
such registration statement;
(viii) enter into such customary
agreements (including an underwriting agreement) and take all such other
customary actions as the holders of a majority of the Registrable Stock being
sold reasonably request in order to expedite or facilitate the disposition of
such Registrable Stock; and
(ix) make available for inspection by
any Prospective Seller, any underwriter participating in any disposition
pursuant to such registration statement, and any attorney, accountant or other
agent retained by any such seller or underwriter, all financial and other
records, pertinent corporate documents and properties of the Company, and cause
the Company's officers, directors and employees to supply all information
reasonably requested by any such seller, underwriter, attorney, accountant or
agent in connection with the preparation of such registration statement.
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(b) Each Prospective Seller of Registrable
Stock, shall furnish to the Company such information as the Company may
reasonably require from the Prospective Seller for inclusion in the registration
statement (and the prospectus included therein).
(c) The Prospective Sellers shall not (until
further notice) effect sales of the shares covered by the registration statement
after receipt of telegraphic or written notice from the Company to suspend sales
to permit the Company to correct or update a registration statement or
prospectus.
3.7 Expenses of Registration.
(a) All expenses incurred in effecting any
registration requested pursuant to Section 3.1 or 3.3 hereof, including, without
limitation, all registration and filing fees, printing expenses, expenses of
compliance with blue sky laws, fees and disbursements of counsel for the
Company, fees and disbursements of one counsel for the holders of Registrable
Stock selected by the holders of a majority of the Registrable Stock so to be
offered for sale and reasonably acceptable to the Company, expenses of any
audits incidental to or required by any such registration, and reasonable
expenses of all marketing and promotional efforts requested by the managing
underwriter shall be borne by the Company; provided, however, that each
Prospective Seller shall bear its own underwriting discounts or brokerage fees
or commissions relating to the sale of its Registrable Stock.
3.8 Indemnification.
(a) In the event of any registration of any of
its securities under the Securities Act pursuant to this Agreement, the Company
shall indemnify and hold harmless each Investor requesting or joining in a
registration of such securities, each underwriter (as defined in the Securities
Act), each officer, director and partner of any Investor or underwriter and each
controlling person of any Investor or underwriter, if any (within the meaning of
the Securities Act), against any expenses, losses, claims, damages or
liabilities, joint or several (or actions in respect thereof), to which such
Investor, underwriter, officer, director, partner or controlling person may be
subject under the Securities Act, under any other statute or at common law,
insofar as such expenses, losses, claims, damages or liabilities (or actions in
respect thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or are based upon (i) any
untrue statement (or alleged untrue statement) of any material fact contained in
any registration statement under which such securities were registered under the
Securities Act, any preliminary prospectus or final prospectus contained
therein, or any summary prospectus issued in connection with any securities
being registered or any other document, or any amendment or supplement thereto,
or 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,
in light of the circumstances in which they were made or (ii) any violation by
the Company of the Securities Act or any blue sky law, or any rule or regulation
promulgated under the Securities Act or any blue sky law, or any other law,
applicable to the Company in connection
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with any such registration, qualification or compliance of any shares of
Registrable Stock, and shall reimburse each such Investor, underwriter, officer,
director, partner or controlling person for any legal or other expenses
reasonably incurred by such Investor, underwriter, officer, director, partner or
controlling person in connection with investigating, preparing or defending any
such expense, loss, claim, damage, liability or action; provided, however, that
the Company shall not be liable to any Investor, underwriter, officer, director,
partner or controlling person in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon any such untrue
statement or omission made in such registration statement, preliminary
prospectus, summary prospectus, final prospectus or any other document, or
amendment or supplement thereto in reliance upon and in conformity with written
information furnished to the Company by such Investor, underwriter, officer,
director, partner or controlling person, respectively, specifically for use
therein. The indemnity provided for herein shall remain in full force and effect
regardless of any investigation made by or on behalf of such Investor,
underwriter, officer, director, partner or controlling person, and shall survive
the transfer of such securities by such Investor.
(b) The Company may require, as a condition to
including any Registrable Stock of a Prospective Seller in any registration
statement filed pursuant to Section 3.1 or Section 3.3, that the Company shall
have received an undertaking satisfactory to it from such Prospective Seller,
severally and not jointly, to indemnify and hold harmless (in the same manner
and to the same extent as set forth in Section 3.8(a)) the Company, each
director of the Company, each officer of the Company who shall sign such
registration statement and each other person, if any, who controls the Company
within the meaning of the Securities Act (except the indemnifying Investor, if
such indemnifying Investor so controls the Company), with respect to (i) any
untrue statement (or alleged untrue statement) of any material fact contained in
any registration statement under which such securities were registered under the
Securities Act, any preliminary prospectus or final prospectus contained
therein, or any summary prospectus issued in connection with any securities
being registered or any other document, or any amendment or supplement thereto,
or 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,
in light of the circumstances in which they were made or (ii) any violation by
the Prospective Investor of the Securities Act or any blue sky law, or any rule
or regulation promulgated under the Securities Act or any blue sky law, or any
other law, applicable to the Company in connection with any such registration,
qualification or compliance of any shares of Registrable Stock, in each case if
such statement or omission was made in reliance on and in conformity with
written information furnished to the Company by such Prospective Seller
specifically for use in preparing any such registration statement, preliminary
prospectus, final prospectus, summary prospectus or amendment or supplement
thereto, or in making any such filing or representation. Each Prospective Seller
hereunder shall promptly provide such indemnification upon request. The
indemnity provided for herein shall remain in full force and effect regardless
of any investigation made by or on behalf of the indemnified party and shall
survive any transfer of the Registrable Stock held by the indemnifying party. In
no event shall a Prospective Seller's obligation to
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indemnify any Person hereunder exceed the net proceeds from the sale of the
Prospective Seller's Registrable Stock in the offering.
(c) If the indemnification provided for in Section 3.8(a)
or Section 3.8(b) above is held by a court of competent jurisdiction to be
unavailable to an indemnified party in respect of any expenses, losses, claims,
damages or liabilities referred to therein, then the indemnifying party, in lieu
of indemnifying such indemnified party thereunder, shall contribute to the
amount paid or payable by such indemnified party as a result of such expenses,
losses, claims, damages or liabilities, in such proportion as is appropriate to
reflect the relative fault of the indemnifying party on the one hand and of the
indemnified parties on the other in connection with the statements or omissions
or violations which resulted in such expenses, losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of the indemnified parties shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the indemnifying party or by the indemnified
parties, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company and the Investors agree that it would not be just
and equitable if contribution pursuant to this Section 3.8(c) were determined by
pro rata allocation or by any other method of allocation which does not take
into account the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages and liabilities or actions in respect
thereof referred to in the immediately preceding paragraph shall be deemed to
include, subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 3.8(c), no Prospective Seller shall be required to contribute any amount
in excess of the net proceeds from the sale of the Prospective Seller's
Registrable Stock in the Offering. No person guilty of fraudulent
misrepresentations (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Company may require, as a condition to
including any Registrable Stock of a Prospective Seller in any registration
statement filed pursuant to Section 3.1 or Section 3.3, that the Company shall
have received an undertaking satisfactory to it from such Prospective Seller of
such Registrable Stock, severally and not jointly, to contribute to the amount
paid or payable by an indemnified party hereunder as and to the extent set forth
in this Section 3.8(c), and each Investor hereunder shall promptly provide such
undertaking upon request.
(d) Promptly after receipt by an indemnified party under
Section 3.8(a) or Section 3.8(b) above of notice of the commencement of any
action, such indemnified party shall, if a claim in respect thereof is to be
made under such Section, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under
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such Section or to the extent that it has not been prejudiced as a proximate
result of such failure. In case any such action shall be brought against any
indemnified party, and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, to assume the defense thereof,
with counsel satisfactory to such indemnified party; provided, however, that, if
the defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to assert such legal defenses (in which case the
indemnifying party shall not have the right to direct the defense of such action
on behalf of the indemnified party or parties). Upon the permitted assumption by
the indemnifying party of the defense of such action, and approval by the
indemnified party of counsel, the indemnifying party shall not be liable to such
indemnified party under this Section 3.8 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof (other than reasonable costs of investigation) unless (i) the
indemnified party shall have employed separate counsel in connection with the
assertion of legal defenses in accordance with the proviso to the next preceding
sentence, (ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time, (iii) the indemnified party and its counsel do not actively
and vigorously pursue the defense of such action, or (iv) the indemnifying party
has authorized the employment of counsel for the indemnified party at the
expense of the indemnifying party.
3.9 Inclusion of Additional Shares in Required
Registrations; Other Company Initiated Registrations. The Company shall not
register securities for sale for its own account or for the account of any other
Person in any registration requested by the holders of Registrable Stock
pursuant to Section 3.1 hereof unless permitted to do so by the written consent
of the holders of at least 51% of the Registrable Stock as to which registration
has been requested. The Company may not cause any other registration of
securities for sale for its own account or for the account of any other Person
to become effective within 180 days after the effective date of any registration
requested by the holders of Registrable Stock pursuant to Section 3.1 hereof
except pursuant to registrations on Form S-8 or Form S-4 or any successors
thereto.
3.10 Rights Which May Be Granted to Other Persons. The
Company shall not grant any Person registration rights which shall in any way
whatsoever impair the priority of the registration rights granted to the
Investors in this Agreement; provided, that the Company may grant to Phoenix
Growth Capital Corporation ("Phoenix") registration rights which are on parity
with the registration rights granted to the Investors herein and may, in
connection therewith, require Phoenix to become a party to this Agreement.
3.11 Rule 144 Requirements. Immediately after the date on
which a registration statement filed by the Company under the Securities Act
becomes effective, the Company shall undertake to make publicly available, and
available to the holders of Registrable Stock, such information as is necessary
to enable the holders of Registrable Stock to make sales of Registrable
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Stock pursuant to Rule 144 of the Commission under the Securities Act. The
Company shall furnish to any holder of Registrable Stock, upon request, a
written statement executed by the Company as to the steps it has taken to comply
with the current public information requirements of Rule 144.
3.12 Sale of Preferred Stock to Underwriter.
Notwithstanding any provision of this Agreement to the contrary, in lieu of
converting any shares of Preferred Stock prior to the filing of any registration
statement filed pursuant to this Agreement, the holder of such shares may sell
such shares of Preferred Stock to the underwriters of the offering being
registered upon the undertaking of such underwriters to convert the Preferred
Stock on or prior to the closing date of the offering. The Company agrees to
cause the Common Stock issuable on the conversion of the Preferred Stock to be
issued within such time period as will permit the underwriters to make and
complete the distribution contemplated by the underwriting.
3.13 Holdback. If the Company files a registration
statement in connection with an underwritten public offering, a holder of
Registrable Stock, if so requested by the managing underwriter of such public
offering, shall not effect any sale or distribution of any shares (except
pursuant to such registration statement) of the capital stock of the Company,
whether now owned or hereafter acquired, during the period commencing with the
effective date of such registration statement and ending on the close of
business on the 120th day thereafter or such time as the registration statement
is withdrawn, whichever is earlier.
3.14 Transfer of Registration Rights. The registration
rights of any Investor under this Agreement may be transferred only to (i) any
transferee who acquires at least twenty percent (20%) of such Investor's
Registrable Stock, or (ii) a Permitted Transferee.
3.15 Effective Period of Registration. Once any
registration effected by the Company pursuant to this Article III becomes
effective, the Company shall file all reports, financial statements and other
documents necessary to keep such registration statement current and the
registration in effect until the earlier of (i) the sale of all securities
offered for sale pursuant to the registration statement, or (ii) three months
from the effective date of the registration statement.
ARTICLE IV.
RESTRICTIONS ON TRANSFER
4.1 Notice. If an Investor desires to offer, sell,
assign, pledge, transfer or dispose of its Preferred Stock or Registrable Stock
(the "Offered Shares") to a Person in a transaction other than to a Permitted
Transferee, pursuant to Sections 3.1 or 3.3 hereof, or pursuant to Rule 144
under the Securities Act, such Investor (the "Offeror") shall notify (the "Sale
Notice") the other Investors (the "Nonoffering Investors") and the Company in
writing of the (a) proposed price (the "Price") and terms of payment (the
"Terms") for all Offered Shares
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owned by the Offeror that the Offeror seeks for its Offered Shares, and (b)
class and the percentage of the total number of shares of that class and of all
Preferred Stock and Registrable Stock then held by such Investor represented by
the Offered Shares. The Sale Notice shall constitute an offer by the Offeror to
the Nonoffering Investors and to the Company to sell all Offered Shares owned by
the Offeror to the Nonoffering Investors and to the Company at the Price and on
the Terms.
4.2 Nonoffering Investors' Exercise of Right of First
Refusal. Each Nonoffering Investor shall have the right to purchase, at the
Price and payable in accordance with the Terms, that proportion of the Offered
Shares equal to an amount which the number of shares of Preferred Stock and
Registrable Stock then owned of record by such Nonoffering Investor bears to the
total number of shares of Preferred Stock and Registrable Stock then owned of
record by all Investors other than the Offeror. The Nonoffering Investors may
exercise their rights by giving written notice to the Offeror within 30 days
after the date of receipt of the Sale Notice.
In the event any Nonoffering Investor does not elect to
purchase any or all of the Offered Shares under this Section 4.2 (the
"Unpurchased Offered Shares"), then the other Nonoffering Investors so electing
to purchase the Offered Shares shall have the right to elect to purchase that
proportion of the Unpurchased Offered Shares equal to an amount which the number
of Offered Shares originally requested to be purchased by such Nonoffering
Investor bears to the total number of Offered Shares originally requested to be
purchased by all Nonoffering Investors. Any Nonoffering Investor electing to
purchase the Offered Shares (a "Purchasing Investor") shall give written notice
to the Offeror, the other Investors and the Company of such election to purchase
the Offered Shares (and the maximum number of Offered Shares that such Investor
is willing to purchase) within the 30-day period specified in this Section 4.2.
4.3 Company's Exercise of Right of First Refusal. In the
event the Nonoffering Investors do not elect to purchase all of the Offered
Shares pursuant to Section 4.2 hereof, then the Company shall have the right to
purchase any remaining Unpurchased Offered Shares at the Price and payable in
accordance with the Terms. The Company may exercise its right by giving written
notice to the Offeror within 30 days after the expiration of the 30-day period
specified in Section 4.2 hereof. The Offeror shall not participate in the
determination by the Company on whether to exercise the right provided in this
Section 4.3. If the Company does not exercise its right or does not purchase all
of the remaining Unpurchased Offered Shares at the Price and in accordance with
the Terms, it shall notify the Offeror and the Purchasing Investors that it is
not doing so within such 30-day period. Unless otherwise agreed by the Offeror,
all the Offered Shares must be purchased by the Nonoffering Investors and the
Company pursuant to Section 4.2 and this Section 4.3, respectively, or none may
be so purchased.
4.4 Closing. The consummation of the purchase by the
Purchasing Investors and the Company pursuant to any exercise of the rights set
forth above shall occur at a closing (the "Closing") to be held at the principal
offices of the Company not later than 75 days following the date on which the
Nonoffering Investors and the Company received the Sale Notice described
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in Section 4.1. At the Closing, the Purchasing Investors and the Company, as
appropriate, shall make payment for the Offered Shares in accordance with the
Terms, and the Offeror shall deliver the Offered Shares, duly endorsed for
transfer, to the Purchasing Investors and the Company, as appropriate, with all
required revenue stamps attached.
4.5 Transfer to Third Party. If the rights provided above
are not exercised as to all of the Offered Shares (unless otherwise agreed to by
the Offeror), or if the purchase by the Nonoffering Investors and the Company is
not consummated within the time specified in Section 4.4 through no fault of the
Offeror, then the Offeror may transfer all, but not less than all, of the
Offered Shares not so purchased to any third party at not less than the Price
and payable in accordance with the Terms or on such other terms as the Board, in
its sole discretion, determines in good faith would not have been accepted by
the Nonoffering Investors and the Company if such terms had been offered to the
Nonoffering Investors and the Company. If the transfer by the Offeror of the
Offered Shares to a third party is not consummated within 150 days after the
date the Offeror first becomes free to make such transfer, the right to transfer
in accordance with this Article IV shall expire. In such event, the restrictions
of this Agreement shall be reinstated as to the Offered Shares and any transfer
of such Offered Shares proposed to be made by the Offeror subsequent to the
expiration of that 150-day period must be made in accordance with this
Agreement.
ARTICLE V.
MISCELLANEOUS
5.1 Adjustments Affecting Registrable Securities. The
Company shall not effect a stock split or combination of shares or take any
other action, or permit any change to occur, with respect to its Equity
Securities that would adversely affect at such time the ability of the holders
of Registrable Stock to include such Registrable Stock in a registration
undertaken pursuant to this Agreement or which would adversely affect the
marketability of such Registrable Stock in any such registration.
5.2 Notices. All notices, demands or other communications
hereunder shall be in writing and shall be deemed given when delivered
personally, mailed by certified mail (return receipt requested), sent by
overnight courier service or telecopied (transmission confirmed), or otherwise
actually delivered:
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<PAGE> 22
If to Investors: Alliance Technology Ventures, Limited Partnership
ATV/GP Parallel Fund, Limited Partnership
ATV/MFJ Parallel Fund, Limited Partnership
285 Peachtree Center Avenue, Suite 1750
Atlanta, Georgia 30303
Attention: Michael A. Henos
Telephone: (404) 816-4791
Facsimile: (404) 816-4891
Intelligent Systems Corporation
4355 Shackleford Road
Norcross, Georgia 30093
Attention: Leland Strange
Telephone: (770) 381-2900
Facsimile: (770) 381-2808
International Murex Technologies Corporation
3075 Northwoods Circle
Norcross, Georgia 30071
Attention: President
Attention: Secretary
Telephone: (770) 662-0660
Facsimile: (770) 242-3861
Sanderling III Limited
Sanderling Venture Partners III
Sanderling III Biomedical
Sanderling Venture Management
2730 Sand Hill Road
Suite 200
Menlo Park, California 94025-7067
Attention: Robert McNeil
Telephone: (415) 854-9855
Facsimile: (415) 854-3648
New York Life Insurance Company
51 Madison Avenue
New York, New York 10010
Attention: Dominique Semon
Telephone: (212) 576-6856
Facsimile: (212) 576-8080
22
<PAGE> 23
If to Company: AtheroGenics, Inc.
3065 Northwoods Circle
Norcross, Georgia 30071
Attention: R. Wayne Alexander
Telephone: (404) 447-1866
Facsimile: (404) 447-1886
If to any other Investor: At the address and numbers set forth in the
Company's records, marked for attention as
therein indicated;
or at such other address and numbers as may have been furnished by such person
in writing to the other parties.
5.3 Severability and Governing Law. Should any Section or
any part of a Section within this Agreement be rendered void, invalid or
unenforceable by any court of law for any reason, such invalidity or
unenforceability shall not void or render invalid or unenforceable any other
Section or part of a Section in this Agreement. This Agreement is made and
entered into in the State of Georgia and the laws of said state shall govern the
validity and interpretation hereof and the performance by the parties hereto of
their respective duties and obligations hereunder.
5.4 Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
5.5 Captions and Section Headlines. Section titles or
captions contained in this Agreement are inserted as a matter of convenience and
for reference purposes only, and in no way define, limit, extend or describe the
scope of this Agreement or the intent of any provision hereof.
5.6 Singular and Plural, Etc. Whenever the singular
number is used herein and where required by the context, the same shall include
the plural, and the neuter gender shall include the masculine and feminine
genders.
5.7 Costs and Attorneys' Fees. In the event that any
action, suit or other proceeding is instituted concerning or arising out of this
Agreement, the prevailing party shall recover all of such party's costs, and
attorneys' fees incurred in each and every such action, suit or other
proceeding, including any and all appeals or petitions therefrom. As used
herein, "attorneys' fees" shall mean the full and actual costs of any legal
services actually rendered in connection with the matters involved, calculated
on the basis of the usual fee charged by the attorneys performing such services.
23
<PAGE> 24
5.8 Amendments and Waivers. Neither this Agreement nor
any term hereof may be changed, waived, discharged or terminated orally or in
writing, except that any term of this Agreement may be amended and the
observance of any such term may be waived (either generally or in a particular
instance and either retroactively or prospectively) only with the written
consent of the Company and the holders of at least 66-2/3% of the Registrable
Stock then in existence; provided, however, that no such amendment or waiver
shall affect the provisions of this Section 5.8 and no such waiver shall extend
to or affect any other obligation not expressly waived. No failure to exercise
and no delay in exercising, on the part of any party, any right, remedy, power
or privilege hereunder shall operate as a waiver thereof; nor shall any single
or partial exercise of any right, remedy, power or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other right remedy,
power or privilege. The rights, remedies, powers and privileges herein provided
are cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law. The failure of any party to insist upon a strict performance of
any of the terms or provisions of this Agreement, or to exercise any option,
right or remedy herein contained, shall not be construed as a waiver or as a
relinquishment for the future of such term, provision, option, right or remedy,
but the same shall continue and remain in full force and effect.
5.9 Successors and Assigns. All rights, covenants and
agreements of the parties contained in this Agreement shall, except as otherwise
provided herein, be binding upon and inure to the benefit of their respective
successors and assigns.
5.10 Specific Performance. The parties hereto agree that
the capital stock of the Company cannot be purchased or sold in the open market
and that, for these reasons, among others, the parties will be irreparably
damaged in the event that this Agreement is not specifically enforceable.
Accordingly, in the event of any controversy concerning the capital stock which
is the subject of this Agreement, or any right or obligation to register such
securities, such right or obligation shall be enforceable in a court of equity
by specific performance. The rights granted in this Section 5.10 shall be
cumulative and not exclusive, and shall be in addition to any and all other
rights which the parties hereto may have hereunder, at law or in equity.
5.11 Entire Agreement. This Agreement contains the entire
understanding of the parties and there are no further or other agreements or
understandings, written or oral, in effect between the parties relating to the
subject matter hereof unless expressly referred to herein. Without limiting the
foregoing, this Agreement specifically supersedes that certain Master Rights
Agreement dated May 6, 1994 between the Company and Alliance.
5.12 No Third-Party Beneficiaries. With the exception of
the parties to this Agreement and the holders of Common Stock afforded the
limited registration rights described herein, there shall exist no right of any
Person to claim a beneficial interest in this Agreement, or any rights accruing
by virtue of this Agreement.
24
<PAGE> 25
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Master Rights Agreement by duly authorized officers as of the
date first above written.
ATHEROGENICS, INC.
By: /s/ Russell M. Medford
------------------------------------------
Name: Russell M. Medford
----------------------------------------
Title: Exec. Vice President Secretary
---------------------------------------
ALLIANCE TECHNOLOGY VENTURES,
LIMITED PARTNERSHIP
By: /s/ Michael A. Henos
------------------------------------------
Name: Michael A. Henos
----------------------------------------
Title: General Partner
---------------------------------------
ATV/GP PARALLEL FUND, LIMITED
PARTNERSHIP
By: /s/ Michael A. Henos
------------------------------------------
Name: Michael A. Henos
----------------------------------------
Title: General Partner
---------------------------------------
ATV/MFJ PARALLEL FUND, LIMITED
PARTNERSHIP
By: /s/ Michael A. Henos
------------------------------------------
Name: General Partner
----------------------------------------
Title:
---------------------------------------
INTELLIGENT SYSTEMS CORPORATION
By: /s Bonnie Herron
------------------------------------------
Name: Bonnie Herron
----------------------------------------
Title: V.P..
---------------------------------------
S-1
<PAGE> 26
INTERNATIONAL MUREX TECHNOLOGIES
CORP.
By: /s/ J. David Tholen
------------------------------------------
Name: J. David Tholen
----------------------------------------
Title: President & CEO, COO
---------------------------------------
SANDERLING III LIMITED
By: /s/ Robert G. McNeil
------------------------------------------
Name: Robert G. McNeil
----------------------------------------
Title: General Partner
---------------------------------------
SANDERLING VENTURE PARTNERS III
By: /s/ Robert G. McNeil
------------------------------------------
Name: Robert G. McNeil
----------------------------------------
Title: General Partner
---------------------------------------
SANDERLING III BIOMEDICAL
By: /s/ Robert G. McNeil
------------------------------------------
Name: Robert G. McNeil
----------------------------------------
Title: General Partner
---------------------------------------
SANDERLING VENTURES MANAGEMENT
By: /s/ Robert G. McNeil
------------------------------------------
Name: Robert G. McNeil
----------------------------------------
Title: General Partner
---------------------------------------
S-2
<PAGE> 27
FIRST AMENDMENT TO AMENDED AND RESTATED
MASTER RIGHTS AGREEMENT
THIS FIRST AMENDMENT TO AMENDED AND RESTATED MASTER RIGHTS AGREEMENT
(the "Amendment"), dated as of November 1, 1995, is entered into by and among
ATHEROGENICS, INC., a Georgia corporation (the "Company"), and the other parties
hereto, with respect to the Amended and Restated Master Rights Agreement, dated
as of October 31, 1995, by and among the Company and the other parties thereto
(the "Agreement").
RECITALS
WHEREAS, the Company proposes to issue a Warrant (the "Phoenix
Warrant") to Phoenix Leasing Incorporated ("Phoenix") to acquire shares of the
Company's Series B Convertible Preferred Stock (the shares acquirable under the
Phoenix Warrant hereafter the "Warrant Shares");
WHEREAS, under the terms of the Phoenix Warrant, the Company must grant
to Phoenix with respect to the Warrant Shares the same registration rights as
granted to the Investors, as defined in the Agreement;
WHEREAS, to grant Phoenix registration rights in its capacity as the
holder of the Phoenix Warrant would require certain amendments to the Agreement;
WHEREAS, under Section 5.8 of the Agreement, the Agreement may be
amended only with the written consent of the holders of at least 66-2/3% of the
Registrable Stock, as defined in the Agreement, then in existence; and
WHEREAS, in order to grant Phoenix the rights required under the
Phoenix Warrant, the parties hereto desire to enter into this Amendment in
accordance with Section 5.8 of the Agreement;
NOW, THEREFORE, IT IS AGREED THAT:
1. Definitions. All capitalized terms used herein without definition
shall have the meanings ascribed to them in the Agreement.
2. Amendments. The Agreement is hereby amended as follows:
(a) Section 1.1(l) is amended to read as follows:
1
<PAGE> 28
(1) "Investors." The term "Investors" shall mean
Alliance, ATV/GP, ATV/MFJ, Intelligent Systems, Murex,
Sanderling Limited, Sanderling Venture, Sanderling Biomedical,
Sanderling Management, NY Life and Phoenix Leasing
Incorporated, their respective successors and assigns and any
other holder of Preferred Stock who by amendment is added as a
party to this Agreement.
(b) Section 2.2(c)(vi) is amended to read as follows:
(vi) the issuance is pursuant to the Warrant, dated
November 1, 1995, issued to Phoenix Leasing Incorporated.
3. Phoenix. Upon the effectiveness of this Amendment, as provided
in Section 4 hereof, Phoenix Leasing Incorporated agrees to be bound by all of
the terms and conditions of the Agreement applicable to Investors.
4. Effectiveness. This Amendment shall become effective upon the
execution hereof by (a) the Company, and (b) the holders 66-2/3% of the
Registrable Stock.
5. Effect of Amendment. Except as amended as set forth above, the
Agreement shall continue in full force and effect.
6. Counterparts. This Amendment may be signed in one or more
counterparts, each of which shall be deemed an original and all of which, taken
together, shall be deemed one and the same documents.
2
<PAGE> 29
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the day and year first above written.
ATHEROGENICS, INC.
By: /s/ Russell M. Medford, MD, PhD
-------------------------------------
Name: Russell M. Medford, MD, PhD
-----------------------------------
Title: President and C.E.O.
----------------------------------
ALLIANCE TECHNOLOGY VENTURES, L.P.
ATV/GP PARALLEL FUND, L.P.
ATV/MFJ PARALLEL FUND, L.P.
By: /s/ Michael A. Henos
-------------------------------------
Name: Michael A. Henos
-----------------------------------
Title: General Partner
----------------------------------
INTELLIGENT SYSTEMS CORPORATION
By: /s/ J. Leland Strange
-------------------------------------
Name: J. Leland Strange
-----------------------------------
Title: President
----------------------------------
INTERNATIONAL MUREX TECHNOLOGIES
CORPORATION
By: /s/ J. David Tholen
-------------------------------------
Name: J. David Tholen
-----------------------------------
Title: President/CEO
----------------------------------
NEW YORK LIFE INSURANCE COMPANY
By: /s/ Dominique O. Semon
-------------------------------------
Name: Dominique O. Semon
-----------------------------------
Title: Assistant Vice President
----------------------------------
<PAGE> 30
SANDERLING III LIMITED PARTNERSHIP
SANDERLING VENTURE PARTNERS III, L.P.
SANDERLING III BIOMEDICAL, L.P.
SANDERLING VENTURES MANAGEMENT
By: /s/ Robert G. McNeil
-------------------------------------
Name: Robert G. McNeil
-----------------------------------
Title: General Partner
----------------------------------
PHOENIX LEASING INCORPORATED
By: /s/ N. H. Nelson
-------------------------------------
Name: N. H. Nelson
-----------------------------------
Title: Vice President
----------------------------------
2
<PAGE> 31
SECOND AMENDMENT TO AMENDED AND RESTATED
MASTER RIGHTS AGREEMENT
THIS SECOND AMENDMENT TO AMENDED AND RESTATED MASTER RIGHTS AGREEMENT
(the "Amendment"), dated as of July 30, 1996, is entered into by and among
ATHEROGENICS, INC., a Georgia corporation (the "Company"), and the other parties
listed on the signature page hereto, with respect to the Amended and Restated
Master Rights Agreement, dated as of October 31, 1995, by and among the Company
and the other parties thereto, as amended (the "Agreement").
RECITALS
WHEREAS, the Company intends to sell additional shares of its Series B
Convertible Preferred Stock (the "Series B Preferred") to certain purchasers
(the "Purchasers") pursuant to the terms of a Series B Convertible Preferred
Stock Purchase Agreement of even date herewith (the "Purchase Agreement"); and
WHEREAS, pursuant to the terms of the Purchase Agreement, the
Purchasers who are not already holders of Registrable Stock (as defined in the
Agreement) (the "New Purchasers") must be added as parties to the Agreement; and
WHEREAS, to add the New Purchasers as parties to the Agreement would
require certain amendments to the Agreement; and
WHEREAS, pursuant to Section 5.8 of the Agreement, the Agreement may be
amended only with the written consent of the Company and the holders of at least
66-2/3% of the Registrable Stock then in existence; and
WHEREAS, in order to add the New Purchasers as parties to the Agreement
and to make certain other amendments to the Agreement, the parties hereto desire
to enter into this Amendment in accordance with Section 5.8 of the Agreement;
NOW, THEREFORE, IT IS AGREED THAT:
1. Definitions. All capitalized terms used herein without
definition shall have the meanings ascribed to them in the Agreement.
2. Amendments. The Agreement is hereby amended as follows:
(a) Section 1.1(l) is amended to read as follows:
<PAGE> 32
(1) "Investors." The term "Investors" shall mean
Alliance, ATV/GP, ATV/MFJ, Intelligent Systems, Murex,
Sanderling Limited, Sanderling Venture, Sanderling Biomedical,
Sanderling Management, NY Life , Phoenix Leasing Incorporated,
Sprout Capital VII, L.P., Sprout CEO Fund, L.P., DLJ Capital
Corp., DLJ First ESC L.L.C., DP III Associates, L.P., Old
Court Limited, Domain Partners III, L.P., Roy M. Barbee,
Vaughn D. Bryson, Joe C. Cook, Arthur M. Pappas, their
respective successors and assigns and any other holder of
Preferred Stock who by amendment is added as a party to this
Agreement.
(b) Section 2.2(c)(ii) is hereby amended by deleting
therefrom the number "800,000" and replacing it with the number
"2,038,500".
(c) Section 2.2(c) is hereby amended by adding a new
subparagraph (x) to that section which shall be and read in its
entirety as follows:
"(x) the issuance is of additional shares of Series B
Convertible Preferred Stock at a price per share of
not less than $3.00, provided, that the total of all
such shares does not exceed 3,053,334 shares."
3. New Purchasers. Upon the effectiveness of this Amendment, as
provided in Section 4 hereof, the New Purchasers shall have all of the rights
and privileges and shall be bound by all of the terms and conditions of the
Agreement applicable to Investors.
4. Effectiveness. This Amendment shall become effective upon the
execution hereof by (a) the Company, (b) the holders of 66-2/3% of the
Registrable Stock outstanding immediately prior to the issuance of shares of
Series B Preferred pursuant to the Purchase Agreement and (c) the New Investors.
5. Effect of Amendment. Except as amended as set forth above, the
Agreement shall continue in full force and effect.
6. Intent of the Parties. The Parties intend that the Recitals
set forth in this Agreement shall be part of this Agreement.
7. Counterparts. This Amendment may be signed in one or more
counterparts, each of which shall be deemed an original and all of which, taken
together, shall be deemed one and the same documents.
2
<PAGE> 33
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the day and year first above written.
ATHEROGENICS, INC.
By: /s/ Russell M Medford MD PhD
-----------------------------------------
Name: RUSSELL M MEDFORD MD PHD
---------------------------------------
Title: PRESIDENT & CEO
--------------------------------------
ALLIANCE TECHNOLOGY VENTURES, L.P.
ATV/GP PARALLEL FUND, L.P.
ATV/MFJ PARALLEL FUND, L.P.
By: /s/ Michael A Henos
-----------------------------------------
Name: Michael A Henos
---------------------------------------
Title: Managing Gen. Partner
--------------------------------------
INTELLIGENT SYSTEMS CORPORATION
By: /s/ J. Leland Strange
-----------------------------------------
Name: J. Leland Strange
---------------------------------------
Title: President
--------------------------------------
INTERNATIONAL MUREX TECHNOLOGIES
CORPORATION
By: /s/ J. D. Tholen
-----------------------------------------
Name: J. D. Tholen
---------------------------------------
Title: President/CEO
--------------------------------------
NEW YORK LIFE INSURANCE COMPANY
By: /s/ Dominique O. Semon
-----------------------------------------
Name: Dominique O. Semon
---------------------------------------
Title: Assistant Vice President
--------------------------------------
S-1
<PAGE> 34
SANDERLING III LIMITED PARTNERSHIP
SANDERLING VENTURE PARTNERS III, L.P.
SANDERLING III BIOMEDICAL, L.P.
SANDERLING VENTURES MANAGEMENT
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
PHOENIX LEASING INCORPORATED
By: /s/ N. H. Nelson
-----------------------------------------
Name: N. H. Nelson
---------------------------------------
Title: Vice President
--------------------------------------
DP III ASSOCIATES, L.P.
By: One Palmer Square Associates, L.P.
Its: General Partner
By: /s/ Kathleen K. Schoemaker
-----------------------------------------
Name: Kathleen K. Schoemaker
---------------------------------------
Title: General Partner
--------------------------------------
BIOTECHNOLOGY INVESTMENTS LIMITED
By: Old Court Limited
Its: Custodian
----------------------------------------
By: /s/ Kathleen K. Schoemaker
-----------------------------------------
Name: Kathleen K. Schoemaker
---------------------------------------
Title: Attorney-in-Fact
--------------------------------------
S-2
<PAGE> 35
DOMAIN PARTNERS III, L.P.
By: One Palmer Square Associates III, L.P.
Its: General Partner
By: /s/ Kathleen K. Schoemaker
-----------------------------------------
Name: Kathleen K. Schoemaker
---------------------------------------
Title: General Partner
--------------------------------------
SPROUT CAPITAL VII, L.P.
By: DLJ Capital Corp.
Its: Managing General Partner
By: /s/ Philippe Chambon, M.D., Ph.D.
-----------------------------------------
Name: Philippe Chambon, M.D., Ph.D.
---------------------------------------
Title: Attorney-in-Fact
--------------------------------------
SPROUT CEO FUND, L.P.
By: DLJ Capital Corp.
Its: General Partner
By: /s/ Philippe Chambon, M.D., Ph.D.
-----------------------------------------
Name: Philippe Chambon, M.D., Ph.D.
---------------------------------------
Title: Attorney-in-Fact
--------------------------------------
DLJ CAPITAL CORP.
By: /s/ Philippe Chambon, M.D., Ph.D.
-----------------------------------------
Name: Philippe Chambon, M.D., Ph.D.
---------------------------------------
Title: Attorney-in-Fact
--------------------------------------
S-3
<PAGE> 36
DLJ FIRST ESC, L.L.C.
By: DLJ LBO Plans Management Corporation
Its: Manager
By: /s/ Philippe Chambon, M.D., Ph.D.
-----------------------------------------
Name: Philippe Chambon, M.D., Ph.D.
---------------------------------------
Title: Attorney-in-Fact
--------------------------------------
/s/ Roy M. Barbee
--------------------------------------------
Roy M. Barbee
/s/ Vaughn D. Bryson
--------------------------------------------
Vaughn D. Bryson
/s/ Joe C. Cook
--------------------------------------------
Joe C. Cook
/s/ Arthur M. Pappas
--------------------------------------------
Arthur M. Pappas
S-4
<PAGE> 37
THIRD AMENDMENT TO AMENDED AND RESTATED
MASTER RIGHTS AGREEMENT
THIS THIRD AMENDMENT TO AMENDED AND RESTATED MASTER RIGHTS AGREEMENT
(the "Amendment"), dated as of April 13, 1999, is entered into by and among
ATHEROGENICS, INC., a Georgia corporation (the "Company"), and the other parties
listed on the signature pages hereto, with respect to the Amended and Restated
Master Rights Agreement, dated as of October 31, 1995, by and among the Company
and the other parties thereto, as amended (the "Agreement").
RECITALS
WHEREAS, the Company intends to sell shares of its Series C Convertible
Preferred Stock (the "Series C Preferred") to certain purchasers (the
"Purchasers") pursuant to the terms of a Series C Convertible Preferred Stock
Purchase Agreement dated of even date herewith (the "Purchase Agreement");
WHEREAS, pursuant to the terms of the Purchase Agreement, the
Purchasers must be added as parties to the Agreement;
WHEREAS, to add the Purchasers as parties to the Agreement requires
certain amendments to the Agreement;
WHEREAS, pursuant to Section 5.8 of the Agreement, the Agreement may be
amended only with the written consent of the Company and the holders of at least
66-2/3% of the Registrable Stock then in existence; and
WHEREAS, in order to add the Purchasers as parties to the Agreement and
to make certain other amendments to the Agreement, the parties hereto desire to
enter into this Amendment in accordance with Section 5.8 of the Agreement;
NOW, THEREFORE, for and in consideration of the premises, the
agreements and covenants set forth herein, and other consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Definitions. All capitalized terms used herein without
definition shall have the meanings ascribed to them in the Agreement.
2. Amendments. The Agreement is hereby amended as follows:
(a) Section 1.1(l) is amended in its entirety to read as
follows:
(1) "Investors." The term "Investors" shall mean
Alliance, ATV/GP, ATV/MFJ, Intelligent Systems, Murex,
Sanderling Limited, Sanderling Venture, Sanderling Biomedical,
Sanderling Management, NY Life , Phoenix Leasing Incorporated,
Sprout Capital VII, L.P., Sprout CEO Fund, L.P., DLJ Capital
Corp., DLJ First ESC L.L.C., DP III Associates, L.P., Old
Court Limited, Domain
<PAGE> 38
Partners III, L.P., Roy M. Barbee, Vaughn D. Bryson, Joe C.
Cook, Arthur M. Pappas, Long Aldridge & Norman LLP, Cordova
Technology Partners, L.P., Live Oak Equity Partners, L.P.,
Sentron Medical, Inc., Trustees of Boston University, Pacific
Horizons Partners II L.P., Pacific Horizons Partners III L.P.,
their respective successors and assigns and any other holder
of Preferred Stock who by amendment is added as a party to
this Agreement.
(b) Section 1.1(o) is hereby amended in its entirety to
read as follows:
(o) "Permitted Transferees." The term "Permitted
Transferees" of an Investor shall mean (i)
any other Investor; (ii) any Affiliate of
any Investor; (iii) any one or more members
of a class consisting of the spouse,
children and grandchildren of an Investor,
or a trust for the benefit of any one or
more members of such class; or (iv) any
shareholder or partner of any non-natural
Investor upon a distribution by a
partnership to its partners or otherwise
upon the dissolution or liquidation of the
non-natural Investor.
(c) Section 1.1(q) is hereby amended in its entirety to
read as follows:
(q) "Preferred Stock." The term "Preferred
Stock" shall mean the Company's Series A
Convertible Preferred Stock, Series B
Convertible Preferred Stock and Series C
Convertible Preferred Stock.
(d) Sections 2.1(b) and 2.1(c) are hereby amended by
deleting from each such section the percentage "7.5%" and replacing it
with the percentage "3.0%".
(e) Section 2.2(c)(x) is hereby amended by deleting
therefrom the number "3,053,334" and replacing it with the number
"4,854,316".
(f) Section 2.2(c) is hereby amended by adding a new
subparagraph (xi) to that section which shall be and read in its
entirety as follows:
"(xi) the issuance is of shares of Series C
Convertible Preferred Stock at a price per share of
not less than $3.00, provided, that the total of all
such shares does not exceed 4,715,385 shares."
(g) Section 3.1(a) is hereby amended by deleting
therefrom the date "January 1, 2001" and replacing it with the date
"April 15, 2004".
3. Purchasers. Upon the effectiveness of this Amendment, as
provided in Section 4 hereof, the Purchasers shall have all of the rights and
privileges and shall be bound by all of the terms and conditions of the
Agreement applicable to Investors.
2
<PAGE> 39
4. Effectiveness. This Amendment shall become effective upon the
execution hereof by (a) the Company, (b) the holders of 66-2/3% of the
Registrable Stock outstanding immediately prior to the issuance of shares of
Series C Preferred pursuant to the Purchase Agreement and (c) the Purchasers.
5. Effect of Amendment. Except as amended as set forth above, the
Agreement shall continue in full force and effect.
6. Intent of the Parties. The Parties intend that the Recitals
set forth in this Agreement shall be part of this Agreement.
7. Counterparts. This Amendment may be signed in one or more
counterparts, each of which shall be deemed an original and all of which, taken
together, shall be deemed one and the same Amendment.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the day and year first above written.
ATHEROGENICS, INC.
By: /s/ M.P. Colonnese
---------------------------------------
Name: M.P. Colonnese
-------------------------------------
Title: Vice President
------------------------------------
ALLIANCE TECHNOLOGY VENTURES, L.P.
ATV/GP PARALLEL FUND, L.P.
ATV/MFJ PARALLEL FUND, L.P.
By: /s/ Michael A. Henos
---------------------------------------
Name: Michael A. Henos
-------------------------------------
Title: Managing G.P.
------------------------------------
INTELLIGENT SYSTEMS CORPORATION
By: /s/
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
INTERNATIONAL MUREX TECHNOLOGIES
CORPORATION
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
[Signatures continued on following page]
S-1
<PAGE> 40
NEW YORK LIFE INSURANCE COMPANY
By: /s/ Richard F. Drake
---------------------------------------
Name: Richard F. Drake
-------------------------------------
Title: Director, Venture Capital
------------------------------------
SANDERLING III LIMITED PARTNERSHIP
SANDERLING VENTURE PARTNERS III, L.P.
SANDERLING III BIOMEDICAL, L.P.
SANDERLING VENTURES MANAGEMENT
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
PHOENIX LEASING INCORPORATED
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
DP III ASSOCIATES, L.P.
By: One Palmer Square Associates, L.P.
Its: General Partner
By: /s/ Kathleen K. Schoemaker
---------------------------------------
Name: Kathleen K. Schoemaker
-------------------------------------
Title: General Partner
------------------------------------
BIOTECHNOLOGY INVESTMENTS LIMITED
By: Old Court Limited
Its: Custodian
---------------------------------------
By: /s/ Kathleen K. Schoemaker
---------------------------------------
Name: Katheleen K. Schoemaker
-------------------------------------
Title: Attorney-In-Fact
------------------------------------
[Signatures continued on following page]
S-2
<PAGE> 41
DOMAIN PARTNERS III, L.P.
By: One Palmer Square Associates III, L.P.
Its: General Partner
By: /s/ Kathleen K. Schoemaker
---------------------------------------
Name: Kathleen K. Schoemaker
-------------------------------------
Title: General Partner
------------------------------------
SPROUT CAPITAL VII, L.P.
By: DLJ Capital Corp.
Its: Managing General Partner
By: /s/
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
SPROUT CEO FUND, L.P.
By: DLJ Capital Corp.
Its: General Partner
By: /s/
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
DLJ CAPITAL CORP.
By: /s/
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
[Signatures continued on following page]
S-3
<PAGE> 42
DLJ FIRST ESC, L.L.C.
By: DLJ LBO Plans Management Corporation
Its: Manager
By: /s/
-------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
------------------------------------------
Roy M. Barbee
------------------------------------------
Vaughn D. Bryson
------------------------------------------
Joe C. Cook
/s/ Arthur M. Pappas
------------------------------------------
Arthur M. Pappas
CORDOVA TECHNOLOGY PARTNERS, L.P.
By: /s/
---------------------------------------
Name:
-------------------------------------
Title: Managing Partner
------------------------------------
LIVE OAK EQUITY PARTNERS, L.P.
By: /s/ Murali Anantharaman
---------------------------------------
Name: Murali Anantharaman
-------------------------------------
Title: General Partner
------------------------------------
[Signatures continued on following page]
S-4
<PAGE> 43
SENTRON MEDICAL, INC.
By: /s/ Steven E. Guilar
-------------------------------------------
Name: Steven E. Guilar
-----------------------------------------
Title: Group Director Venture Projects
----------------------------------------
TRUSTEES OF BOSTON UNIVERSITY
By: /s/ Matthew J. Burns
-------------------------------------------
Name: Matthew J. Burns
-----------------------------------------
Title: Assistant Treasurer/Boston University
----------------------------------------
PACIFIC HORIZONS PARTNERS II L.P.
By: /s/ Donald J. Elmer
-------------------------------------------
Name: Donald J. Elmer
-----------------------------------------
Title: General Partner
----------------------------------------
PACIFIC HORIZONS PARTNERS III L.P.
By: /s/ Donald J. Elmer
-------------------------------------------
Name: Donald J. Elmer
-----------------------------------------
Title: General Partner
----------------------------------------
LONG ALDRIDGE & NORMAN LLP
By: /s/ Leonard A. Silverstein
-------------------------------------------
Name: Leonard A. Silverstein
-----------------------------------------
Title: Partner
----------------------------------------
S-5
<PAGE> 44
FOURTH AMENDMENT TO AMENDED AND RESTATED
MASTER RIGHTS AGREEMENT
THIS FOURTH AMENDMENT TO AMENDED AND RESTATED MASTER RIGHTS AGREEMENT
(the "Amendment"), dated as of May 11, 1999, is entered into by and among
ATHEROGENICS, INC., a Georgia corporation (the "Company"), and the other parties
listed on the signature pages hereto, with respect to the Amended and Restated
Master Rights Agreement, dated as of October 31, 1995, by and among the Company
and the other parties thereto, as amended (the "Agreement").
RECITALS
WHEREAS, the Company intends to sell shares of its Series C Convertible
Preferred Stock (the "Series C Preferred") to certain purchasers (the
"Purchasers") pursuant to the terms of a Series C Convertible Preferred Stock
Purchase Agreement dated of even date herewith (the "Purchase Agreement");
WHEREAS, pursuant to the terms of the Purchase Agreement, the
Purchasers must be added as parties to the Agreement;
WHEREAS, to add the Purchasers as parties to the Agreement requires
certain amendments to the Agreement;
WHEREAS, pursuant to Section 5.8 of the Agreement, the Agreement may be
amended only with the written consent of the Company and the holders of at least
66-2/3% of the Registrable Stock then in existence; and
WHEREAS, in order to add the Purchasers as parties to the Agreement and
to make certain other amendments to the Agreement, the parties hereto desire to
enter into this Amendment in accordance with Section 5.8 of the Agreement;
NOW, THEREFORE, for and in consideration of the premises, the
agreements and covenants set forth herein, and other consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Definitions. All capitalized terms used herein without
definition shall have the meanings ascribed to them in the Agreement.
2. Amendments. The Agreement is hereby amended as follows:
(a) Section 1.1(l) is amended in its entirety to read as
follows:
(1) "Investors." The term "Investors" shall mean
Alliance, ATV/GP, ATV/MFJ, Intelligent Systems, Murex,
Sanderling Limited, Sanderling Venture, Sanderling Biomedical,
Sanderling Management, NY Life , Phoenix Leasing Incorporated,
Sprout Capital VII, L.P., Sprout CEO Fund, L.P., DLJ Capital
Corp., DLJ First ESC L.L.C., DP III Associates, L.P., Old
Court Limited, Domain
<PAGE> 45
Partners III, L.P., Roy M. Barbee, Vaughn D. Bryson, Joe C.
Cook, Arthur M. Pappas, Long Aldridge & Norman LLP, Cordova
Technology Partners, L.P., Live Oak Equity Partners, L.P.,
Sentron Medical, Inc., Trustees of Boston University, Pacific
Horizons Partners II L.P., Pacific Horizons Partners III L.P.,
Zeist Foundation, Inc., George W. Brumley, Jr. and Jean S.
Brumley, Joint Tenants with Right of Survivorship, George
William Brumley III, Oakwood Medical Investors II, L.L.C.,
Community Investment Partners III L.P., LLLP, their respective
successors and assigns and any other holder of Preferred Stock
who by amendment is added as a party to this Agreement.
(b) Section 2.2(c)(xi) is hereby amended by deleting therefrom
the number "4,715,385" and replacing it with the number "7,500,000".
3. Purchasers. Upon the effectiveness of this Amendment, as
provided in Section 4 hereof, the Purchasers shall have all of the rights and
privileges and shall be bound by all of the terms and conditions of the
Agreement applicable to Investors.
4. Effectiveness. This Amendment shall become effective upon the
execution hereof by (a) the Company, (b) the holders of 66-2/3% of the
Registrable Stock outstanding immediately prior to the issuance of shares of
Series C Preferred pursuant to the Purchase Agreement and (c) the Purchasers.
5. Effect of Amendment. Except as amended as set forth above, the
Agreement shall continue in full force and effect.
6. Intent of the Parties. The Parties intend that the Recitals
set forth in this Agreement shall be part of this Agreement.
7. Counterparts. This Amendment may be signed in one or more
counterparts, each of which shall be deemed an original and all of which, taken
together, shall be deemed one and the same Amendment.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the day and year first above written.
ATHEROGENICS, INC.
By: /s/ M. P. Colonnese
-----------------------------------------
Name: M. P. Colonnese
---------------------------------------
Title: Vice President
--------------------------------------
ALLIANCE TECHNOLOGY VENTURES, L.P.
ATV/GP PARALLEL FUND, L.P.
ATV/MFJ PARALLEL FUND, L.P.
By: /s/ Michael A. Henos
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
[Signatures continued on following page]
S-1
<PAGE> 46
INTELLIGENT SYSTEMS CORPORATION
By: /s/ Bonnie L. Herron
-----------------------------------------
Name: Bonnie L. Herron
---------------------------------------
Title: Vice President
--------------------------------------
INTERNATIONAL MUREX TECHNOLOGIES
CORPORATION
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
NEW YORK LIFE INSURANCE COMPANY
By: /s/ Richard F. Drake
-----------------------------------------
Name: RICHARD F. DRAKE
---------------------------------------
Title: DIRECTOR, VENTURE CAPITAL
--------------------------------------
SANDERLING III LIMITED PARTNERSHIP
SANDERLING VENTURE PARTNERS III, L.P.
SANDERLING III BIOMEDICAL, L.P.
SANDERLING VENTURES MANAGEMENT
By: /s/ Robert McNeil
-----------------------------------------
Name: Robert McNeil
---------------------------------------
Title: General Partner
--------------------------------------
PHOENIX LEASING INCORPORATED
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
[Signatures continued on following page]
S-2
<PAGE> 47
DP III ASSOCIATES, L.P.
By: One Palmer Square Associates III, L.P.
Its: General Partner
By: /s/ Kathleen K. Schoemaker
-----------------------------------------
Name: Kathleen K. Schoemaker
---------------------------------------
Title: General Partner
--------------------------------------
BIOTECHNOLOGY INVESTMENTS LIMITED
By: Old Court Limited
Its: Custodian
By: /s/ Kathleen K. Schoemaker
-----------------------------------------
Name: Kathleen K. Schoemaker
---------------------------------------
Title: Attorney-In-Fact
--------------------------------------
DOMAIN PARTNERS III, L.P.
By: One Palmer Square Associates III, L.P.
Its: General Partner
By: /s/ Kathleen K. Schoemaker
-----------------------------------------
Name: Kathleen K. Schoemaker
---------------------------------------
Title: General Partner
--------------------------------------
SPROUT CAPITAL VII, L.P.
By: DLJ Capital Corp.
Its: Managing General Partner
By: /s/ Philippe O. Chambon
-----------------------------------------
Name: Philippe O. Chambon
---------------------------------------
Title: Attorney-In-Fact
--------------------------------------
[Signatures continued on following page]
S-3
<PAGE> 48
SPROUT CEO FUND, L.P.
By: DLJ Capital Corp.
Its: General Partner
By: /s/ Philippe O. Chambon
-----------------------------------------
Name: Philippe O. Chambon
---------------------------------------
Title: Attorney-In-Fact
--------------------------------------
DLJ CAPITAL CORP.
By: /s/ Philippe O. Chambon
-----------------------------------------
Name: Philippe O. Chambon
---------------------------------------
Title: Attorney-In-Fact
--------------------------------------
DLJ FIRST ESC, L.L.C.
By: DLJ LBO Plans Management Corporation
Its: Manager
By: /s/ Philippe O. Chambon
-----------------------------------------
Name: Philippe O. Chambon
---------------------------------------
Title: Attorney-In-Fact
--------------------------------------
--------------------------------------------
Roy M. Barbee
/s/ Vaughn D. Bryson
--------------------------------------------
Vaughn D. Bryson
/s/ Joseph C. Cook
--------------------------------------------
Joe C. Cook
/s/ Arthur M. Pappas
--------------------------------------------
Arthur M. Pappas
[Signatures continued on following page]
S-4
<PAGE> 49
CORDOVA TECHNOLOGY PARTNERS, L.P.
By: /s/
--------------------------------------------
Name:
------------------------------------------
Title: Managing Partner
-----------------------------------------
LIVE OAK EQUITY PARTNERS, L.P.
By: /s/
--------------------------------------------
Name:
------------------------------------------
Title: General Partner
-----------------------------------------
SENTRON MEDICAL, INC.
By: /s/ Vincent M. Paglino
--------------------------------------------
Name: Vincent M. Paglino
------------------------------------------
Title: Vice President for Sentron Medical, Inc.
-----------------------------------------
TRUSTEES OF BOSTON UNIVERSITY
By: /s/ Matthew J. Burns
--------------------------------------------
Name: Matthew J. Burns
------------------------------------------
Title: Assistant Treasurer
-----------------------------------------
PACIFIC HORIZONS PARTNERS II L.P.
By: /s/
--------------------------------------------
Name:
------------------------------------------
Title: General Partner
-----------------------------------------
PACIFIC HORIZONS PARTNERS III L.P.
By: /s/
--------------------------------------------
Name:
------------------------------------------
Title: General Partner
-----------------------------------------
[Signatures continued on following page]
S-5
<PAGE> 50
LONG ALDRIDGE & NORMAN LLP
By: /s/ Leonard A. Silverstein
-----------------------------------------
Name: Leonard A. Silverstein
---------------------------------------
Title: Partner
--------------------------------------
ZEIST FOUNDATION, INC.
By: /s/ George W. Brumley, Jr.
-----------------------------------------
Name: George W. Brumley, Jr.
---------------------------------------
Title: President
--------------------------------------
/s/ George W. Brumley, Jr.
--------------------------------------------
George W. Brumley, Jr.
/s/ Jean S. Brumley
--------------------------------------------
Jean S. Brumley
/s/ George William Brumley III
--------------------------------------------
George William Brumley III
OAKWOOD MEDICAL INVESTORS II, L.L.C.
By: /s/ Raul E. Perez, M.D.
-----------------------------------------
Name: Raul E. Perez, M.D.
---------------------------------------
Title:
--------------------------------------
COMMUNITY INVESTMENT
PARTNERS III L.P., LLLP
By: /s/ Daniel A. Burkhardt
-----------------------------------------
Name: Daniel A. Burkhardt
---------------------------------------
Title: President
--------------------------------------
S-6
<PAGE> 51
FIFTH AMENDMENT TO AMENDED AND RESTATED
MASTER RIGHTS AGREEMENT
THIS FIFTH AMENDMENT TO AMENDED AND RESTATED MASTER
RIGHTS AGREEMENT (the "Amendment"), dated as of August 30, 1999, is entered
into by and among ATHEROGENICS, INC., a Georgia corporation (the "Company"),
and the other parties listed on the signature pages hereto, with respect to the
Amended and Restated Master Rights Agreement, dated as of October 31, 1995, by
and among the Company and the other parties thereto, as amended (the
"Agreement").
RECITALS
WHEREAS, the Company intends to sell shares of its Series C
Convertible Preferred Stock (the "Series C Preferred") to William Blair Capital
Partners VI, L.P. (the "Purchaser") pursuant to the terms of a Series C
Convertible Preferred Stock Purchase Agreement dated of even date herewith (the
"Purchase Agreement");
WHEREAS, pursuant to the terms of the Purchase Agreement, the
Purchaser must be added as a party to the Agreement;
WHEREAS, to add the Purchaser as a party to the Agreement requires
certain amendments to the Agreement;
WHEREAS, pursuant to Section 5.8 of the Agreement, the Agreement may
be amended only with the written consent of the Company and the holders of at
least 66-2/3% of the Registrable Stock then in existence; and
WHEREAS, in order to add the Purchaser as a party to the Agreement and
to make certain other amendments to the Agreement, the parties hereto desire to
enter into this Amendment in accordance with Section 5.8 of the Agreement;
NOW, THEREFORE, for and in consideration of the premises, the
agreements and covenants set forth herein, and other consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Definitions. All capitalized terms used herein without
definition shall have the meanings ascribed to them in the Agreement.
2. Amendments. The Agreement is hereby amended as follows:
(a) Section 1.1(l) is amended in its entirety to read as
follows:
(1) "Investors." The term "Investors" shall
mean Alliance, ATV/GP, ATV/MFJ, Intelligent Systems, Murex,
Sanderling Limited, Sanderling Venture,
<PAGE> 52
Sanderling Biomedical, Sanderling Management, NY Life ,
Phoenix Leasing Incorporated, Sprout Capital VII, L.P.,
Sprout CEO Fund, L.P., DLJ Capital Corp., DLJ First ESC
L.L.C., DP III Associates, L.P., Old Court Limited, Domain
Partners III, L.P., Roy M. Barbee, Vaughn D. Bryson, Joe C.
Cook, Arthur M. Pappas, Long Aldridge & Norman LLP, Cordova
Technology Partners, L.P., Live Oak Equity Partners, L.P.,
Sentron Medical, Inc., Trustees of Boston University, Pacific
Horizons Partners II L.P., Pacific Horizons Partners III
L.P., Zeist Foundation, Inc., George W. Brumley, Jr. and Jean
S. Brumley, Joint Tenants with Right of Survivorship, George
William Brumley III, Oakwood Medical Investors II, L.L.C.,
Community Investment Partners III L.P., LLLP, William Blair
Capital Partners VI, L.P., their respective successors and
assigns and any other holder of Preferred Stock who by
amendment is added as a party to this Agreement.
(b) Section 2.2(c)(xi) is hereby amended by deleting
therefrom the number "7,500,000" and replacing it with the number
"8,500,000".
3. Purchaser. Upon the effectiveness of this Amendment, as
provided in Section 4 hereof, the Purchaser shall have all of the rights and
privileges and shall be bound by all of the terms and conditions of the
Agreement applicable to Investors.
4. Effectiveness. This Amendment shall become effective upon the
execution hereof by (a) the Company, (b) the holders of 66-2/3% of the
Registrable Stock outstanding immediately prior to the issuance of shares of
Series C Preferred pursuant to the Purchase Agreement and (c) the Purchaser.
5. Effect of Amendment. Except as amended as set forth above,
the Agreement shall continue in full force and effect.
6. Intent of the Parties. The Parties intend that the Recitals
set forth in this Agreement shall be part of this Agreement.
7. Counterparts. This Amendment may be signed in one or more
counterparts, each of which shall be deemed an original and all of which, taken
together, shall be deemed one and the same Amendment.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the day and year first above written.
ATHEROGENICS, INC.
By: /s/ M. P. Colonnese
-----------------------
Name: M. P. Colonnese
-----------------------
Title: Vice President
-----------------------
[Signatures continued on following page]
S-1
<PAGE> 53
ALLIANCE TECHNOLOGY VENTURES, L.P.
ATV/GP PARALLEL FUND, L.P.
ATV/MFJ PARALLEL FUND, L.P.
By: /s/
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
INTELLIGENT SYSTEMS CORPORATION
By: /s/
---------------------------------------
Name: J. L.
-------------------------------------
Title:
------------------------------------
INTERNATIONAL MUREX TECHNOLOGIES
CORPORATION
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
NEW YORK LIFE INSURANCE COMPANY
By:/s/ Richard Drake
---------------------------------------
Name: Richard F. Drake
-------------------------------------
Title: Director, Venture Capital
------------------------------------
SANDERLING III LIMITED PARTNERSHIP
SANDERLING VENTURE PARTNERS III, L.P.
SANDERLING III BIOMEDICAL, L.P.
SANDERLING VENTURES MANAGEMENT
By:/s/ Fred A. Middleton
---------------------------------------
Name: Fred A. Middleton
-------------------------------------
Title: General Partner
------------------------------------
[Signatures continued on following page]
S-2
<PAGE> 54
PHOENIX LEASING INCORPORATED
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
DP III ASSOCIATES, L.P.
By: One Palmer Square Associates III, L.P.
Its: General Partner
By:/s/ Kathleen K. Schoemaker
---------------------------------------
Name: Kathleen K. Schoemaker
-------------------------------------
Title: General Partner
------------------------------------
BIOTECHNOLOGY INVESTMENTS LIMITED
By: Old Court Limited
Its: Custodian
--------------------------------------
By:/s/ Kathleen K. Schoemaker
---------------------------------------
Name: Kathleen K. Schoemaker
-------------------------------------
Title: Attorney-In-Fact
------------------------------------
DOMAIN PARTNERS III, L.P.
By: One Palmer Square Associates III, L.P.
Its: General Partner
By:/s/ Kathleen K. Schoemaker
---------------------------------------
Name: Kathleen K. Schoemaker
-------------------------------------
Title: General Partner
------------------------------------
[Signatures continued on following page]
S-3
<PAGE> 55
SPROUT CAPITAL VII, L.P.
By: DLJ Capital Corp.
Its: Managing General Partner
By:/s/ Philippe O. Chambon
---------------------------------------
Name: Philippe O. Chambon
-------------------------------------
Title: Attorney-In-Fact
------------------------------------
SPROUT CEO FUND, L.P.
By: DLJ Capital Corp.
Its: General Partner
By:/s/ Philippe O. Chambon
---------------------------------------
Name: Philippe O. Chambon
-------------------------------------
Title: Attorney-In-Fact
------------------------------------
DLJ CAPITAL CORP.
By:/s/ Philippe O. Chambon
---------------------------------------
Name: Philippe O. Chambon
-------------------------------------
Title: Attorney-In-Fact
------------------------------------
DLJ FIRST ESC, L.L.C.
By: DLJ LBO Plans Management Corporation
Its: Manager
By:/s/ Philippe O. Chambon
---------------------------------------
Name: Philippe O. Chambon
-------------------------------------
Title: Attorney-In-Fact
------------------------------------
------------------------------------------
Roy M. Barbee
[Signatures continued on following page]
S-4
<PAGE> 56
/s/ Vaughn D. Bryson
------------------------------------------
Vaughn D. Bryson
/s/ Joseph C. Cook
------------------------------------------
Joe C. Cook
/s/ Arthur M. Pappas
------------------------------------------
Arthur M. Pappas
CORDOVA TECHNOLOGY PARTNERS, L.P.
By:
---------------------------------------
Name:
-------------------------------------
Title: Managing Partner
------------------------------------
LIVE OAK EQUITY PARTNERS, L.P.
By:
---------------------------------------
Name: Murali
-------------------------------------
Title: General Partner
------------------------------------
SENTRON MEDICAL, INC.
By:/s/ Steven R. Gailar
---------------------------------------
Name: Steven R. Gailar
-------------------------------------
Title: Group Director, Venture Projects
------------------------------------
TRUSTEES OF BOSTON UNIVERSITY
By:/s/ Matthew J. Burns
---------------------------------------
Name: Matthew J. Burns
-------------------------------------
Title: Assistant Treasurer
Boston University
------------------------------------
[Signatures continued on following page]
S-5
<PAGE> 57
PACIFIC HORIZONS PARTNERS II L.P.
By:/s/ Donald J. Elmer
---------------------------------------
Name: Donald J. Elmer
-------------------------------------
Title: G. P.
------------------------------------
PACIFIC HORIZONS PARTNERS III L.P.
By:/s/ Donald J. Elmer
---------------------------------------
Name: Donald J. Elmer
-------------------------------------
Title: G. P.
------------------------------------
LONG ALDRIDGE & NORMAN LLP
By:/s/ Leonard A. Silverstein
---------------------------------------
Name: Leonard A. Silverstein
-------------------------------------
Title: Partner
------------------------------------
ZEIST FOUNDATION, INC.
By:/s/ George W. Brumley, Jr.
---------------------------------------
Name: George W. Brumley, Jr.
-------------------------------------
Title: Co-President
------------------------------------
/s/ George W. Brumley, Jr.
------------------------------------------
George W. Brumley, Jr.
/s/ Jean S. Brumley
------------------------------------------
Jean S. Brumley
/s/ George W. Brumley III
------------------------------------------
George William Brumley III
[Signatures continued on following page]
S-6
<PAGE> 58
OAKWOOD MEDICAL INVESTORS II, L.L.C.
By:/s/ Raul E. Perez, M. D.
---------------------------------------
Name: Raul E. Perez, M. D.
-------------------------------------
Title: Manager
------------------------------------
COMMUNITY INVESTMENT
PARTNERS III L.P., LLLP
By:/s/ Dan Burkhardt
---------------------------------------
Name: Dan Burkhardt
-------------------------------------
Title: Chairman
------------------------------------
WILLIAM BLAIR CAPITAL PARTNERS VI, L.P.
By:/s/ A. M. Minocherhomjee
---------------------------------------
Name: Arda M. Minocherhomjee
-------------------------------------
Title: Managing Director
------------------------------------
S-7
<PAGE> 1
EXHIBIT 10.07
ATHEROGENICS, INC.
1995 STOCK OPTION PLAN
ARTICLE 1
PURPOSE
1.1 General Purpose. The purpose of this Plan is to further the
growth and development of the Company by encouraging Directors, employees,
consultants and contractors of the Company or of a parent or subsidiary
corporation of the Company to obtain a proprietary interest in the Company by
owning its stock. The Company intends that the Plan will provide such persons
with an added incentive to continue to serve as Directors, employees,
consultants and contractors, and will stimulate their efforts in promoting the
growth, efficiency and profitability of the Company. The Company also intends
that the Plan will afford the Company a means of attracting persons of
outstanding quality to service as Directors, employees, consultants and
contractors of the Company or a parent or subsidiary corporation of the Company.
1.2 Intended Tax Effects of Options. It is intended that the tax
effects of any Option granted hereunder should be determined under Code ss.83.
ARTICLE 2
DEFINITIONS
The following words and phrases as used in this Plan shall have the
meanings set forth in this Article unless a different meaning is clearly
required by the context:
2.1 1933 Act shall mean the Securities Act of 1933, as amended.
2.2 1934 Act shall mean the Securities Exchange Act of 1934, as
amended.
2.3 Beneficiary shall mean, with respect to an Optionee, the
Person to whom the Optionee's Option shall be transferred upon the Optionee's
death (i.e., the Optionee's Beneficiary).
(a) Designation of Beneficiary. An Optionee's Beneficiary
shall be the Person who is last designated in writing by the Optionee
as such Optionee's Beneficiary hereunder. An Optionee shall designate
his original Beneficiary in writing on his Option Agreement. Any
subsequent modification of the Optionee's Beneficiary shall be in a
written executed and notarized letter addressed to the Company and
shall be effective when it is received and accepted by the Board,
determined in the Board's sole discretion.
(b) No Designated Beneficiary. If, at any time, no
Beneficiary has been validly designated by an Optionee, or the
Beneficiary designated by the Optionee is no longer living or no longer
exists (whichever is applicable) at the time of the Optionee's
<PAGE> 2
death, then the Optionee's Beneficiary shall be deemed to be the Person
or Persons in the first of the following classes of individuals with
one or members of such class surviving or in existence as of the
Optionee's death, and in the absence thereof, the Optionee's estate:
(A) the Optionee's surviving spouse; or (B) the Optionee's then living
lineal descendants, per stirpes.
(c) Designation of Multiple Beneficiaries. An Optionee
may not designate more than one Person as a Beneficiary. To the extent
that a designation purports to designate more than one Person as a
Beneficiary, the designation shall be null and void.
(d) Contingent Beneficiaries. An Optionee may designate a
contingent Beneficiary to receive a Beneficiary's Option in the event
that such Beneficiary should predecease the Optionee; otherwise, in the
event a Beneficiary predeceases the Optionee, then the Person or
Persons specified in subsection (b) above shall be the Optionee's
Beneficiary.
2.4 Board shall mean the Board of Directors of the Company.
2.5 Cause shall mean an act or acts involving dishonesty,
incompetence, willful misconduct, breach of fiduciary duty, breach of contract
or any other obligation to the Company, intentional failure to perform stated
duties or violation of any law, rule or regulation (other than traffic
violations or similar offenses).
2.6 Code shall mean the Internal Revenue Code of 1986, as amended.
2.7 Common Stock shall mean the common stock of the Company.
2.8 Company shall mean Atherogenics, Inc.
2.9 Director shall mean an individual who is serving as a member
of the Board (i.e., a director of the Company) or who is serving as a member of
the board of directors of a parent or subsidiary corporation of the Company.
2.10 Disability shall mean, with respect to an individual, the
total and permanent disability of such individual as determined by the Board in
its sole discretion.
2.11 Effective Date shall mean the date on which this Plan is
adopted by the Board. See Article 9 herein.
2.12 Fair Market Value of the Common Stock as of a date of
determination shall mean the following:
Page -2-
<PAGE> 3
(a) Stock Listed and Shares Traded. If the Common Stock
is listed and traded on a national securities exchange (as such term is
defined by the 1934 Act) or on the NASDAQ National Market System on the
date of determination, the Fair Market Value per share shall be the
closing price of a share of the Common Stock on said national
securities exchange or National Market System on the date of
determination. If the Common Stock is traded in the over-the-counter
market, the Fair Market Value per share shall be the average of the
closing bid and asked prices on the date of determination.
(b) Stock Listed But No Shares Traded. If the Common
Stock is listed on a national securities exchange or on the National
Market System but no shares of the Common Stock are traded on the date
of determination but there were shares traded on dates within a
reasonable period before the date of determination, the Fair Market
Value shall be the closing price of the Common Stock on the most recent
date before the date of determination. If the Common Stock is regularly
traded in the over-the-counter market but no shares of the Common Stock
are traded on the date of determination (or if records of such trades
are unavailable or burdensome to obtain) but there were shares traded
on dates within a reasonable period before the date of determination,
the Fair Market Value shall be the average of the closing bid and asked
prices of the Common Stock on the most recent date before the date of
determination.
(c) Stock Not Listed. If the Common Stock is not listed
on a national securities exchange or on the National Market System and
is not regularly traded in the over-the-counter market, then the Board
shall determine the Fair Market Value of the Common Stock from all
relevant available facts.
The Board's determination of Fair Market Value, which shall be made pursuant to
the foregoing provisions, shall be final and binding for all purposes of this
Plan.
2.13 Option shall mean an option to which Code ss.421 (relating
generally to incentive stock options and other options) does not apply which is
granted to Persons pursuant to the terms and provisions of this Plan.
2.14 Option Agreement shall mean a written agreement, executed and
dated by the Company and an Optionee, evidencing an Option granted under the
terms and provisions of this Plan, setting forth the terms and conditions of
such Option, and specifying the name of the Optionee and the number of shares of
stock subject to such Option. Such Agreement shall be in substantially the form
as shown in Appendix A hereto.
2.15 Option Price shall mean the purchase price of the shares of
Common Stock underlying an Option.
2.16 Optionee shall mean a Person who is granted an Option pursuant
to the terms and provisions of this Plan.
Page -3-
<PAGE> 4
2.17 Optionee Restriction Agreement shall mean a written agreement,
executed and dated by the Company and an Optionee, evidencing certain
restrictions, limitations, and rights of the Company and certain third parties
with respect to any shares of Common Stock acquired by the Optionee pursuant to
an Option. Such Agreement shall be in substantially the form as shown in
Appendix B hereto.
2.18 Person shall mean any individual, organization, corporation,
partnership or other entity.
2.19 Plan shall mean this Atherogenics, Inc. 1995 Stock Option
Plan.
ARTICLE 3
ADMINISTRATION
The Plan shall be administered and interpreted by the Board. Subject to
the express provisions of the Plan, the Board shall have authority to interpret
the Plan, to prescribe, amend and rescind rules and regulations relating to the
Plan, to determine the terms and provisions of the Option Agreements by which
Options shall be evidenced (which shall not be inconsistent with the terms of
the Plan), and to make all other determinations necessary or advisable for the
administration of the Plan, all of which determinations shall be final, binding
and conclusive.
ARTICLE 4
STOCK
The stock subject to the Options and other provisions of the Plan shall
be authorized but unissued or reacquired shares of Common Stock. Subject to
adjustment in accordance with the provisions of Article 7, the total number of
shares of Common Stock for which Options may be granted to persons participating
in the Plan shall not exceed in the aggregate 600,000 shares of Common Stock.
Notwithstanding the foregoing, shares of Common Stock allocable to the
unexercised portion of any expired or terminated Option again may become subject
to Options under the Plan.
ARTICLE 5
ELIGIBILITY TO RECEIVE AND GRANT OF OPTIONS
5.1 Persons Eligible for Grants of Options. The Persons eligible
to receive Options hereunder shall be solely those Persons who are Directors,
employees, consultants or contractors of the Company or a parent or subsidiary
corporation of the Company.
5.2 Grants of Options. Subject to the provisions of the Plan, the
Board shall have the authority and sole discretion to determine and designate,
from time to time, those Persons (from among the Persons eligible for a grant of
Options under the Plan pursuant to Section 5.1 above)
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to whom Options will actually be granted, the Option Price of the shares covered
by any Options granted, the manner in and conditions under which Options are
exercisable (including, without limitation, any limitations or restrictions
thereon), and the time or times at which Options shall be granted. In making
such determinations, the Board may take into account the nature of the services
rendered by the respective Persons to whom Options may be granted, their present
and potential contributions to the Company's success and such other factors as
the Board, in its sole discretion, shall deem relevant. In its authorization of
the granting of an Option hereunder, the Board shall specify the name of the
Optionee and the number of shares of stock subject to such Option. The Board may
grant, at any time, new Options to an Optionee who previously has received
Options, whether such Options include prior Options that still are outstanding,
previously have been exercised in whole or in part, have expired or are canceled
in connection with the issuance of new Options. No Person shall have any claim
or right to be granted Options under the Plan.
ARTICLE 6
TERMS AND CONDITIONS OF OPTIONS
Options granted hereunder and Option Agreements shall comply with and
be subject to the following terms and conditions:
6.1 Requirement of Option Agreement and Optionee Restriction
Agreement. Upon the grant of an Option hereunder, the Board shall prepare (or
cause to be prepared) an Option Agreement and an Optionee Restriction Agreement.
The Board shall present such Option Agreement and Optionee Restriction Agreement
to the Optionee. Upon execution of such Option Agreement and Optionee
Restriction Agreement by the Optionee, such Option shall be deemed to have been
granted effective as of the date of grant. The failure of the Optionee to
execute the Option Agreement and Optionee Restriction Agreement within 30 days
after the date of the receipt of same shall render the Option Agreement and the
underlying Option null and void ab initio.
6.2 Optionee and Number of Shares. Each Option Agreement shall
state the name of the Optionee and the total number of shares of the Common
Stock to which it pertains, the Option Price, the Beneficiary of the Optionee
and the date as of which the Option was granted under this Plan.
6.3 Vesting. Each Option shall first become exercisable (i.e.,
vested) with respect to such portions of the shares subject to such Option
(rounded to the nearest whole number) as are specified in the schedule set forth
hereinbelow:
(a) Commencing as of the first anniversary of the date
the Option is granted, the Optionee shall have the right to exercise
the Option with respect to, and to thereby purchase, 20% of the shares
subject to such Option. Prior to said date, the Option shall be
unexercisable in its entirety.
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(b) Commencing as of each monthly anniversary of the date
the Option is granted occurring after the first anniversary of the date
the Option is granted and prior to the fifth anniversary of the date
the Option is granted, the Optionee shall have the right to exercise
the Option with respect to, and to thereby purchase, an additional
1-2/3% of the shares subject to the Option. For purposes of
determining the monthly anniversary of the date an Option is granted,
if the date of grant of an Option occurs on the 29th, 30th or 31st,
then, if the month during which the monthly anniversary is to be
determined does not contain such a 29th, 30th or 31st day,
respectively, the last day of such month shall be considered the
monthly anniversary of the date of grant.
(c) Commencing as of the fifth anniversary of the date
the Option is granted, the Optionee shall have the right to exercise
the Option with respect to, and to thereby purchase, all the shares
subject to such Option.
If an Optionee ceases to perform services for the Company for any reason
(including Disability or death), his rights with regard to all non-vested
Options shall cease immediately.
6.4 Option Price. The Option Price of the shares of Common Stock
underlying each Option shall be the Fair Market Value of the Common Stock on the
date the Option is granted, unless otherwise determined by the Board; provided,
however, in no event shall the Option Price of any Option be less than 75% of
the Fair Market Value of the Common Stock on the date the Option is granted.
Upon execution of an Option Agreement by both the Company and Optionee, the date
as of which the Option was granted under this Plan as noted in the Option
Agreement shall be considered the date on which such Option is granted.
6.5 Terms of Options. Terms of Options granted under the Plan
shall commence on the date of grant and shall expire on such date as the Board
may determine for each Option; provided, in no event shall any Option be
exercisable after 10 years from the date the Option is granted. No Option shall
be granted hereunder after 10 years from the date the Plan is adopted by the
Board.
6.6 Terms of Exercise. The exercise of an Option may be for less
than the full number of shares of Common Stock subject to such Option, but such
exercise shall not be made for less than (i) 100 shares or (ii) the total
remaining shares subject to the Option, if such total is less than 100 shares.
Subject to the other restrictions on exercise set forth herein, the unexercised
portion of an Option may be exercised at a later date by the Optionee.
6.7 Method of Exercise. All Options granted hereunder shall be
exercised by written notice directed to the Secretary of the Company at its
principal place of business or to such other person as the Board may direct.
Each notice of exercise shall identify the Option which the Optionee is
exercising (in whole or in part) and shall be accompanied by payment of the
Option Price for the number of shares specified in such notice and by any
documents required by
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Article 8 hereof. The Company shall make delivery of such shares within a
reasonable period of time; provided, if any law or regulation requires the
Company to take any action (including, but not limited to, the filing of a
registration statement under the 1933 Act and causing such registration
statement to become effective) with respect to the shares specified in such
notice before the issuance thereof, then the date of delivery of such shares
shall be extended for the period necessary to take such action.
6.8 Medium and Time of Payment.
(a) The Option Price shall be payable upon the exercise
of the Option in an amount equal to the number of shares then being
purchased times the per share Option Price. Payment, at the election of
the Optionee (or his Beneficiary as provided in subsection (c) of
Section 6.9), shall be (A) in cash; (B) by delivery to the Company of a
certificate or certificates for shares of the Common Stock duly
endorsed for transfer to the Company with signature guaranteed by a
member firm of a national stock exchange or by a national or state bank
or a federally chartered thrift institution (or guaranteed or notarized
in such other manner as the Board may require) or by instructing the
Company to retain shares of Common Stock upon the exercise of the
Option with a Fair Market Value equal to the exercise price as payment;
(C) by delivery to the Company of such other property or by the
performance for the Company of such services as may be acceptable to
the Board and allowed under applicable law; or (D) by a combination of
(A), (B) and (C).
(b) If all or part of the Option Price is paid by
delivery of shares of the Common Stock, on the date of such payment,
the Optionee must have held such shares for at least six months from
(i) the date of acquisition, in the case of shares acquired other than
through a stock option or other stock award plan or (ii) the date of
grant or award in the case of shares acquired through such a plan; and
the value of such Common Stock (which shall be the Fair Market Value of
such Common Stock on the date of exercise) shall be less than or equal
to the total Option Price payment. If the Optionee delivers Common
Stock with a value that is less than the total Option Price, then such
Optionee shall pay the balance of the total Option Price in cash, other
property or services, as provided in subsection (a) above.
(c) In addition to the payment of the purchase price of
the shares then being purchased, an Optionee also shall pay in cash (or
have withheld from his normal pay) an amount equal to, or by
instructing the Company to retain Common Stock upon the exercise of the
Option with a Fair Market Value equal to, the amount, if any, which the
Company at the time of exercise is required to withhold under the
income tax or Federal Insurance Contributions Act tax withholding
provisions of the Code, of the income tax laws of the state of the
Optionee's residence, and of any other applicable law.
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<PAGE> 8
6.9 Effect of Termination of Service, Disability or Death. Except
as provided in subsections (a), (b) and (c) below, no Option shall be
exercisable unless the Optionee thereof shall have been performing services for
the Company or a parent or subsidiary of the Company from the date of the
granting of the Option until the date of exercise; provided, the Board, in its
sole discretion, may waive the application of this Section and, instead, may
provide a different expiration date or dates in an Option Agreement.
(a) Termination of Service. In the event an Optionee
ceases to be performing services for the Company or a parent or
subsidiary of the Company for any reason other than death or
Disability, any Option or unexercised portion thereof granted to him
shall terminate on and shall not be exercisable after the earliest to
occur of (i) the expiration date of the Option, (ii) 30 days after the
date the Optionee ceases to be performing such services, or (iii) the
date on which the Company gives notice to such Optionee of termination
of such services if such services are terminated by the Company or by
its shareholders for Cause (an Optionee's resignation in anticipation
of termination of service by the Company or by its shareholders for
Cause shall constitute a notice of termination by the Company);
provided, the Board may provide in the Option Agreement that such
Option or any unexercised portion thereof shall terminate sooner. Prior
to the earlier of the dates specified in the preceding sentences of
this subsection (a), the Option shall be exercisable only in accordance
with its terms and only for the number of shares exercisable on the
date of termination of service. The question of whether an authorized
leave of absence or absence for military or government service or for
any other reason shall constitute a termination of service for purposes
of the Plan shall be determined by the Board, which determination shall
be final and conclusive.
(b) Disability. Upon the termination of an Optionee's
service for the Company or a parent or subsidiary of the Company due to
Disability, any Option or unexercised portion thereof granted to him
which is otherwise exercisable shall terminate on and shall not be
exercisable after the earlier to occur of (i) the expiration date of
such Option, or (ii) six months after the date on which such Optionee
ceases to be performing such services due to Disability; provided, the
Board may provide in the Option Agreement that such Option or any
unexercised portion thereof shall terminate sooner. Prior to the
earlier of such date, such Option shall be exercisable only in
accordance with its terms and only for the number of shares exercisable
on the date such. Optionee's service ceases due to Disability.
(c) Death. In the event of the death of the Optionee (i)
while he is performing services for the Company or a parent or
subsidiary of the Company, (ii) within 30 days after the date on which
such Optionee's service is terminated (for a reason other than Cause)
as provided in subsection (a) above, or (iii) within six months after
the date on which such Optionee's service terminated due to his
Disability, any Option or unexercised portion thereof granted to him
which is otherwise exercisable may be exercised by the Optionee's
Beneficiary at any time prior to the expiration of six months from the
date of
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<PAGE> 9
death of such Optionee, but in no event later than the date of
expiration of the Option period; provided, the Board may provide in the
Option Agreement that such Option or any unexercised portion thereof
shall terminate sooner. Such exercise shall be effected pursuant to the
terms of this Section as if such Beneficiary is the named Optionee.
6.10 Restrictions on Transfer and Exercise of Options. No Option
shall be assignable or transferable by the Optionee except by transfer to a
Beneficiary upon the death of the Optionee, and any purported transfer (other
than as excepted above) shall be null and void. After the death of an Optionee
and upon the death of the Optionee's Beneficiary, an Option shall be transferred
only by will or by the laws of descent and distribution. During the lifetime of
an Optionee, the Option shall be exercisable only by him; provided, however,
that in the event the Optionee is incapacitated and unable to exercise Options,
such Options may be exercised by such Optionee's legal guardian, legal
representative, fiduciary or other representative whom the Board deems
appropriate based on applicable facts and circumstances. To the extent that any
transfer is allowed pursuant to this Section, the new holder of the Option (the
Optionee's Beneficiary or otherwise) shall be subject to the all restrictions
and limitations to which the original Optionee was subject under this Plan, the
Optionee's Option Agreement and the Optionee's Optionee Restriction Agreement.
See also Article 8 hereof.
6.11 Rights as a Shareholder. An Optionee shall have no rights as a
shareholder with respect to shares covered by his Option until date of the
issuance of the shares to him and only after the Option Price of such shares is
fully paid. Unless specified in Article 7, no adjustment will be made for
dividends or other rights for which the record date is prior to the date of such
issuance.
6.12 No Obligation to Exercise Option. The granting of an Option
shall impose no obligation upon the Optionee to exercise such Option.
6.13 Acceleration. The Board shall at all times have the power to
accelerate the vesting date of Options previously granted under this Plan.
6.14 Holding Period. Shares underlying any Option granted hereunder
to an Optionee who is an "affiliate" of the Company subject to the "short-swing
profit provisions" of Section 16(b) of the 1934 Act are subject to a six-month
holding period. Such holding period will be satisfied if, with regard to any
vested (i.e., exercisable) Option that is exercised within six months of the
date of grant, the shares acquired upon exercise are not disposed of until a
minimum of six months have elapsed from the date of grant of the Option.
Notwithstanding the foregoing, the Board may, in its sole discretion, waive the
preceding required holding period with respect to any Optionee.
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ARTICLE 7
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
7.1 Recapitalization. In the event that the outstanding shares of
the Common Stock of the Company are hereafter increased or decreased or changed
into or exchanged for a different number or kind of shares or other securities
of the Company by reason of a recapitalization, reclassification, stock split,
combination of shares or dividend payable in shares of the Common Stock, the
following rules shall apply:
(a) The Board shall make or cause to be made an
appropriate adjustment in the number and kind of shares available for
the granting of Options under the Plan.
(b) The Board also shall make an appropriate adjustment
in the number and kind of shares as to which outstanding Options, or
portions thereof then unexercised, shall be exercisable; any such
adjustment in any outstanding Options shall be made without change in
the total price applicable to the unexercised portion of such Option
and with a corresponding adjustment in the Option Price per share. No
fractional shares shall be issued or optioned in making the foregoing
adjustments, and the number of shares available under the Plan or the
number of shares subject to any outstanding Options shall be the next
higher number of shares, rounding all fractions upward.
(c) If any rights or warrants to subscribe for additional
shares are given pro rata to holders of outstanding shares of the class
or classes of stock then set aside for the Plan, each Optionee shall be
entitled to the same rights or warrants on the same basis as holders of
the outstanding shares with respect to such portion of his Option as is
exercised on or prior to the record date for determining shareholders
entitled to receive or exercise such rights or warrants.
7.2 Reorganization. Subject to any required action by the
shareholders, if the Company shall be a party to any reorganization involving
merger, consolidation, acquisition of the stock or acquisition of the assets of
the Company, the Board, in its sole discretion, may declare that:
(a) any Option granted but not yet exercised shall
pertain to and apply, with appropriate adjustment as determined by the
Board, to the securities of the resulting corporation to which a holder
of the number of shares of the Common Stock subject to such Option
would have been entitled;
(b) any or all outstanding Options granted hereunder
shall become immediately nonforfeitable and fully exercisable or vested
(to the extent permitted under federal or state securities laws);
and/or
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<PAGE> 11
(c) any or all Options granted hereunder shall become
immediately nonforfeitable and fully exercisable or vested (to the
extent permitted under federal or state securities laws) and are to be
terminated after giving at least 30 days' notice to the Optionees to
whom such Options have been granted.
7.3 Dissolution and Liquidation. If the Board adopts a plan of
dissolution and liquidation that is approved by the shareholders of the Company,
the Board shall give each Optionee written notice of such event at least ten
days prior to its effective date, and the rights of all Optionees shall become
immediately nonforfeitable and fully exercisable or vested (to the extent
permitted under federal or state securities laws).
7.4 Limits on Adjustments. Any issuance by the Company of stock of
any class, or securities convertible into shares of stock of any class, shall
not affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of the Common Stock subject to any Option, except
as specifically provided otherwise in this Article. The grant of Options
pursuant to the Plan shall not affect in any way the right or power of the
Company to make adjustments, reclassifications, reorganizations or changes of
its capital or business structure or to merge, consolidate or dissolve, or to
liquidate, sell or transfer all or any part of its business or assets. All
adjustments the Board makes under this Article shall be conclusive.
ARTICLE 8
AGREEMENT BY OPTIONEE AND SECURITIES REGISTRATION
8.1 Agreement. If, in the opinion of counsel to the Company, such
action is necessary or desirable, no Options shall be granted to any Optionee,
and no Option shall be exercisable, unless, at the time of grant or exercise, as
applicable, such Optionee (i) represents and warrants that he will acquire the
Common Stock for investment only and not for purposes of resale or distribution,
and (ii) makes such further representations and warranties as are deemed
necessary or desirable by counsel to the Company with regard to holding and
resale of the Common Stock. The Optionee shall, upon the request of the Board,
execute and deliver to the Company an agreement or affidavit to such effect.
Should the Board have reasonable cause to believe that such Optionee did not
execute such agreement or affidavit in good faith, the Company shall not be
bound by the grant of the Option or by the exercise of the Option. All
certificates representing shares of Common Stock issued pursuant to the Plan
shall be marked with the following restrictive legend or similar legend, if such
marking, in the opinion of counsel to the Company, is necessary or desirable:
The shares represented by this certificate [have not been registered
under the Securities Act of 1933, as amended, or the securities laws of
any state and] are held by an "affiliate" (as such term is defined in
Rule 144 promulgated by the Securities and Exchange Commission under
the Securities Act of 1933, as amended) of the Corporation.
Accordingly, these shares may not be sold, hypothecated, pledged or
otherwise transferred except (i) pursuant to an effective registration
statement under the Securities Act of 1933, as amended, and any
applicable securities laws or regulations of any state with respect to
such shares, (ii) in accordance with
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<PAGE> 12
Securities and Exchange Commission Rule 144, or (iii) upon the issuance
to the Corporation of a favorable opinion of counsel or the submission
to the Corporation of such other evidence as may be satisfactory to the
Corporation that such proposed sale, assignment, encumbrance or other
transfer will not be in violation of the Securities Act of 1933, as
amended, or any applicable securities laws of any state or any rules or
regulations thereunder. Any attempted transfer of this certificate or
the shares represented hereby which is in violation of the preceding
restrictions will not be recognized by the Corporation, nor will any
transferee be recognized as the owner thereof by the Corporation.
If the Common Stock is (A) held by an Optionee who is not an "affiliate," as
that term is defined in Rule 144 of the 1933 Act, or who ceases to be an
"affiliate," or (B) registered under the 1933 Act and all applicable state
securities laws and regulations as provided in Section 8.2, the Board, in its
discretion and with the advice of counsel, may dispense with or authorize the
removal of the restrictive legend set forth above or the portion thereof which
is inapplicable.
8.2 Registration. In the event that the Company in its sole
discretion shall deem it necessary or advisable to register, under the 1933 Act
or any state securities laws or regulations, any shares with respect to which
Options have been granted hereunder, then the Company shall take such action at
its own expense before delivery of the certificates representing such shares to
an Optionee. In such event, and if the shares of Common Stock of the Company
shall be listed on any national securities exchange or on NASDAQ at the time of
the exercise of any Option, the Company shall make prompt application at its own
expense for the listing on such stock exchange or NASDAQ of the shares of Common
Stock to be issued.
8.3 Optionee Restrictions. No Options shall be granted to any
Optionee, and no Option shall be exercisable by any Optionee (or other holder of
the Optionee's Option), unless, at the time of grant or exercise, as applicable,
the Optionee (or other holder of the Optionee's Option) is subject to the terms,
provisions, restrictions and limitations contained in the Optionee's Optionee
Restriction Agreement in the option of counsel to the Company.
ARTICLE 9
EFFECTIVE DATE
The Plan shall be effective as of the Effective Date, and no Options
shall be granted hereunder prior to said date. Adoption of the Plan shall be
approved by the Board.
ARTICLE 10
AMENDMENT AND TERMINATION
10.1 Amendment and Termination By the Board. Subject to Section
10.2 below, the Board shall have the power at any time to add to, amend, modify
or repeal any of the provisions of the Plan, to suspend the operation of the
entire Plan or any of its provisions for any period or periods or to terminate
the Plan in whole or in part. In the event of any such action, the Board
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<PAGE> 13
shall prepare written procedures which shall govern the administration of the
Plan resulting from such addition, amendment, modification, repeal, suspension
or termination.
10.2 Restrictions on Amendment and Termination. Notwithstanding the
provisions of Section 10.1 above, except as otherwise expressly provided in this
Plan or in an Option Agreement or an Optionee Restriction Agreement, no
addition, amendment, modification, repeal, suspension or termination shall
adversely affect, in any way, the rights of the Optionees who have outstanding
Options without the consent of such Optionees.
ARTICLE 11
MISCELLANEOUS PROVISIONS
11.1 Application of Funds. The proceeds received by the Company
from the sale of the Common Stock subject to the Options granted hereunder will
be used for general corporate purposes.
11.2 Notices. All notices or other communications by an Optionee to
the Board pursuant to or in connection with the Plan shall be deemed to have
been duly given when received in the form specified by the Board at the
location, or by the person, designated by the Board for the receipt thereof.
11.3 Term of Plan. Subject to the terms of Article 10, the Plan
shall terminate upon the later of (i) the complete exercise or lapse of the last
outstanding Option, or (ii) the last date upon which Options may be granted
hereunder.
11.4 Governing Law. The Plan shall be governed by and construed in
accordance with the laws of the State of Georgia.
11.5 Additional Provisions By Board. The Option Agreements
authorized under the Plan may contain such other provisions, including, without
limitation, restrictions upon the exercise of an Option, as the Board shall deem
advisable.
11.6 Plan Document Controls. In the event of any conflict between
the provisions of an Option Agreement and the Plan, the Plan shall control.
11.7 Gender and Number. Wherever applicable, the masculine pronoun
shall include the feminine pronoun, and the singular shall include the plural.
11.8 Headings. The titles in this Plan are inserted for convenience
of reference; they constitute no part of the Plan and are not to be considered
in the construction hereof.
11.9 Legal References. Any references in this Plan to a provision
of law which is, subsequent to the Effective Date of this Plan, revised,
modified, finalized or redesignated, shall
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<PAGE> 14
automatically be deemed a reference to such revised, modified, finalized or
redesignated provision of law.
11.10 No Rights to Perform Services. Nothing contained in the Plan,
or any modification thereof, shall be construed to give any Person any rights to
perform services for the Company or any parent or subsidiary corporation of the
Company.
11.11 Unfunded Arrangement. The Plan shall not be funded, and except
for reserving a sufficient number of authorized shares to the extent required by
law to meet the requirements of the Plan, the Company shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the payment of any grant under the Plan.
ADOPTED BY BOARD OF DIRECTORS ON JUNE 13, 1995
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APPENDIX A
NONQUALIFIED STOCK OPTION NO. ______
ATHEROGENICS, INC.
1995 STOCK OPTION PLAN
NONQUALIFIED STOCK OPTION AGREEMENT
This Nonqualified Stock Option Agreement (the "Agreement") is entered
into as of the ________ day of _______________, ________, by and between
Atherogenics, Inc. (the "Company") and ______________________ ("Optionee").
W I T N E S S E T H:
WHEREAS, the Company, has adopted the Atherogenics, Inc. 1995 Stock
Option Plan (the "Plan") which is administered by the Company's Board of
Directors (the "Board"); and
WHEREAS, effective as of ____________, __________ the Board granted to
Optionee a nonqualified stock option under, and in accordance with, the terms of
the Plan to reward Optionee for his efforts on behalf of the Company and to
encourage his continued loyalty and diligence; and
WHEREAS, to comply with the terms of the Plan and to further the
interests of the Company and Optionee, the parties hereto have set forth the
terms of such option in writing in this Agreement;
NOW, THEREFORE, for and in consideration of the premises and mutual
promises herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which are acknowledged, the parties agree as follows:
1. Grant of Option. Effective as of ____________, __________, the
Optionee was granted a nonqualified stock option under the Plan. Under that
option and subject to the terms and conditions set forth herein, Optionee shall
have the right to purchase __________ shares of the common stock of the Company
(the "Common Stock"); such __________ shares hereinafter are referred to as the
"Optioned Shares", and this option hereinafter is referred to as the "Option".
The Option is intended to be a nonqualified stock option.
2. Option Price. The price per share for each of the Optioned
Shares shall be $__________ (the "Option Price"), which is not less than 75% of
the per share Fair Market Value of the Optioned Shares on the date of grant
specified above.
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<PAGE> 16
3. Exercise of Option.
(a) General. The Option may be exercised by Optionee's
delivery to the Secretary of the Company of a written notice of exercise
executed by Optionee (the "Notice of Exercise"). The Notice of Exercise shall be
substantially in the form set forth as Exhibit A, attached hereto and made a
part hereof, and shall identify the Option and the number of Optioned Shares
that are being exercised.
(b) Beginning of Exercise Period. The Option first shall
become exercisable (i.e., vested) according to the following schedule; provided,
if Optionee ceases to perform services for the Company for any reason (including
Disability or death), his rights with regard to all non-vested Options under
this schedule shall cease immediately:
(i) As of the first anniversary of the date of
grant of the Option, Optionee shall have the right to exercise 20% of
the Optioned Shares;
(ii) As of each monthly anniversary of the date
of grant of the Option occurring after the first anniversary of the
date of grant of the Option and prior to the fifth anniversary of the
date of grant of the Option, the Optionee shall have the right to
exercise the Option with respect to, and to thereby purchase, an
additional 1-2/3% of the Optioned Shares (for purposes of determining
the monthly anniversary of the date an Option is granted, if the date
of grant of an Option occurs on the 29th, 30th or 31st day, then, if
the month during which the monthly anniversary is to be determined does
not contain such a 29th, 30th or 31st day, respectively, the last day
of such month shall be considered the monthly anniversary of the date
of grant); and
(iii) As of the fifth anniversary of the date the
Option is granted, the Optionee shall have the right to exercise the
Option with respect to, and to thereby purchase, all the shares subject
to such Option.
(c) Partial Exercise. Optionee may exercise the Option
for less than the full number of exercisable Optioned Shares, but such exercise
may not be made for less than 100 shares or the total remaining shares subject
to the Option, if less than 100 shares.
4. Termination of Option. Notwithstanding any provisions to the
contrary herein, and except as otherwise specified in Attachment I (if
any).hereto, the Option shall not be exercisable either in whole or in part
after the earliest of:
(a) Ten years from the date of grant;
(b) The date that is immediately prior to the six month
anniversary of the date on which Optionee dies (i) while performing services for
the Company, (ii) within the 30 day period that begins on the date on which
Optionee ceases to be performing services for the
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<PAGE> 17
Company for any reason other than death or Disability or (iii) within the six
month period that begins on the date on which Optionee ceases to perform
services for the Company due to Disability;
(c) The date of expiration of the six month period that
begins on the date on which Optionee ceases to perform services for the Company
due to Disability; provided, if Optionee dies during such six month period, the
terms of subsection (b) shall control;
(d) The date of expiration of the 30 day that begins on
the date on which Optionee ceases to perform services for the Company for any
reason other than death or Disability; provided, if Optionee dies during such 30
day period, the terms of subsection (b) shall control;
(e) The date on which the Company gives notice (or is
deemed to have given notice) to Optionee of his termination of service for
Cause, all as described in Section 6.9(a) of the Plan; or
(f) Such other earlier date as may be required under the
terms of the Plan.
5. Option Non-Transferable. The Option shall not be transferable
by Optionee other than by will or by the laws of descent and distribution except
by transfer to a Beneficiary upon the death of the Optionee, and any purported
transfer (other than as excepted above) shall be null and void. After the death
of the Optionee and upon the death of the Optionee's Beneficiary, the Option may
be transferred by will or by the laws of descent and distribution. During the
lifetime of Optionee, the Option shall be exercisable only by Optionee (or, if
he becomes incapacitated or upon his Disability, by the guardian of his property
or his duly appointed attorney-in-fact), and shall not be assignable or
transferable by Optionee and, subject to Section 6 hereof, no other person shall
acquire any rights in the Option. To the extent that any transfer is allowed
pursuant to this Section, the new holder of the Option (the Optionee's
Beneficiary or otherwise) shall be subject to the all restrictions and
limitations to which the original Optionee was subject under this Plan, the
Optionee's Option Agreement and the Optionee's Optionee Restriction Agreement.
See also Article 8 of the Plan.
6. Death of Optionee and Transfer of Option. Except as otherwise
specified in Attachment I (if any) hereto, in the event of the death of Optionee
while performing services for the Company, within a six month period after the
termination of his service of the Company due to Disability, or within a 30 day
period after the Optionee ceases to perform services for the Company for any
reason other than for Cause, all or any of the unexercised portion of the Option
owned by the deceased Optionee may be exercised by Optionee's Beneficiary at any
time prior to the six month anniversary of the date of the death of Optionee,
but in no event later than the date as of which such Option expires pursuant to
Section 4 hereof. Such exercise shall be effected in accordance with the terms
hereof as if such Beneficiary was Optionee herein. The Optionee agrees that the
following individual shall initially be his Beneficiary:
Page -3-
<PAGE> 18
Name:
----------------------
Address:
----------------------
----------------------
----------------------
Any subsequent modification of the Optionee's Beneficiary shall be made pursuant
to the terms and provisions of the Plan.
7. Medium and Time of Payment of Option Price.
(a) General. The Option Price shall be payable by
Optionee (or his Beneficiary in accordance with Section 6 hereof) upon exercise
of the Option and shall be paid in cash, in shares of the Common Stock (or by
instructing the Company to retain shares of Common Stock as payment), in other
property or services acceptable to the Board and allowed under the terms of the
Plan and applicable law, or any combination thereof.
(b) Payment in Shares of the Common Stock. If Optionee
pays all or part of the Option Price with shares of the Common Stock, the
following conditions shall apply:
(i) Optionee shall deliver to the Secretary of
the Company a certificate or certificates for shares of the Common
Stock duly endorsed for transfer to the Company with signature
guaranteed by a member firm of a national stock exchange or by a
national or state bank (or guaranteed or notarized in such other manner
as the Board may require);
(ii) Optionee must have held any shares of the
Common Stock used to pay the Option Price for at least six months prior
to the date such payment is made;
(iii) Such shares shall be valued on the basis of
the Fair Market Value of the Common Stock on the date of exercise
pursuant to the terms of the Plan; and
(iv) The value of such Common Stock shall be less
than or equal to the Option Price. If Optionee delivers Common Stock
with a value that is less than the Option Price, then Optionee shall
pay the balance of the Option Price in a form allowed under subsection
(a) above.
In addition to the payment of the Option Price, Optionee also shall pay in cash
(or have withheld from his normal pay) an amount equal to, or by instructing the
Company to retain Common Stock upon the exercise of the Option with a Fair
Market Value equal to, the amount, if any, which the Company at the time of
exercise is required to withhold under the income tax and FICA withholding
provisions of the Internal Revenue Code of 1986, as amended, and of the income
tax laws of the state of Optionee's residence.
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<PAGE> 19
8. Agreement of Optionee. Optionee acknowledges that he has read
Article 8 of the Plan and understands that certain restrictions may apply with
respect to shares of the Common Stock acquired by him pursuant to his exercise
of the Option (including restrictions on resale applicable to "affiliates" under
Rule 144 of the Securities Act of 1933, as amended, and restrictions on resale
applicable to shares of the Common Stock that have not been registered under the
Securities Act of 1933, as amended, and applicable state securities laws).
Optionee hereby agrees to execute such documents and take such actions as the
Company may require with respect to state and federal securities laws and any
restrictions on the resale of such shares which may pertain. Optionee also
acknowledges that shares of Common Stock acquired through exercise of all or a
portion of the Option will be subject to the terms and provisions of the
Optionee Restriction Agreement which has been executed by the Optionee.
9. Delivery of Stock Certificates. Within a reasonable period of
time after the date of exercise of the Option and the receipt by the Company of
full payment therefor, the Company shall deliver to Optionee a stock certificate
representing the shares of the Common Stock acquired by Optionee pursuant to his
exercise of the Option.
10. Notices. All notices or other communications hereunder shall
be in writing and shall be effective (i) when personally delivered by courier
(including overnight carriers) or otherwise to the party to be given such notice
or other communication or (ii) on the third business day following the date
deposited in the United States mail if such notice or other communication is
sent by certified or registered mail with return receipt requested and postage
thereon fully prepaid. The addresses for such notices shall be as follows:
If to the Company:
Atherogenics, Inc.
Attention: Corporate Secretary
3075B Northwoods Circle
Norcross, Georgia 30071
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<PAGE> 20
If to Optionee:
------------------
------------------
------------------
------------------
Any party hereto, by notice of the other party hereunder, may change its address
for receipt of notices hereunder.
11. Other Terms and Conditions. In addition to the terms and
conditions set forth herein, the Option is subject to and governed by the other
terms and conditions set forth in the Plan and in any Attachment I attached
hereto, each of which is hereby incorporated by reference. In the event of any
conflict between the provisions of this Agreement and the Plan, the Plan shall
control. In the event of any conflict between the provisions of this Agreement
and Attachment I, Attachment I shall control.
12. Miscellaneous.
(a) The granting of the Option and the execution of this
Agreement shall not give Optionee any rights to similar grants in future years
or any right to be retained in the service of the Company or to interfere in any
way with the right of the Company to terminate Optionee's services at any time.
(b) Optionee shall have no rights of a stockholder with
respect to any shares covered by the Option until the date of issuance of a
stock certificate to him for such shares.
(c) If any term, provision, covenant or restriction
contained in this Agreement or in any Attachment I attached hereto is held by a
court or a federal regulatory agency of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions contained in this Agreement or in such Attachment I shall remain in
full force and effect, and shall in no way be affected, impaired or invalidated.
If for any reason such court or regulatory agency determines that this Agreement
or any Attachment I will not permit Optionee to acquire the full number of
Optioned Shares as provided in Section 1 hereof, it is the express intention of
the Company to allow Optionee to acquire such lesser number of shares as may be
permissible without any amendment or modification hereof.
(d) This Agreement shall be construed and enforced in
accordance with the laws of Georgia.
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<PAGE> 21
(e) This Agreement, together with the Plan and any
Attachment I attached hereto, contains the entire understanding among the
parties and supersedes any prior understanding and agreements between them
representing the subject matter hereof. There are no representations,
agreements, arrangements or understandings, oral or written, between and among
the parties hereto relating to the subject matter hereof which are not fully
expressed herein, or in the Plan and in any Attachment I attached hereto.
(f) Section and other headings contained in this
Agreement are for reference purposes only and are in no way intended to
describe, interpret, define or limit the scope, extent or intent of this
Agreement or any provision hereof.
(g) This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which shall
constitute one agreement, and the signatures of any party or any counterpart
shall be deemed to be a signature to, and may be appended to, any other
counterpart.
(h) All capitalized terms in this Agreement shall be
construed in accordance with their defined terms under the Plan.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the first date written above.
ATHEROGENICS, INC.
By:
--------------------------------
Title:
------------------------------
OPTIONEE:
------------------------------------
Signature
------------------------------------
Print or type name
Page -7-
<PAGE> 22
NONQUALIFIED STOCK OPTION NO. ________
ATHEROGENICS, INC.
1995 STOCK OPTION PLAN
NONQUALIFIED STOCK OPTION AGREEMENT
ATTACHMENT I
ADDITIONAL TERMS AND PROVISIONS REGARDING OPTION
Page -8-
<PAGE> 23
Exhibit A
ATHEROGENICS, INC.
1995 STOCK OPTION PLAN
NOTICE OF EXERCISE FOR NONQUALIFIED STOCK OPTION AGREEMENT
This Notice of Exercise is given pursuant to the terms of the
Nonqualified Stock Option Agreement, dated _______________________,
__________________, between Atherogenics, Inc. (the "Company") and the
undersigned Optionee (the "Agreement"), which Agreement represents Nonqualified
Stock Option No. ______________and which is made a part hereof and incorporated
herein by reference.
EXERCISE OF OPTION. Optionee hereby exercises his option to purchase
__________ of his Optioned Shares. Optionee hereby delivers, together with this
written statement of exercise, the full Option Price with respect to the
exercised Optioned Shares, which consists of: [COMPLETE ONLY ONE]
- cash in the total amount of $___________________________.
- ______ shares of the Company's Common Stock.
- cash in the total amount of $_____________________and
______________shares of the Company's Common Stock.
- other (specify): _______________________.
ACKNOWLEDGMENT. Optionee hereby acknowledges that, to the extent he is
an "affiliate" of the Company (as that term is defined in Rule 144 promulgated
under the Securities Act of 1933, as amended) or to the extent that the Optioned
Shares have not been registered under the Securities Act of 1933, as amended, or
applicable state securities laws, any shares of the Company's Common Stock
acquired by him as a result of his exercise of the Option pursuant to this
Notice are subject to, and the certificates representing such shares shall be
legended to reflect, certain trading restrictions under applicable securities
laws (including particularly the Securities and Exchange Commission's Rule 144),
all as described in Article 8 of the Plan, and Optionee hereby agrees to comply
with all such restrictions and to execute such documents or take such other
actions as the Company may require in connection with such restrictions.
REPRESENTATIONS AND WARRANTIES OF OPTIONEE. Optionee hereby
specifically represents and warrants as follows:
- - The Shares are being purchased for the Optionee's own account without the
participation of any other person, with the intent of holding the Shares for
investment and without the intent of participating, directly or indirectly, in a
distribution of the Shares and not with a view to, or for
Page -9-
<PAGE> 24
resale in connection with, any distribution of the Shares or any portion
thereof, nor is the Optionee aware of the existence of any distribution of the
Company's securities;
- - The Optionee is not acquiring the Shares based upon any representation, oral
or written, by any person with respect to the future value of, or income from,
the Shares, but rather upon an independent examination and judgment as to the
prospects of the Company; and
- - The Shares were not offered to the Optionee by means of publicly disseminated
advertisements or sales literature, nor is the Optionee aware of any offers made
to other persons by such means.
Executed this ________________ day of ____________________.
OPTIONEE:
_________________________________
Signature
_________________________________
Print or Type Name
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<PAGE> 25
APPENDIX B
ATHEROGENICS, INC.
1995 STOCK OPTION PLAN
OPTIONEE RESTRICTION AGREEMENT
This Optionee Restriction Agreement (the "Agreement") is made and
entered into as of 19__ between ATHEROGENICS, INC., a Georgia corporation (the
"Company"), and ________ ("Optionee").
W I T N E S S E T H:
WHEREAS, the Company desires to grant to Optionee as of the date hereof
an option to purchase all or part of an aggregate of _____ shares (the "Shares")
of the Common Stock of the Company at a price of $_____ per share (the term
"Shares" refers to all shares acquired or which could be acquired pursuant to
such option and to all securities received in addition thereto or in replacement
thereof, pursuant to or in consequence of any stock dividend, stock split,
recapitalization, merger, reorganization, exchange of shares or other similar
event), and the Optionee wishes to receive such Option; and
WHEREAS, the Company is party to a Series A Convertible Preferred Stock
Purchase Agreement dated as of _____, 1994 with Alliance Technology Ventures,
L.P., a Delaware limited partnership ("Alliance"), pursuant to which the Company
issued to such entity shares of the Company's Series A Convertible Preferred
Stock (the "Preferred Stock"); and
WHEREAS, in order to provide assurance to Alliance and other persons
who may purchase or otherwise acquire shares of the Preferred Stock of the
Company in the future (collectively, the "Investors") and thereby to assist in
future equity financing of the Company, the Company requires that Optionee
execute and deliver this Agreement prior to the grant of any option by the
Company, and Optionee, in consideration for the Options to be granted to
Optionee, is willing to enter into this Agreement for the benefit of the
Company, the Investors and any other person or entity who holds stock of the
Company from time to time;
NOW, THEREFORE, the parties hereto agree as follows:
I
COMPANY'S RIGHT OF FIRST REFUSAL RESPECTING SHARES
1.1 Right of First Refusal. Subject to Section 1.5 hereof, in the
event that the Optionee proposes to sell, pledge, or otherwise transfer any
Shares, the Company shall have a
Page -1-
<PAGE> 26
right of first refusal (the "Right of First Refusal") with respect to such
Shares. Optionee shall give a written notice (the "Transfer Notice") to the
Company describing fully any proposed transfer of Shares, including the number
of Shares proposed to be transferred, the proposed transfer price, and the name
and address of the proposed transferee. The Transfer Notice shall be signed both
by the Optionee and by the proposed transferee. The Company shall have the right
to purchase all, but not less than all, of the Shares subject to the Transfer
Notice at a price per share equal to the lower of (i) the proposed per share
transfer price or (ii) the fair market value of a share of Common Stock of the
Company, as most recently determined by the Board of Directors of the Company
prior to delivery of the Transfer Notice, by delivery of a notice of exercise of
the Company's Right of First Refusal within thirty (30) days after the date the
Transfer Notice is delivered to the Company. The Company's rights under this
Section shall be freely assignable, in whole or in part.
1.2 Transfer of Exercised Shares. If the Company fails to exercise
the Right of First Refusal within thirty (30) days from the date the Transfer
Notice is delivered to the Company, the Optionee may, not later than ninety (90)
days following delivery to the Company of the Transfer Notice, conclude a
transfer of the Shares subject to the Transfer Notice on the terms and
conditions described in the Transfer Notice. Any proposed transfer on terms and
conditions different from those described in the Transfer Notice, as well as any
subsequent proposed transfer by the Optionee, shall again be subject to the
Right of First Refusal and shall require compliance by the Optionee with the
procedure described in Section 1.1 of this Agreement. If the Company exercises
the Right of First Refusal, the parties shall consummate the sale of Shares on
the terms set forth in the Transfer Notice; provided, however, in the event the
Transfer Notice provides for payment for the Shares other than in cash, the
Company shall have the option of paying for the Shares by the discounted cash
equivalent of the consideration described in the Transfer Notice.
1.3 Binding Effect. The Right of First Refusal shall inure to the
benefit of the successors and assigns of the Company and shall be binding upon
any transferee of Shares other than a transferee acquiring shares in a
transaction where the Company failed to exercise that Right of First Refusal (a
"Free Transferee") or a transferee of a Free Transferee.
1.4 Termination of the Company's Right of First Refusal.
Notwithstanding anything in this Article I, the Company shall have no Right of
First Refusal, and Optionee shall have no obligation to comply with the
procedures in Sections 1.1 through 1.3 after the earlier of (i) the Company's
initial registered public offering of Common Stock to the public generally or
(ii) the date ten (10) years after the date of this Agreement.
1.5 Limitations to Rights. Without regard and not subject to the
provisions of Sections 1.1 and 2.1:
(a) The Optionee may sell or otherwise assign Shares to any or all
of his ancestors, descendants, spouse, or members of his immediate family, or to
a custodian, trustee (including a
Page -2-
<PAGE> 27
trustee of a voting trust), executor, or other fiduciary for the account of his
ancestors, descendants, spouse, or members of his immediate family, provided
that each such transferee or assignee, prior to the completion of the sale,
transfer, or assignment, shall have executed documents assuming the obligations
of the Optionee under this Agreement with respect to the transferred securities.
(b) To the extent permitted by the Company, the Optionee may sell
or transfer Shares in the first firmly underwritten public offering of
securities of the Company registered under the Securities Act of 1933, as
amended (the "Act").
II
RIGHTS OF CO-SALE
2.1 The Rights of Investors. If at any time Optionee proposes to
sell any Shares to parties other than the Investors or their assignees or
transferees (the "Eligible Holders") in a transaction (the "Transaction") not
registered under the Act in reliance upon a claimed exemption thereunder, then
to the extent the Company has not exercised its Right of First Refusal as to any
Shares being sold, any Eligible Holder (a "Selling Holder") which notifies the
Company in writing, within thirty (30) days after receipt of the notification
from the Optionee referred to in Section 2.2, shall have the opportunity to sell
a pro rata portion of Shares which the Optionee proposes to sell to such third
party in the Transaction; whereupon the Optionee shall assign so much of his
interest in the agreement of sale as the Selling Holder shall be entitled to and
shall request hereunder, and the Selling Holder shall assume such part of the
obligations of the Optionee under such agreement as shall relate to the sale of
the Shares by the Selling Holder. For the purposes of this Article II, the "pro
rata portion" which the Selling Holder shall be entitled to sell shall be an
amount of shares equal to the total amount of Shares proposed to be sold
multiplied by a fraction, the numerator of which is the number of shares of
Common Stock issuable upon conversion of the Preferred Shares and shares of
Common Stock owned by a Selling Holder, and the denominator of which is the
total number of such shares owned by all participating Selling Holders and the
Optionee. Each Selling Holder shall notify the Optionee whether it elects to
sell an amount equal to, more than or less than its pro rata portion of the
Shares so offered. Each Selling Holder shall be entitled to apportion Shares to
be sold among its partners and affiliates, provided that such Selling Holder
notifies the Company of such allocation.
1.2 Notice. Prior to any sale by the Optionee of any Shares, the
Optionee shall notify each Eligible Holder and the Company, in writing, of his
intention to sell and issue such securities, setting forth the general terms
under which he proposes to make such sale. Such notice shall be signed by the
third parties, or a representative, of such third parties, or shall be
accompanied by a letter of intent signed by the third parties or representatives
of such third parties, to whom the sale, assignment or transfer is proposed and
shall indicate the third parties' concurrence with the description of the terms.
Page -3-
<PAGE> 28
2.3 Failure to Notify. If within thirty (30) days after the
Optionee gives his notice to the Eligible Holders, the Eligible Holders do not
notify the Company that they desire to sell all of their pro rata portion of the
Shares described in such notice at the price and on the terms and conditions set
forth therein, then the Optionee may, not later than ninety (90) days following
delivery of the notice under Section 2.2, as to the Shares to which the Eligible
Holders do not indicate a desire to sell, conclude a transfer on the terms and
conditions described in the notice. In the event the Optionee has not sold the
Shares or entered into an agreement to sell the Shares within such ninety (90)
days, the Optionee shall not thereafter sell any Shares without first notifying
the Eligible Holders and the Company in the manner provided above. The exercise
or nonexercise of the right to participate in one or more sales of Shares made
by the Optionee shall not adversely affect an Eligible Holder's right to
participate in subsequent sales of Shares by the Optionee pursuant to Section
2.1 hereof.
2.4 Termination. The obligations of the Optionee under this
Article II shall terminate and be of no further force and effect upon the
occurrence of either event described in Section 1.4 of this Agreement.
III
MARKET STANDOFF
Optionee hereby agrees that if so requested by the Company or any
representative of the underwriters in connection with any registration of the
offering of any securities of the Company under the Act, Optionee shall not sell
or otherwise transfer any Shares for a period of one hundred twenty (120) days
following the effective date of a Registration Statement filed under the Act;
provided, however, that such restriction shall apply only to the first two
Registration Statements of the Company to become effective under the Act which
include securities to be sold on behalf of the Company to the public in an
underwritten public offering under the Act. The Company may impose stop-transfer
instructions with respect to securities subject to the foregoing restrictions
until the end of such one hundred twenty (120) day period.
IV
COMPANY'S RIGHT TO REPURCHASE UPON TERMINATION OF EMPLOYMENT
4.1 Repurchase Right. The Shares shall be subject to a right (but
not obligation) of repurchase in favor of the Company (the "Right of
Repurchase"). If the Optionee ceases to perform services with the Company or an
affiliate for any reason whatsoever (the "Service Termination") before the Right
of Repurchase expires pursuant to this Article, the Company may purchase Shares
subject to the Right of Repurchase at a purchase price per share equal to the
purchase price per share paid by the Optionee for the Shares (exclusive of any
taxes paid upon acquisition of the stock). The Optionee may not dispose of or
transfer any Shares while such Shares are subject to the Right of Repurchase and
any such attempted transfer shall be null and void. The Company's rights under
this Section 4.1 shall be freely assignable, in whole or in part.
Page -4-
<PAGE> 29
4.2 Repurchase Procedure. The Company's Right of Repurchase shall
terminate if not exercised by written notice from the Company to the Optionee
within ninety (90) days from the date on which the Company learns of the Service
Termination. If the Company exercises its Right of Repurchase, the Optionee
shall promptly endorse and deliver to the Company the stock certificates
representing the Shares being repurchased, and the Company shall then pay
promptly (but in no event later than ninety (90) days after the date of Service
Termination), pursuant to the provisions of Section 4.3 of this Agreement, the
total repurchase price to the Optionee.
4.3 Repurchase Payment. If, at the time of repurchase, any notes
are outstanding which represent any portion of the total purchase price for
Shares being so repurchased, the repurchase price shall be paid first by
cancellation of any obligation for accrued but unpaid interest under such notes,
next by cancellation of principal under such notes, and finally by payment of
cash or check.
4.4 Binding Effect. The Company's Right of Repurchase shall inure
to the benefit of the successors and assigns of the Company and shall be binding
upon any representative, executor, administrator, heir, or legatee of the
Optionee.
4.5 Expiration of Repurchase Right. The Right of Repurchase as set
forth in this Article shall expire in accordance with the following:
(a) Commencing as of the first anniversary of the date
the Option is granted, the Right of Repurchase shall expire with
respect to, and thereafter not be applicable to, 20% of the shares
subject to such Option. Prior to said date, the Right of Repurchase
shall be applicable to all shares subject to such Option.
(b) Commencing as of the second anniversary of the date
the Option is granted, the Right of Repurchase shall expire with
respect to, and thereafter not be applicable to, an additional 20% of
the shares subject to the Option.
(c) Commencing as of the third anniversary of the date
the Option is granted, the Right of Repurchase shall expire with
respect to, and thereafter not be applicable to, an additional 20% of
the shares subject to the Option.
(d) Commencing as of the fourth anniversary of the date
the Option is granted, the Right of Repurchase shall expire with
respect to, and thereafter not be applicable to, an additional 20% of
the shares subject to the Option.
(e) Commencing as of the fifth anniversary of the date
the Option is granted, the Right of Repurchase shall expire with
respect to, and thereafter not be applicable to, the remainder of the
shares subject to such Option.
V
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<PAGE> 30
STOCK CERTIFICATE RESTRICTIVE LEGENDS
Stock certificates evidencing Shares may bear such restrictive legends
as the Company and the Company's counsel deem necessary or advisable under
applicable law or pursuant to this Agreement, including, without limitation, any
one or more of the following legends:
The securities represented hereby are subject to a right of first
refusal by the Company and a right of co-sale on the part of certain
stockholders pursuant to the provisions of an agreement between the
Company and the original purchaser of such securities relating to such
securities, and may not be sold or otherwise transferred except in
compliance with the terms of such agreement.
The securities represented hereby may be subject to a right of
repurchase by the Company, pursuant to the provisions of an agreement
between the Company and the original purchaser of such securities
relating to such securities should the person initially issued these
securities cease to be employed by the Company or any affiliate
thereof.
The securities represented hereby are subject to restrictions on
transfer for a period of 120 days following the effective date of a
registration statement under the Securities Act of 1933, as amended,
for an offering of the Company's securities as more fully provided in
the agreement relating to the option to purchase such securities
between the Company and the original purchaser of such securities.
VI
BINDING EFFECT
Subject to the limitations set forth in this Agreement, this Agreement
shall be binding upon, and inure to the benefit of, the executors,
administrators, heirs, legal representatives, successors, and assigns of the
parties hereto, including any Beneficiary of the Optionee and any other holder
of the Optionee's Option.
VII
DAMAGES
Optionee shall be liable to the Company for all costs and damages,
including incidental and consequential damages, resulting from a disposition of
Shares which is not in conformity with the provisions of this Agreement.
VIII
GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of the State of Georgia applicable to contracts entered into and wholly
to be performed within the State of Georgia by Georgia residents. The parties
agree that the exclusive jurisdiction and venue of any action with respect to
this Agreement shall be in the Superior Court of Georgia for the
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<PAGE> 31
County of Fulton or the United States District Court for the Northern District
of Georgia, and each of the parties hereby submits itself to the exclusive
jurisdiction and venue of such courts for the purpose of such action. The
parties agree that service of process in any such action may be effected by
delivery of the summons to the parties in the manner provided for delivery of
notices set forth in Article IX.
IX
NOTICES
All notices and other communications under this Agreement shall be in
writing. Unless and until Optionee is notified in writing to the contrary, all
notices, communications and documents directed to the Company and related to the
Agreement, if not delivered by hand, shall be mailed, addressed as follows:
Atherogenics, Inc.
Attention: Corporate Secretary
3075B Northwoods Circle
Norcross, Georgia 30071
Unless and until the Company is notified in writing to the contrary, all
notices, communications and documents intended for Optionee and related to this
Agreement, if not delivered by hand, shall be mailed to Optionee's last known
address as shown on the Company's books. Notices and communications shall be
mailed by registered or certified mail, return receipt requested, postage
prepaid. All notices related to this Agreement shall be deemed received upon
delivery or, if mailed, within five (5) days after mailing in accordance with
this Article IX.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
ATHEROGENICS, INC.
By:
------------------------------
Title:
------------------------------
Optionee hereby accepts and agrees to be bound by all of the terms and
conditions of this Agreement.
OPTIONEE:
---------------------------
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<PAGE> 32
AMENDMENT NO. 1
TO
ATHEROGENICS, INC.
1995 STOCK OPTION PLAN
THIS AMENDMENT NO. 1 to the Atherogenics, Inc. 1995 Stock Option Plan
(the "Plan") is made by Atherogenics, Inc. (the "Company"), effective as of the
15th day of August, 1995.
W I T N E S S E T H:
WHEREAS, the Board of Directors of the Company (the "Board") has
previously adopted the Plan, and pursuant to Section 10.1 thereof, the Board has
the right to amend the Plan at any time; and
WHEREAS, the Board wishes to increase the number of shares of Common
Stock of the Company available for issuance upon the exercise of stock options
which may be granted under the Plan:
NOW, THEREFORE, the Plan is amended as follows, effective as stated
above:
I. Article 4 of the Plan shall be deleted in its entirety and amended to
read as follows:
"The stock subject to Options and other provisions of the Plan shall be
authorized but unissued or reacquired shares of Common Stock. Subject
to adjustment in accordance with the provisions of Article 7, the total
number of shares of Common Stock for which Options may be granted to
persons participating in the Plan shall not exceed in the aggregate
800,000 shares of Common Stock. Notwithstanding the foregoing, shares
of Common Stock allocable to the unexercised portion of any expired or
terminated Option again may become subject to Options under the Plan."
II. All other provisions of the Plan not inconsistent herewith are hereby
confirmed and ratified.
<PAGE> 1
EXHIBIT 10.08
[LOGO] ATHEROGENICS, INC.
EQUITY OWNERSHIP PLAN
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TABLE OF CONTENTS
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SECTION 1 DEFINITIONS 1
1.1 Definitions 1
SECTION 2 GENERAL TERMS 5
2.1 Purpose of the Plan 5
2.2 Stock Subject to the Plan 5
2.3 Administration of the Plan 5
2.4 Eligibility and Limits 5
SECTION 3 TERMS OF AWARDS 6
3.1 Terms and Conditions of All Awards 6
3.2 Terms and Conditions of Options 6
(a) Option Price 7
(b) Option Term 7
(c) Payment 7
(d) Conditions to the Exercise of an Option 7
(e) Termination of Incentive Stock Option 7
(f) Special Provisions for Certain Substitute Options 8
3.3 Terms and Conditions of Stock Appreciation Rights 8
(a) Payment 8
(b) Conditions to Exercise 8
3.4 Terms and Conditions of Stock Awards 8
3.5 Treatment of Awards Upon Termination of Employment 9
SECTION 4 RESTRICTIONS ON STOCK 10
4.1 Escrow of Shares 10
4.2 Forfeiture of Shares 10
4.3 Restrictions on Transfer 10
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ii
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TABLE OF CONTENTS
(continued)
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SECTION 5 GENERAL PROVISIONS 11
5.1 Withholding 11
5.2 Changes in Capitalization; Merger; Liquidation 11
5.3 Cash Awards 12
5.4 Compliance with Code 12
5.5 Right to Terminate Employment 12
5.6 Restrictions on Delivery and Sale of Shares; Legends 12
5.7 Non-alienation of Benefits 13
5.8 Termination and Amendment of the Plan 13
5.9 Stockholder Approval 13
5.10 Choice of Law 13
5.11 Effective Date of Plan 13
</TABLE>
iii
<PAGE> 4
ATHEROGENICS, INC.
EQUITY OWNERSHIP PLAN
AtheroGenics, Inc. hereby establishes this Plan to be called the AtheroGenics,
Inc. Equity Ownership Plan to encourage employees of the Company to acquire an
equity interest in the Company, to make monetary payments to certain employees
based upon the value of the Company's Stock, or based upon achieving certain
goals on a basis mutually advantageous to such employees and the Company and
thus provide an incentive for continuation of the efforts of the employees for
the success of the Company, for continuity of employment and to further the
interests of the shareholders.
SECTION 1 DEFINITIONS
1.1 Definitions. Whenever used herein, the masculine pronoun shall
be deemed to include the feminine, the singular to include the plural, unless
the context clearly indicates otherwise, and the following capitalized words and
phrases are used herein with the meaning thereafter ascribed:
(a) "Administrator" means the Board or its designee(s).
(b) "Award" means any Stock Option, Stock Appreciation Right,
Restricted Stock or Performance Award granted under the Plan.
(c) "Beneficiary" means the person or persons designated by a
Participant to exercise an Award in the event of the Participant's death while
employed by the Company, or in the absence of such designation, the executor or
administrator of the Participant's estate.
(d) "Board" means the Board of Directors of the Company.
(e) "Cause" means conduct by the Participant amounting to (1)
fraud or dishonesty against the Company, (2) willful misconduct, repeated
refusal to follow the reasonable directions of an individual or group authorized
to give such directions, or knowing violation of law in the course of
performance of the duties of Participant's employment with the Company, (3)
repeated absences from work without a reasonable excuse, (4) intoxication with
alcohol or drugs while on the Company's premises during regular business hours,
(5) a conviction or plea of guilty or nolo contendere to a felony or a crime
involving dishonesty, or (6) a breach or violation of the terms of any
employment or other agreement to which Participant and the employer are party.
(f) "Change in Control" shall be deemed to have occurred if
(i) a tender offer shall be made and consummated of the ownership of 50% or more
of the outstanding voting securities of the Company, (ii) the Company shall be
merged or consolidated with another
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corporation and as a result of such merger or consolidation less than 50% of the
outstanding voting securities of the surviving or resulting corporation shall be
owned in the aggregate by the former shareholders of the Company, other than
affiliates (within the meaning of the Securities Exchange Act of 1934) of any
party to such merger or consolidation, (iii) the Company shall sell
substantially all of its assets to another corporation which corporation is not
wholly owned by the Company, or (iv) a person, within the meaning of Section
3(a)(9) or of Section 13(d)(3) (as in effect on the date hereof) of the
Securities Exchange Act of 1934, shall acquire 50% or more of the outstanding
voting securities of the Company (whether directly, indirectly beneficially or
of record). For purposes hereof, ownership of voting securities shall take into
account and shall include ownership as determined by applying the provisions of
Rule 13d-3(d)(1)(i) (as in effect on the date hereof) pursuant to the Securities
Exchange Act of 1934.
(g) "Code" means the Internal Revenue Code of 1986, as
amended.
(h) "Company" means AtheroGenics, Inc. a Georgia corporation.
(i) "Constructive Discharge" means a Termination of Employment
by the Participant on account of (i) any material reduction in the Participant's
Compensation, (ii) any material reduction in the level or scope of job
responsibility or status of the Participant occurring without the consent of the
Participant, or (iii) any relocation to an office of the Company which is more
than fifty (50) miles from the office where the Participant was previously
located to which the Participant has not agreed.
(j) "Disability" has the same meaning as provided in the
long-term disability plan maintained by the Company. In the event of a dispute,
the determination of Disability shall be made by the Administrator. If, at any
time during the period that this Plan is in operation, the Company does not
maintain a long term disability plan, Disability shall mean a physical or mental
condition which, in the judgment of the Administrator, permanently prevents a
Participant from performing his usual duties for the Company or such other
position or job which the Company makes available to him and for which the
Participant is qualified by reason of his education, training and experience. In
making its determination the Administrator may, but is not required to, rely on
advice of a physician competent in the area to which such Disability relates.
The Administrator may make the determination in its sole discretion and any
decision of the Administrator will be binding on all parties.
(k) "Disposition" means any conveyance, sale, transfer,
assignment, pledge or hypothecation, whether outright or as security, inter
vivos or testamentary, with or without consideration, voluntary or involuntary.
(l) "Equity Ownership Agreement" means an agreement between
the Company and a Participant or other documentation evidencing an Award.
(m) "Expiration Date" means, the last date upon which an Award
can be exercised.
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(n) "Fair Market Value" means, for any particular date, (i)
for any period during which the Stock shall be listed for trading on a national
securities exchange or the National Association of Securities Dealers Automated
Quotation System ("NASDAQ"), the closing price per share of Stock on such
exchange or the NASDAQ closing bid price as of the close of such trading day, or
(ii) the market price per share of Stock as determined in good faith by the
Board in the event (i) above shall not be applicable. If the Fair Market Value
is to be determined as of a day when the securities markets are not open, the
Fair Market Value on that day shall be the Fair Market Value on the next
succeeding day when the markets are open.
(o) "Incentive Stock Option" means an incentive stock option,
as defined in Code Section 422, and described in Plan Section 3.2.
(p) "Initial Public Offering" means the first instance in
which the Company Stock is offered for sale to the public following successful
registration of the Stock with the Securities and Exchange Commission.
(q) "Involuntary Termination" means a Termination of
Employment but does not include a Termination of Employment for Cause or a
Voluntary Resignation.
(r) "Non-Qualified Stock Option" means a stock option, other
than an option qualifying as an Incentive Stock Option, described in Plan
Section 3.2.
(s) "Non-Employee Board Member" means a member of the
Board who is not an employee of the Company.
(t) "Option" means a Non-Qualified Stock Option or an
Incentive Stock Option.
(u) "Over 10% Owner" means an individual who at the time an
Incentive Stock Option is granted owns Stock possessing more than 10% of the
total combined voting power of the Company or one of its Parents or
Subsidiaries, determined by applying the attribution rules of Code Section
424(d).
(v) "Parent" means any corporation (other than the Company) in
an unbroken chain of corporations ending with the Company if, with respect to
Incentive Stock Options, at the time of granting of the Option, each of the
corporations other than the Company owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in the chain.
(w) "Participant" means an individual who receives an Award
hereunder.
(x) "Plan" means the AtheroGenics, Inc. Equity Ownership
Plan.
(y) "Retirement" means a Termination of Employment after
attaining the normal retirement age specified in the qualified retirement plan
maintained by the Company.
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(z) "Stock" means the Company's common stock.
(aa) "Stock Appreciation Right" means a stock appreciation
right described in Plan Section 3.3.
(ab) "Stock Award" means a stock award described in Plan
Section 3.4.
(ac) "Subsidiary" means any corporation (other than the
Company) in an unbroken chain of corporations beginning with the Company if,
with respect to Incentive Stock Options, at the time of the granting of the
Option, each of the corporations other than the last corporation in the unbroken
chain owns stock possession 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in the chain.
(ad) "Termination of Affiliation" means the termination of a
business relationship, for any reason, between an advisor or consultant who is a
Participant and the Company or its affiliates. A Termination of Affiliation
shall be deemed to have occurred as of the date written notice to that effect is
received by the Participant.
(ae) "Termination of Employment" means the termination of the
employee-employer relationship between a Participant and the Company and its
affiliates regardless of the fact that severance or similar payments are made to
the Participant, for any reason, including, but not by way of limitation, a
Voluntary Resignation, Constructive Discharge, Involuntary Termination, death,
Disability or Retirement. The Administrator shall, in its absolute discretion,
determine the effect of all matters and questions relating to Termination of
Employment, including, but not by way of limitation, the question of whether a
leave of absence constitutes a Termination of Employment, or whether a
Termination of Employment is for Cause or is a Constructive Discharge. With
regard to a member of the Board, Termination of Employment shall mean the date
on which the individual ceases to be a member of the Board for any reason.
(af) "Vested" means that an Award is nonforfeitable and
exercisable with regard to a designated number of shares of Stock.
(ag) "Voluntary Resignation" means a Termination of Employment
as a result of the Participant's resignation but does not include a Constructive
Discharge.
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<PAGE> 8
SECTION 2 GENERAL TERMS
2.1 Purpose of the Plan. The Plan is intended to (a) provide incentive
to employees of the Company and its affiliates to stimulate their efforts toward
the continued success of the Company and to operate and manage the business in a
manner that will provide for the long-term growth and profitability of the
Company; (b) encourage stock ownership by employees by providing them with a
means to acquire a proprietary interest in the Company by acquiring shares of
Stock or to receive compensation which is based upon appreciation in the value
of Stock; and (c) provide a means of obtaining and rewarding employees,
directors, advisors and consultants.
2.2 Stock Subject to the Plan. Subject to adjustment in accordance with
Section 5.2, 1,484,416 shares of Stock (the "Maximum Plan Shares") are hereby
reserved and subject to issuance under the Plan. At no time shall the Company
have outstanding Awards and shares of Stock issued in respect to Awards in
excess of the Maximum Plan Shares. To the extent permitted by law, the shares of
Stock attributable to the nonvested, unpaid, unexercised, unconverted or
otherwise unsettled portion of any Award that is forfeited, canceled, expired or
terminated for any reason without becoming vested, paid, exercised, converted or
otherwise settled in full shall again be available for purposes of the Plan.
2.3 Administration of the Plan. The Plan shall be administered by the
Administrator. The Administrator shall have full authority in its discretion to
determine the employees of the Company or its affiliates to whom Awards shall be
granted and the terms and provisions of Awards, subject to the Plan. Subject to
the provisions of the Plan, the Administrator shall have full and conclusive
authority to interpret the Plan; to prescribe, amend and rescind rules and
regulations relating to the Plan; to determine the terms and provisions of the
respective Equity Ownership Agreements and to make all other determinations
necessary or advisable for the proper administration of the Plan. The
Administrator's determination under the Plan need not be uniform and may be made
by it selectively among persons who receive, or are eligible to receive, Awards
under the Plan (whether or not such persons are similarly situated). The
Administrator's decisions shall be final and binding on all Participants.
2.4 Eligibility and Limits. Participants in the Plan shall be selected
by the Administrator. No Participant may be granted Awards in excess of 30% of
the Maximum Plan Shares. In the case of Incentive Stock Options, the aggregate
Fair Market Value (determined as at the date an Incentive Stock Option is
granted) of Stock with respect to which Stock Options intended to meet the
requirements of Code Section 422 become exercisable for the first time by an
individual during any calendar year under all plans of the Company and its
Parents and Subsidiaries shall not exceed $100,000; provided further, that if
the limitation is exceeded, the Incentive Stock Option(s) which cause the
limitation to be exceeded shall be treated as Non-Qualified Stock Option(s).
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SECTION 3 TERMS OF AWARDS
3.1 Terms and Conditions of All Awards.
(a) The number of shares of Stock as to which an Award shall
be granted shall be determined by the Administrator in its sole discretion,
subject to the provisions of Sections 2.2 and 2.4 as to the total number of
shares available for grants under the Plan.
(b) Each Award shall be evidenced by an Equity Ownership
Agreement in such form as the Administrator may determine is appropriate,
subject to the provisions of the Plan.
(c) The date an Award is granted shall be the date on which
the Administrator has approved the terms and conditions of the Equity Ownership
Agreement and has determined the recipient of the Award and the number of shares
covered by the Award and has taken all such other action necessary to complete
the grant of the Award.
(d) The Administrator may provide in any Equity Ownership
Agreement a vesting schedule. The vesting schedule shall specify when such
Awards shall become Vested and thus exercisable. The Administrator may
accelerate the vesting schedule set forth in the Equity Ownership Agreement if
the Administrator determines that it is in the best interests of the Company and
Participant to do so. Notwithstanding any vesting schedule which may be
specified in an Equity Ownership Agreement, or any determination made by the
Administrator, no award will vest if, to do so, would create a situation in
which the exercisability of any such Award would result in an "excess parachute
payment" within the meaning of Section 280G of the Code.
(e) Awards shall not be transferable or assignable except by
will or by the laws of descent and distribution and shall be exercisable, during
the Participant's lifetime, only by the Participant, or in the event of the
Disability of the Participant, by the legal representative of the Participant.
3.2 Terms and Conditions of Options. At the time any Option is
granted, the Administrator shall determine whether the Option is to be an
Incentive Stock Option or a Non-Qualified Stock Option, and the Option shall be
clearly identified as to its status as an Incentive Stock Option or a
Non-Qualified Stock Option. At the time any Incentive Stock Option is exercised,
the Company shall be entitled to place a legend on the certificates representing
the shares of Stock purchased pursuant to the Option to clearly identify them as
shares of Stock purchased upon exercise of an Incentive Stock Option. An
Incentive Stock Option may only be granted within ten (10) years from the date
the Plan, as amended and restated, is adopted or the date such Plan is approved
by the Company's stockholders, whichever is earlier. Incentive stock options may
only be granted to employees of the Company.
(a) Option Price. Subject to adjustment in accordance with
Section 5.2 and the other provisions of this Section 3.2, the exercise price
(the "Exercise Price") per share of the
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Stock purchasable under any Option shall be as set forth in the applicable
Equity Ownership Agreement. With respect to each grant of an Incentive Stock
Option to a Participant who is not an Over 10% Owner, the Exercise Price per
share shall not be less than the Fair Market Value on the date the Option is
granted. With respect to each grant for an Incentive Stock Option to a
Participant who is an Over 10% Owner, the Exercise Price shall not be less than
110% of the Fair Market Value on the date the Option is granted.
(b) Option Term. The Equity Ownership Agreement shall set
forth the term of each option. Any Incentive Stock Option granted to a
Participant who is not an Over 10% Owner shall not be exercisable after the
expiration of ten (10) years after the date the Option is granted. Any Incentive
Stock Option granted to an Over 10% Owner shall not be exercisable after the
expiration of five (5) years after the date the Option is granted. In either
case, the Administrator may specify a shorter term and state such term in the
Equity Ownership Agreement.
(c) Payment. Payment for all shares of Stock purchased
pursuant to exercise of an Option shall be made in any form or manner authorized
by the Administrator in the Equity Ownership Agreement or by amendment thereto,
including, but not limited to, cash or, if the Equity Ownership Agreement
provides, (i) by delivery or deemed delivery (based on an attestation to the
ownership thereof) to the Company of a number of shares of Stock which have been
owned by the holder for at least six (6) months prior to the date of exercise
having an aggregate Fair Market Value on the date of exercise equal to the
Exercise Price or (ii) by tendering a combination of cash, and Stock. Payment
shall be made at the time that the Option or any part thereof is exercised, and
no shares shall be issued or delivered upon exercise of an option until full
payment has been made by the Participant. The holder of an Option, as such,
shall have none of the rights of a stockholder.
(d) Conditions to the Exercise of an Option. Each Option
granted under the Plan shall be exercisable by whom, at such time or times, or
upon the occurrence of such event or events, and in such amounts, as the
Administrator shall specify in the Equity Ownership Agreement; provided,
however, that subsequent to the grant of an Option, the Administrator, at any
time before complete termination of such Option, may accelerate the time or
times at which such Option may be exercised in whole or in part, including,
without limitation, upon a Change in Control and may permit the Participant or
any other designated person acting for the benefit of the Participant to
exercise the Option, or any portion thereof, for all or part of the remaining
Option term notwithstanding any provision of the Equity Ownership Agreement to
the contrary.
(e) Termination of Incentive Stock Option. With respect to an
Incentive Stock Option, in the event of Termination of Employment of a
Participant, the Option or portion thereof held by the Participant which is
unexercised shall expire, terminate, and become unexercisable no later than the
expiration of three (3) months after the date of Termination of Employment;
provided, however, that in the case of a holder whose Termination of Employment
is due to death or Disability, one (1) year shall be substituted for such three
(3) month period. For purposes of this Subsection (e), Termination of Employment
of the Participant shall not be deemed to have occurred if the Participant is
employed by another corporation (or a parent or
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subsidiary corporation of such other corporation) which has assumed the
Incentive Stock Option of the Participant in a transaction to which Code Section
424(a) is applicable.
(f) Special Provisions for Certain Substitute Options.
Notwithstanding anything to the contrary in this Section 3.2, any Option issued
in substitution for an option previously issued by another entity, which
substitution occurs in connection with a transaction to which Code Section
424(a) is applicable, may provide for an exercise price computed in accordance
with such Code Section and the regulations thereunder and may contain such other
terms and conditions as the Administrator may prescribe to cause such substitute
Option to contain as nearly as possible the same terms and conditions (including
the applicable vesting and termination provisions) as those contained in the
previously issued option being replaced thereby.
3.3 Terms and Conditions of Stock Appreciation Rights. A Stock
Appreciation Right may be granted in connection with all or any portion of a
previously or contemporaneously granted Award or not in connection with an
Award. A Stock Appreciation Right shall entitle the Participant to receive the
excess of (1) the Fair Market Value of a specified or determinable number of
shares of the Stock at the time of payment or exercise over (2) a specified
price which, in the case of a Stock Appreciation Right granted in connection
with an Option, shall be not less than the Exercise Price for that number of
shares. A Stock Appreciation Right granted in connection with an Award may only
be exercised to the extent that the related Award has not been exercised, paid
or otherwise settled. The exercise of a Stock Appreciation Right granted in
connection with an Award shall result in a pro rata surrender or cancellation of
any related Award to the extent the Stock Appreciation Right has been exercised.
(a) Payment. Upon payment or exercise of a Stock Appreciation
Right, the Company shall pay to the Participant the appreciation in cash or
shares of Stock (valued at the aggregate Fair Market Value on the date of
payment or exercise) as provided in the Equity Ownership Agreement or, in the
absence of such provision, as the Administrator may determine.
(b) Conditions to Exercise. Each Stock Appreciation Right
granted under the Plan shall be exercisable or payable at such time or times, or
upon the occurrence of such event or events, and in such amounts, as the
Administrator shall specify in the Equity Ownership Agreement; provided,
however, that subsequent to the grant of a Stock Appreciation Right, the
Administrator, at any time before complete termination of such Stock
Appreciation Right, may accelerate the time or times at which such Stock
Appreciation Right may be exercised or paid in whole or in part.
3.4 Terms and Conditions of Stock Awards. The number of shares of
Stock subject to a Stock Award and restrictions or conditions on such shares, if
any, shall be as the Administrator determines, and the certificate for such
shares shall bear evidence of any restrictions or conditions. Subsequent to the
date of the grant of the Stock Award, the Administrator shall have the power to
permit, in its discretion, an acceleration of the expiration of an applicable
restriction period with respect to any part or all of the shares awarded to a
Participant. The Administrator may require a cash payment from the Participant
in an amount no greater than the aggregate Fair
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Market Value of the shares of Stock awarded determined at the date of grant in
exchange for the grant of a Stock Award or may grant a Stock Award without the
requirement of a cash payment.
3.5 Treatment of Awards Upon Termination of Employment or
Affiliation. Except as otherwise provided by Plan Section 3.2(e), any award
under this Plan to a Participant who incurs a Termination of Employment or
Affiliation may be canceled, accelerated, paid or continued, as provided in the
Equity Ownership Agreement or, in the absence of such provision, as the
Administrator may determine. The portion of any award exercisable in the event
of continuation or the amount of any payment due under a continued award may be
adjusted by the Administrator to reflect the Participant's period of service
from the date of grant through the date of the Participant's Termination of
Employment or Affiliation or such other factors as the Administrator determines
are relevant to its decision to continue the award.
SECTION 4 RESTRICTIONS ON STOCK
4.1 Escrow of Shares. Any certificates representing the shares of
Stock issued under the Plan shall be issued in the Participant's name, but, if
the Equity Ownership Agreement so provides, the shares of Stock shall be held by
a custodian designated by the Administrator (the "Custodian"). Each Equity
Ownership Agreement providing for transfer of shares of Stock to the Custodian
shall appoint the Custodian as the attorney-in-fact for the Participant for the
term specified in the Equity Ownership Agreement, with full power and authority
in the Participant's name, place and stead to transfer, assign and convey to the
Company any shares of Stock held by the Custodian for such Participant, if the
Participant forfeits the shares under the terms of the Equity Ownership
Agreement. During the period that the Custodian holds the shares subject to this
Section, the Participant shall be entitled to all rights, except as provided in
the Equity Ownership Agreement, applicable to shares of Stock not so held. Any
dividends declared on shares of Stock held by the Custodian shall, as the
Administrator may provide in the Equity Ownership Agreement, be paid directly to
the Participant or, in the alternative, be retained by the Custodian until the
expiration of the term specified in the Equity Ownership Agreement and shall
then be delivered, together with any proceeds, with the shares of Stock to the
Participant or the Company, as applicable.
4.2 Forfeiture of Shares. Notwithstanding any vesting schedule set
forth in any Equity Ownership Agreement, in the event that the Participant
violates a non competition agreement as set forth in the Equity Ownership
Agreement, all Awards and shares of Stock issued to the holder pursuant to the
Plan shall be forfeited; provided, however, that the Company shall return to the
holder the lesser of any consideration paid by the Participant in exchange for
Stock issued to the Participant pursuant to the Plan for the then Fair Market
Value of the Stock forfeited hereunder.
4.3 Restrictions on Transfer. The Participant shall not have the
right to make or permit to exist any Disposition of the shares of Stock issued
pursuant to the Plan except as provided in the Plan or the Equity Ownership
Agreement. Any Disposition of the shares of Stock issued under the Plan by the
Participant, not made in accordance with the Plan or the
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Equity Ownership Agreement, including, but not limited to, any right of
repurchase or right of first refusal, shall be void. The Company shall not
recognize, or have the duty to recognize, any Disposition not made in accordance
with the Plan and the Equity Ownership Agreement, and the shares of Stock so
transferred shall continue to be bound by the Plan and the Equity Ownership
Agreement.
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SECTION 5 GENERAL PROVISIONS
5.1 Withholding. The Company shall deduct from all cash
distributions under the Plan any taxes required to be withheld by federal, state
or local government. Whenever the Company proposes or is required to issue or
transfer shares of Stock under the Plan or upon the vesting of any Stock Award,
the Company shall have the right to require the recipient to remit to the
Company an amount sufficient to satisfy any federal, state and local withholding
tax requirements prior to the delivery of any certificate or certificates for
such shares or the vesting of such Stock Award. A Participant may pay the
withholding tax in cash, or, if the Equity Ownership Agreement provides, a
Participant may also elect to have the number of shares of Stock he is to
receive reduced by, or with respect to a Stock Award, tender back to the
Company, the smallest number of whole shares of Stock which, when multiplied by
the Fair Market Value of the shares determined as of the Tax Date (defined
below), is sufficient to satisfy federal, state and local, if any, withholding
taxes arising from exercise or payment of an Award (a "Withholding Election"). A
Participant may make a Withholding Election only if both of the following
conditions are met:
(a) The Withholding Election must be made on or prior to the
date on which the amount of tax required to be withheld is determined (the "Tax
Date") by executing and delivering to the Company a properly completed notice of
Withholding Election as prescribed by the Administrator; and
(b) Any Withholding Election made will be irrevocable;
however, the Administrator may in its sole discretion approve or give no effect
to the Withholding Election.
5.2 Changes in Capitalization; Merger; Liquidation.
(a) The number of shares of Stock reserved for the grant of
Options, Dividend Equivalent Rights, Performance Unit Awards, Phantom Shares,
Stock Appreciation Rights and Stock Awards; the number of shares of Stock
reserved for issuance upon the exercise or payment, as applicable, of each
outstanding Option, Dividend Equivalent Right, Performance Unit Award, Phantom
Share and Stock Appreciation Right and upon vesting or grant, as applicable, of
each Stock Award; the Exercise Price of each outstanding Option and the
specified number of shares of Stock to which each outstanding Dividend
Equivalent Right, Phantom Share and Stock Appreciation Right pertains may be
proportionately adjusted by the Administrator for any increase or decrease in
the number of issued shares of Stock resulting from a subdivision or combination
of shares or the payment of a stock dividend in shares of Stock to holders of
outstanding shares of Stock or any other increase or decrease in the number of
shares of Stock outstanding effected without receipt of consideration by the
Company.
(b) In the event of a merger, consolidation or other
reorganization of the Company or tender offer for shares of Stock, the
Administrator may make such adjustments with respect to awards and take such
other action as it deems necessary or appropriate to reflect or in anticipation
of such merger, consolidation, reorganization or tender offer, including,
without limitation, the substitution of new awards, the termination or
adjustment of outstanding awards,
-11-
<PAGE> 15
the acceleration of awards or the removal of restrictions on outstanding awards.
Any adjustment pursuant to this Section 5.2 may provide, in the Administrator's
discretion, for the elimination without payment therefore of any fractional
shares that might otherwise become subject to any Award.
(c) The existence of the Plan and the Awards granted pursuant
to the Plan shall not affect in any way the right or power of the Company to
make or authorize any adjustment, reclassification, reorganization or other
change in its capital or business structure, any merger or consolidation of the
Company, any issue of debt or equity securities having preferences or priorities
as to the Stock or the rights thereof, the dissolution or liquidation of the
Company, any sale or transfer of all or any part of its business or assets, or
any other corporate act or proceeding.
5.3 Cash Awards. The Administrator may, at any time and in its
discretion, grant to any holder of an Award the right to receive, at such times
and in such amounts as determined by the Administrator in its discretion, a cash
amount which is intended to reimburse such person for all or a portion of the
federal, state and local income taxes imposed upon such person as a consequence
of the receipt of the Award or the exercise of rights thereunder.
5.4 Compliance with Code. All Incentive Stock Options to be
granted hereunder are intended to comply with Code Section 422, and all
provisions of the Plan and all Incentive Stock Options granted hereunder shall
be construed in such manner as to effectuate that intent.
5.5 Right to Terminate Employment. Nothing in the Plan or in any
Award shall confer upon any Participant the right to continue as an employee or
officer of the Company or any of its affiliates or affect the right of the
Company or any of its affiliates to terminate the Participant's employment at
any time.
5.6 Restrictions on Delivery and Sale of Shares; Legends. Each
Award is subject to the condition that if at any time the Administrator, in its
discretion, shall determine that the listing, registration or qualification of
the shares covered by such Award upon any securities exchange or under any state
or federal law is necessary or desirable as a condition of or in connection with
the granting of such Award or the purchase or delivery of shares thereunder, the
delivery of any or all shares pursuant to such Award may be withheld unless and
until such listing, registration or qualification shall have been effected. If a
registration statement is not in effect under the Securities Act of 1933 or any
applicable state securities laws with respect to the shares of Stock purchasable
or otherwise deliverable under Awards then outstanding, the Administrator may
require, as a condition of exercise of any Option or as a condition to any other
delivery of Stock pursuant to an Award, that the Participant or other recipient
of an Award represent, in writing, that the shares received pursuant to the
Award are being acquired for investment and not with a view to distribution and
agree that shares will not be disposed of except pursuant to an effective
registration statement, unless the Company shall have received an opinion of
counsel that such disposition is exempt from such requirement under the
Securities Act of 1933 and any applicable state securities laws. The Company may
include on certificates representing shares delivered pursuant to an Award such
legends referring to the foregoing
-12-
<PAGE> 16
representations or restrictions or any other applicable restrictions on resale
as the Company, in its discretion, shall deem appropriate.
5.7 Non-alienation of Benefits. Other than as specifically
provided with regard to the death of a Participant, no benefit under the Plan
shall be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance or charge; and any attempt to do so shall be
void. No such benefit shall, prior to receipt by the Participant, be in any
manner liable for or subject to the debts, contracts, liabilities, engagements
or torts of the Participant.
5.8 Termination and Amendment of the Plan. The Board at any time
may amend or terminate the Plan without stockholder approval; provided, however,
that the Board may condition any amendment on the approval of stockholders of
the Company if such approval is necessary or advisable with respect to tax,
securities or other applicable laws. No such termination or amendment without
the consent of the holder of an Award shall adversely affect the rights of the
Participant under such Award.
5.9 Stockholder Approval. The Plan shall be submitted to the
stockholders of the Company for their approval within twelve (12) months before
the adoption of the Plan by the Board. If such approval is not obtained, any
Award granted hereunder shall be void.
5.10 Choice of Law. The laws of the State of Georgia shall govern
the Plan, to the extent not preempted by federal law.
5.11 Effective Date of Plan. The Plan shall be effective as of
July 30, 1997.
* * * * * * * * * *
ATHEROGENICS, INC. ATTEST:
By: /s/ Russell M. Medford /s/ Mark Colonnese
------------------------------ --------------------------------
Russell M. Medford, MD, PhD Mark Colonnese
President and C.E.O. Assistant Secretary
[CORPORATE SEAL]
-13-
<PAGE> 17
[LOGO]ATHEROGENICS, INC.
FORM OF
EQUITY OWNERSHIP AGREEMENT
RELATING TO
INCENTIVE STOCK OPTIONS
NAME
99I-##
<PAGE> 18
FORM OF
ATHEROGENICS, INC.
EQUITY OWNERSHIP AGREEMENT
THIS EQUITY OWNERSHIP AGREEMENT ("Agreement") is made and entered into
between AtheroGenics, Inc. ("Company") a Georgia corporation and Name N. Name
("Grantee").
WITNESSETH:
WHEREAS, the Board of Directors ("Board") of the Company has approved
the grant of Stock Options to selected employees pursuant to the AtheroGenics,
Inc. Equity Ownership Plan ("Plan"); and
WHEREAS, the Grantee has been selected to receive Incentive Stock
Options under the Plan;
NOW, THEREFORE, in consideration of the above premises, the Company and
the Grantee agree as set forth below:
For purposes of this Agreement, the capitalized terms used herein, but
defined, shall have the meaning given to such terms by the AtheroGenics, Inc.
Equity Ownership Plan adopted July 30, 1997.
I. GRANT OF STOCK OPTIONS
Subject to the terms and conditions set forth herein and in the Plan
which is attached hereto and made a part hereof the Grantee is hereby awarded
Incentive Stock Options to purchase ### shares of Stock of the Company. For
purposes of this Agreement, the Date of Grant of the Options is Month ##, 2XXX.
II. EXERCISE PRICE
Each Option granted above shall have an Exercise Price of $.##, which
is equal to the Fair Market Value of a share of Stock of the Company as defined
in the Plan as of the above stated Date of Grant.
2
<PAGE> 19
III. VESTING
The Grantee may exercise only those Options which are Vested and have
not yet expired as set forth in Section IV. Otherwise, unless specified in the
special rules which follow, Options granted under this Agreement become Vested
in accordance with Schedule A attached. (For purposes of determining the Monthly
Anniversary of the Date of Grant of an Option, if the Date of Grant occurs on
the 29th, 30th or 31st day of the month, and the month during which the Monthly
Anniversary is to be determined does not contain such a 29th, 30th or 31st day,
respectively, the last day of such month shall be considered the Monthly
Anniversary of the Date of Grant.)
Notwithstanding the Vesting set forth in Schedule A, and subject to the terms of
the Plan, the following special rules apply with regard to the Options granted
under this Agreement.
(a) In the event of the Disability of the Grantee while employed by the
Company, the Options granted herein will become 100% Vested.
(b) In the event of the death of the Grantee while employed by the Company,
the Options granted herein will become 100% Vested.
(c) In the event of the Voluntary Resignation of the Grantee, no further
Options will become Vested after the Termination of Employment.
(d) In the event of the Involuntary Termination of the Grantee, no further
Options will become Vested after the Termination of Employment.
(e) In the event of Termination of Employment of the Grantee for Cause, no
further Options will become Vested after the Termination of Employment.
(f) In the event of a Change of Control followed by a Constructive Discharge
or Involuntary Termination of the Grantee within twenty-four months
following the Change of Control, the Options granted herein will become
100% Vested.
(g) In the event of the Grantee's Termination of Employment for any reason
other than those specified above, no further options will become Vested
as of the date of such Termination of Employment.
(h) Additionally, the Administrator may accelerate the Vesting of Grantee's
Options if the Administrator determines that it is in the best interests
of the Company and the Grantee.
IV. EXERCISE
The Expiration Date of the Options granted herein is the date
immediately preceding the tenth anniversary of the Date of Grant. Prior to a
Termination of Employment, the Grantee may exercise any Vested Options until the
Options' Expiration Date. The Grantee's ability to exercise any Vested Options
following the date the Grantee ceases to be an employee is as follows:
3
<PAGE> 20
(a) In the event the Grantee ceases to be an employee as a result of
Retirement, the Grantee may exercise any Vested Options for a period of
thirty (30) days following the date of the Grantee's Termination of
Employment (or not later than the Expiration Date of the Options, if
shorter).
(b) Unless otherwise extended by death during the period of Disability, in
the event the Grantee ceases to be an employee as a result of a
Disability, the Grantee may exercise any Vested Options for a period of
six (6) months following the date of the Grantee's Termination of
Employment (or not later than the Expiration Date of the Options, if
shorter).
(c) In the event the Grantee dies while an employee of the Company or during
the six (6) month period following Disability, the legal representative
of such Grantee's estate may exercise any Vested Options on the
Grantee's behalf for a period of six (6) months following the date of
death (or not later than the Expiration Date of the Options, if
shorter).
(d) In the event the Grantee ceases to be an employee as a result of a
Voluntary Resignation, the Grantee may exercise any Vested Options for a
period of thirty (30) days following the date of the Grantee's
Termination of Employment (or not later than the Expiration Date of the
Options, if shorter).
(e) In the event the Grantee ceases to be an employee as a result of an
Involuntary Termination, the Grantee may exercise any Vested Options for
a period of thirty (30) days following the date of the Grantee's
Termination of Employment (or not later than the Expiration Date of the
Options, if shorter).
(f) In the event that the Grantee ceases to be an employee as a result of a
Termination of Employment for Cause, the Grantee shall have no further
right to exercise any Option granted hereunder effective with the
Company's delivery (or deemed delivery) of notice to the Grantee of such
Termination of Employment for Cause.
(g) In the event that the Grantee ceases to be an employee for any other
reason not specified above, the Grantee may exercise any Vested Options
for a period of thirty (30) days following the date the Grantee's
Termination of Employment (or not later than the Expiration Date of the
Options, if shorter).
Neither Grantee nor any other person entitled to exercise the Options
under the terms of the Plan shall be, or have any of the rights or privileges
of, a shareholder of the Company in respect to any shares of Stock issuable upon
exercise of the Option, unless and until the Exercise Price for such shares has
been paid in full.
4
<PAGE> 21
V. DISPOSITIONS OF STOCK
Prior to an Initial Public Offering, the Grantee may not sell,
exchange, transfer, pledge or otherwise dispose of any Stock acquired through
the exercise of any Option granted hereunder until after the expiration of a six
(6) month period following the transfer of such Stock to the Grantee.
In the event of, and after an Initial Public Offering, the Grantee, by
acceptance hereof, hereby represents, warrants and agrees that, upon exercise of
this Option, unless the shares of stock are then covered by an effective
registration statement under the Securities Act of 1993, as amended (the "Act"):
(a) the Stock is being acquired for investment and not with a view towards
the public distribution or resale thereof;
(b) the Grantee will not sell, transfer or assign any Stock except in
compliance with the Act and the rules and regulations thereunder;
(c) the certificate representing the Stock may bear an appropriate
restrictive legend; and
(d) the transfer agent of the Company may place a stop transfer notation
with respect to the shares in the Stock transfer books of the Company.
VI. RIGHT OF FIRST REFUSAL
Prior to an Initial Public Offering, the Company, following the
expiration of the six (6) month holding period referred to in V. above, shall
have the right of first refusal with respect to Grantee's stock at a purchase
price equal to the higher of Fair Market Value or the price offered by a bona
fide purchaser.
VII. NOTICE AND PAYMENT
Subject to the limitations set forth in this Agreement, the Grantee may
exercise Options granted under this Agreement by delivering written notice to
the Company, on a form provided by the Company, specifying the number of shares
of Stock to be purchased. The Exercise Price of any Option shall be payable to
the Company in full at the time of exercise of the Option (i) in cash or its
equivalent, (ii) by delivery or deemed delivery (based on an attestation of the
ownership thereof) of previously acquired Stock which has been held by the
Grantee for at least six (6) months having a Fair Market Value on the date of
exercise equal to the total Exercise Price, or (iii) by a combination of cash
and previously acquired stock.
5
<PAGE> 22
VIII. GENERAL
Administration. Administration of this agreement will be governed by
the terms and conditions set forth in the Plan in effect on the Date of Grant.
That document is incorporated in this Agreement in its entirety.
Notices. Every notice or other communication relating to the Agreement
shall be in writing, and shall be mailed to or delivered to the party for whom
it is intended at such address as may from time to time be designated by such
party. Unless and until some other address is so designated, all notices or
communications by the Grantee to the Company shall be mailed to AtheroGenics,
Inc., 8995 Westside Parkway, Alpharetta, GA 30004, Attention: Chief Executive
Officer. All notices by the Company to the Grantee may be delivered to the
Grantee personally or may be mailed to the Grantee at the address shown on the
records of the Company.
Withholding: The Company shall deduct from any payment of any kind due
to the Grantee, any federal, state or local taxes of any kind required by law to
be withheld with respect to the exercise of the Stock Options or require the
Grantee to remit an additional amount in cash or its equivalent to pay for such
withholding.
Interpretation: This Agreement is subject in all respects to the terms
of the Plan, and in the event that any provision of the Agreement shall be
inconsistent with the terms of the Plan, then the terms of the Plan shall
govern. Any question of interpretation arising under this Agreement shall be
determined by the Administrator and its determinations shall be final and
conclusive upon all parties in interest.
Counterparts: This Agreement may be executed in one or more
counterparts, each counterpart of which will be regarded for all purposes as an
original.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the _______day of ___________, .
ATHEROGENICS, INC.
By:
----------------------------------------
Name:
Title:
By:
----------------------------------------
Name
6
<PAGE> 23
SCHEDULE A
VESTING SCHEDULE
<TABLE>
<CAPTION>
MONTHLY ANNIVERSARY INCREMENTAL VESTING PERCENT TOTAL PERCENT VESTED
<S> <C> <C>
1 0% 0%
2 0% 0%
3 0% 0%
4 0% 0%
5 0% 0%
6 0% 0%
7 0% 0%
8 0% 0%
9 0% 0%
10 0% 0%
11 0% 0%
12 25% 25%
13 2% 27%
14 2% 29%
15 2% 31%
16 2% 33%
17 2% 35%
18 2% 37%
19 2% 39%
20 2% 41%
21 2% 43%
22 2% 45%
23 2% 47%
24 3% 50%
25 2% 52%
26 2% 54%
27 2% 56%
28 2% 58%
29 2% 60%
30 2% 62%
31 2% 64%
32 2% 66%
33 2% 68%
34 2% 70%
35 2% 72%
36 3% 75%
37 2% 77%
38 2% 79%
39 2% 81%
40 2% 83%
41 2% 85%
42 2% 87%
43 2% 89%
44 2% 91%
45 2% 93%
46 2% 95%
47 2% 97%
48 3% 100%
</TABLE>
<PAGE> 24
ATHEROGENICS, INC.
FORM OF
EQUITY OWNERSHIP AGREEMENT
RELATING TO
NON-QUALIFIED STOCK OPTIONS
NAME NAME
<PAGE> 25
FORM OF
ATHEROGENICS, INC.
EQUITY OWNERSHIP AGREEMENT
THIS AGREEMENT between AtheroGenics, Inc. ("Company") a Georgia
corporation and Name ("Grantee").
WITNESSETH:
WHEREAS, the Board of Directors ("Board") of the Company has approved
the grant of Stock Options to selected Participants pursuant to the
AtheroGenics, Inc. Equity Ownership Plan ("Plan"); and
WHEREAS, the Grantee has been selected to receive Non-Qualified Stock
Options under the Plan;
NOW, THEREFORE, in consideration of the above premises, the Company and
the Grantee agree as follows:
I. GRANT OF STOCK OPTIONS
Subject to the terms and conditions set forth herein and in the Plan
which is attached hereto and made a part hereof the Grantee is hereby awarded
Non-Qualified Stock Options to purchase ### shares of Stock of the Company. For
purposes of this Agreement, the Date of Grant of the Options is Month XX, 2XXX.
II. EXERCISE PRICE
Each Option granted above shall have an Exercise Price of $.XX.
III. VESTING
The Grantee may exercise only those Options which are Vested and have
not yet expired as set forth in Section IV. All Options granted under this
Agreement are 100% Vested as of the Date of Grant.
2
<PAGE> 26
IV. EXERCISE
The Expiration Date of the Options granted herein is the date
immediately preceding the tenth anniversary of the Date of Grant. Prior to a
Termination of Employment or Termination of Affilliation the Grantee may
exercise any Vested Options until the Options' Expiration Date. The Grantee's
ability to exercise any Vested Options following a Termination of Employment or
Termination of Affiliation is as follows:
(a) In the event the Grantee dies or becomes Disabled prior to a
Termination of Employment or Termination of Affiliation, the Grantee or the
legal representative of such Grantee's estate acting on the Grantee's behalf may
exercise any Vested Options for a period of six (6) months following Disability
or death (or not later than the Expiration Date of the Options, if shorter).
(b) In the event that the Grantee incurs a Termination of Employment or
Termination of Affiliation for Cause, the Grantee shall have no further right to
exercise any Option granted hereunder effective with the Company's delivery (or
deemed delivery) of notice to the Grantee of such Termination of Employment or
Termination of Affiliation for Cause.
(c) In the event that the Grantee incurs a Termination of Employment or
Termination of Affiliation for any other reason not specified above, the Grantee
may exercise any Vested Options for a period of thirty (30) days following the
date of the Grantee's Termination of Employment or Termination of Affiliation
(or not later than the Expiration Date of the Options, if shorter).
Neither Grantee nor any other person entitled to exercise the Options
under the terms of the Plan shall be, or have any of the rights or privileges
of, a shareholder of the Company in respect to any shares of Stock issuable upon
exercise of the Option, unless and until the Exercise Price for such shares has
been paid in full.
V. DISPOSITIONS OF STOCK
Prior to an Initial Public Offering, the Grantee may not sell,
exchange, transfer, pledge or otherwise dispose of any Stock acquired through
the exercise of any Option granted hereunder until after the expiration of a six
(6) month period following the transfer of such Stock to the Grantee.
In the event of, and after an Initial Public Offering, the Grantee,
by acceptance hereof, hereby represents, warrants and agrees that, upon exercise
of this Option, unless the shares of Stock are then covered by an effective
registration statement under the Securities Act of 1993, as amended (the "Act"):
(a) the Stock is being acquired for investment and not with a view
towards the public distribution or resale thereof;
(b) the Grantee will not sell, transfer or assign any Stock except in
compliance with the Act and the rules and regulations thereunder;
(c) the certificate representing the Stock may bear an appropriate
restrictive legend; and
3
<PAGE> 27
(d) the transfer agent of the Company may place a stop transfer
notation with respect to the shares in the Stock transfer books of the Company.
VI. RIGHT OF FIRST REFUSAL AND REPURCHASE
In the event that the Grantee shall incur a Termination of Employment
or a Termination of Affiliation for any reason including death or Disability,
the Company, following the expiration of the six (6) month holding period
referred to in Section V. above, shall have the right to repurchase some or all
of Grantee's Stock acquired through the exercise of an Option granted herein in
accordance with the following:
(a) If the Termination of Employment or Termination of Affiliation
occurs prior to the first anniversary of the Date of Grant, all the Grantee's
Stock acquired through the exercise of an Option granted herein may be
repurchased at the purchase price originally paid for such Stock upon exercise
of the Option.
(b) If the Termination of Employment or Termination of Affiliation
occurs on or after the first anniversary of the Date of Grant and prior to the
second anniversary of the Date of Grant a number of shares of Stock equal to 75%
of the total Options granted herein may be repurchased at the purchase price
originally paid for such stock upon exercise of the Option.
(c) If the Termination of Employment or Termination of Affiliation
occurs on or after the second anniversary of the Date of Grant and prior to the
third anniversary of the Date of Grant a number of shares of Stock equal to 50%
of the total Options granted herein may be repurchased at the purchase price
originally paid for such stock upon exercise of the Option.
(d) If the Termination of Employment or Termination of Affiliation
occurs on or after the third anniversary of the Date of Grant and prior to the
fourth anniversary of the Date of Grant a number of shares of Stock equal to 25%
of the total Options granted herein may be repurchased at the purchase price
originally paid for such stock upon exercise of the Option.
Prior to an Initial Public Offering, the Company, following the
expiration of the six (6) month holding period referred to in V. above, shall
have the right of first refusal with respect to Grantee's stock at a purchase
price equal to the higher of Fair Market Value or the price offered by a bona
fide purchaser.
VII. NOTICE AND PAYMENT
Subject to the limitations set forth in this Agreement, the Grantee may
exercise Options granted under this Agreement by delivering written notice to
the Company, on a form provided by the Company, specifying the number of shares
of Stock to be purchased. The Exercise Price of any Option shall be payable to
the Company in full at the time of exercise of the Option (i) in cash or its
equivalent, (ii) by delivery or deemed delivery (based on an attestation of the
ownership thereof) of previously acquired Stock which has been held by the
Grantee for at least six (6) months having a Fair Market Value on the date of
exercise equal to the total Exercise Price, or (iii) by a combination of cash
and previously acquired stock.
4
<PAGE> 28
VIII. GENERAL
Administration. Administration of this agreement will be governed by
the terms and conditions set forth in the Plan in effect on the Date of Grant.
That document is incorporated in this Agreement in its entirety.
Notices. Every notice or other communication relating to the Agreement
shall be in writing, and shall be mailed to or delivered to the party for whom
it is intended at such address as may from time to time be designated by such
party. Unless and until some other address is so designated, all notices or
communications by the Grantee to the Company shall be mailed to AtheroGenics,
Inc., 8995 Westside Parkway, Alpharetta, GA 30004. Attention: Chief Executive
Officer. All notices by the Company to the Grantee may be delivered to the
Grantee personally or may be mailed to the Grantee at the address shown on the
records of the Company.
Withholding: The Company shall deduct from any payment of any kind due
to the Grantee, any federal, state or local taxes of any kind required by law to
be withheld with respect to the exercise of the Stock Options or require the
Grantee to remit an additional amount in cash or its equivalent to pay for such
withholding.
Interpretation: This Agreement is subject in all respects to the terms
of the Plan, and in the event that any provision of the Agreement shall be
inconsistent with the terms of the Plan, then the terms of the Plan shall
govern. Any question of interpretation arising under this Agreement shall be
determined by the Administrator and its determinations shall be final and
conclusive upon all parties in interest.
Counterparts: This Agreement may be executed in one or more
counterparts, each counterpart of which will be regarded for all purposes as an
original.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the _______day of ___________, 2____.
By:
---------------------------------------
Name:
----------------------------------
Title:
---------------------------------
By:
---------------------------------------
Grantee
5
<PAGE> 1
EXHIBIT 10.09
[FORM OF WARRANT]
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE "SECURITIES") HAVE BEEN
ISSUED AND SOLD IN RELIANCE UPON EXEMPTIONS FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933 (THE "1933 ACT"), SECTION 10-5-9(13) OF THE OFFICIAL CODE
OF GEORGIA ANNOTATED (THE "GEORGIA CODE"), AND APPROPRIATE EXEMPTIONS FROM
REGISTRATION UNDER THE SECURITIES LAWS OF OTHER APPLICABLE JURISDICTIONS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD OR TRANSFERRED OTHER THAN PURSUANT
TO AN EFFECTIVE REGISTRATION OR AN EXEMPTION SATISFACTORY TO THE ISSUER OF
COMPLIANCE WITH THE 1933 ACT, THE GEORGIA CODE AND THE APPLICABLE SECURITIES
LAWS OF ANY OTHER JURISDICTION. THE ISSUER SHALL BE ENTITLED TO REQUIRE AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT WITH RESPECT TO COMPLIANCE WITH
THE 1933 ACT.
NO: RIGHT TO PURCHASE
PREFERRED SHARES OF
ATHEROGENICS, INC.
FORM OF
ATHEROGENICS, INC.
PREFERRED SHARES PURCHASE WARRANT
(BRIDGE LOAN)
AtheroGenics, Inc., a Georgia corporation (the "Company"), hereby
certifies that, for value received, (the "Holder"), or its successors
or registered assigns, is entitled, subject to the terms set forth below, to
purchase from the Company, commencing on the Exercise Date (as hereinafter
defined) and thereafter, at any time or from time to time before 5:00 p.m.,
Atlanta, Georgia time, on the Expiration Date (as hereinafter defined), that
number of fully paid and nonassessable Preferred Shares (as hereinafter defined)
as is equal to the Warrant Number (as hereinafter defined), at a purchase price
per share as is equal to the Purchase Price (as hereinafter defined). The number
of such Preferred Shares and the Purchase Price are subject to adjustment as
provided in this Warrant.
This Warrant is issued pursuant to and is contemplated by that certain
Loan Agreement (the "Loan Agreement"), dated as of August 20, 1998, by and among
the Company and the lenders named therein, a copy of which is on file at the
principal office of the Company. This Warrant is one of several warrants (the
"Purchaser Warrants") representing the right to purchase Preferred Shares
issuable pursuant to and contemplated by the Loan Agreement.
<PAGE> 2
As used herein the following terms, unless the context otherwise
requires, have the respective meanings set forth below:
(a) The term "Company" shall include AtheroGenics, Inc., a Georgia
corporation, and any corporation that shall succeed to or assume the obligations
of AtheroGenics, Inc. hereunder.
(b) The term "Preferred Shares" means either (i) the securities
issued in connection with the Venture Capital Financing, or (ii) if the Venture
Capital Financing has not occurred on or before December 31, 1998 or if a
consolidation or merger of the Company or a sale of all or substantially all of
the capital shares or assets of the Company shall have occurred on or before
December 31, 1998, then the Company's Series B Convertible Preferred Stock, as
authorized on the date of the Loan Agreement, and, in each instance, any other
securities into which or for which any of the securities described in (i) or
(ii) of this paragraph may be converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or otherwise.
(c) The term "Purchase Price" shall mean, subject to adjustment
pursuant to Section 5 hereof, (i) if a Venture Capital Financing occurs on or
before December 31, 1998, the Venture Capital Financing Price, or (ii) in the
event a Venture Capital Financing has not occurred on or before December 31,
1998, or if a consolidation or merger of the Company or a sale of all or
substantially all of the capital shares or assets of the Company shall have
occurred on or before December 31, 1998, $3.00 per share.
(d) The term "Outstanding Principal Amount" shall mean the maximum
aggregate principal amount then outstanding of one or more Notes (the "Notes")
from the Company to the Holder and the other holders of the Notes and issued
pursuant to the Loan Agreement.
(e) The term "Venture Capital Financing" shall mean any venture
capital, institutional or other equity security financing (including debt with
warrants or convertible debt) for the account of the Company, at which time (i)
the Company receives proceeds from one or more institutional or venture capital
investors, (ii) the aggregate gross proceeds received (or commitments for
amounts to be received) by the Company (not including conversion of the
Outstanding Principal Amount) equals or exceeds $4,000,000 and (iii) the per
share purchase price shall not be less than $3.00 per share (as equitably
adjusted for share splits, share dividends or other subdivisions or combinations
of the outstanding capital shares).
(f) The term "Venture Capital Financing Price" shall mean the
price per share, expressed on a Common Stock equivalent basis, at which the
Company sells securities in the Venture Capital Financing, provided that if
options, warrants or other rights to subscribe for the Company's securities are
issued in the Venture Capital Financing, the Venture Capital Financing Price
shall mean the lowest price per share at which the holders of such options,
warrants or rights may acquire Common Stock.
(g) The term "Warrant Number" shall mean that number of the
Company's Preferred Shares equal to the quotient of $_________ [DOLLAR AMOUNT
EQUALS 10% OF THE AMOUNT LOANED BY A LENDER] divided by the Purchase Price.
-2-
<PAGE> 3
1. Term. This Warrant is exercisable, in whole or in part, at any
time and from time to time commencing on the earlier of (i) the occurrence of a
Venture Capital Financing, (ii) the consolidation or merger of the Company or a
sale of all or substantially all of the capital shares or assets of the Company,
or (iii) January 1, 1999 (such date referred to as the "Exercise Date") and
prior to the Expiration Date (as hereinafter defined). This Warrant shall expire
and be of no further force and effect upon the earlier to occur of (x) the time
when it has been exercised with respect to all Preferred Shares which the Holder
is or may become entitled to purchase hereunder or (y) 5:00 p.m. Atlanta,
Georgia time on August 19, 2008 (the "Expiration Date").
2. Exercise of Warrant. The purchase rights represented by this
Warrant may be exercised by the Holder as provided in Section 1 in whole or in
part by the surrender of this Warrant to the Company at its principal office in
Norcross, Georgia, along with a written notice stating that the Holder intends
to purchase all or a specified number of Preferred Shares pursuant to this
Warrant and specifying the name or names in which the Holder wishes the
certificate or certificates for the Preferred Shares to be issued, and together
with payment of the Purchase Price for the shares then purchased. Such payment
shall be made, at the option of the Holder, by certified or official bank check
payable to the order of the Company in same day funds or by wire transfer of
same day funds to an account designated by the Company for such purpose. At the
option of the Holder, the Holder may, as payment of the Purchase Price for the
Preferred Shares then purchased, elect to receive a number of Preferred shares
equal to the number of Preferred Shares then purchased, less a number of
Preferred Shares then having a fair market value equal to the Purchase Price of
the Preferred Shares then purchased. If the number of Preferred Shares then
purchased is less than the total number of Preferred Shares then issuable upon
exercise of this Warrant, the Company shall cancel this Warrant upon surrender
and shall execute and deliver a new Warrant of like tenor and date for the
balance of the shares issuable upon the exercise of this Warrant (provided, that
if only a fractional share remains unexercised, the Company shall make a cash
payment therefor in lieu of issuing a new Warrant). As promptly as practicable
after such surrender of this Warrant, the Company shall issue and deliver to the
Holder, at the address appearing in the books of the Company or otherwise
designated by Holder, a certificate or certificates for the applicable number of
Preferred Shares. Certificates representing Preferred Shares purchased pursuant
to this Warrant shall bear restrictive legends substantially similar to those at
the head of this Warrant and as required by the Loan Agreement, or such other
restrictive legends as the Company and the Company's counsel deem necessary or
advisable under applicable law.
3. Reservation of Shares; Validity of Issuance. The Company
covenants and agrees that it shall reserve for issuance as of the Exercise Date
of this Warrant and keep available out of its authorized but unissued Preferred
Shares, free from preemptive rights, such number of Preferred Shares for which
this Warrant shall from time to time be exercisable. The Company represents and
warrants that all shares issued upon the exercise of this Warrant will, upon
issuance, be fully paid and nonassessable and be free from all taxes, liens and
charges in respect of their issuance.
4. Merger, Consolidation or Sale of Assets. In the event of any
capital reorganization or any consolidation or merger of the Company with or
into another person (each, a "Reorganization"), the Holder shall have the right
to purchase and receive, upon the basis and upon the terms and conditions
specified in this Warrant and in lieu of the Preferred Shares of the Company
then purchasable and receivable upon the exercise of the rights represented by
this Warrant, the kind and number of shares
-3-
<PAGE> 4
of stock, securities or other property (including cash) of the Company, or other
corporation resulting from such consolidation or surviving such merger, to which
the holder of the number of outstanding Preferred Shares equal to the number of
shares of such stock then purchasable and receivable upon the exercise of the
rights represented by this Warrant immediately prior to such Reorganization
would have been entitled to receive with respect to such Reorganization, and in
any such case appropriate provision shall be made in the application of the
provisions herein set forth with respect to the rights and interests thereafter
of the Holder to the end that the provisions herein set forth shall thereafter
be applicable, as nearly as reasonably may be, in relation to any shares, other
securities or property thereafter deliverable upon the exercise of this Warrant.
The Company shall not effect any Reorganization unless prior to or
simultaneously with the consummation of such Reorganization the successor
corporation (if other than the Company) resulting from such Reorganization shall
assume by written instrument executed and delivered to the Holder at the address
of the Holder appearing in the books of the Company, the obligation to deliver
to the Holder such shares, securities or property as, in accordance with the
provisions of this Section 4, the Holder may be entitled to purchase. The
provisions of this Section 4 shall similarly apply to successive
Reorganizations.
5. Adjustments for Stock Splits and Combinations. If outstanding
Preferred Shares shall be subdivided into a greater number of shares, or a
dividend in Preferred Shares or other securities of the Corporation convertible
or exchangeable into Preferred Shares (in which latter event the number of
Preferred Shares issuable upon the conversion or exchange of such securities
shall be deemed to have been distributed), shall be paid in respect to the
Preferred Shares, the number of Preferred Shares which may be acquired by the
Holder upon the exercise of this Warrant shall, simultaneously with the
effectiveness of such subdivision or immediately after the record date of such
dividend, be proportionately increased, and conversely, if the outstanding
Preferred Shares shall be combined into a smaller number of shares, the number
of Preferred Shares which may be acquired by the Holder upon the exercise of
this Warrant shall, simultaneously with the effectiveness of such combination,
be proportionately reduced.
6. Notice of Certain Events. In case at any time:
(i) the Company shall declare or pay any dividend or make
any distribution to the holders of its Preferred
Shares;
(ii) the Company shall offer for subscription pro rata to
the holders of its Preferred Shares any additional
shares of stock of any class or other rights;
(iii) there shall be any capital reorganization or
reclassification of the capital stock of the Company
or consolidation or merger of the Company with, or
sale of all or substantially all of its assets to,
another corporation or entity; or
(iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the
Company;
then, in any one or more of the above cases, the Company shall give written
notice, by first class mail, postage prepaid, addressed to the Holder at the
address of the Holder as shown on the books of the Company, of the date on which
(i) the books of the Company shall close or a record shall be
-4-
<PAGE> 5
taken for such dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up shall take place, as the case may be. Such notice
shall also specify the date as of which the holders of Preferred Shares of
record shall participate in said dividend, distribution or subscription rights,
or shall be entitled to exchange their Preferred Shares for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up, as the case may be. Such
written notice shall be given not less than 30 days prior to the record date or
the date on which the transfer books of the Company are closed in respect to
such record date in the case of an action specified in clause (i) and at least
30 days prior to the action in question in the case of an action specified in
clause (ii). Any notices given pursuant to this Section 6 shall be effective and
deemed received upon the date of actual receipt or upon the fifth calendar day
subsequent to deposit in the United States mail (or other comparable mail
system), whichever is earlier.
7. No Impairment. The Company will not, by amendment of its
Articles 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 by the Company under this Warrant, but
will at all times in good faith assist in the carrying out of all the provisions
of Sections 3 through 6 and in the taking of all such action as may be necessary
or appropriate in order to protect the rights of the Holder.
8. No Voting Rights. This Warrant shall not entitle the Holder to
any voting rights or other rights as a shareholder of the Company, and no
dividend or interest shall be payable or accrue in respect of this Warrant or
the interest represented by or the shares purchasable under this Warrant until
and unless, and except to the extent that, this Warrant shall be exercised.
9. Stock Certificates. The issue of stock certificates upon the
exercise of this Warrant shall be made without charge to the Holder for any tax
(other than taxes attributable to any difference between the fair market value
and the exercise price of this Warrant on the date of the exercise of this
Warrant or transfer taxes resulting from issuance of stock certificates to a
person other than the Holder) in respect of the issue of such stock. The Holder
shall for all purposes be deemed to have become the holder of record of the
shares issued upon exercise of this Warrant on the date on which the Warrant was
surrendered and payment of the Warrant Price was made, irrespective of the date
of delivery of the certificate for such shares, except that, if the date of such
surrender and payment is a date when the stock transfer books of the Company are
closed the Holder shall be deemed to have become the holder of such shares at
the close of business on the next succeeding date on which the stock transfer
books are open.
10. Lost, Stolen, Mutilated or Destroyed Warrant. Upon receipt of
evidence reasonably satisfactory to the Company of the loss, theft, mutilation
or destruction of this Warrant, and in case of loss, theft or destruction, upon
the agreement of the Holder to indemnify the Company, or in the case of
mutilation, upon surrender and cancellation of this Warrant, the Company shall
issue a new Warrant of like denomination and tenor as the Warrant so lost,
stolen, mutilated or destroyed. Any such new Warrant shall constitute an
original contractual obligation of the
-5-
<PAGE> 6
Company, whether or not the allegedly lost, stolen, mutilated or destroyed
Warrant shall be at any time enforceable by anyone.
11. Applicable Law. This Warrant shall be governed by and
construed in accordance with the internal laws of the State of Georgia, without
regard to the principles of conflicts of law.
-6-
<PAGE> 7
IN WITNESS WHEREOF, the Company has duly executed this Warrant as of
the ____ day of August, 1998.
ATHEROGENICS, INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
-7-
<PAGE> 8
Preferred Shares Purchase Warrant
Names of investors, amount of shares and warrant number for each Preferred Share
Purchase Warrant issued by AtheroGenics, Inc.
<TABLE>
<CAPTION>
===============================================================================
Name Shares No.
===============================================================================
<S> <C> <C>
Alliance Technology Ventures, L.P. 46,374 01
- -------------------------------------------------------------------------------
ATV/GP, L.P. 12,859 02
- -------------------------------------------------------------------------------
ATV/MJF, L.P. 3,514 03
- -------------------------------------------------------------------------------
Domain Partners III, L.P. 32,219 04
- -------------------------------------------------------------------------------
Biotechnology Investments Limited 23,937 05
- -------------------------------------------------------------------------------
DP III Associates, L.P. 1,115 06
- -------------------------------------------------------------------------------
Sprout Capital VII, L.P. 31,234 07
- -------------------------------------------------------------------------------
The Sprout CEO Fund, L.P. 363 08
- -------------------------------------------------------------------------------
DLJ Capital Corp. 718 09
- -------------------------------------------------------------------------------
DLJ First ESC L.P. 3,591 10
- -------------------------------------------------------------------------------
New York Life Insurance Company 20,333 11
- -------------------------------------------------------------------------------
Boston University Nominee Partnership 16,667 12
- -------------------------------------------------------------------------------
Intelligent Systems Corporation 5,000 13
- -------------------------------------------------------------------------------
Arthur M. Pappas 1,000 14
- -------------------------------------------------------------------------------
Roy M. Barbee 359 15
- -------------------------------------------------------------------------------
Vaughn D. Bryson 359 16
- -------------------------------------------------------------------------------
Joseph C. Cook, Jr. 359 17
- -------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
EXHIBIT 10.10
[FORM OF WARRANT]
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE "SECURITIES") HAVE BEEN
ISSUED AND SOLD IN RELIANCE UPON EXEMPTIONS FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933 (THE "1933 ACT"), SECTION 10-5-9(13) OF THE OFFICIAL
CODE OF GEORGIA ANNOTATED (THE "GEORGIA CODE"), AND APPROPRIATE EXEMPTIONS FROM
REGISTRATION UNDER THE SECURITIES LAWS OF OTHER APPLICABLE JURISDICTIONS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD OR TRANSFERRED OTHER THAN PURSUANT
TO AN EFFECTIVE REGISTRATION OR AN EXEMPTION SATISFACTORY TO THE ISSUER OF
COMPLIANCE WITH THE 1933 ACT, THE GEORGIA CODE AND THE APPLICABLE SECURITIES
LAWS OF ANY OTHER JURISDICTION. THE ISSUER SHALL BE ENTITLED TO REQUIRE AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT WITH RESPECT TO COMPLIANCE
WITH THE 1933 ACT.
No: Right to Purchase
Series C Convertible
Preferred Stock of
AtheroGenics, Inc.
FORM OF
ATHEROGENICS, INC.
SERIES C CONVERTIBLE PREFERRED STOCK PURCHASE WARRANT
AtheroGenics, Inc., a Georgia corporation (the "Company"), hereby
certifies that, for value received, ______________________ (the "Holder"), or
its successors or registered assigns, is entitled, subject to the terms set
forth below, to purchase from the Company, commencing on the Exercise Date (as
hereinafter defined) and thereafter, at any time or from time to time before
5:00 p.m., Atlanta, Georgia time, on the Expiration Date (as hereinafter
defined), that number of fully paid and nonassessable Preferred Shares (as
hereinafter defined) as is equal to the Warrant Number (as hereinafter
defined), at a purchase price per share as is equal to the Purchase Price (as
hereinafter defined). The number of such Preferred Shares and the Purchase
Price are subject to adjustment as provided in this Warrant.
This Warrant is issued as a replacement to the Company's obligation to
issue a "New Warrant" to the Holder pursuant to that certain Loan Agreement,
dated as of August 24, 1998, as amended as of December 17, 1998, as of April
13, 1999 and as otherwise amended, supplemented or modified and in effect from
time to time (the "Loan Agreement") by and among the Company and the lenders
named therein, a copy of which is on file at the principal office of the
Company. This Warrant is one of several warrants (the "Purchase Warrants")
representing the right to purchase Preferred Shares issuable pursuant to and
contemplated by the Loan Agreement.
-1-
<PAGE> 2
As used herein the following terms, unless the context otherwise
requires, have the respective meanings set forth below:
(a) The term "Company" shall include AtheroGenics, Inc., a
Georgia corporation, and any corporation that shall succeed to or assume the
obligations of AtheroGenics, Inc. hereunder.
(b) The term "Preferred Shares" means the Company's Series C
Convertible Preferred Stock.
(c) The term "Purchase Price" shall mean $3.00 per Preferred
Share, subject to adjustment pursuant to Section 5 hereof.
(d) The term "Outstanding Principal Amount" shall mean the
maximum aggregate principal amount then outstanding of one or more Notes (the
"Notes") from the Company to the Holder and the other holders of the Notes and
issued pursuant to the Loan Agreement.
(e) The term "Warrant Number" shall mean, subject to adjustment
pursuant to Section 5 hereof, that number of the Company's Preferred Shares
equal to __________.
1. Term. This Warrant is exercisable, in whole or in
part, at any time and from time to time commencing on the date hereof (such
date referred to as the "Exercise Date") and prior to the Expiration Date (as
hereinafter defined). This Warrant shall expire and be of no further force and
effect upon the earlier to occur of (x) the time when it has been exercised
with respect to all Preferred Shares which the Holder is or may become entitled
to purchase hereunder or (y) 5:00 p.m. Atlanta, Georgia time on December 31,
2008 (the "Expiration Date").
2. Exercise of Warrant. The purchase rights represented
by this Warrant may be exercised by the Holder as provided in Section 1 in
whole or in part by the surrender of this Warrant to the Company at its
principal office in Alpharetta, Georgia, along with a written notice stating
that the Holder intends to purchase all or a specified number of Preferred
Shares pursuant to this Warrant and specifying the name or names in which the
Holder wishes the certificate or certificates for the Preferred Shares to be
issued, and together with payment of the Purchase Price for the shares then
purchased. Such payment shall be made, at the option of the Holder, by
certified or official bank check payable to the order of the Company in same
day funds or by wire transfer of same day funds to an account designated by the
Company for such purpose. At the option of the Holder, the Holder may, as
payment of the Purchase Price for the Preferred Shares then purchased, elect to
receive a number of Preferred Shares equal to the number of Preferred Shares
then purchased, less a number of Preferred Shares then having a fair market
value equal to the Purchase Price of the Preferred Shares then purchased. If
the number of Preferred Shares then purchased is less than the total number of
Preferred Shares then issuable upon exercise of this Warrant, the Company shall
cancel this Warrant upon surrender and shall execute and deliver a new Warrant
of like tenor and date for the balance of the shares issuable upon the exercise
of this Warrant (provided, that if only a fractional share remains unexercised,
the Company shall make a cash payment therefor in lieu of issuing a new
Warrant). As promptly as practicable after such surrender of this Warrant, the
Company shall issue and deliver to the Holder, at the address appearing in the
books of the Company or otherwise designated by Holder,
-2-
<PAGE> 3
a certificate or certificates for the applicable number of Preferred Shares.
Certificates representing Preferred Shares purchased pursuant to this Warrant
shall bear restrictive legends substantially similar to those at the head of
this Warrant and as required by the Loan Agreement, or such other restrictive
legends as the Company and the Company's counsel deem necessary or advisable
under applicable law.
3. Reservation of Shares; Validity of Issuance. The
Company covenants and agrees that it shall reserve for issuance as of the
Exercise Date of this Warrant and keep available out of its authorized but
unissued Preferred Shares, free from preemptive rights, such number of
Preferred Shares for which this Warrant shall from time to time be exercisable.
The Company represents and warrants that all shares issued upon the exercise of
this Warrant will, upon issuance, be fully paid and nonassessable and be free
from all taxes, liens and charges in respect of their issuance.
4. Merger, Consolidation or Sale of Assets. In the
event of any capital reorganization or any consolidation or merger of the
Company with or into another person (each, a "Reorganization"), the Holder
shall have the right to purchase and receive, upon the basis and upon the terms
and conditions specified in this Warrant and in lieu of the Preferred Shares of
the Company then purchasable and receivable upon the exercise of the rights
represented by this Warrant, the kind and number of shares of stock, securities
or other property (including cash) of the Company, or other corporation
resulting from such consolidation or surviving such merger, to which the holder
of the number of outstanding Preferred Shares equal to the number of shares of
such stock then purchasable and receivable upon the exercise of the rights
represented by this Warrant immediately prior to such Reorganization would have
been entitled to receive with respect to such Reorganization, and in any such
case appropriate provision shall be made in the application of the provisions
herein set forth with respect to the rights and interests thereafter of the
Holder to the end that the provisions herein set forth shall thereafter be
applicable, as nearly as reasonably may be, in relation to any shares, other
securities or property thereafter deliverable upon the exercise of this
Warrant. The Company shall not effect any Reorganization unless prior to or
simultaneously with the consummation of such Reorganization the successor
corporation (if other than the Company) resulting from such Reorganization
shall assume by written instrument executed and delivered to the Holder at the
address of the Holder appearing in the books of the Company, the obligation to
deliver to the Holder such shares, securities or property as, in accordance
with the provisions of this Section 4, the Holder may be entitled to purchase.
The provisions of this Section 4 shall similarly apply to successive
Reorganizations.
5. Adjustments. If outstanding Preferred Shares shall
be subdivided into a greater number of shares, or a dividend in Preferred
Shares or other securities of the Corporation convertible or exchangeable into
Preferred Shares (in which latter event the number of Preferred Shares issuable
upon the conversion or exchange of such securities shall be deemed to have been
distributed), shall be paid in respect to the Preferred Shares, the number of
Preferred Shares which may be acquired by the Holder upon the exercise of this
Warrant shall, simultaneously with the effectiveness of such subdivision or
immediately after the record date of such dividend, be proportionately
increased, and conversely, if the outstanding Preferred Shares shall be
combined into a smaller number of shares, the number of Preferred Shares which
may be
-3-
<PAGE> 4
acquired by the Holder upon the exercise of this Warrant shall, simultaneously
with the effectiveness of such combination, be proportionately reduced.
6. Notice of Certain Events. In case at any time:
(i) the Company shall declare or pay any
dividend or make any distribution to the holders of its Preferred Shares;
(ii) the Company shall offer for subscription
pro rata to the holders of its Preferred Shares any additional shares of stock
of any class or other rights;
(iii) there shall be any capital reorganization
or reclassification of the capital stock of the Company or consolidation or
merger of the Company with, or sale of all or substantially all of its assets
to, another corporation or entity; or
(iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Company;
then, in any one or more of the above cases, the Company shall give written
notice, by first class mail, postage prepaid, addressed to the Holder at the
address of the Holder as shown on the books of the Company, of the date on
which (i) the books of the Company shall close or a record shall be taken for
such dividend, distribution or subscription rights or (ii) such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up shall take place, as the case may be. Such notice shall also specify
the date as of which the holders of Preferred Shares of record shall
participate in said dividend, distribution or subscription rights, or shall be
entitled to exchange their Preferred Shares for securities or other property
deliverable upon such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up, as the case may be. Such written
notice shall be given not less than 30 days prior to the record date or the
date on which the transfer books of the Company are closed in respect to such
record date in the case of an action specified in clause (i) and at least 30
days prior to the action in question in the case of an action specified in
clause (ii). Any notices given pursuant to this Section 6 shall be effective
and deemed received upon the date of actual receipt or upon the fifth calendar
day subsequent to deposit in the United States mail (or other comparable mail
system), whichever is earlier.
7. No Impairment. The Company will not, by amendment of
its Articles 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 by the Company under this Warrant,
but will at all times in good faith assist in the carrying out of all the
provisions of Sections 3 through 6 and in the taking of all such action as may
be necessary or appropriate in order to protect the rights of the Holder.
8. No Voting Rights. This Warrant shall not entitle the
Holder to any voting rights or other rights as a shareholder of the Company,
and no dividend or interest shall be payable or accrue in respect of this
Warrant or the interest represented by or the shares
-4-
<PAGE> 5
purchasable under this Warrant until and unless, and except to the extent that,
this Warrant shall be exercised.
9. Stock Certificates. The issue of stock certificates
upon the exercise of this Warrant shall be made without charge to the Holder
for any tax (other than taxes attributable to any difference between the fair
market value and the exercise price of this Warrant on the date of the exercise
of this Warrant or transfer taxes resulting from issuance of stock certificates
to a person other than the Holder) in respect of the issue of such stock. The
Holder shall for all purposes be deemed to have become the holder of record of
the shares issued upon exercise of this Warrant on the date on which the
Warrant was surrendered and payment of the Warrant Price was made, irrespective
of the date of delivery of the certificate for such shares, except that, if the
date of such surrender and payment is a date when the stock transfer books of
the Company are closed the Holder shall be deemed to have become the holder of
such shares at the close of business on the next succeeding date on which the
stock transfer books are open.
10. Lost, Stolen, Mutilated or Destroyed Warrant. Upon
receipt of evidence reasonably satisfactory to the Company of the loss, theft,
mutilation or destruction of this Warrant, and in case of loss, theft or
destruction, upon the agreement of the Holder to indemnify the Company, or in
the case of mutilation, upon surrender and cancellation of this Warrant, the
Company shall issue a new Warrant of like denomination and tenor as the Warrant
so lost, stolen, mutilated or destroyed. Any such new Warrant shall constitute
an original contractual obligation of the Company, whether or not the allegedly
lost, stolen, mutilated or destroyed Warrant shall be at any time enforceable
by anyone.
11. Applicable Law. This Warrant shall be governed by
and construed in accordance with the internal laws of the State of Georgia,
without regard to the principles of conflicts of law.
IN WITNESS WHEREOF, the Company has duly executed this Warrant as of
the 13th day of April, 1999.
ATHEROGENICS, INC.
By: /s/
----------------------------------------------
Name: Russell M. Medford, M.D., Ph.D.
Title: President and Chief Executive Officer
-5-
<PAGE> 6
Series C Convertible Preferred Warrant
Names of investors, amount of shares and warrant number for each Series C
Convertible Preferred Warrant issued by AtheroGenics, Inc.
<TABLE>
<CAPTION>
================================================================================
Name Shares No.
================================================================================
<S> <C> <C>
Alliance Technology Ventures, L.P. 46,374 22
- --------------------------------------------------------------------------------
ATV/GP, L.P. 12,859 23
- --------------------------------------------------------------------------------
ATV/MJF, L.P. 3,514 24
- --------------------------------------------------------------------------------
Domain Partners III, L.P. 32,219 25
- --------------------------------------------------------------------------------
Biotechnology Investments Limited 23,937 26
- --------------------------------------------------------------------------------
DP III Associates, L.P. 1,115 27
- --------------------------------------------------------------------------------
Sprout Capital VII, L.P. 31,234 28
- --------------------------------------------------------------------------------
The Sprout CEO Fund, L.P. 363 29
- --------------------------------------------------------------------------------
DLJ Capital Corp. 718 30
- --------------------------------------------------------------------------------
DLJ First ESC L.P. 3,591 31
- --------------------------------------------------------------------------------
New York Life Insurance Company 20,333 32
- --------------------------------------------------------------------------------
Boston University Nominee Partnership 16,667 33
- --------------------------------------------------------------------------------
Intelligent Systems Corporation 5,000 34
- --------------------------------------------------------------------------------
Arthur M. Pappas 1,000 35
- --------------------------------------------------------------------------------
Roy M. Barbee 359 36
- --------------------------------------------------------------------------------
Vaughn D. Bryson 359 37
- --------------------------------------------------------------------------------
Joseph C. Cook, Jr. 359 38
- --------------------------------------------------------------------------------
Sanderling Venture Partners III, L.P. 2,920 39
- --------------------------------------------------------------------------------
Sanderling III Limited 1,513 40
- --------------------------------------------------------------------------------
Sanderling III Biomedical, L.P. 504 41
- --------------------------------------------------------------------------------
Sanderling Ventures Management 64 42
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
EXHIBIT 10.11
NON-NEGOTIABLE PROMISSORY NOTE
$220,572.00 April 1, 1999
FOR VALUE RECEIVED, the undersigned, Inhibitex. Inc., a Delaware
corporation, with its principal offices at 8995 Westside Parkway, Alpharetta,
Georgia 30004 (the "Maker"), promises to pay to the order of AtheroGenics,
Inc., a Georgia corporation (the "Holder"), the principal sum of Two Hundred
Twenty Thousand Five Hundred Seventy-Two and 00/100 Dollars ($220,572.00),
together with interest on so much thereof as is from time to time outstanding
and unpaid, from the date hereof until the principal sum is paid in full, at
the rate of seven percent (7%) per annum, with principal and accrued interest
being due and payable as follows.
1. PAYMENTS. All payments due hereunder shall be made in lawful money of
the United States of America at 8995 Westside Parkway, Alpharetta,
Georgia 30004, or at such other place as Holder may designate in
writing to the undersigned. Commencing on the date of this Note,
interest shall accrue and be computed on the daily outstanding balance
on a 360-day year simple interest basis. Principal and interest shall
be due and payable monthly, in advance, in accordance with the
amortization schedule, attached hereto as Attachment A and
incorporated herein by this reference, commencing on April 1, 1999 and
continuing on the first day of each month thereafter and including
March 1, 2009, at which time all outstanding principal and accrued but
unpaid interest will be due and payable in full.
2. EVENT OF DEFAULT. An event of default shall be deemed to occur if
Maker fails to make or cause to be made any payments required to be
made under this Note when the same shall be due and payable and such
default is not cured within three (3) days after Maker receives
written notice thereof from Holder.
REMEDIES. Upon the occurrence of an event of default, at the option of
the Holder, the entire principal amount due hereunder, together with
all accrued interest and any other amounts due hereunder, shall
immediately become due and payable.
4. PREPAYMENT. This Note may be prepaid in full or in part prior to
maturity, without penalty or fee.
5. WAIVER. Maker hereby waives diligence, presentment, protest and
demand, notice of protest, dishonor, notice of dishonor and nonpayment
of this Note, and expressly agrees that, without in any way affecting
the liability of Maker, Holder may extend any date or the time for
payment of sums due hereunder.
6. CHOICE OF LAW. This Note shall be governed by and construed and
enforced in accordance with the laws of the State of Georgia (without
regard to its rules of conflicts of laws).
7. COSTS OF COLLECTION. The Maker shall reimburse the Holder for all
reasonable costs and expenses (including reasonable attorneys' fees)
actually incurred by the Holder in enforcing or collecting, or
attempting to enforce or collect, the obligations evidenced by this
Note, whether or not suit is instituted.
8. SEVERABILITY. Wherever possible, each provision of this Note shall be
interpreted in such manner as to be effective and valid, but if any
provision hereof shall be prohibited by law or be otherwise invalid,
such provision shall be ineffective to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or
the remaining provisions of this Note.
<PAGE> 2
9. ASSIGNMENT. This Note may not be transferred or assigned by Holder to
any third party without the prior written permission of Maker.
10. HEADINGS. The headings and titles used in this Note are intended
solely for identification and not for any substantive purpose, and no
heading or title shall in any way limit or extend the provisions
hereof.
11. LIMITATION OF INTEREST. Notwithstanding any provision herein to the
contrary, the interest rate provided by this Note shall in no case
exceed the rate allowable under any statute or law applicable to this
transaction when appropriate consideration is given to borrowers or
lenders of like character or classification. In the event the rate is
determined to exceed the rate allowable under any statute or law
applicable to this transaction, the interest rate shall be the maximum
allowed by any such statute or law, and any amounts actually paid in
excess thereof, shall be credited to principal.
Time is of the essence of this note.
IN WITNESS WHEREOF, this Note has been duly scaled, executed and
delivered the day and year first above written.
"MAKER"
INHIBITEX, INC.,
a Delaware corporation
By: /s/ William A. Johnston
-------------------------------------
Name: William A. Johnston
Title:
<PAGE> 1
EXHIBIT 10.12
-----------------------
LEASE AGREEMENT
COUSINS PROPERTIES INCORPORATED,
a Georgia corporation, LANDLORD
and
ATHEROGENICS, INC.,
a Georgia corporation, TENANT
June 19, 1998
NORTH POINT
CENTER WEST
<PAGE> 2
LEASE AGREEMENT
THIS LEASE (the "Lease") is made and entered into this ______ day of
June 1998, by and between COUSINS PROPERTIES INCORPORATED, a Georgia corporation
(hereinafter referred to as "Landlord"), and ATHEROGENICS, INC., a Georgia
corporation (hereinafter referred to as "Tenant").
ARTICLE I. DEMISE OF PREMISES
Section 1.01 Demise. For and in consideration of the rents, terms,
covenants and agreements hereinafter set forth on the part of Tenant and
Landlord to be paid, kept, observed and performed, Landlord does hereby demise
and lease to Tenant, and Tenant does hereby take and hire from Landlord, upon
and subject to the terms and conditions contained herein, that certain tract of
land lying and being in Land Lot 691 of the 1st District, 2nd Section, City of
Alpharetta, Fulton County, Georgia, being more particularly described on Exhibit
"A" attached hereto and by reference incorporated herein (the "Site"), together
with all improvements now or hereafter located thereon and all appurtenances
thereunto belonging, together with the right and easement to use the water
detention pond and related facilities located adjacent to the Site (subject to
payment of the Shared Costs therefor in accordance with Section 3.04 hereof) and
together with the right and easement to use the temporary driveway shown on
Exhibit "C-1" hereto for pedestrian and vehicular access until Westside Parkway
is completed and dedicated as a public street (said Site, improvements and
appurtenances hereinafter collectively referred to as "Premises"), subject to
the encumbrances set forth on Exhibit "B" attached hereto and by reference
incorporated herein. A plat of the Site is attached hereto as Exhibit "C" and by
reference incorporated herein. The term "Improvements" as used in this Lease
shall mean any and all structures and appurtenances thereto of every type and
kind on, at or under the Premises, including, but not limited to, buildings,
outbuildings, garages, sheds, patios, patio covers, awnings, additions,
walkways, bicycle trails, sprinkler systems or pipes, garages, roads, curbing,
paving, driveways, parking areas, fences, screening walls, retaining walls,
stairs, decks, fixtures, landscaping hedges, windbreaks, poles, signs, exterior
tanks, solar panels and equipment, exterior evaporative coolers, air
conditioning and water softener fixtures, wind mills, exterior antennae, aerials
and other equipment for the reception or transmission of radio, television,
microwave, electromagnetic, or other similar or dissimilar communication
systems, and any thing or any device that alters the natural flow of water from
any property adjoining the Premises.
ARTICLE II. TERM OF LEASE
Section 2.01 Term of Lease. The term of this Lease (hereinafter
referred to as "Term") shall commence on the date first set forth above, and
unless sooner terminated or extended under the terms and conditions contained
herein, shall continue thereafter until 11:59 p.m. (local, Atlanta, Georgia,
time) on the day preceding the tenth (10th) anniversary of the "Rent
Commencement Date" (as hereinafter defined). "Rent Commencement Date" shall mean
the
<PAGE> 3
later of (i) the date one hundred twenty (120) days after the Floor Ready
Condition Date (as defined in Exhibit "D") or (ii) the date of Substantial
Completion (as defined in Exhibit "D") of the Base Building Work (as defined in
Exhibit "D").
Section 2.02 Options to Extend Term. Tenant is hereby granted options
to extend the Term of this Lease for two (2) successive additional periods of
five (5) years each (each such additional period being herein referred to as an
"Extended Term") by giving written notice of such extension to Landlord at least
nine (9) months prior to the expiration of the initial Term of this Lease or the
first Extended Term, as the case may be. Tenant shall have the right to exercise
these options to extend provided that on the date of such exercise no Event of
Default (as hereinafter defined) under this Lease then exists. Each Extended
Term shall be upon all of the same terms, covenants and conditions of this Lease
then applicable except that the Rent (as hereinafter defined) during the
Extended Terms shall be as set forth in Sections 3.02 and 3.03 hereof. The term
"Term" or the phrase "Term of this Lease" as used in this Lease shall mean the
initial Term and any Extended Term which may become effective.
Section 2.03 Supplemental Agreement. Landlord and Tenant shall, within
twenty (20) days after the occurrence of the Rent Commencement Date, execute a
supplemental agreement setting forth the Minimum Rent, the number of rentable
square feet contained in the Premises, the amount of the Additional Improvement
Allowance which was actually disbursed (and confirming that no further
Additional Improvement Allowance is required to be disbursed by Landlord and
waiving Tenant's right to any further disbursements of Additional Improvement
Allowance), the amount of the Additional Rent determined pursuant to Section
4(b) of Exhibit "D", the Rent Commencement Date and the expiration date of the
Term of this Lease as dated pursuant to Section 2.01 hereof and the dates for
Minimum Rent adjustments as determined pursuant to Section 3.02 of this Lease.
Such supplemental agreement, when executed and delivered by Landlord and Tenant,
shall be attached to and become a permanent part of this Lease.
ARTICLE III. MINIMUM RENT AND ADDITIONAL RENT
Section 3.01 Minimum Rent. Tenant covenants and agrees to pay Landlord,
in lawful money of the United States of America, for the period commencing on
the Rent Commencement Date and continuing thereafter throughout the Term, as
rent hereunder, (i) "Minimum Rent (as hereinafter defined), plus (ii) any and
all additional rent consisting of such sums and charges that come due under the
terms and conditions of this Lease (any and all such sums and charges
hereinafter referred to as "Additional Rent"). For the period from the Rent
Commencement Date to the day immediately preceding the first (1st) anniversary
of the Rent Commencement Date, "Minimum" Rent shall mean a base annual minimum
rent in the amount (the "Initial Minimum Rent" equal to the sum of (a) eleven
percent of Landlord's total cost (the "Total Cost") of developing the Premises,
plus (b) $0.98 multiplied by the number of rentable square feet in the Premises.
Commencing on the first (1st) anniversary of the Rent Commencement Date and
continuing on each subsequent anniversary of the Rent Commencement Date, the
Minimum Rent
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<PAGE> 4
shall be adjusted as provided in Section 3.02 hereof. "Total Cost" shall include
without limitation the matters set forth on Exhibit "F" attached hereto and by
reference made a part hereof, including but not limited to imputed and
acquisition costs in the agreed amount of $500,000.00, grading costs, the costs
of constructing and installing landscaping, irrigation, and drainage facilities
and other site work, the costs of the Base Building Work, development fees to
Landlord or an affiliate of Landlord, brokers' commissions, permit and tap fees,
impact fees, architect's and engineer's fees, legal fees, taxes, the Improvement
Allowances, and imputed interest at the rate of 8.5% per annum on all such
costs, including but not limited to imputed costs from the date of disbursement
through the Rent Commencement Date. Notwithstanding the foregoing to the
contrary, there shall be a credit against Total Cost in the amount of the
Additional Improvement Allowance actually disbursed. The amounts set forth on
Exhibit "F" are estimates as of the date of this Lease of the Total Cost and of
the amounts of the elements comprising Total Cost which estimates may and almost
certainly will change, and which estimates do not and shall not be deemed to set
either minimum or maximum limits for such elements or for the Total Cost. For
purposes of illustration, as set forth on Exhibit "F", if the Total Cost were
$6,245,584.00, then the Initial Minimum Rent would be $735,546.00 per annum
[Fourteen and 82/100 Dollars ($14.82) per rentable square foot (based on the
Premises containing an estimated 49,632 rentable square feet; provided, however,
that the actual number of rentable square feet shall be determined as
hereinafter set forth)], being the sum of (a) eleven percent of the Total Cost,
plus (b) $0.98 multiplied by the number of rentable square feet in the Premises.
The number of rentable square feet in the Premises shall be determined
in accordance with the American National Standard Method of Measuring Floor Area
in Office Buildings, ANSI/BOMA Z65.1-1996 published by the Building Owners and
Managers Association International ("BOMA Standards"). Upon Substantial
Completion, Landlord will cause its architect to make and certify to Landlord
and Tenant physical measurements of the Premises and the resulting calculation
of the number of rentable square feet contained within the Premises in
accordance with BOMA Standards, and a copy of such certification of Landlord's
architect shall be given to Tenant.
Minimum Rent shall be payable, in advance, in twelve (12) equal monthly
installments for each Lease Year (as hereinafter defined), in time to be good
funds for Landlord's account on the first day of each calendar month during the
Term, at the office of Landlord, 2500 Windy Ridge Parkway, Suite 1600, Atlanta,
Georgia 30339-5683, or at such other address as Landlord may from time to time
designate in writing to Tenant. Landlord agrees that Tenant shall have the
right, if it elects, to pay Minimum Rent by means of a wire transfer of
immediately available federal funds to the account of Landlord, and upon request
by Tenant, Landlord agrees to provide Tenant with Landlord's account information
and wiring instructions to enable Tenant to make payment of Minimum Rent by wire
transfer as aforesaid. Minimum Rent for the first and last months of the Term
shall be prorated on a daily basis if the Term shall begin or end on a day other
than the first or last day of a calendar month.
3
<PAGE> 5
Section 3.02 Minimum Rent Adjustments. As used in this Lease, the term
"Lease Year" shall mean the twelve (12) month period commencing on the Rent
Commencement Date and ending on the day immediately preceding the first (1st)
anniversary of the Rent Commencement Date, and each successive twelve (12) month
period thereafter during the Term. On the first day of the second and each
subsequent Lease year (each of such dates being herein referred to as an
"Adjustment Date"), the annual Minimum Rent shall be increased to an amount
equal to (a) the Initial Minimum Rent, plus (b) an amount equal to the Initial
Minimum Rent multiplied by the product of five (5) times the percentage increase
in the Index (as hereinafter defined) for the month preceding the applicable
Adjustment Date as compared to the Index for the month during which this Lease
is fully-executed by Landlord and Tenant; provided, however, in no event shall
the Minimum Rent following an Adjustment Date be less than the Minimum Rent
prior to such Adjustment Date and in no event shall the Minimum Rent be so
increased so as to exceed the following amounts:
For the second Lease Year, 102.5% of the Initial Minimum Rent;
For the third Lease Year, 105.06% of the Initial Minimum Rent;
For the fourth Lease Year, 107.689% of the Initial Minimum Rent;
For the fifth Lease Year, 110.381% of the Initial Minimum Rent;
For the sixth Lease Year, 113.141% of the Initial Minimum Rent;
For the seventh Lease Year, 115.969% of the Initial Minimum Rent;
For the eighth Lease Year, 118.869% of the Initial Minimum Rent;
For the ninth Lease Year, 121.840% of the Initial Minimum Rent;
For the tenth Lease Year, 124.886% of the Initial Minimum Rent;
For the eleventh Lease Year, 128.009% of the Initial Minimum Rent;
For the twelfth Lease Year, 131.209% of the Initial Minimum Rent;
For the thirteenth Lease Year, 134.489% of the Initial Minimum Rent;
For the fourteenth Lease Year, 137.851% of the Initial Minimum Rent;
For the fifteenth Lease Year, 141.297% of the Initial Minimum Rent;
For the sixteenth Lease Year, 144.83% of the Initial Minimum Rent;
4
<PAGE> 6
For the seventeenth Lease Year, 148.441% of the Initial Minimum Rent;
For the eighteenth Lease Year, 152.162% of the Initial Minimum Rent;
For the nineteenth Lease Year, 155.966% of the Initial Minimum Rent;
For the twentieth Lease Year, 159.865% of the Initial Minimum Rent.
Section 3.03 Additional Rent. Tenant covenants and agrees to pay to
Landlord, from time to time as provided in this Lease, (a) interest (herein
referred to as "Interest" which for all purposes of this Lease shall equal two
percent (2%) plus the "prime rate" [as used herein, "prime rate" shall mean the
rate of interest per annum announced from time to time by SunTrust Bank,
Atlanta, Georgia, or its successor organization, as its prime commercial lending
rate]) on all installments of Minimum Rent not paid by the fifth (5th) day of
the month for which such amount is due, from the due date through the date of
payment (provided, however, such five [5] day grace period shall be applicable
only two [2] times in any twelve [12] month period, and with respect to any
installment of Minimum Rent thereafter coming due within said twelve [12] month
period, Interest shall accrue from the due date of such Minimum Rent through the
date of payment regardless of whether same is paid by the fifth [5th] day of the
month for which such amount is due), (b) all amounts, other than Minimum Rent
which Tenant herein agrees to assume and pay to Landlord, (c) all other amounts
which Tenant herein agrees to assume and pay to a third party or third parties,
including, without limitation, taxes, assessments and charges specified in
Article IV hereof, in those circumstances where Tenant shall fail or refuse to
pay to such third party or parties and Landlord elects to pay such amounts as
herein provided, and (d) Interest on amounts referred to in Subsections 3.03(b)
and 3.03(c) not paid within five (5) days after such amounts are due, from the
due date through the date paid or, if demand is required therefor by the terms
of this Lease, from the date which is ten (10) days after the date of demand
through the date paid (all or any one of the aforementioned items being herein
included in "Additional Rent"). If Tenant fails to pay any Additional Rent,
Landlord shall have the same rights, powers and remedies for such failure as are
provided in this Lease, at law, in equity or otherwise for the nonpayment of
Rent.
Section 3.04 Shared Costs: Master Declaration. Tenant covenants and
agrees to pay to Landlord from time to time, within ten (10) days after notice
of the amount thereof (but in no event more often than once each month), the pro
rata share applicable to the Site of the sum of (i) the costs of operation,
maintenance, repair and replacement of the landscaping and irrigation systems
now or hereafter located along Westside Parkway and all future roadways, whether
public or private, constructed in the project known as North Point Center West
and generally including the property shown on Exhibit "G" attached hereto and by
reference made a part hereof (said project, as from time to time constituted by
Landlord, "North Point Center West"), together with the landscaped median strips
and shoulders of such roadways (but not including the landscaping and irrigation
system located on the shoulder of any roadway contiguous to a site upon which
construction of improvements has commenced) and any and all light systems
located
5
<PAGE> 7
on or in any rights-of-way for private roads; (ii) ad valorem taxes on any
private roadways now or hereafter located within North Point Center West and on
any medians adjacent to public roads if such medians are not included in public
road rights-of-way; (iii) the costs of ownership, operation, maintenance, repair
and replacement of office park signage for North Point Center West and any
underground sanitary sewer lines, storm water drainage lines, electric lines,
gas lines, water lines, telephone lines and communication lines located across,
through and under any public or private roadways now or hereafter located within
North Point Center West, except for any such utility facilities serving solely
another project within North Point Center West; (iv) the non-capital costs and
expenses of the transportation system and equipment from time to time provided
or made available to the developed portions of North Point Center West,
including but not limited to ad valorem taxes on personal property or equipment,
electricity, fuel, painting and cleaning costs; (v) the costs and expenses of
operation of any security patrols or services, if any, from time to time
provided to North Point Center West in general, but excluding any such security
patrols or services provided solely to another project within North Point Center
West; and (vi) the costs and expenses of operating, maintaining, repairing and
replacing water drainage, retention, detention and discharge systems and
facilities (the foregoing taxes, costs and expenses collectively referred to as
the "Non-Declaration Shared Costs"). The Non-Declaration Shared Costs shall not
include the costs of initially installing any landscaping, sprinkler systems,
irrigation systems, lighting systems or road systems (the Non-Declaration Shared
Costs shall not be deemed to include such initial costs by virtue of the
Non-Declaration Shared Costs including a reasonable reserve for the costs of
replacing any of such items or including amortization of the cost of replacement
of any such items, amortized with interest over the useful life thereof). Tenant
acknowledges and agrees that Landlord shall have the right but not the
obligation to encumber the Site and North Point Center West with one or more
declarations of easements, covenants and restrictions (collectively, the
"Declaration"), which may contain or provide for, among other items, all or any
of the matters the costs of which constitute Non-Declaration Shared Costs (in
which event, there shall thereafter be deleted from the determination of
Non-Declaration Shared Costs the costs of those matters which are provided for
in the Declaration). The Declaration may provide for certain costs and expenses
(the "Declaration Shared Costs") to be shared among the owners of the sites
comprising North Point Center West. "Shared Costs" shall mean the sum of
Non-Declaration Shared Costs and Declaration Shared Costs. Provided that the
Declaration does not include in Declaration Shared Costs the costs of initially
installing any landscaping, sprinkler systems, irrigation systems, lighting
systems or road systems (the Declaration Shared Costs shall not be deemed to
include such initial costs by virtue of the Declaration Shared Costs including a
reasonable reserve for the costs of replacing any of the foregoing specific
items or by virtue of the Declaration Shared Costs including amortization of the
cost of any replacement of the foregoing specific items, amortized with interest
over the useful life thereof), the Declaration may be executed by Landlord
without the joinder or consent of Tenant or anyone claiming by, through or under
Tenant and shall be binding on Tenant and anyone claiming by, through or under
Tenant, and the Site and this Lease and Tenant's rights hereunder shall be
subject in all respects to the Declaration. In furtherance thereof, within five
(5) days after request by Landlord, Tenant will execute in recordable form and
deliver to Landlord an acknowledgment confirming that the Site, this Lease and
Tenant's rights hereunder
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<PAGE> 8
are subject to the Declaration, but neither the delivery of such acknowledgment
to Tenant nor the failure of Tenant to execute the same shall in any way affect
or negate the fact that the Site, this Lease and Tenant's rights hereunder are
and shall be subject to the Declaration. Landlord shall have no obligation to
install or maintain any landscaping, sprinkler systems, irrigation systems or
lighting systems. Landlord shall have no obligation to provide or make available
any such security patrols or services, or to continue to provide or make
available any security patrols or services which may at any time be provided or
made available. Tenant acknowledges and agrees that the pro rata share of the
Shared Costs which are attributable to the Site shall be based upon a fraction,
the numerator of which shall be the acreage of the Site and the denominator of
which shall be the total acreage within North Point Center West (but at the
option of Landlord, excluding from such calculation those areas where storm and
surface water drainage, retention, detention and discharge systems and
facilities are installed so as to accommodate storm and surface water from more
than just a single site, including any such systems and facilities which serve a
road right-of-way). Notwithstanding anything elsewhere herein to the contrary,
the costs of certain items, such as detention facilities serving less than all
of the sites in North Point Center West and the roadways over the "Access Tract"
described in Exhibit "B" hereto shall be shared among the owners of the sites
benefitted by such facilities, based upon, with respect to a benefitted site, a
fraction, the numerator of which shall be the acreage of such benefitted site
and the denominator of which shall be the total acreage within all sites
benefitted by such facilities within North Point Center West. Such share of the
Declaration Shared Costs attributable to the Site shall be paid by Tenant to
Landlord before the same become delinquent under the Declaration and before any
interest may be added for nonpayment under the Declaration. The Site's
proportionate share of any such Shared Costs for the year in which the Term
commences and terminates or expires shall be prorated on a daily basis between
Landlord and Tenant. If Tenant fails to pay the Site's proportionate share of
any such Shared Costs when due, Landlord, without declaring a default hereunder
and without relieving Tenant of any liability hereunder, may, but shall not be
obligated to, pay any such amount (or any installment thereof) and any amount so
paid by Landlord shall constitute Additional Rent hereunder and shall be paid by
Tenant to Landlord on demand with Interest thereon in the manner provided in
Section 3.07 hereof. Tenant's obligation to pay the Site's share of such Shared
Costs which accrue during the Term shall survive any termination of this Lease.
ARTICLE IV. TAXES, ASSESSMENTS AND CHARGES
Section 4.01 Taxes and Assessments. Subject to the provisions of
Section 14.01 hereof (concerning "Permitted Contests"), Tenant covenants and
agrees to discharge and pay before the same become delinquent and before any
fine, penalty, or interest may be added for nonpayment, any and all taxes,
assessments, license or permit fees, special district or community improvement
district assessments, excises, imposts and charges of every nature and
classification (all or any one of which are hereinafter referred to as "Taxes")
that at any time during the Term are levied, assessed, charged or imposed upon
Landlord's fee simple and/or reversionary interest in the Premises, the Premises
themselves, the Improvements, this Lease, the leasehold estate of Tenant created
hereby or any Rent or Additional Rent reserved or payable hereunder (including
7
<PAGE> 9
any gross receipts or other taxes levied upon, assessed against or measured by
the Rent or Additional Rent); provided, however, Tenant shall not be obligated
to pay any municipal, state or federal income tax imposed on Landlord, and
Tenant shall not be obligated to pay any amounts levied upon Landlord as a
franchise, estate, gift, inheritance, succession or capital levy tax.
Notwithstanding the foregoing to the contrary, if at any time after the
execution of this Lease the methods of taxation prevailing at the execution of
this Lease shall be altered so that any imposition, which at the date hereof or
during the Term is or shall be levied, assessed or imposed on real estate and
the improvements thereon, is thereafter levied, assessed or imposed wholly or
partially on the rents received from real estate or the improvements thereon, or
as a tax assessment, levy or license fee (regardless of the form and regardless
of the taxing authority) upon Landlord measured by Rent and Additional Rent
payable under this Lease, then all such substitute or additional taxes,
assessments, levies or license fees shall be deemed to be included with the
meaning of the term "Taxes" for purposes hereof, and Tenant shall pay and
discharge the same as herein provided in respect of the payment of Taxes.
Landlord shall use reasonable efforts to obtain from the taxing
authorities a separate tax parcel assessment for the Premises (and Improvements
located thereon) and to cause Tenant to be named as the party to whom all such
bills and assessments should be sent. If such separate assessment shall be
obtained, Tenant shall pay the Taxes directly to the taxing authority. If such
separate assessment shall not be obtained, notwithstanding Landlord's reasonable
efforts to obtain the same, the valuation placed on the Premises and the
Improvements by the applicable taxing authority shall be used as the appropriate
standard for determining the Taxes payable by Tenant. If this valuation is not
available, Tenant shall pay a share of the Taxes included in Landlord's tax
bill, which share shall be determined in a fair and equitable manner, giving
consideration to the value of the various improvements on the real property
covered by such tax bill (Landlord and Tenant acknowledging that for the
calendar year 1998, no improvements were located on the Site as of January 1,
1998, the effective date of the tax assessment and the date as of which such
improvements value for 1998 is to be determined for purposes of allocating 1998
taxes). If the Premises are not separately assessed, Landlord shall notify
Tenant of Tenant's proportionate share of the Taxes and will furnish Tenant with
a copy of the tax bill within fifteen (15) days after receipt by Landlord
thereof. Tenant shall pay its share of the Taxes as set forth above to Landlord
not later than ten (10) days before the taxing authority's delinquency date or
ten (10) days after receipt of a bill from Landlord, whichever is later. In no
event shall Tenant be liable for interest or penalties for Landlord's failure to
pay the Taxes prior to delinquency, unless Tenant fails to timely pay its share
of such Taxes as provided above.
Section 4.02 Charges. Subject to the provisions of Section 14.01 hereof
(concerning "Permitted Contests"), Tenant covenants and agrees that it shall pay
when due all charges for all public or private utility services including, but
not limited to, water, sewer, gas, light, heat and air conditioning, telephone,
electricity, cable television, trash removal, power and other utility and
communications services (all or any one of which hereinafter referred to as
"Charges") that are rendered or become due and payable with respect to the
Premises at any time during the Term and during any period prior to the
commencement of the Term after Tenant takes possession of
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<PAGE> 10
the Premises for the construction of Improvements. Landlord and Tenant shall use
reasonable efforts to cause the applicable governmental authority providing
water service to the Premises to separately meter the water consumption at the
Premises and charge Tenant directly for such water service (and associated sewer
service). In the event the governmental authority providing water service to the
Premises is unwilling to do so, Landlord agrees that Landlord will submeter the
water consumption at the Premises, and Tenant agrees to pay the applicable
Charge for such water (and associated sewer service) to Landlord, based upon the
submetered consumption of water at the Premises and at the same rate that Tenant
would pay if such water service (and associated sewer service) were provided
directly to Tenant with respect to the Premises by the applicable governmental
authority. Tenant agrees to pay Landlord for such water service (and associated
sewer service) within fifteen (15) days after receipt by Tenant of request for
payment from Landlord (but not more frequently than monthly), which request for
payment shall be accompanied, by information regarding the submetered
consumption of water at the Premises and a copy of the most recent water and
sewer bill received by Landlord with respect to the Premises and the other real
property covered by such bill.
Section 4.03 General. To the extent that the Premises is separately
assessed as an independent tax parcel, Tenant shall prepare and file all reports
and returns required by law and governmental regulations with respect to any
Taxes and, upon Landlord's request, shall furnish copies thereof to Landlord.
Tenant shall promptly forward to Landlord copies of any bill or assessment
respecting any Taxes upon Tenant's receipt thereof from the taxing authority.
Likewise, Landlord shall promptly furnish to Tenant copies of any bill or
assessment respecting any Taxes upon Landlord's receipt thereof from the taxing
authority. Upon request of Landlord, Tenant agrees to furnish and deliver to
Landlord receipts evidencing the payment of any Taxes and/or Charges payable by
Tenant as provided in Section 4.01 and Section 4.02 hereof. If the Taxes shall
include any special assessments for improvements which may be paid in
installments, Tenant shall be obligated to pay only such installments as they
become due and shall be obligated to pay only such installments which are to
become due and payable prior to the expiration of the Term; provided, however,
that in the event this Lease is terminated prior to the scheduled expiration of
the Term as a result of Tenant's default, any and all installments which are to
become due and payable after the termination of this Lease but prior to the
scheduled expiration of the Term shall be due and payable by Tenant upon such
termination. Any Taxes for the year in which the Term commences and terminates
or expires shall be prorated on a daily basis between Landlord and Tenant. If
Tenant fails to pay any Taxes and/or Charges (or any installment thereof) when
due, Landlord, without declaring a default hereunder and without relieving
Tenant of any liability hereunder, may, but shall not be obligated to, pay any
such Taxes and/or Charges (or any installment thereof) and any amount so paid by
Landlord, together with all actual costs and expenses incurred by Landlord in
connection therewith, shall constitute Additional Rent hereunder and shall be
paid immediately by Tenant to Landlord on demand with Interest thereon in the
manner provided in Section 3.07 hereof. Tenant's obligation to pay Taxes and
Charges which accrue during the Term shall survive any termination of this
Lease.
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ARTICLE V. NET LEASE; NON-TERMINATION
Section 5.01 Net Lease. This Lease is a net lease and Rent and
Additional Rent shall be paid without notice, demand (except as expressly
provided herein in the case of certain Additional Rent), counterclaim, setoff,
recoupment, deduction or defense and, without abatement, suspension, deferment,
diminution or reduction. It is the purpose and intent of Landlord and Tenant
that Rent and Additional Rent (where payable to Landlord) shall be absolutely
net to Landlord, so that this Lease shall yield, net, to Landlord, Rent
specified in Sections 3.01 and 3.02 and Additional Rent specified in Section
3.03 hereof throughout the Term, and that all costs, expenses and obligations of
every kind and nature whatsoever relating to the Premises (except the taxes of
Landlord referred to in Section 4.01 hereof) which may arise and become due as
specified in Sections 3.04, 4.01 and 4.02 hereof or elsewhere herein during the
Term shall be paid by Tenant, and that Landlord shall be indemnified and saved
harmless by Tenant from and against the same.
Section 5.02 Non-Termination. Except as otherwise expressly provided in
this Lease, this Lease shall not terminate nor shall Tenant have any right to
terminate this Lease or be entitled to the abatement of any Rent or Additional
Rent hereunder or any reduction thereof, nor shall the obligations of Tenant
under this Lease be otherwise affected, by reason of (a) any damage to or
destruction of all or any portion of the Premises from whatever cause, (b) the
prohibition, limitation or restriction of or interference with Tenant's use of
all or any portion of the Premises, other than by Landlord in violation of
Section 18.06 hereof, or (c) the failure on the part of Landlord to perform or
comply with any term, provision or covenant of this Lease or any other agreement
to which Landlord and Tenant may be parties. Except as otherwise expressly
provided in this Lease, Tenant waives all rights now or hereafter conferred by
statute or otherwise to quit, terminate or surrender this Lease or the leasehold
estate in the Premises or any part thereof, and to any abatement, recoupment,
suspension, deferment, diminution or reduction of Rent and Additional Rent.
ARTICLE VI. USE OF THE PREMISES
Section 6.01 Use of the Premises; No Abandonment. Subject to the terms
and conditions hereof, Tenant, its successors or assigns (as permitted
hereunder), shall use and occupy the Premises only for general office purposes,
biomedical laboratories and a vivarium (including maintaining animals for
research purposes) and uses accessory and incidental thereto (hereinafter
referred to as the "Permitted Use"). Tenant also agrees to comply with the Rules
and Regulations set forth in Exhibit "E" attached hereto.
Section 6.02 Construction of the Movements. Landlord shall tender
possession of the Premises to Tenant on the Floor Ready Condition Date (as
defined in Exhibit "D"), and Tenant shall accept possession of the Premises on
such date for the performance of the Layout Work and Tenant's Work (as defined
in Exhibit "D"). The obligations of Landlord with respect to the Base
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Building Work (as defined in Exhibit "D") and the obligations of Landlord and
Tenant with respect to the Layout Work are set forth in the Work Letter attached
hereto as Exhibit "D" and by reference incorporated herein. Prior to entry onto
the Premises for the purpose of performing Layout Work or Tenant's Work, Tenant
shall furnish to Landlord evidence satisfactory to Landlord that the insurance
coverage required of Tenant pursuant to paragraph 6(d) of the Work Letter is in
effect.
"Target Date" shall mean the date one hundred fifty days after the
Anticipated Ready Date (as defined in Exhibit "D"). If Substantial Completion
(as defined in Exhibit "D") of the Base Building Work has not occurred on or
before the Target Date as a result of the negligence of Landlord, then Tenant's
sole right and remedy shall be to terminate this Lease by written notice to
Landlord at any time after the Target Date and prior to the date of Substantial
Completion of the Base Building Work.
Within thirty (30) days after the date of Substantial Completion of the
Base Building Work, Tenant shall have the right to prepare and provide to
Landlord a list of incomplete or defective Punch List Items (as defined in
Exhibit "D"), all of which shall be promptly repaired or completed (as the case
may be) by Landlord at its sole cost and expense. During the Term, Tenant shall
have the right to notify Landlord in writing of Tenant's discovery of latent
defects in the Base Building Work, all of which shall be promptly repaired or
completed (as the case may be) by Landlord at its sole cost and expense. Except
for such Punch List Items so specified by Tenant within said ninety (90) day
period, and except for such latent defects, the taking of possession by Tenant
shall be deemed conclusively to establish that Landlord's construction
obligations with respect to the Base Building Work have been completed in
accordance with the plans and specifications approved by Landlord and Tenant and
that the Premises, to the extent of Landlord's construction obligations with
respect thereto, are in good and satisfactory condition.
ARTICLE VII. COMPLIANCE WITH LAW; LIENS AND ENCUMBRANCES
Section 7.01 Compliance with Laws. Subject to the provisions of Section
14.01 hereof (concerning "Permitted Contests"), Tenant, at its sole cost and
expense, shall comply with and cause the Premises and any and all Improvements
located thereon, to comply with (a) all federal, state, county, municipal and
other governmental statutes, laws, rules, orders, regulations, ordinances or
recommendations affecting the Premises or any part thereof, or the use thereof,
including those which require "Repairs", as that term is defined in Section 8.01
hereof, or any structural changes in the Improvements whether or not any such
statutes, laws, rules, orders, regulations, ordinances or recommendations which
may hereafter be enacted involve a change of policy on the part of the
governmental body enacting the same, (b) all rules, orders and regulations of
the National Board of Fire Underwriters or other bodies exercising similar
functions and responsibilities in connection with the prevention of fire or the
correction of hazardous conditions which apply to the Premises, and (c) the
requirements of all policies of public liability, fire and other insurance which
at any time may be in force with respect to the
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Premises (all or any one of the items enumerated in this Section 7.01
hereinafter referred to as "Regulation").
Section 7.02 Tenant's Agreement Relating to Hazardous Substances.
Tenant hereby covenants that Tenant and its agents, employees and contractors
will not generate, store, use, treat or dispose of any "Hazardous Substances"
(as hereinafter defined) in, on or at the Premises or any part of the
Improvements, except for the use and storage of Hazardous Substances as are
legally used or stored (and in such amounts as are legally used or stored) as a
consequence of using the Premises for the Permitted Use, but only so long as the
quantities thereof do not pose a threat to public health or to the environment
or would necessitate a "response action", as that term is defined in CERCLA (as
hereinafter defined), and so long as Tenant strictly complies or causes
compliance with all laws, statutes, rules, orders, regulations, ordinances and
decrees concerning the use, storage or disposal of such Hazardous Substances.
Tenant further covenants that neither the Premises nor any part of the
Improvements shall ever be used by Tenant or its agents, contractors or
employees as a dump site or storage site (whether permanent or temporary) for
any Hazardous Substances during the Term (except for the storage of the limited
quantities permitted under and in strict accordance with the first sentence of
this Section 7.02). Tenant agrees that, not less than once each calendar quarter
during the Term, Tenant shall have a reputable professional environmental
engineering firm (with expertise in biomedical research) inspect the Premises
with respect to Tenant's compliance with Regulation, including without
limitation any and all laws, statutes, rules, orders, regulations, ordinances
and decrees concerning the use, storage or disposal of Hazardous Substances.
Promptly upon receipt thereof by Tenant, Tenant shall provide Landlord with
copies of all written reports and other information provided to Tenant by such
firm with respect to or in any manner connected with the use, misuse, storage or
disposal of Hazardous Substances at the Premises or Tenant's compliance as
aforesaid. Furthermore, Tenant, at Tenant's sole cost and expense, shall make
such firm [and the engineer(s) familiar with the Premises] available to talk
with Landlord (regarding Tenant, Hazardous Substances, the Premises and Tenant's
compliance as aforesaid) from time to time upon request of Landlord regarding
any such reports and information (and any other services provided by such
engineer pursuant to such engineer's contract with Tenant), but any additional
services which Landlord shall request of such engineer shall be at Landlord's
expense. Landlord acknowledges and agrees that Risk Consultants, Inc. (Tenant's
current safety engineer) is an acceptable professional environmental engineering
firm for purposes of this Section 7.02.
Tenant hereby agrees to indemnify Landlord and hold Landlord harmless
from and against any and all losses, liabilities, including strict liability,
damages, injuries, expenses, including reasonable attorneys' fees, costs of any
settlement or judgment and claims of any and every kind whatsoever paid,
incurred or suffered by, or asserted against, Landlord by any person or entity
or governmental agency for, with respect to, or as a direct or indirect result
of, the presence on or under, or the escape, seepage, leakage, spillage,
discharge, emission, discharging or release on or from, the Premises or the
Improvements of any Hazardous Substance [including, without limitation, any
losses, liabilities, including without limitation strict liability, damages,
injuries, expenses, including without limitation reasonable attorneys' fees,
costs of any settlement
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or judgment or claims asserted or arising under the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), any so called federal,
state or local "Superfund" or "Superlien" laws, or any federal, state or local
statute, law, ordinance, code, rule, regulation, order or decree regulating,
relating to or imposing liability, including strict liability, or standards of
conduct concerning any Hazardous Substance]; provided, however, that the
foregoing indemnity is limited to matters arising solely from the violation of
the covenants and agreements of Tenant during the Term (and during any period
subsequent to the expiration of the Term that Tenant remains in possession of
the Premises) contained in the preceding paragraph and excludes matters caused
by Landlord and does not extend to Hazardous Substances on the Site as of the
date Tenant first goes onto the Premises.
For purposes of this Lease, "Hazardous Substances" shall mean and
include those elements or compounds which are contained in the lists of
hazardous substances or wastes now or hereafter adopted by the United States
Environmental Protection Agency (the "EPA") or the lists of toxic pollutants
designated now or hereafter by Congress or the EPA or which are defined as
hazardous, toxic, pollutant, infectious or radioactive by CERCLA or any
Superfund law or any Superlien law or any other Federal, state or local statute,
law, ordinance, code, rule, regulation, order or decree regulating, relating to,
or imposing liability or standards of conduct concerning, any hazardous, toxic
or dangerous waste, substance or material, as now or at any time hereafter in
effect.
Landlord shall have the right but not the obligation, and without
limitation of Landlord's rights under this Lease, to enter onto the Premises or
to take such other actions as it deems necessary or advisable to clean up,
remove, resolve or minimize the impact of, or otherwise deal with, any Hazardous
Substance following receipt of any notice from any person or entity (including
without limitation the EPA) asserting the existence of any Hazardous Substance
in, on or at the Premises or any part thereof which, if true, could result in an
order, suit or other action against Tenant and/or Landlord; provided; however,
Landlord agrees that, except in the case of an emergency, Landlord will take
such action only after written notice to Tenant of the alleged existence of
Hazardous Substances and the failure by Tenant within a reasonable period of
time following receipt of such notice to commence, or the failure by Tenant to
thereafter diligently pursue to completion, the appropriate action to clean-up,
remove, resolve or minimize the impact of, or otherwise deal with, such
Hazardous Substances. All reasonable costs and expenses incurred by Landlord in
the exercise of any such rights, which costs and expenses result from the
violation of the covenants and agreements of Tenant contained in the first
paragraph of this Section 7.02, shall be deemed Additional Rent under this Lease
and shall be payable by Tenant upon demand.
This Section 7.02 shall survive cancellation, termination or expiration
of this Lease.
Section 7.03 Liens and Encumbrances. Subject to the provisions of
Section 14.01 hereof (concerning "Permitted Contests"), and except for any lien
related to the Base Building Work, Tenant shall not create or permit to be
created or to remain, and, shall promptly discharge,
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at its sole cost and expense, any lien, encumbrance or charge (all or any one of
which hereinafter referred to as "Lien") upon the Premises, or any part thereof
or upon Tenant's leasehold estate created hereby that arises from the use or
occupancy of the Premises by Tenant or by reason of any labor, service or
material furnished or claimed to have been furnished to or for the benefit of
Tenant or by reason of any construction, repairs or demolition by or at the
direction of Tenant of all or any part of the Improvements, or by reason of any
Permitted Contest under Section 14.01 hereof.
Except with respect to the Base Building Work, notice is hereby given
that Landlord shall not be liable for the cost and expense of any labor,
services or materials shed or to be furnished with respect to the Premises at or
by the direction of Tenant or anyone holding the Premises or any part thereof
by, through or under Tenant and that no laborer's, mechanic's or materialman's
or other lien for any such labor, service or materials shall attach to or affect
the interest of Landlord in and to the Premises. Nothing contained in this Lease
shall be deemed or construed in any way as constituting the consent or request
of Landlord, express or implied, by inference or otherwise, to any contractor,
subcontractor, laborer or materialman for the performance of any labor or the
furnishing of any materials for any improvements or Repairs to or of the
Premises or any part thereof, nor as giving Tenant any right, power or authority
on behalf of Landlord to contract for or permit the rendering of any services or
the furnishing of any materials that would give rise to the filing of any Lien
against the Premises or any part thereof.
If Tenant fails to discharge any Lien created or established in
violation of Tenant's covenant herein or to comply with any Regulation as
hereinabove provided, and if such failure continues for a period of twenty (20)
days after receipt by Tenant of notice of the existence of the Lien or twenty
(20) days after receipt by Tenant of notice of noncompliance with any
Regulation, and provided such Lien or Regulation is not being contested by
Tenant pursuant to Section 14.01 hereof, Landlord, without declaring a default
hereunder and without relieving Tenant of any liability hereunder, may, but
shall not be obligated to, discharge or pay such Lien (either by paying the
amount claimed to be due or by procuring the discharge of such Lien by deposit
or by bonding proceedings) or cause compliance with such Regulation, and any
amount so paid by Landlord and all costs and expenses incurred by Landlord in
connection therewith shall constitute Additional Rent hereunder and shall be
paid immediately by Tenant to Landlord upon demand by Landlord, with Interest
thereon from the date of demand by Landlord.
Section 7.04 Landlord's Agreement Relating to Hazardous Substances.
Landlord hereby represents to Tenant that: (i) to the best of Landlord's
knowledge (which knowledge for purposes of this Section 7.04 is based on
document entitled Report of Phase I Environmental Site Assessment, Georgia 400
and Haynes Bridge Road, Alpharetta, Georgia, prepared for Cousins Properties
Incorporated, dated May 6, 1992, prepared by Law Engineering, Inc., bearing Law
Engineering No. 56301938.02, a copy of which has heretofore been provided to
Tenant), the Site is free from Hazardous Substances and does not constitute an
environmental hazard of any type under local, state or federal law; (ii) to the
best of Landlord's knowledge, there are no wetlands on the Site and there are no
buried, partially buried, above-ground or other tanks, storage vessels,
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drums or containers located in or on the Site; and (iii) Landlord has received
no warning notice, notice of violation, administrative complaint, judicial
complaint or formal or informal notice alleging that conditions on the Site are
in violation of any environmental laws, regulations, ordinances or rules.
Landlord shall indemnify and hold Tenant harmless from any and all claims,
damages, fines, judgements, penalties, costs, liabilities, or losses (including
reasonable attorneys' fees, and reasonable consultant and expert fees) arising
during or after the Term as a result of (a) the breach by Landlord of the
representation made in the preceding sentence and (b) the presence, escape,
seepage, leakage, spillage, discharge, emission or release of any Hazardous
Substances on or under the Premises if caused by Landlord, its agents,
contractors or employees after the date hereof. This indemnification includes,
without limitation, any and all costs incurred because of any investigation of
the Site, any clean-up, removal or restoration mandated by a federal, state, or
local agency or political subdivision. The obligations of Landlord under this
Section 7.04 shall survive the cancellation, termination or expiration of this
Lease.
ARTICLE VIII. REPAIRS AND ALTERATIONS
Section 8.01 Maintenance and Repair. Tenant, at all times during the
Term, at its expense, shall keep the Premises, including, without limitation,
the Improvements, in good order, condition and repair and in substantially the
condition on the completion of construction, ordinary wear and tear excepted.
Tenant further agrees to be responsible for maintaining the landscaping
surrounding Tenant's building and parking area in accordance with first-class
landscape maintenance standards and for sweeping and cleaning the entrances to
the building in addition to the parking lot, sidewalks, and other improved areas
of the Premises. Tenant will provide and maintain vermin-proof receptacles for
Tenant's own use in the event refuse is temporarily stored outside of the
building, and Tenant will be responsible for the removal of said refuse and will
promptly and strictly comply with all health, sanitary or other laws,
regulations and ordinances pertaining to the depositing and removal of such
refuse from or about the Premises. Tenant shall promptly perform such
maintenance and shall promptly make or cause to be made any and all necessary or
appropriate repairs, replacements, or renewals (all or any one of which herein
referred to as "Repairs"). All Repairs shall be at least equal in quality and
class to the original work. The term "Repairs" includes, without limitation, all
necessary repairs and replacements of the Premises (including, without
limitation, the roofs, foundations, all interior and exterior walls, and all
structural and nonstructural portions of the buildings and other improvements),
structural or otherwise, ordinary or extraordinary, foreseen and unforeseen,
including but not limited to the exterior and interior windows, doors and
entrances, signs, floor coverings, columns and partitions; and lighting,
heating, plumbing and sewerage facilities, and air conditioning equipment.
Landlord shall not be required to make any Repairs of any kind or nature in, on
or to the Premises during the Term.
Section 8.02 Alterations. Except for any initial improvement of the
Premises pursuant to Exhibit "D", which shall be governed by the provisions of
said Exhibit "D", Tenant shall not make, suffer or permit to be made any
alterations, additions or improvements to or of the Premises or any part
thereof, or attach any fixtures or equipment thereto, without first obtaining
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Landlord's written consent, which consent shall not be unreasonably withheld,
conditioned or delayed; provided that Landlord's consent shall not be required
for interior, non-structural alterations which cost less than $5,000.00 and
which do not materially affect building systems (changes to electrical,
mechanical or life safety systems shall be deemed to materially affect building
systems). Any such alterations, additions or improvements to the Premises
consented to by Landlord shall, at Landlord's option, be made by Landlord or
under Landlord's supervision for Tenant's account and Tenant shall reimburse
Landlord for all costs thereof (including a reasonable charge for Landlord's
overhead), as Rent, within fifteen (15) days after receipt of a statement. All
such alterations, additions and improvements shall become Landlord's property at
the expiration or earlier termination of the Term and shall remain on the
Premises without compensation to Tenant unless Landlord elects by notice to
Tenant when Landlord's consent thereto is given, to have Tenant remove such
alterations, additions and improvements, in which event, notwithstanding any
contrary provisions respecting such alterations, additions and improvements
contained in Section 12.02 hereof, Tenant shall promptly restore, at its sole
cost and expense, the Premises to its condition prior to the installation of
such alterations, additions and improvements, normal wear and tear excepted.
Tenant shall have no obligation to remove any initial improvements to the
Premises pursuant to Exhibit "D".
ARTICLE IX. DAMAGE AND DESTRUCTION
Section 9.01 Notice. In the event of any material damage to or
destruction of all or any part of the Improvements, Tenant will promptly give
written notice thereof to Landlord, which notice shall generally describe the
nature and extent of such damage or destruction. There shall be no abatement of
or adjustment to Minimum Rent or Additional Rent under this Lease as a result of
any damage or destruction.
Section 9.02 Restoration. In the event of any damage to or destruction
of all or any part of the Improvements and whether or not the insurance proceeds
on account of such damage or destruction shall be sufficient for the purpose, or
in the event of any condemnation of the Premises of the character described in
Section 16.02 hereof and whether or not the proceeds of any award received on
account of such condemnation shall be sufficient for such purpose, Tenant, at
its sole cost and expense, shall promptly commence and shall thereafter
diligently and continuously prosecute to completion the restoration, replacement
or rebuilding of the Improvements as nearly as practicable to their value,
architectural condition and character as existed immediately prior to such
damage, destruction or condemnation so as to permit resumption of the use of the
Premises for the Permitted Use to as nearly the same degree as possible (pending
completion of the work, such restoration, replacement or rebuilding, together
with any temporary repairs and property protection, are herein collectively
referred to as "Restoration").
In the event damage to or destruction of a substantial portion of the
Improvements occurs within the last twelve (12) months of the Term, Tenant shall
have the right, at its election and in lieu of fulfilling its obligations under
this Section 9.02, to terminate this Lease upon thirty (30)
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days' prior written notice to Landlord by paying to Landlord, simultaneously
with such notice, a sum equal to all Rent and Additional Rent due from Tenant to
Landlord to such termination date, together with all insurance proceeds due on
account of any damage or destruction of the Premises or any part thereof.
Section 9.03 Application of Proceeds. Except as otherwise provided in
Section 9.02 hereof, insurance proceeds received on account of any damage to or
destruction of the Improvements or any part thereof shall be applied to pay for
the cost of Restoration. To the extent any such proceeds shall be inadequate to
pay such cost, it shall be Tenant's sole cost and obligation to pay all costs of
Restoration.
ARTICLE X. INSURANCE
Section 10.01 Classes of Insurance. Commencing on the date of this
Lease (with regard to the insurance required by subsection [b] below) and on the
date Tenant shall commence occupancy of any Improvements on the Site (with
regard to the insurance required by subsections [a] and [c] below) and at all
times thereafter through and during the Term, Tenant shall keep the Premises
insured against the risks and hazards and with coverage in amounts not less than
those specified as follows:
(a) Insurance against the risks customarily included under
"all-risks" policies with respect to improved properties similar to the
Premises in an amount equal to the "full insurable value" (which as
used herein shall mean the full replacement value, including the costs
of debris removal, which amount shall be determined annually) of the
Improvements. Tenant shall be entitled to carry a deductible of up to
$10,000.00 in connection with said coverage provided Tenant
self-insures for the amount of the deducible. Tenant hereby further
agrees that to the extent available, Tenant will obtain an "agreed
amount" endorsement with respect to such insurance so as to prevent
either Landlord or Tenant from becoming a co-insurer of any loss.
(b) Commercial general liability and property damage insurance
(including, but not limited to, coverage for any construction,
reconstruction or alteration by or at the instance of Tenant on or
about the Premises) covering the legal liability of Tenant against all
claims for any bodily injury or death of persons and for damage to or
destruction of property occurring on, in or about the Premises and the
adjoining streets, sidewalks and passageways in combined single limits
for both property damage and personal injury and in the minimum amount,
during the period from the date of this Lease to the day immediately
preceding the fifth (5th) anniversary of the Rent Commencement Date, of
Three Million and No/100 Dollars ($3,000,000.00) in connection with any
single occurrence. Tenant shall be entitled to carry a deductible of up
to $10,000.00 in connection with the said coverage provided Tenant
self-insures for the amount of the deductible. Commencing on the fifth
(5th) anniversary of the Rent Commencement Date, and continuing
thereafter on the fifth (5th) anniversary of the previous "Adjustment
Date"
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(as hereinafter defined) during the Term (each of such dates being
referred to in this Section 10.01 as an "Adjustment Date"), the
aforesaid minimum amount of insurance coverage shall be increased to
the amount equal to the initial minimum amount set forth above
increased at the rate of three percent (3%) per annum compounded on
each anniversary of the Rent Commencement Date throughout the Term.
(c) Business interruption insurance covering losses resulting
from any interruption of Tenant's business in an amount sufficient to
cover Tenant's costs of operation (including but not limited to Minimum
Rent and Additional Rent) for a period of not less than six (6) months.
Tenant's right to self-insure with respect to the deductibles under subsections
(a) and (b) of this Section 10.0 1 shall be subject to Tenant agreeing not to
hold Landlord, its agents, contractors and employees, liable for any losses,
claims and liabilities which would have been covered under such insurance.
Section 10.02 Requirements. All insurance required under Section 10.01
hereof shall be written by companies of recognized financial standing (with a
rating from Best's Insurance Reports of not less than A-/X) which are authorized
to do insurance business in the State of Georgia, shall name Landlord as an
additional insured party, shall be reasonably satisfactory to Landlord in all
respects and shall expressly provide (a) an effective waiver by the insurer of
all rights of subrogation against any named insured and against such insured's
interest in the Premises and against any income derived therefrom, (b) that no
cancellation, reduction in amount or material change in coverage thereof shall
be effective until at least twenty (20) days after receipt by Landlord and
Tenant of written notice thereof, and (c) that during construction,
reconstruction, alteration or material remodeling of any Improvements on the
Premises by Tenant such policies shall be in "builder's risk" form if there
would be an exclusion of coverage under Tenant's all-risks policy as a result of
such construction, reconstruction, alteration or material remodeling. A copy of
each policy or of an acceptable certificate of insurance in force, issued by the
insurer as provided in Section 10.01 hereof, shall be delivered to Landlord on
or before the date Tenant is required to obtain the applicable insurance, and
with respect to renewal or replacement policies, not less than twenty (20) days
prior to expiration of the policy being renewed or replaced. Tenant may obtain
the insurance required hereunder by endorsement on its blanket insurance
policies, provided that said policies fulfill the requirements of this Section
10.02, that said policies reference the Premises, and that Landlord receives
satisfactory written proof of coverage. Tenant shall permit Landlord to examine
all policies evidencing the insurance required to be maintained by Tenant under
this Lease. Nothing contained in this Lease shall be construed to require
Landlord to prosecute any claim against any insurer or to contest any settlement
proposed by any insurer. To the extent of the amount of insurance or
self-insurance required to be maintained by Tenant (but in no event in excess of
the fullest extent permitted under O.C.G.A. Section 13-8-2), Tenant hereby
releases Landlord, its agents and employees from any liability for damage to
property or injury to persons, regardless of the cause of such damage or injury.
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Section 10.03 Certificates. Within fifteen (15) days after receipt of
written request from Landlord (but in no event more often than twice annually),
Tenant shall deliver to Landlord a certificate addressed to Landlord, signed by
Tenant, and dated within (30) days prior to the delivery thereof which lists the
insurers and policy numbers evidencing all the insurance then required to be
maintained by Tenant hereunder, and which warrants that said insurance is in
full force and effect and that such insurance and the policies evidencing the
same comply with the requirements of this Lease. In the event that Tenant fails
to obtain, maintain or renew any insurance provided for in this Article X or to
pay the premiums therefor, or to deliver to Landlord any of such certificates,
Landlord may, but shall not be obligated to, procure such insurance, pay the
premiums therefor or obtain such certificates and any costs or expenses incurred
by Landlord for such purposes shall be Additional Rent hereunder and shall be
immediately paid by Tenant to Landlord upon demand by Landlord, with Interest
thereon from the date of demand by Landlord.
ARTICLE XI. INDEMNIFICATION
Section 11.01 Indemnification. Tenant covenants and agrees to pay,
defend, indemnify and save harmless Landlord from and against any and all
liability, loss, damage, cost, expense (including without limitation all
attorneys' fees and expenses of Landlord), causes of action, suits, claims,
demands or judgments of any nature whatsoever based upon, arising from or
connected in any manner with (a) injury to or the death of any person or damage
to any property occurring on the Premises, (b) the use, non-use, condition,
possession, construction, operation, maintenance, management or occupation of
the Premises or any part thereof, (c) any negligence or intentional misconduct
on the part of Tenant or its agents, contractors, servants, employees, licensees
or invitees or (d) the violation by Tenant of any term, condition or covenant of
this Lease or of any contract, agreement, restriction, or Regulation affecting
the Premises or any part thereof or the ownership, occupancy or use thereof. If
any action or proceeding should be brought against Landlord based upon any such
claim and if Tenant, upon notice from Landlord, shall cause such action or
proceeding to be defended at Tenant's expense by counsel reasonably satisfactory
to Landlord, without any disclaimer of liability by Tenant in connection with
such claim, Tenant shall not be required to indemnify Landlord for attorneys'
fees and expenses in connection with such action or proceeding. The agreement of
indemnification set forth in this Section 11.01 shall not extend to claims for
damages arising out of bodily injury to persons or damage to property caused by
or resulting from the negligence or willful misconduct of Landlord, its agents
or employees, unless such claims are covered by the insurance required to be
maintained by Tenant hereunder or would be covered by such insurance had Tenant
not elected to self-insure pursuant to Section 10.01 hereof. The obligations of
Tenant under this Section 11.01 shall commence to accrue on the date Tenant or
its agents, contractors or employees shall first go onto the Premises to inspect
or test same or perform work thereon and with respect to any such matters
occurring prior to the termination of this Lease, and shall survive any
termination of this Lease.
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ARTICLE XII. OWNERSHIP OF IMPROVEMENTS
Section 12.01 Title to Improvements. Title to any portion of the
Improvements constructed by Tenant shall, during the Term, be in Tenant, but
notwithstanding such title, the terms and conditions of this Lease shall govern
the construction, use, and operation of the Improvements and the exercise of
Tenant's rights with respect thereto; and Tenant's right, title, interest, and
estate in and to the Improvements shall not be separable from the leasehold
estate granted Tenant hereunder. Except for termination pursuant to Section 9.02
hereof, upon the termination or expiration of this Lease, title to all
Improvements shall vest in and become the full and absolute property of Landlord
without need of any further action being taken by Tenant or Landlord, and Tenant
shall immediately surrender possession of the Improvements upon such termination
or expiration as provided in Section 12.02 hereof. The value or cost of any
Improvements constructed by Tenant shall not in any way constitute a substitute
for or a credit against any obligation of Tenant under this Lease to pay Rent or
Additional Rent.
Section 12.02 Surrender. Upon any termination of this Lease, Tenant
shall peaceably quit and surrender the Premises, and any and all built-in or
attached machinery and equipment (other than trade fixtures) constructed,
installed or placed by Tenant thereon, to Landlord in good order and condition,
ordinary wear and tear excepted. In the event Tenant is not then in default
under this Lease, Tenant shall have the right upon a termination of this Lease
to remove from the Premises all furniture, inventory, trade fixtures, signs (but
not any pylon or monument) or other personal property of Tenant; provided,
however, that Tenant shall repair, at its sole cost and expense, any damage to
the Premises or to the Improvements caused by such removal. In no event shall
any built-in or attached machinery and equipment (other than trade fixtures)
used in and necessary to the operation of the Improvements be removed by Tenant
unless same is promptly replaced with comparable or better such machinery or
equipment or unless same is damaged and is removed by Tenant pursuant to Section
9.02 hereof.
ARTICLE XIII. ASSIGNMENT AND SUBLETTING; NONSUBORDINATION TO LEASEHOLD
MORTGAGING
Section 13.01 Assignment and Subletting; Prior Consent. Except as
herein provided, neither this Lease nor the interest of Tenant in this Lease or
in the Premises, or any part thereof, shall be sold, assigned or otherwise
transferred by Tenant, whether by operation of law or otherwise, and the
Premises shall not be sublet in whole or in part, without the express prior
written consent of Landlord. Neither this Lease nor the interest of Tenant in
this Lease or in the Premises, or any part thereof, shall be mortgaged, pledged
or hypothecated by Tenant without the express prior written consent of Landlord.
The transfer of any voting capital stock of Tenant or the voting
capital stock of any corporate entity which directly or indirectly controls
Tenant or any interest in any non-corporate entity which directly or indirectly
controls Tenant, which transfer results in a change in the direct
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or indirect voting control of Tenant (whether such transfer occurs at one time
or at intervals so that, in the aggregate, such a transfer shall have occurred)
shall be deemed to be an assignment prohibited by the provisions of this Section
13.01. The preceding sentence shall not apply to, and Tenant shall not be in
default under this Section 13.01 as a result of, an offering of voting stock to
the public pursuant to a registered securities offering, the transfer of voting
stock on a national securities exchange or through the NASDAQ national market
system, the transfer of voting stock to Tenant's employees pursuant to a bona
fide employee stock ownership plan or other bona fide arrangement with one or
more employees, or any transfer of Tenant's voting stock by gift, bequest or
inheritance.
Should Tenant desire to assign this Lease or any right or interest
herein (including, without limitation, in connection with any mortgage, pledge
or encumbrance of Tenant's interest herein as security for a debt) or sublet the
Premises or any part thereof and such assignment or sublease requires Landlord's
prior consent hereunder, Tenant shall give Landlord written notice of such
desire, which notice shall contain (i) the name and address of the proposed
subtenant or assignee and its form of organization, (ii) information regarding
the experience of such proposed subtenant or assignee, (iii) the material terms
and conditions of the proposed sublease or assignment (including, without
limitation, the financial terms of such proposed subletting or assignment and
the proposed commencement date of the proposed sublease or assignment), (iv) in
the case of a proposed assignment, financial statements for the (3) most
recently completed fiscal years of the proposed assignee and such other
financial information as Landlord shall reasonably request (or if the proposed
assignee has not been extant for at least three [3] years, such financial
statements as are available), and (v) a description of any proposed remodeling
or renovation to the Improvements to be conducted by the proposed assignee or
subtenant, together with the request that Landlord approve such assignment or
sublease (which request shall contain a statement that in the event the proposed
sublease or assignment is not approved or disapproved by Landlord in writing to
Tenant within fifteen [15] days following receipt of such request, the proposed
sublease or assignment shall be deemed approved). Landlord shall have a period
of fifteen (15) days following receipt of such written notice within which to
notify Tenant in writing that Landlord elects either (a) to deny Tenant the
right to consummate such sublease or assignment or (b) permit Tenant to assign
this Lease or sublet the Premises. The failure of Landlord to notify Tenant in
writing of such election within the fifteen (15) day period described above
shall be deemed approval of such proposed assignment or sublease.
Any consent given by Landlord to any sale, assignment, mortgage,
pledge, hypothecation or other transfer or subletting shall apply only to the
specific action thereby authorized and shall not relieve Tenant or any approved
successor of Tenant from the requirement of obtaining the prior written consent
of Landlord to any further transfer or subletting. No consent by Landlord to any
assignment of this Lease or of Tenant's interest under this Lease or in the
Premises, or any part thereof, or to any sublease shall be effective unless and
until there shall have been delivered to Landlord a written agreement, in a form
reasonably acceptable to Landlord, executed by Tenant and the proposed assignee
or subtenant, as the case may be, wherein and whereby any
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assignee legally binds itself to pay the Rent and Additional Rent due under this
Lease and to observe and perform all of the other terms, conditions and
provisions of this Lease on the part of Tenant to be observed or performed, and
any subtenant acknowledges the right of Landlord to continue or terminate any
sublease, in Landlord's sole discretion, upon termination of this Lease, and
such subtenant agrees to recognize and attorn to Landlord in the event that
Landlord elects to continue such sublease.
Any person who shall, by operation of law or otherwise, become an
assignee of this Lease or become vested with a leasehold interest hereunder
shall be bound by and be liable upon all the terms, covenants, provisions and
conditions contained in this Lease during the Term, whether or not of the nature
of covenants ordinarily running with the land, but neither Tenant nor any
subsequent Tenant whose interest is assigned or divested shall be relieved of
liability hereunder other than by an express release from liability executed in
writing by Landlord. Likewise, no course of dealing with any assignee, any other
party vested with a leasehold interest hereunder, or any sublessee shall release
or relieve Tenant from liability under this Lease.
Notwithstanding the provisions above to the contrary, Tenant shall have
the right, upon prior notice to Landlord, but without Landlord's prior written
consent, to assign this Lease to any parent corporation of which Tenant is a
direct or indirect wholly-owned subsidiary, to any direct or indirect
wholly-owned subsidiary of Tenant or to any wholly-owned subsidiary of any
parent corporation of which Tenant is a direct or indirect wholly-owned
subsidiary, provided that (i) no such assignment shall be deemed to release
Tenant from its obligation to observe and perform all of the terms, covenants
and provisions on Tenant's part to be observed and performed under this Lease;
and (ii) any assignee must execute and deliver to Landlord a written assumption
agreement for the benefit of Landlord, in a form reasonably acceptable to
Landlord, whereby such assignee legally binds itself to pay the Rent and
Additional Rent due under this Lease and to observe and perform all of the other
terms, conditions and provisions of this Lease on the part of Tenant to be
observed or performed.
Also notwithstanding the provisions above to the contrary, Tenant shall
have the right to assign this Lease or sublease the Premises without the consent
of Landlord but with prior notice to Landlord, (i) to any corporation pursuant
to a deemed assignment resulting from a merger, consolidation, or share exchange
in which Tenant is not the surviving corporation so long as the corporation into
which tenant is merged or consolidated or the corporation surviving such share
exchange has a net worth after such combination, at least equal to the net worth
of Tenant prior to such combination; or (ii) to any other entity financed by
Alliance Technology Ventures; provided, however, that as a condition to any such
assignment of this Lease without the consent of Landlord, the assignee properly
executes and delivers to Landlord a written assumption agreement for the benefit
of Landlord, in a form reasonably acceptable to Landlord, whereby such assignee
legally binds itself to pay the Rent and Additional Rent due under this Lease
and to observe and perform all of the other terms, conditions and provisions of
this Lease on the part of Tenant to be observed or performed. Tenant covenants
that it will not effect a merger, consolidation or share exchange in which
Tenant is not the surviving corporation or sell or
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otherwise dispose of all or substantially all of its assets unless there shall
be compliance with all of the foregoing provisions of this paragraph and unless
the written assumption agreement referred to in this paragraph shall have been
delivered to Landlord.
As evidence and proof of the net worth of the proposed assignee as
provided in the preceding paragraph of this Section, Tenant shall provide
Landlord with recent certified financial statements of such assignee at least
fifteen (15) days prior to the effective date of such assignment. Financial
statements of such assignee must be certified (without material qualification)
by a national or regional firm of certified public accountants as having been
prepared in accordance with generally accepted accounting principles and as
presenting fairly the financial condition of such assignee. Such audited
financial statements shall be prepared as of a date not more than fifteen (15)
months prior to the date of delivery of the same to Landlord; provided, however,
that if such financial statements have been prepared as of a date more than six
(6) months prior to such date of delivery, they shall be accompanied by
unaudited financial statements of such assignee prepared as of a date not more
than sixty (60) days prior to such date of delivery and certified by the chief
financial officer (or comparable person) of such assignee as having been
prepared in accordance with generally accepted accounting principles and as
presenting fairly the financial condition of such assignee.
Landlord agrees that Landlord will not unreasonably withhold, delay or
condition the consent required of Landlord to any proposed assignment of this
Lease or sublease of the Premises (when such consent is required hereunder);
provided, however, in exercising such right of consent to an assignment or
subletting pursuant to this Section 13.01, Landlord shall be entitled to take
into account any factor or factors relevant to such decision, including but not
necessarily limited to the financial strength of the proposed assignee or
sublessee, including the adequacy of its working capital, the experience of the
proposed assignee or sublessee with respect to the successful operation of its
business and the reputation of the proposed assignee or sublessee for ethical
business practices. As a condition to any such assignment of this Lease with the
consent of Landlord, the assignee shall properly execute and deliver to Landlord
a written assumption agreement for the benefit of Landlord, in a form reasonably
acceptable to Landlord, whereby such assignee legally binds itself to pay the
Rent and Additional Rent due under this Lease and to observe and perform all of
the other terms, conditions and provisions of this Lease on the part of Tenant
to be observed or performed. Neither Tenant nor any subsequent tenant whose
interest is assigned or divested shall be relieved of liability under this Lease
other than by an express release from liability executed in writing by Landlord.
In the event a dispute shall arise as to whether Landlord has
unreasonably withheld or denied its consent to any proposed assignment or
subletting pursuant to the preceding paragraph, such dispute shall be resolved
by arbitration as provided in Section 18.24 of this Lease. In no event shall
Landlord be liable for any damages to Tenant as a result of the withholding or
denial of any such consent, whether or not such withholding or denial by
Landlord is determined to be unreasonable and whether or not such withholding or
denial shall result in the loss of a prospective assignment or sublease, it
being agreed by the parties hereto that Tenant's sole
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recourse in the event of an unreasonable withholding or denial is to obtain a
determination through arbitration that such withholding or denial is
unreasonable.
One-half (1/2) of any consideration, in excess of the Minimum Rent,
Additional Rent and other charges and sums due and payable by Lessee under this
Lease, paid to Tenant by any assignee of this Lease for its assignment, or by
any sublessee under or in connection with its sublease, or otherwise paid to
Tenant by another party for use and occupancy of the Premises or any portion
thereof, shall be promptly remitted by Tenant to Landlord as Additional Rent
hereunder.
ARTICLE XIV. RIGHT TO CONTEST
Section 14.01 Permitted Contests. Tenant, at its sole cost and expense,
may contest by appropriate legal proceedings conducted in good faith and with
due diligence (individually, a "Permitted Contest", any two or more,
collectively, "Permitted Contests") the amount, validity or application, in
whole or in part, of any Taxes or Charges referred to in Section 4.01 and
Section.4.02 hereof, any Regulation referred to in Section 7.01 hereof or any
Lien referred to in Section 7.03 hereof; provided, however, that (a) Tenant
shall give Landlord prior written notice of each such contest, (b) Tenant shall
first make all contested payments (under protest if it desires) unless such
proceeding shall suspend the collection thereof from Landlord and from Rent
under this Lease or from the Premises, (c) no part of the Premises or any
interest therein or the Rent under this Lease shall be subjected thereby to
sale, forfeiture, foreclosure or interference, (d) Landlord shall not be exposed
thereby to any civil or criminal liability for failure to comply with any
Regulation and the Premises shall not be subject to the imposition of any Lien
as a result of such failure, and (e) Tenant shall have furnished any security
required in such proceeding or under this Lease or reasonably requested by
Landlord to ensure payment of any Taxes, Charges, Lien or compliance with any
Regulation. Landlord agrees to cooperate with Tenant in any Permitted Contest so
long as the cost and expense of such cooperation is paid by Tenant. Tenant
agrees that it shall pay, and save Landlord harmless from and against, any and
all losses, judgments, decrees and costs (including all attorneys' fees and
expenses) in connection with any Permitted Contest and that, promptly after the
final determination of every Permitted Contest, Tenant shall fully pay and
discharge the amounts which shall be levied, assessed, charged or imposed or be
determined to be payable therein, together with all penalties, fines, interest,
costs and expenses resulting therefrom and shall promptly comply with any
Regulation under which compliance is required therein.
ARTICLE XV. DEFAULT
Section 15.01 Events of Default. The occurrence of any of the following
acts, events or conditions, notwithstanding the pendency of any proceeding which
has or might have the effect of preventing Tenant from complying with the terms,
conditions or covenants of this Lease, shall constitute an "Event of Default"
under this Lease:
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(a) The Rent, Additional Rent or any other sum of money
payable under this Lease is not paid when due and such failure shall
continue for ten (10) days after written notice of such failure of
payment; provided, however, such notice and such grace period
shall be required to be provided by Landlord and shall be accorded
Tenant, if necessary, only two (2) times during any twelve (12)
consecutive month period of the Term, and an Event of Default shall be
deemed to have immediately occurred upon the third (3rd) failure by
Tenant to make a timely payment as aforesaid within any twelve (12)
consecutive month period of the Term, it being intended by the parties
hereto that such notice and such grace period shall protect against
infrequent unforeseen clerical errors beyond the control of Tenant, and
shall not protect against Tenant's lack of diligence or planning in
connection with its obligations to make timely payment of Rent,
Additional Rent and other amounts due hereunder,
(b) The failure or refusal of Tenant, at any time during the
Term, to fulfill or perform any other covenant, agreement or obligation
of Tenant hereunder if such failure or refusal shall continue without
correction for a period of (30) consecutive calendar days from and
after notice thereof to Tenant, provided that if such covenant,
agreement or obligation shall be of such nature that it can be
fulfilled or performed and if Tenant in good faith commences to fulfill
or perform same within said (30) day period, but due to the nature of
same it could not be reasonably fulfilled or performed within said
thirty (30) day period exercising due diligence, an Event of Default
shall not be deemed to have occurred if Tenant is then diligently
pursuing the fulfillment or performance of the covenant, agreement or
obligation and shall thereafter continuously and diligently proceed
therewith until completion;
(c) The initiation of any proceeding whereupon the estate or
interest of Tenant in the Premises, or any portion thereof, or in this
Lease is levied upon or attached if such proceeding is not vacated,
discharged or bonded within thirty (30) days after the date of such
levy or attachment;
(d) The entry of any decree or order for relief by a court
having jurisdiction in the Premises in respect of Tenant or any
guarantor of Tenant's obligations ("Guarantor") in an involuntary case
under the federal bankruptcy laws, as now or hereafter constituted, or
any other applicable federal or state bankruptcy, insolvency or other
similar law, or the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or similar official) of Tenant or any
Guarantor or for any substantial part of the assets of Tenant or any
Guarantor, or the entry of any decree or order with respect to winding
up or liquidation of the affairs of Tenant or any Guarantor, if any
such decree or order continues unstayed and in effect for a period of
sixty (60) consecutive days;
(e) The commencement by Tenant or any Guarantor of a voluntary
case under the federal bankruptcy laws, as now or hereafter
constituted, or any other applicable federal or state bankruptcy,
insolvency or other similar law, or the consent by Tenant or
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any Guarantor to the appointment of or possession by a receiver,
liquidator, assignee, trustee, custodian, sequestrator (or other
similar official) of Tenant or any Guarantor or for any substantial
part of the assets of Tenant or such Guarantor, or any assignment made
by Tenant or any Guarantor for the benefit of creditors;
(f) Any attempt by Tenant to make any sale, assignment,
mortgage, pledge, hypothecation or other transfer of this Lease or any
interest of Tenant hereunder or in the Premises or to sublet the
Premises without full compliance with any and all requirements therefor
set forth in Section 13.01 of this Lease; or
(g) The failure of Tenant to fulfill or perform Tenant's
covenants, agreements and obligations set forth in Section 18.01 of
this Lease; or
Section 15.02 Remedies. Upon the occurrence of an Event of Default
Landlord shall have the option to do and perform any one or more of the
following in addition to, and not in limitation of, any other remedy or right
permitted it by law or in equity or by this Lease:
(a) Landlord, with or without terminating this Lease, may
perform, correct or repair any condition which shall constitute a
failure on Tenant's part to keep, observe, perform, satisfy, or abide
by any term, condition, covenant, agreement, or obligation of this
Lease, and Landlord may reenter the Premises for such purposes, and
Tenant shall fully reimburse and compensate Landlord on demand for all
costs and expenses incurred by Landlord in such performance, correction
or repair, including, without limitation accrued interest as provided
in the next sentence. All sums so expended to cure Tenant's default
shall accrue Interest from the date of demand until date of payment at
the rate specified in Section 3.03 hereof.
(b) Landlord, with or without terminating this Lease, may
immediately or at any time thereafter demand in writing that Tenant
vacate the Premises and thereupon Tenant shall vacate the Premises and
remove therefrom all property thereon belonging to or placed on the
Premises by, at the direction of, or with consent of Tenant within
three (3) business days of receipt by Tenant of such notice from
Landlord, whereupon Landlord shall have the right to reenter and take
possession of the Premises. Any such demand, reentry and taking
possession of the Premises by Landlord shall not of itself constitute
an acceptance by Landlord of a surrender of this Lease or of the
Premises by Tenant and shall not of itself constitute a termination of
this Lease by Landlord.
(c) Landlord, with or without terminating this Lease, may
immediately or at any time thereafter reenter the Premises and remove
therefrom Tenant and all property belonging to or placed on the
Premises by, at the direction of, or with consent of Tenant. Any such
reentry and removal by Landlord shall not of itself constitute an
acceptance by Landlord of a surrender of this Lease or of the Premises
by Tenant and shall not of itself constitute a termination of this
Lease by Landlord.
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(d) Landlord, with or without terminating this Lease, may
immediately or at any time thereafter relet the Premises or any part
thereof for such term or terms (which may be for a term extending
beyond the Term), at such rental or rentals and upon such other terms
and conditions as Landlord in its sole discretion may deem advisable,
and Landlord may make any alterations, redecorations or repairs to the
Premises which it may deem reasonably necessary or proper to facilitate
such reletting; and Tenant shall pay all costs of such reletting
including but not limited to the reasonable cost of any such
alterations, redecorations and repairs made to the Premises, reasonable
attorneys' fees, reasonable brokerage commissions and lease
assumptions; and if this lease shall not have been terminated, Tenant
shall continue to pay all Minimum Rent, Additional Rent and all other
charges due under this Lease up to and including, without limitation,
the date of beginning of payment of rent by any subsequent tenant of
part or all of the Premises, and thereafter Tenant shall pay monthly
during the remainder of the Term the difference, if any, between the
rent and other charges collected from any such subsequent tenant or
tenants and the Minimum Rent, Additional Rent and other charges
reserved in this Lease, but Tenant shall not be entitled to receive any
excess of any such rents collected over the Minimum Rent and Additional
Rent reserved herein.
(e) Landlord may immediately or at any time thereafter
terminate this Lease, and this Lease shall be deemed to have been
terminated upon receipt by Tenant of written notice of such
termination. Upon such termination, Landlord shall recover from Tenant
all arrearages in Rent, costs, charges, Additional Rent, assessments,
and reimbursements, the cost (including, without limitation, court
costs and attorneys' fees) of recovering possession of the Premises,
the cost of any alteration or redecoration of or repair to the Premises
and Improvements which is necessary or proper to prepare the same for
reletting and, in addition thereto, Landlord may declare to be due and
payable immediately, the then present value (calculated with a discount
factor of eight percent [8%] per annum) of the difference between (x)
the entire amount of Rent, Additional Rent and other charges and
assessments which in Landlord's reasonable determination would become
due and payable during the remainder of the Term (in the absence of the
termination of this Lease), and (y) the then fair market rental value
of the Premises for the reminder of the Term. Upon the acceleration of
such amounts, Tenant agrees to pay the same at once, in addition to all
Rent, costs, charges, Additional Rent, assessments, and reimbursements
theretofore due; provided, however, that such payment shall not
constitute a penalty or forfeiture, but shall constitute liquidated
damages for Tenant's failure to comply with the terms and provisions of
this Lease (Landlord and Tenant agreeing that Landlord's actual damages
in such event are impossible to ascertain and that the amount set forth
above is a reasonable estimate thereof).
Section 15.03 Reentry by Landlord. If Landlord reenters the Premises or
terminates this Lease pursuant to any of the provisions of this Lease, Tenant
hereby waives all claims for damages which may be caused by such reentry or
termination by Landlord. Tenant shall and
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does hereby agree to indemnify and hold Landlord harmless from any loss, cost
(including, without limitation, court costs and attorneys' fees), or damages
suffered by Landlord by reason of such reentry or termination. No such reentry
or termination shall be considered or construed to be a forcible entry. No
reentry or taking possession of the Premises by Landlord or any other action
taken by or on behalf of Landlord shall be construed to be an acceptance of a
surrender of this Lease or an election by Landlord to terminate this Lease.
Section 15.04 General. No course of dealing between Landlord and Tenant
or any failure or delay on the part of Landlord in exercising any rights of
Landlord under Section 15.02 hereof or under any other provisions of this Lease
shall operate as a waiver of any rights of Landlord hereunder, at law or in
equity or under any other provisions of this Lease, nor shall any waiver of an
Event of Default on one occasion operate as a waiver of any subsequent Event of
Default or of any other Event of Default. No express waiver shall affect any
condition, covenant, rule, or regulation other than the one specified in such
waiver and that one only for the time and in the manner specifically stated. The
exercise by Landlord of any one or more of the rights and remedies provided in
this Lease shall not prevent the subsequent exercise by Landlord of any one or
more of the other rights and remedies herein provided. All remedies provided for
in this Lease are cumulative and may, at the election of Landlord, be exercised
alternatively, successively, or in any other manner and are in addition to any
other rights provided for or allowed by law or in equity.
Section 15.05 Landlord's Lien on Personalty. Any provision contained in
Section 12.01 hereof or elsewhere in this Lease to the contrary notwithstanding,
and in addition to and not in lieu of any other right, power or remedy of
Landlord provided in this Lease, upon any Event of Default and for so long as
such Event of Default continues uncured, and whether or not this Lease shall
have been terminated pursuant to Section 15.02 hereof, to the fullest extent
permitted by law, Landlord shall have, and shall be deemed to have, and is
hereby granted by Tenant a prior lien upon and security title in and to all of
Tenant's right, title and interest in and to all improvements, machinery,
equipment and personalty of any kind or nature whatsoever now or hereafter
constructed, installed or placed by Tenant upon the Premises, and all articles
in replacement or substitution therefor, and none of the same shall be removed
from the Premises by Tenant or by any other person without the prior written
consent of Landlord. Upon request by Landlord, Tenant shall promptly execute and
deliver such other instruments or writings as may be necessary or desirable to
secure to Landlord all of Tenant's right title, interest in and to all
improvements, machinery, equipment and personalty.
ARTICLE XVI. CONDEMNATION
Section 16.01 Total Condemnation. If all or part of the Premises shall
be taken for any public or quasi-public use by virtue of the exercise of the
power of eminent domain or by private purchase in lieu thereof, this Lease shall
terminate as to the part so taken as of the date of taking, and, in the case of
a partial taking, either Landlord or Tenant shall have the right to terminate
this Lease as to the balance of the Premises by written notice to the other
within thirty (30) days after
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such date; provided, however, that a condition to the exercise of such right to
terminate shall be that the portion of the Premises taken shall be of such
extent and nature as substantially to handicap, impede or impair Tenant's use of
the balance of the Premises. If title to so much of the Building is taken that a
reasonable amount of reconstruction thereof will not in Landlord's reasonable
judgment result in the Building being a practical improvement and reasonably
suitable for use for the purpose for which it is designed, then this Lease shall
terminate on the date that the condemning authority actually takes possession of
the part so condemned or purchased.
In the event a dispute shall arise as to whether Landlord was
reasonable in Landlord's judgment regarding the Building, after a reasonable
amount of reconstruction, being a practical improvement and reasonably suitable
for use for the purpose for which it was designed pursuant to the preceding
paragraph, such dispute shall be resolved by arbitration as provided in Section
18.24 of this Lease. In no event shall Landlord be liable for any damages to
Tenant as a result of such judgment of Landlord, whether or not such judgment of
Landlord is determined to be unreasonable, it being agreed by the parties hereto
that Tenant's sole recourse is to obtain a determination through arbitration
that such judgment is unreasonable.
If this Lease is terminated under the provisions of this Section 16.01,
Rent shall be apportioned and adjusted as of the date of termination. Tenant
shall have no claim against Landlord or against the condemning authority for the
value of any leasehold estate or for the value of the unexpired Term provided
that the foregoing shall not preclude any claim that Tenant may have against the
condemning authority for the unamortized cost of leasehold improvements, to the
extent the same were installed at Tenant's expense (and not with the proceeds of
the Improvement Allowances), or for loss of business, moving expenses or other
consequential damages, in accordance with Section 16.03 below.
Section 16.02 Partial Condemnation. If there is a partial taking of the
Improvements and this Lease is not thereupon terminated under the provisions of
Section 16.01, then this Lease shall remain in full force and effect, and
Landlord shall, within a reasonable time thereafter, repair or reconstruct the
remaining portion of the Improvements (other than those alterations, additions,
or improvements for which Landlord's consent was required under Section 8.02 and
was not obtained) as nearly as reasonably possible to their condition prior to
the partial condemnation; provided that in complying with its obligations
hereunder Landlord shall not be required to expend more than the net proceeds of
the condemnation award which are paid to Landlord; further provided, however,
that with respect to those alterations, additions or improvements under Section
8.02 which did not require Landlord's consent or for which Landlord's consent
was obtained, Landlord's obligation shall be limited to the condemnation
proceeds obtained by Tenant therefor and made available to Landlord for such
reconstruction.
Section 16.03 Awards. All compensation awarded or paid to Landlord upon
a total or partial taking of the Premises or the Improvements shall belong to
and be the property of Landlord (subject to the obligations of Landlord under
Section 16.02) without any participation by Tenant. Nothing herein shall be
construed to preclude Tenant from prosecuting any claim
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directly against the condemning authority for loss of business, for damage to,
and cost of removal of, trade fixtures, furniture and other personal property
belonging to Tenant, and for the unamortized cost of leasehold improvements to
the extent same were installed at Tenant's expense (and not with the proceeds of
the Improvement Allowances), provided, however, no such claim shall diminish or
adversely affect Landlord's award. In no event shall Tenant have or assert a
claim for the value of any unexpired term of this Lease. Subject to the
foregoing provisions of this Section 16.03, Tenant hereby assigns to Landlord
any and all of its right, title and interest in or to any compensation awarded
or paid as a result of any such taking.
Section 16.04 General. Notwithstanding anything to the contrary
contained in this Article XVI, if, during the Term, the use or occupancy of any
part of the Improvements or the Premises shall be taken or appropriated
temporarily for any public or quasi-public use under any governmental law,
ordinance, or regulations, or by right of eminent domain, this Lease shall be
and remain unaffected by such taking or appropriation and Tenant shall continue
to pay in full all Rent payable hereunder by Tenant during the Term. In the
event of any such temporary appropriation or taking, Tenant shall be entitled to
receive that portion of any award which represents compensation for the loss of
use or occupancy of the Premises during the Term, and Landlord shall be entitled
to receive that portion of any award which represents the cost of restoration
and compensation for the loss of use or occupancy of the Premises after the end
of the Term.
ARTICLE XVII. BROKERAGE PROVISIONS
Section 17.01 Brokers. Landlord and Tenant represent and warrant that
no broker, commission agent, real estate agent or salesman has participated in
the negotiation of this Lease, its procurement or in the procurement of Landlord
or Tenant except Carter & Associates, L.L.C. ("Broker"), whose fees and
commissions shall be paid by Landlord pursuant to a separate agreement between
Landlord and Broker. No other person, firm, corporation or other entity is or
shall be entitled to the payment of any fee, commission, compensation or other
form of remuneration in connection herewith in any manner. Landlord shall and
does hereby indemnify and agree to hold Tenant harmless from and against any
claims, demands, actions and judgments of any and all brokers, agents and other
intermediaries alleging a commission, fee or other payment to be owing by reason
of Landlord's dealings, negotiations or communications in connection with this
Lease or the demise of the Premises. Likewise, Tenant shall and does hereby
indemnify and agree to hold Landlord harmless from and against any claims,
demands, actions and judgments of any and all brokers, agents and other
intermediaries (other than Broker) alleging a commission, fee or other payment
to be owing by reason of Tenant's dealings, negotiations or communications in
connection with this Lease or the demise of the Premises. The terms of this
Section 17.01 shall survive any termination of this Lease.
ARTICLE XVIII. MISCELLANEOUS
Section 18.01 Warrants. On or before the date which is (30) days after
the execution date of this Lease, Tenant shall (a) take such actions as shall be
required to cause there to be
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authorized a new series of preferred stock of Tenant to be denominated the
"Series C Convertible Preferred" (the "Series C Stock") and reserve for issuance
upon exercise of the Warrant (as herein defined) an aggregate of 50,000 shares
of the Series C Stock; and (b) issue to Landlord or Landlord's designee a
warrant (the "Warrant"), exercisable in whole or in part from time to time after
January 1, 1999, and on or before the date which is ten years after the issuance
date of the Warrant, to purchase 50,000 shares of the Series C Stock at an
exercise price of $5.00 per share and on such other terms and conditions as
shall be herein prescribed. In the event Tenant consummates an initial public
offering of its common equity prior to the expiration or exercise in full of the
Warrant, the Warrant shall as of the day next preceding the closing of such
public offering, become exercisable for that number of shares of Tenant's common
stock into which the Series C Stock underlying the Warrant is then exercisable
in accordance with its terms.
The Series C Stock shall be convertible into common stock of the Tenant
on a one-for-one basis (subject to adjustment after the issuance date of the
Warrant for stock splits, dividends payable in common stock, recombinations of
shares and other matters affecting the common stock in a manner similar to the
manner in which such matters are currently addressed in the terms of the
Tenant's currently authorized Series B Convertible Preferred Stock (the "Series
B Stock") and otherwise shall have such rights, preferences and other terms as
shall be identical in all material respects to the Series B Stock as of the date
hereof except that (i) the holders of the Series C Stock shall not (except as
otherwise required by Georgia law) have a right to vote separately as a class on
any matter coming before Tenant's shareholders for a vote, including the
election of directors, but instead, shall have the right to vote with the
holders of Tenant's common stock (on an as converted basis) on all matters
submitted to Tenant's common shareholders, (ii) the purchase price of $5.00 per
share paid for the shares of Series C Stock upon exercise of the Warrant shall
be substituted where the amount of $3.00 appears in such corresponding terms of
the Series B Stock and (iii) the amount which is ten percent (10%) of the
purchase price per share of such Series C Stock shall be the annual rate at
which non-cumulative dividends shall be payable when, as and if declared by the
Board of Directors.
The terms of the Warrant which are not specifically prescribed herein
shall be substantially similar, as may be applicable, to the terms of Tenant's
currently outstanding warrants to purchase Series B Stock. The Warrant and
certificates for shares of the Series C Stock purchased pursuant to exercise of
the Warrant shall bear a restrictive legend to the effect that such securities
have not been registered under the Securities Act of 1933 as amended (the
"Securities Act"), or any state securities laws and may not be transferred other
than pursuant to such registration or an exemption therefrom; provided, the
provisions of Rule 144 under the Securities Act shall not be available for any
such transfers. Upon the issuance of the Warrant, Landlord shall pay to Tenant
the sum of $500.00 as consideration therefor.
Notwithstanding anything to the contrary stated herein, there shall be
no registration rights associated with the Warrant or any securities to be
received upon exercise of the Warrant or with any securities to be received upon
conversion of any Series C Stock.
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All per share amounts set forth herein shall be proportionately
adjusted to reflect any stock splits, stock dividends or other similar changes
affecting Tenant's common stock prior to the issuance of the Warrant (or any
subsequent determination of its exercise price or adjustment thereof, if
applicable).
Section 18.02 No Waiver. Failure of Landlord or Tenant to insist upon
the strict performance by the other party of any term, condition or covenant on
such other party's part to be performed pursuant to the terms of this Lease or
to exercise any option, right, power, or remedy contained in this Lease shall
not be or be deemed to be a waiver of such performance or relinquishment of such
right now or at any time subsequent hereto. The receipt by Landlord of any Rent
or Additional Rent required to be paid by Tenant hereunder with knowledge of any
Event of Default by Tenant shall not be or be deemed to be a waiver of such
Event of Default. No waiver by Landlord or Tenant of any provision of this Lease
shall be or be deemed to have been made unless expressed in writing and signed
by Landlord or Tenant, as the case may be.
Section 18.03 Waiver of Redemption. Tenant hereby waives and surrenders
any right or privilege under any present or future constitution, statute or law
to redeem the Premises or to continue this Lease after the termination of this
Lease for any reason, and the benefits of any present or future constitution,
statute or rule of law which exempts property from liability for debt or for
distress for rent.
Section 18.04 Estoppel Certificates. Upon written request of Landlord,
Tenant shall from time to time execute, acknowledge and deliver to Landlord and
to any mortgagee of or prospective purchaser from Landlord, a written
certificate certifying (a) that this Lease is unmodified and in full force and
effect (or if there have been modifications, that this Lease is in full force
and effect as modified, and stating the modifications), (b) the dates to which
Rent and Additional Rent payable by Tenant hereunder have been paid, and (c)
that no notice has been received by Tenant of any default or Event of Default by
Tenant hereunder which has not been cured, except as to any default or Event of
Default specified in said certificate.
Upon written request of Tenant, Landlord shall from time to time
execute, acknowledge and deliver to Tenant a written certificate certifying (a)
that this Lease is unmodified and in full force and effect (or if there have
been modifications, that this Lease is in full force and effect as modified, and
stating the modifications), (b) the dates to which Rent and Additional Rent
payable by Tenant hereunder have been paid, and (c) whether or not, to the
knowledge of Landlord, a default or Event of Default by Tenant has occurred
under this Lease which has not been cured (and if so, specifying the same).
Section 18.05 No Merger of Title. No merger of the leasehold estate
created by this Lease with the fee estate of Landlord shall occur
notwithstanding the fact that the same person may own or hold both the leasehold
estate created by this Lease or any interest therein and the fee estate in the
Premises or any interest therein. No such merger shall occur unless and until
all persons or entities (including any mortgagee with respect to the fee estate
of Landlord) having
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any interest in the leasehold estate created by this Lease or the fee estate in
the Premises shall join in a written instrument effecting such merger and shall
duly record the same.
Section 18.06 Quiet Enjoyment. If and so long as Tenant shall pay, when
due, the Rent and Additional Rent reserved or payable under this Lease and shall
observe all terms, conditions and covenants and other obligations required to be
observed by Tenant under this Lease, Landlord and anyone claiming by, through or
under Landlord shall not interfere with the peaceful and quiet occupation and
enjoyment of the Premises by Tenant, which occupation and enjoyment shall be
without hindrance or ejectment by Landlord or anyone claiming by, through or
under Landlord, provided, however, that this Section 18.06 shall not abrogate or
diminish, in any way, the approval and inspection rights granted Landlord under
this Lease.
Section 18.07 Transfer by Landlord. In the event Landlord shall
transfer or assign or otherwise dispose of its interest in the Premises or in
this Lease, Landlord shall thereupon be released and discharged from any and all
liabilities and obligations under this Lease (except those accruing prior to
such transfer, assignment or other disposition) and such liabilities and
obligations thereafter accruing shall be binding upon the assignee of Landlord's
interest under this Lease.
Section 18.08 Landlord's Liability. Landlord shall have no personal
liability with respect to any of the provisions of this Lease. If Landlord is in
default with respect to its obligations under this Lease, Tenant shall look
solely to the equity of Landlord in and to the Premises for satisfaction of
Tenant's remedies, if any. It is expressly understood and agreed that Landlord's
liability under the terms of this Lease shall in no event exceed the amount of
its interest in and to said Premises. In no event shall any partner of Landlord
nor any joint venturer in Landlord, nor any officer, director or shareholder of
Landlord or any such partner or joint venturer of Landlord be personally liable
with respect to any of the provisions of this Lease.
Section 18.09 Mortgaging the Fee. Any provision, term or condition of
this Lease which is or which may appear to be to the contrary notwithstanding,
Landlord shall, at all times and from time to time after the date of this Lease,
have the express right, power and privilege of pledging, conveying, assigning or
mortgaging Landlord's fee simple title in and to the Premises and/or Landlord's
reversionary right to the Improvements, for the purpose of obtaining financing,
credit, or as security for any financing or extension of credit. Landlord
represents and warrants to Tenant that no deeds to secure debt, mortgages or
deeds of trust encumber Landlord's title to the Premises as of the date hereof.
Tenant hereby agrees that upon request from Landlord, or from the holder or
proposed holder of any mortgage, pledge, deed to secure debt or deed of trust
which encumbers or will encumber Landlord's interest in the Premises, Tenant
shall execute a subordination, non-disturbance and attornment agreement in a
commercially reasonably form subordinating this Lease to the interest of such
holder and its heirs, successors and assigns. The holder or proposed holder of
any such mortgage, pledge, deed to secure debt or deed of trust shall agree in
such subordination, non-disturbance and attornment agreement that, so long as
Tenant complies with all of the terms and conditions of this Lease and is not in
default hereunder beyond
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the period for cure of such default as provided herein, such holder or any
person or entity acquiring the interest of Landlord under this lease as a result
of the enforcement of such mortgage, pledge, deed to secure debt or deed of
trust shall not take any action to disturb Tenant's possession of the Premises
during the remainder of the Term and shall recognize all of Tenant's rights
under this Lease despite any foreclosure or other action by such holder.
Alternatively, the person or entity accepting such pledge, conveyance,
assignment or mortgage as security may elect to take subject to the rights of
Tenant and its successors and permitted assigns under this Lease. In any event,
Tenant, in the event of any foreclosure or deed in lieu of foreclosure or other
final conveyance and transfer of Landlord's interest as aforesaid, shall
recognize and attorn to the grantee thereof as "landlord" under this Lease.
Likewise, and to similar effect, Landlord, at all times and from time to time
after the date of this Lease, shall have the express right, power and privilege
of assigning Landlord's interest in this Lease or in the Rent and Additional
Rent to be paid hereunder.
Section 18.10 Separability. Each and every covenant and agreement
contained in this Lease shall be for any and all purposes hereof construed as
separate and independent, and the breach of any covenant by Landlord shall not
discharge or relieve Tenant from its obligation to perform each and every
covenant and agreement to be performed by Tenant under this Lease. All rights,
powers and remedies provided herein may be exercised only to the extent that the
exercise thereof does not violate applicable law and shall be limited to the
extent necessary to render this Lease valid and enforceable. If any term,
provision or covenant of this Lease or the application thereof to any person or
circumstance shall be held to be invalid, illegal or unenforceable, by a court
of last resort having jurisdiction in the Premises, the validity of the
remainder of this Lease shall not be affected, this Lease shall not terminate,
and there shall be substituted for such illegal invalid or unenforceable
provision a like provision which is legal, valid and enforceable within the
limits established by such court's final opinion and which most nearly
accomplishes and reflects the original intention of the parties.
Section 18.11 Notices, Demands and Other Instruments. All notices,
demands, requests, consents, and approvals desired, necessary, required or
permitted to be given pursuant to the terms of this Lease shall be in writing
and shall be deemed to have been properly given if personally delivered
(including delivery by courier or by Federal Express or similar overnight
delivery service) or sent, postage prepaid, by first class registered or
certified United States mail, return receipt requested, addressed to each party
hereto at the following address:
Landlord: Cousins Properties Incorporated
2500 Windy Ridge Parkway
Suite 1600
Atlanta, Georgia 30339-5683
Attention: Corporate Secretary
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Tenant: AtheroGenics, Inc.
3065 Northwoods Circle
Norcross, Georgia 30071
Attn: Mr. Connor Seabrook
with a courtesy copy to (which shall not be required
for effective notice to be given to Tenant):
Leonard A. Silverstein, Esq.
Long, Aldridge & Norman
5300 One Peachtree Center
303 Peachtree Street
Atlanta, Georgia 30308-3201
or at such other address in the United States as Landlord or Tenant may from
time to time designate by like notice. Additionally, Tenant agrees to send
copies of all notices required or permitted to be given to Landlord to each
lessor under any underlying lease and each holder of a mortgage, deed to secure
debt, deed of trust or similar financing instrument encumbering Landlord's
interest in the Premises that notifies Tenant in writing of its interest and the
address to which notices are to be sent. Any such notice, demand, request or
other communication shall be considered given or delivered as the case may be,
on the date of personal delivery or on the date of deposit in the United States
mail as provided above. Rejection or other refusal to accept or inability to
deliver because of changed address of which no notice was given shall be deemed
to be receipt of the notice, demand, request or other communication.
Section 18.12 Successors and Assigns. Each and every covenant, term,
condition and obligation contained in this Lease shall apply to and be binding
upon and inure to the benefit or detriment of the respective legal
representatives, heirs, successors and permitted assigns of Landlord and Tenant.
Whenever reference to the parties hereto is made in this Lease, such reference
shall be deemed to include the legal representatives, successors, heirs and
permitted assigns of said party the same as if in each case expressed. The term
"person" when used in this Lease shall mean any individual, corporation,
partnership, firm, trust, joint venture, business association, syndicate,
government or governmental organization or any other entity.
Section 18.13 Headings. The headings to the various Articles and
Sections of this Lease have been inserted for purposes of reference only and
shall not limit or define or otherwise affect the express terms and provisions
of this Lease.
Section 18.14 Counterparts. This Lease may be executed in any number of
counterparts, each of which shall be an original, but all of which shall
constitute one instrument.
Section 18.15 Applicable Law. This Lease shall be construed under and
enforced in accordance with the laws of the State of Georgia.
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Section 18.16 Entire Agreement; Amendments. This Lease sets forth the
entire understanding and agreement of Landlord and Tenant with respect to the
Premises; all courses of dealing, usage of trade and all prior representations,
promises, understandings and agreements, whether oral or written, are superseded
by and merged into this Lease. No modification or amendment of this Lease shall
be binding upon Landlord and Tenant, or either, unless in writing and fully
executed.
Section 18.17 All Genders and Numbers Included. Whenever the singular
or plural number, or masculine, feminine, or neuter gender is used in this
Lease, it shall equally apply to, extend to, and include the other.
Section 18.18 Relationship of the Parties. Nothing contained herein
shall be deemed or construed by the parties hereto, or any third party, as
creating the relationship of principal and agent or a partnership or joint
venture between the parties hereto, it being understood and agreed that neither
the method of computation of rent nor any other provision contained herein, nor
any acts of the parties hereto, shall be deemed to create any relationship
between the parties hereto other than the relationship of landlord and tenant.
Section 18.19 Time is of Essence. Time is of the essence of this Lease.
Whenever a day certain is provided for the payment of any sum of money or the
performance of any act or thing, the same enters into and becomes a part of the
consideration for this Lease.
Section 18.20 Short Form of Lease. Landlord and Tenant hereby agree
that this Lease shall not be recorded in the public records of Fulton County,
Georgia. Landlord and Tenant shall, contemporaneously with the execution of this
Lease, execute a Short Form of Lease, wherein a legal description of the
Premises, the Term and certain other terms and provisions hereto excepting,
however, the provisions hereof relating to the amount of Rent payable hereunder,
shall be set forth. The Short Form of Lease shall be filed for record with the
Clerk of the Superior Court of Fulton County, Georgia. Any and all recording
costs and taxes, if any, required in connection with the recording of the Short
Form of Lease shall be at the sole cost and expense of Tenant.
Section 18.21 Approval and Inspection. Tenant expressly acknowledges
and agrees that Landlord has the right, but not the duty, at all times and from
time to time, upon reasonable prior notice, to enter upon the Premises and any
portion thereof to determine to Landlord's satisfaction whether the terms,
covenants and conditions of this Lease, including Tenant's performance
obligations, are being kept and observed; provided that Landlord shall endeavor
in good faith to minimize any interference with Tenant's business arising from
such inspections. Tenant acknowledges that Landlord's approval or disapproval,
based upon examination of the Premises or upon information and materials
required to be submitted by Tenant to Landlord, may be required from time to
time during the Term and that Tenant is not free under the terms of this Lease
to proceed with some activities and undertakings until such approval or
disapproval of
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Landlord is made known to Tenant. Tenant agrees that other than as provided
herein to the contrary, any failure of Landlord to approve or disapprove any
thing or undertaking where Landlord's approval or disapproval is required shall
not be a waiver or abatement of Landlord's right to give or withhold such
approval as to the specific thing or undertaking involved, nor as to any future
or other instance where Landlord has such right. Tenant agrees that any failure
of Landlord to exercise any right of inspection shall not be or be deemed to be
a waiver of the right of inspection, which is and shall be continuing, nor shall
Landlord ever be accountable or liable to Tenant or to any other person for
exercising or not exercising its right of inspection. Further, Tenant agrees
that in connection with review or inspection (or the lack of inspection, as the
case may be) and approval or disapproval (express or implied, as the case may
be) by Landlord, Landlord, its agents and representatives, shall not be
responsible or liable to Tenant or to any other person by reason of error or
mistake in judgment, negligence, or nonfeasance arising from or out of or in any
manner connected with such inspection, lack of inspection, review, approval or
disapproval. The release from liability set forth in the preceding sentence
shall not apply to claims for damages arising out of bodily injury to persons or
damage to property caused by or resulting from the negligence or willful
misconduct of Landlord, its agents or employees, unless such claims are covered
by the insurance required to be maintained by Tenant under this Lease.
Section 18.22 Holding Over, No Extension Month-to-Month Tenancy and
Holdover Rent. In the event Tenant shall hold the Premises after the expiration
of the Tern, without the express written consent of Landlord, such holding shall
be deemed to have created a tenancy from month to month which shall be
terminable upon (30) days' written notice by either party to the other, and
which shall be on a monthly rental basis and otherwise subject to all terms and
provisions of this Lease, except as contemplated to the contrary in this Section
18.22. Such monthly rental shall be one-twelfth (1/12) of the amount equal to
the product of the total rental payable by Tenant to Landlord during the last
twelve (12) month period of the Term, including but not limited to, Rent,
Additional Rent and all other additional charges provided by this Lease,
multiplied by 1.5.
If Tenant fails to surrender the Premises upon the termination of this
Lease, then Tenant shall, in addition to any other liabilities to Landlord
accruing therefrom, indemnify and hold Landlord harmless from any loss or
liability resulting from such failure, including, without limitation, any claims
made by any succeeding tenant founded on such failure.
Section 18.23 Corporate Authority. Tenant and Landlord shall each
provide contemporaneously with the execution of this Lease evidence of its
authority to enter into this Lease, including, but not limited to, copies of its
bylaws and Certificate of Incorporation together with corporate resolutions duly
passed by the board of directors of Tenant and Landlord authorizing the
execution hereof and the performance of all of the terms herein provided to be
performed. In addition, Tenant shall provide Landlord copies of certificates of
corporate authority and existence from the State of Georgia evidencing Tenant's
right to do business in Georgia.
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Section 18.24 Arbitration. Under circumstances for which arbitration is
specifically provided for under the terms of Section 13.01 or Section 16.01 of
this Lease, the party desiring arbitration shall give notice to that effect to
the other party and shall in such notice appoint a person as arbitrator on its
behalf. Within ten (10) days after its receipt of such notice, the other party
by notice to the original party shall appoint a second person as arbitrator on
its behalf. The arbitrators thus appointed shall appoint a third person, and the
three arbitrators shall, as promptly as reasonably possible (but in no event
later than thirty (30) days after their appointment) determine the matter in
dispute, provided, however, that: (i) if the second arbitrator shall not have
been appointed within the ten (10) day period, as aforesaid, the first
arbitrator shall proceed to determine the matter in dispute and shall render his
or her decision and award in writing within (30) days after the expiration of
said ten (10) day period; and (ii) if the two arbitrators appointed by the
parties shall be unable to agree, within ten (10) days after the appointment of
the second arbitrator, upon the appointment of a third arbitrator, they shall
give written notice to the parties of such failure to agree, and if the parties
fail to agree upon the selection of the third arbitrator within ten (10) days
after receipt of the notice of such failure from the two appointed arbitrators,
then within ten (10) days thereafter either of the parties, upon notice to the
other party, may request such appointment by the American Arbitration
Association (or any successor organization) or in its absence, refusal, failure
or inability to act, may apply to the Chief Judge of the Fulton Superior Court
for a Court appointment of such arbitrator. Each arbitrator shall be a qualified
and impartial person who shall have had at least five (5) years experience in a
professional capacity in the metropolitan Atlanta, Georgia area in a calling
directly connected with the matter in dispute. The arbitration shall be
conducted, to the extent consistent with this Section, in accordance with the
then prevailing rules of the American Arbitration Association (or any successor
organization). The arbitrators, if more than one, shall render their decision
and award in writing, upon the concurrence of at least two of their number,
within thirty (30) days after the appointment of the arbitrator. Such decision
and award (or the decision and award of the single arbitrator as provided above)
shall be final, conclusive and binding on the parties, and counterpart copies
thereof shall be delivered to each of the parties. In rendering such decision
and award, (i) the arbitrator(s) shall have the right to award the costs of such
arbitration, including reasonable attorney's fees, to either party, and (ii) the
arbitrator(s) shall not add to, subtract from or otherwise modify the provisions
of this Lease. Judgment may be had on the decision and award of the
arbitrator(s) so rendered in any court of competent jurisdiction.
Section 18.25 Expansion Space. Landlord agrees to arrange its master
site plan for North Point Center West in order to accommodate Tenant's expansion
needs by contemplating the development of an additional building adjacent to the
Premises. Upon Tenant's request, Landlord and Tenant will endeavor in good faith
to negotiate a mutually acceptable lease for such additional building.
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IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease, have
affixed their seals hereunto and have delivered same, in duplicate originals, at
Atlanta, Georgia, as of the day, month and year first above written.
"LANDLORD":
COUSINS PROPERTIES INCORPORATED,
a Georgia corporation
By: John S. McColl
-----------------------------------------
Its: Senior Vice President-Cousins/Richmond
----------------------------------------
(CORPORATE SEAL)
"TENANT"
ATHEROGENICS, INC.
By: Russell M. Medford
-----------------------------------------
Its: CEO
----------------------------------------
Attest: J. Conner Seabrook
-----------------------------------------
Its: Assistant Secretary
----------------------------------------
(CORPORATE SEAL)
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EXHIBIT 10.13
MASTER EQUIPMENT LEASE NO. 053-9997
Under this Master Equipment Lease No. 053-9997 (the "Lease"), dated as of
November 1, 1995, Phoenix Leasing Incorporated, a California corporation
("Lessor"), hereby leases to AtheroGenics, Inc., a Georgia corporation
("Lessee"), and Lessee hereby leases from Lessor, the equipment (herein called
"Equipment") which is described on the schedule attached hereto or any
subsequently-executed schedule entered into by Lessor and Lessee and which
incorporates this Lease by reference. Any such schedules shall hereinafter
individually be referred to as a "Schedule" and collectively be referred to as
the "Schedules." Lessor hereby leases the Equipment to Lessee upon the following
terms and conditions:
1. TERM OF AGREEMENT. The term of this Lease begins on the date
set forth above and shall continue thereafter and be in effect so long as and at
any time any Schedule entered into pursuant to this Lease is in effect. The
Initial Term and rent payable with respect to each leased item of Equipment
shall be as set forth in and as stated in the respective Schedule(s). The terms
of each Schedule hereto are subject to all conditions and provisions of this
Lease as it may at any time be amended. Each Schedule shall constitute a
separate and independent lease and contractual obligation of Lessee and shall
incorporate the terms and conditions of this Master Equipment Lease and any
additional provisions contained in such Schedule. In the event of a conflict
between the terms and conditions of this Lease and any additional provisions of
such Schedule, the additional provisions of such Schedule shall prevail with
respect to such Schedule only.
2. NON-CANCELLABLE LEASE. This Lease and any Schedule cannot be
cancelled or terminated except as expressly provided herein. This Lease
(including all Schedules to this Lease) constitutes a net lease and Lessee
agrees that its obligations to pay all rent and other sums payable hereunder
(and under any Schedule) and the rights of Lessor and assignee in and to such
rent and other sums, are absolute and unconditional and are not subject to any
abatement, reduction, setoff, defense, counterclaim or recoupment due or alleged
to be due to, or by reason of, any past, present or future claims which Lessee
may have against Lessor, any assignee, the manufacturer or seller of the
Equipment, or against any person for any reason whatsoever.
3. LESSOR COMMITMENT. So long as no Event of Default or event
which with the giving of notice or passage of time, or both, could become an
Event of Default has occurred or is continuing, Lessor agrees to lease to Lessee
the groups of Equipment described on each Schedule, subject to the following
conditions: (i) that in no event shall Lessor be obligated to lease Equipment to
Lessee hereunder where the aggregate purchase price of all Equipment leased to
Lessee hereunder would exceed $750,000.00; (ii) Equipment will be purchased by
Lessor in not more than one funding per month which funding shall be not less
than $35,000.00 except for a final advance which may be less than $35,000.00;
(iii) Lessor shall not be obligated to purchase Equipment hereunder after June
30, 1996; (iv) all Lease documentation required by Lessor has been executed by
Lessee or provided by Lessee no later than December 10, 1995; (v) the equipment
described on the Schedule is acceptable to Lessor; (vi) with respect to each
funding Lessee has provided to Lessor each of the closing documents and other
items described in Exhibit A hereto (which documents shall be in form and
substance acceptable to Lessor) and which list may be modified for each
subsequent funding;
<PAGE> 2
(vii) there is no material adverse change in Lessee's condition, financial or
otherwise, as determined by Lessor, and Lessee so certifies, from (yy) the date
of the most recent financial statements delivered by Lessee to Lessor prior to
execution of this Lease, to (zz) the date of the proposed lease of the
Equipment; (viii) Lessee is performing according to its Income Statement and
Statement of Cash Flows referred to as "AtheroGenics Income Statement and
Statement of Cash Flows for 1995 and 1996" as may be amended from time to time
in form and substance acceptable to Lessor ("Business Plan"); (ix) Lessor or its
agent has inspected and placed identification labels on the Equipment; (x)
Lessee shall offer to Lessor, on an exclusive basis, all lease transactions for
equipment contemplated by Lessee until expiration of all Schedules; however if
Lessor declines to finance any such transaction or Lessee and Lessor cannot
agree upon terms, then Lessee shall be free to seek such financing from any
other third party; and (xi) Lessor has received in form and substance acceptable
to Lessor: (a) Lessee's interim financial statements signed by a financial
officer of Lessee; and (b) evidence of Lessee's receipt of $2,250,000.00 from
the issuance of Series B Preferred Shares by October 31, 1995.
4. NO WARRANTIES BY LESSOR. (a) Lessee has selected both (i) the
Equipment and (ii) the suppliers (herein called "Vendor") from whom Lessor is to
purchase the Equipment. LESSOR MAKES NO WARRANTY EXPRESS OR IMPLIED AS TO ANY
MATTER WHATSOEVER, INCLUDING THE CONDITION OF THE EQUIPMENT, ITS MERCHANTABILITY
OR ITS FITNESS FOR ANY PARTICULAR PURPOSE, AND AS TO LESSOR, LESSEE LEASES THE
EQUIPMENT "AS IS" AND WITH ALL FAULTS. (b) If the Equipment is not properly
installed, does not operate as represented or warranted by Vendor or is
unsatisfactory for any reason, Lessee shall make any claim on account thereof
solely against Vendor and shall, nevertheless, pay Lessor all rent payable under
this Lease, Lessee hereby waiving any such claims as against Lessor. Lessor
hereby agrees to assign to Lessee solely for the purpose of making and
prosecuting any said claim, to the extent assignable, all of the rights which
Lessor has against Vendor for breach of warranty or other representation
respecting the Equipment. Lessor shall have no responsibility for delay or
failure to fill the order. (c) Lessee understands and agrees that neither the
Vendor nor any salesman or other agent of the Vendor is an agent of Lessor. No
salesman or agent of Vendor is authorized to waive or alter any term or
condition of this Lease, and no representations as to the Equipment or any other
matter by the Vendor shall in any way affect Lessee's duty to pay the rent and
perform its other obligations as set forth in this Lease. (d) Lessee hereby
requests Lessor to purchase Equipment from Vendor and to lease Equipment to
Lessee on the terms and conditions of the Lease set forth herein. (e) Lessee
hereby authorizes Lessor to insert in this Lease and each Schedule hereto the
serial numbers and other identification data of the Equipment when determined by
Lessor.
5. LESSEE'S REPRESENTATIONS AND WARRANTIES. Lessee represents and
warrants that (a) it is a corporation in good standing under the laws of the
state of its incorporation, and duly qualified to do business, and will remain
duly qualified during the term of this Lease, in each state where the Equipment
will be located, as specified on each Schedule hereto; (b) it has full authority
to execute and deliver this Lease and perform the terms hereof, and this Lease
has been duly authorized and constitutes valid and binding obligations of Lessee
enforceable in accordance with its terms; (c) this Lease will not contravene any
law, regulation or judgment affecting Lessee
<PAGE> 3
or result in any breach of any agreement or other instrument binding on Lessee;
(d) no consent of Lessee's shareholders or holder of any indebtedness, or filing
with, or approval of, any governmental agency or commission, is a condition to
the performance of the terms hereof; (e) there is no action or proceeding
pending or threatened against Lessee before any court or administrative agency
which might have a materially adverse effect on the business, financial
condition or operations of Lessee; (f) no deed of trust, mortgage or third party
interest arising through Lessee will attach to the Equipment or the Lease; (g)
the Equipment will remain at all times under applicable law, removable personal
property, free and clear of any lien or encumbrance in favor of Lessee or any
other person, notwithstanding the manner in which the Equipment may be attached
to any real property; (h) all credit, financial and any other information
submitted to Lessor herewith or any other time is true and correct; and (i)
Lessee has provided, or will provide if requested, Lessee's tax identification
number.
6. EQUIPMENT ORDERING. Lessee shall be responsible for all
packing, rigging, transportation and installation charges for the Equipment and
Lessor may separately invoice Lessee for such charges. Lessee has selected the
Equipment itself and shall arrange for delivery of Equipment so that it can be
accepted in accordance with Section 7 hereof'. Lessee hereby agrees to indemnify
and hold Lessor harmless from any claims, liabilities, costs and expenses, .
including reasonable attorneys' fees, incurred by Lessor arising out of any
purchase orders or assignments executed by Lessor with respect to any Equipment
or services relating thereto.
7. LESSEE ACCEPTANCE. Lessee shall return to Lessor the signed
and dated Acceptance Notice attached to each Schedule hereto (a) acknowledging
the Equipment has been received, installed and is ready for use and (b)
accepting it as satisfactory in all respects for the purposes of this Lease.
Lessor is authorized to fill in the Rent Start Date on each Schedule in
accordance with the foregoing.
8. LOCATION; INSPECTION; LABELS. Equipment shall be delivered to
and shall not be removed from the Equipment "Location" shown on each Schedule
without Lessor's prior written consent, which "Location" shall in all events be
within the United States. Lessor shall have the right to inspect Equipment at
any reasonable time. Lessee shall be responsible for all labor, material and
freight charges incurred in connection with any removal or relocation of such
Equipment which is requested by the Lessee and consented to by Lessor, as well
as for any charges due to the installation or moving of the Equipment. The
rental payments shall continue during any period in which the Equipment is in
transit during a relocation. Lessor or its agent shall mark and label Equipment,
which labels shall state Equipment is owned by Lessor, and Lessee shall keep
such labels on the Equipment as labeled by Lessor or its agent.
9. EQUIPMENT MAINTENANCE. (a) General. Lessee will locate or base
each item of Equipment where designated in an Acceptance Notice and will
reasonably permit Lessor to inspect such item of Equipment and its maintenance
records. Lessee will at its sole expense comply with all applicable laws, rules,
regulations, requirements and orders with respect to the use, maintenance,
repair, condition, storage and operation of each item of Equipment. Except as
required herein, Lessee will not make any addition or improvement to any item of
Equipment that is not readily removable without causing material damage to any
item or impairing its original value or
<PAGE> 4
utility. Any addition or improvement that is so required or cannot be so removed
will immediately become the property of Lessor.
(b) Service and Repair. With respect to computer
equipment, other than personal computers, Lessee has entered into, and will
maintain in effect, Vendor's standard maintenance contract or another contract
satisfactory to Lessor for a period equal to the term of each Schedule and
extensions thereto which provides for the maintenance of the Equipment and
repairs and replacement parts thereof in good condition and working order, all
in accordance with the terms of such maintenance contract. Lessee shall have the
Equipment certified for the Vendor's standard maintenance agreement prior to
delivery to Lessor upon expiration of this Lease. With respect to any other
Equipment, Lessee will, at its sole expense, maintain and service, and repair
any damage to, each item of Equipment in a manner consistent with prudent
industry practice and Lessee's own practice so that such item of Equipment is at
all times (i) in the same condition as when delivered to Lessee, except for
ordinary wear and tear, (ii) in good operating order for the function intended
by its manufacturer's warranties and recommendations.
10. LOSS OR DAMAGE. Lessee assumes the entire risk of loss to the
Equipment through use, operation or otherwise. Lessee hereby indemnifies and
holds harmless Lessor from and against all claims, loss of rental payments,
costs, damages, and expenses relating to or resulting from any loss, damage or
destruction of the Equipment, any such occurrence being hereinafter called a
"Casualty Occurrence." On the first rental payment date following such Casualty
Occurrence, or, if there is no such rental payment date, thirty (30) days after
such Casualty Occurrence, Lessee shall (i) repair the Equipment, returning it to
good operating condition or (ii) replace the Equipment with identical equipment
in good condition and repair, the title to which shall vest in Lessor and which
thereafter shall be subject to the terms of this Lease; or (iii) pay to Lessor
(a) any unpaid accrued amounts relating to such Equipment due Lessor under this
Lease up to the date of the Casualty Occurrence, and (b) a sum equal to the
Casualty Value as set forth in the Casualty Value table attached to each
Schedule hereto for such Equipment. Upon the making, of such payment, the term
of this Lease as to each unit of Equipment with respect to which the Casualty
Value was paid shall terminate.
11. GENERAL INDEMNITY. Lessee will protect, indemnify and save
harmless Lessor from and against all liabilities, obligations, claims, damages,
penalties, causes, of action, costs and expenses, imposed upon or incurred by or
asserted against Lessor or any assignee of Lessor by Lessee or any third party
by reason of the occurrence or existence (or alleged occurrence or existence) of
any act or event relating to or caused by the Equipment, including but not
limited to, consequential or special damages of any kind, or any failure on the
part of Lessee to perform or comply with any of the terms of this Lease. In the
event-that any action, suit or proceeding is brought against Lessor by reason of
any such occurrence, Lessee, upon request of Lessor, will at Lessee's' expense
resist and defend such action, suit or proceeding or cause the same to be
resisted and defended by counsel designated and approved by Lessor. Lessee's
obligations under this Section 11 shall survive the expiration of this Lease
with respect to acts or events, occurring or alleged to have occurred prior to
the return of the Equipment to Lessor at the end of the Lease term.
<PAGE> 5
12. INSURANCE. Lessee at its expense shall keep the Equipment
insured for the entire term and any extensions of this Lease against all risks
for at least the replacement value of such Equipment and shall provide for (a)
loss payable endorsement to Lessor or any assignee of Lessor. Lessee shall
maintain public liability and property damage insurance in an amount not less
than $3,000,000, naming Lessor as additional insured. Such insurance shall
contain insurer's agreement to give thirty (30) days written notice to Lessor
before cancellation or material change of any policy of insurance. Lessee will
provide Lessor and any assignee of Lessor with a certificate of insurance from
the insurer evidencing Lessor's or such assignee's interest in the policy of
insurance. Such insurance shall cover any Casualty Occurrence to any unit of
Equipment. Notwithstanding anything in Section 10 or this Section 12 to the
contrary, this Lease and Lessee's obligations hereunder and under each Schedule
shall remain in full force and effect with respect to any unit of Equipment
which is not subject to a Casualty Occurrence. If Lessee fails to provide or
maintain insurance as required herein, Lessor shall have the right, but shall
not be obligated to obtain such insurance. In that event, Lessee shall pay to
Lessor the cost thereof.
13. TAXES. Lessee agrees to reimburse Lessor for, (or pay directly
if instructed by Lessor), and agrees to indemnify and hold Lessor harmless from,
all fees, (including, but not limited to, license, documentation, recording and
registration fees), and all sales, use, gross receipts, personal property,
occupational, value added or other taxes, levies, imposts, duties, assessments,
charges or withholdings of any nature whatsoever, together with any penalties,
fines, additions to tax, or interest thereon (all of the foregoing being
hereafter referred to as "Impositions") except same as may be attributable to
Lessor's income, arising at any time prior to or during the term of this Lease,
or upon termination or early termination of this Lease and levied or imposed
upon Lessor directly or otherwise by any Federal, state or local government in
the United States or by any foreign country or foreign or international taxing
authority upon or with respect to (i) the Equipment, (ii) . the exportation,
importation, registration, purchase, ownership, delivery, leasing, possession,
use, operation, storage, maintenance, repair, return, sale, transfer of title,
or other disposition thereof, (iii) the rentals, receipts, or earnings arising
from the Equipment, or any disposition of the rights to such rentals, receipts,
or earnings, (iv) any payment pursuant to this Lease, and (v) this Lease or the
transaction or any part thereof. Lessee's obligations under this Section 13
shall survive the expiration of this Lease with respect to acts or events
occurring or alleged to have occurred prior to the return of the Equipment to
Lessor at the end of the Lease term.
14. PAYMENT BY LESSOR. If Lessee shall fail to make any payment or
perform any act required hereunder, then Lessor may, but shall not be required
to, after such notice to Lessee as is reasonable under the circumstances, make
such payment or perform such act with the same effect as if made or performed by
Lessee. Lessee will upon demand reimburse Lessor for all sums paid and all costs
and expenses incurred in connection with the performance of any such act.
15. SURRENDER OF EQUIPMENT. Upon termination or expiration of this
Lease, with respect to each group of Equipment, Lessee will forthwith surrender
the Equipment to Lessor delivered in as good order and condition as originally
delivered, reasonable wear and tear excepted. Lessor may, at its sole option,
arrange for removal and transportation of the Equipment provided that Lessee's
obligations under Sections 10, 11 and 12 shall not be released. Lessee shall
bear all
<PAGE> 6
expenses of delivering (which include, but are not limited to, the
de-installation, insurance, packaging and transportation of) the Equipment to
Lessor's location or other location within the United States as Lessor may
request. In the event Lessee fails to deliver the Equipment as directed above,
all obligations of Lessee under this Lease, including rental payments, shall
remain in full force and effect until Lessee delivers the Equipment to Lessor.
16. ASSIGNMENT. WITHOUT LESSORS PRIOR WRITTEN CONSENT, SUCH
CONSENT NOT TO BE UNREASONABLY WITHHELD, LESSEE SHALL NOT (a) ASSIGN, TRANSFER,
PLEDGE, HYPOTHECATE OR OTHERWISE DISPOSE OF THIS LEASE, EQUIPMENT, OR ANY
INTEREST THEREIN, OR (b) SUBLET OR LEND EQUIPMENT OR PERMIT IT TO BE USED BY
ANYONE OTHER THAN LESSEE OR LESSEE'S EMPLOYEES. LESSOR MAY ASSIGN THIS LEASE OR
GRANT A SECURITY INTEREST IN ANY OR ALL EQUIPMENT, OR BOTH, IN WHOLE OR IN PART
TO ONE OR MORE ASSIGNEES OR SECURED PARTIES WITHOUT NOTICE TO LESSEE. If Lessee
is given notice of such assignment it agrees to acknowledge receipt thereof in
writing and Lessee shall execute such additional documentation as Lessor's
assignee shall require. Each such assignee and/or secured party shall have all
of the rights, but none of the obligations, of Lessor under this Lease, unless
such assignee or secured party expressly agrees to assume such obligations in
writing. Lessee shall not assert against any assignee and/or secured party any
defense, counterclaim or offset that Lessee may have against Lessor.
Notwithstanding any such assignment, and providing no Event of Default has
occurred and is continuing, Lessor, or its assignees, secured parties, or their
agents or assigns, shall not interfere with Lessee's right to quietly enjoy use
of Equipment subject to the terms and conditions of this Lease. Subject to the
foregoing, this Lease inures to the benefit of and is binding upon the
successors and assignees of the parties hereto. Lessee acknowledges that any
such assignment by Lessor will not materially change Lessee's duties or
obligations under the Lease or increase any burden of risk on Lessee.
17. DEFAULT. (a) Event of Default. Any of the following events or
conditions shall constitute an "Event of Default" hereunder: (i) Lessee's
failure to pay any monies due to Lessor hereunder or under any Schedule beyond
the fifth (5th) day after the same is due; (ii) Lessee's failure to comply with
its obligations under Section 12 or Section 16; (iii) Lessee's failure to comply
with or perform any term, covenant, condition, warranty or representation of
this Lease or any Schedule hereto or under any other agreement between Lessee
and Lessor or under any lease of real property covering the location of
Equipment if such failure to comply or perform is not cured by Lessee within
thirty (30) days of receipt of notice thereof; (iv) seizure of the Equipment
under legal process; (v) the filing by or against Lessee of a petition for
reorganization or liquidation under the Bankruptcy Code or any amendment thereto
or under any other insolvency law providing for the relief of debtors; (vi) the
voluntary or involuntary making of an assignment of a substantial portion of its
assets by Lessee, or any guarantor ("Guarantor") under any guaranty executed in
connection with this Lease ("Guaranty"), for the benefit of its creditors, the
appointment of a receiver or trustee for Lessee or any Guarantor for any of
Lessee's or Guarantor's assets, the institution by or against Lessee or any
Guarantor of any formal or informal proceeding for dissolution, liquidation,
settlement of claims against or winding up of the affairs of Lessee or any
Guarantor, provided that in the case of all such involuntary proceedings, same
are not dismissed within sixty (60) days after commencement; or (vii)
<PAGE> 7
the making by Lessee or any Guarantor of a transfer of all or a material portion
of Lessee's or Guarantor's assets or inventory not in the ordinary course of
business.
(b) Remedies. If any Event of Default shall have
occurred:
(i) Lessor may proceed by appropriate court action or
actions either at law or in equity to enforce performance by Lessee, of the
applicable covenants of this Lease, or to recover damages therefor; or
(ii) Lessee will, without demand, on the next rent payment
date following the Event of Default, pay to Lessor as liquidated damages which
the parties agree are fair and reasonable under the circumstances existing at
the time this Lease is entered into, and not as a penalty, an amount equal to
the Casualty Value of the Equipment set forth in Exhibit C together with any
rent or other amounts past due and owing by Lessee hereunder; and
(iii) Lessor may, without notice to or demand upon Lessee;
(a) Take possession of the Equipment and lease or sell
the same or any portion thereof, for such period, amount, and to such entity as
Lessor shall elect. The proceeds of such lease or sale will be applied by Lessor
(A) first, to pay all costs and expenses, including reasonable legal fees and
disbursements, incurred by Lessor as a result of the default and the exercise of
its remedies with respect thereto, (B) second, to pay Lessor an amount equal to
any unpaid rent or other amounts past due and payable plus the Casualty Value,
to the extent not previously paid by Lessee, and (C) third, to reimburse Lessee
for the Casualty Value to the extent previously paid. Any surplus remaining
thereafter will be retained by Lessor.
(b) Take possession of the Equipment and hold and keep
idle the same or any portion thereof.
Lessee agrees to pay all internal and out-of-pocket
costs of Lessor related to the exercise of its remedies, including direct costs
of its in-house counsel and out-of-pocket legal fees and expenses. At Lessor's
request, Lessee shall assemble the Equipment and make it available to Lessor at
such location as Lessor may designate. Lessee waives any right it may have to
redeem the Equipment.
Repossession of any or all Equipment shall not
terminate this Lease or any Schedule unless Lessor notifies Lessee in writing.
Any amount required to be paid under this Section shall be increased by a
service charge at the rate of 1.5% per month, or the highest rate of interest
permitted by applicable law, whichever is less, accruing from the date the
Casualty Value or other amounts are payable hereunder until such amounts are
paid.
None of the above remedies is intended to be
exclusive, but each is cumulative and in addition to any other remedy available
to Lessor, and all may be enforced separately or concurrently.
<PAGE> 8
18. LATE PAYMENTS. Lessee shall pay to Lender an amount equal to
the greater of 10% of all amounts owed Lessor by Lessee which are not paid when
due or $100, but in no event an amount greater than the highest rate permitted
by applicable law. If such funds have not been received by Lessor at Lessor's
place of business or by Lessor's designated agent by the date such funds are due
under this Lease, Lessor shall bill Lessee for such charges. Lessee acknowledges
that invoices for rentals due hereunder are sent by Lessor for Lessee's
convenience only. Lessee's non-receipt of an invoice will not relieve Lessee of
its obligation to make rent payments hereunder.
19. LESSOR'S EXPENSE. Lessee shall pay Lessor all costs and
expenses including reasonable attorney's fees and the fees of the collection
agencies, incurred by Lessor in enforcing any of the terms, conditions or
provisions hereof.
20. OWNERSHIP; PERSONAL PROPERTY. The Equipment shall be and
remain personal property of Lessor, and Lessee shall have no right, title or
interest therein or thereto except as expressly set forth in this Lease,
notwithstanding the manner in which it may be attached or affixed to real
property, and upon termination or expiration of the Lease term, Lessee shall
have the duty and Lessor shall have the right to remove the Equipment from the
premises where the same be located whether or not affixed or attached to the
real property or any building, at the cost and expense of Lessee.
21. ALTERATIONS; ATTACHMENTS. No alterations or attachments shall
be made to the Equipment without Lessor's prior written consent, which shall not
be given for changes that will affect the reliability and utility of the
Equipment or which cannot be removed without damage to the Equipment, or which
in any way affect the value of the Equipment for purposes of resale or re-lease.
22. FINANCING STATEMENT. Lessee will execute financing statements
pursuant to the Uniform Commercial Code. Lessee authorizes Lessor to file
financing statements signed only by Lessor (where such authorization is
permitted by law) at all places where Lessor deems necessary.
23. MISCELLANEOUS. (a) Lessee shall provide Lessor with such
corporate resolutions, financial statements and other documents as Lessor shall
request from time to time. (b) Lessee represents that the Equipment is being
leased hereunder for business purposes. (c) Time is of the essence with respect
to this Lease. (d) Lessee shall keep its books and records in accordance with
generally accepted accounting principles and practices consistently applied and
shall deliver to Lessor its annual audited financial statements, unaudited
monthly financial statements to include any financial information given to
Lessee's Board of Directors, and signed by an officer of Lessee and such other
unaudited financial statements as may be reasonably requested by Lessor. (e) Any
action by Lessee against Lessor for any default by Lessor under this Lease,
including breach of warranty or indemnity, shall be commenced within one (1)
year after any such cause of action accrues.
24. NOTICES. All notices hereunder shall be in writing, by
registered mail, or reliable messenger or delivery service and shall be
directed, as the case may be, to Lessor at 2401 Kerner
<PAGE> 9
Boulevard, San Rafael, California 94901, Attention: Account Management and to
Lessee at AtheroGenics, Inc., 3065 Northwoods Circle, Norcross, GA 30071,
Attention:_____________.
25. ENTIRE AGREEMENT. Lessee acknowledges that Lessee has read
this Lease, understands it and agrees to be bound by its terms, and further
agrees that it and each Schedule constitute the entire agreement between Lessor
and Lessee with respect to the subject matter hereof and supersedes all previous
agreements, promises, or representations. The terms and conditions hereof shall
prevail notwithstanding any variance with the terms of any purchase order
submitted by the Lessee with respect to any Equipment covered hereby.
26. AMENDMENT. This Lease may not be changed, altered or modified
except by an instrument in writing signed by an officer of the Lessor and the
Lessee.
27. WAIVER. Any failure of Lessor to require strict performance by
Lessee or any waiver by Lessor of any provision herein shall not be construed as
a consent or waiver of any other breach of the same or any other provision.
28. SEVERABILITY. If any provision of this Lease is held invalid,
such invalidity shall not affect any other provisions hereof.
29. JURISDICTION AND WAIVER OF JURY TRIAL. This Lease shall be
governed by and construed under the laws of the State of California. It is
agreed that exclusive jurisdiction and venue for any legal action between the
parties arising out of this Lease shall be in the Superior Court for Marin
County, California, or, in cases where Federal diversity jurisdiction is
available, in the United States District Court for the Northern District of
California. LESSEE, TO THE EXTENT IT MAY LAWFULLY DO SO, HEREBY WAIVES ITS RIGHT
TO TRIAL BY JURY IN ANY ACTION BROUGHT ON OR WITH RESPECT TO THIS LEASE, ANY
SCHEDULE, OR ANY AGREEMENT EXECUTED IN CONNECTION HEREWITH.
30. NATURE OF TRANSACTION. Lessor makes no representation
whatsoever, express or implied, concerning the legal character of the
transaction evidenced hereby, for tax or any other purpose.
31. SECURITY INTEREST. (a) One executed copy of the Lease will be
marked "Original" and all other counterparts will be duplicates. To the extent,
if any, that this Lease constitutes chattel paper (as such term is defined in
the Uniform Commercial Code as in effect in any applicable jurisdiction) no
security interest in the lease may be created in any documents other than the
"Original." (b) There shall be only-one original of each Schedule and it shall
be marked "Original," and all other counterparts will be duplicates. To the
extent, if any, that any Schedule(s) to this Lease constitutes chattel paper (or
as such term is defined in the Uniform Commercial Code as in effect in any
applicable jurisdiction) no security interest in any Schedule(s) may be created
in any documents other than the "Original."
<PAGE> 10
32. SUSPENSION OF OBLIGATIONS. The obligations of Lessor hereunder
will be suspended to the extent that it is hindered or prevented from complying
therewith because of labor disturbances, including but not limited to strikes
and lockouts, acts of God, fires, storms, accidents, failure of the manufacturer
to deliver any item of Equipment, governmental regulations or interference, or
any cause whatsoever not within the sole and exclusive control of Lessor.
33. SOFTWARE. For the term of this Lease, and so long as no Event
of Default has occurred and is continuing, Lessor hereby assigns to Lessee all
of Lessor's rights under any License Agreement executed by Lessor in connection
with the Equipment (except for any right of Lessor to be reimbursed for the
License Fee). Lessee agrees to be bound by the provisions of any such License
Agreement and to perform all obligations of Lessor (except Lessor's payment
obligations) thereunder. Lessee acknowledges that all of Lessee's obligations
under the Lease with respect to the Equipment will apply equally to the
software, including but not limited to Lessee's obligation to pay rent to
Lessor.
34. STOCK WARRANT. Lessee agrees that it will issue to Lessor upon
execution of this Lease a Warrant in the form of Warrant Agreement attached
hereto as Exhibit D. Lessee and Lessor agree that the value of the Warrant
hereunder is ten dollars ($10.00).
35. COMMITMENT FEE. Lessee has paid to Lessor a commitment fee
("Fee") of $10,000.00. The Fee shall be applied by Lessor first to reimburse
Lessor for all out-of-pocket UCC search costs, inspections and labeling which
costs shall not exceed $1,000.00 incurred by Lessor, and then proportionally to
the first month's rent for each Schedule hereunder in the proportion that the
purchase price of the Equipment leased pursuant to the Schedule bears to
Lessor's entire commitment. However, the portion of the Fee which is not applied
to rental shall be non-refundable except if Lessor defaults in its obligations
pursuant to Section 3.
36. FINANCE LEASE. The parties agree that this lease is a "Finance
Lease" as defined by section 10-103(a)(7) of the California Commercial Code
(Cal.Com.C.). Lessee acknowledges either (a) that Lessee has reviewed and
approved any written Supply Contract (as defined by Cal.Com.C. Section
10-103(a)(25)) covering Equipment purchased from the "Supplier" (as defined by
Cal.Com.C. Section 10-103(a)(24)) thereof for lease to Lessee or (b) that Lessor
has informed or advised Lessee, in writing, either previously or by this Lease
of the following: (i) the identity of the Supplier; (ii) that the Lessee may
have rights under the Supply Contract; and (iii) that the Lessee may contact the
Supplier for a description of any such rights Lessee may have under the Supply
Contract. Lessee hereby waives any rights and remedies Lessee may have under
Cal.Com.C. Sections 10-508 through 522.
37. PURCHASE OR RENEWAL REQUIREMENT FOR ALL SCHEDULES TO MASTER
EQUIPMENT LEASE. At the expiration of the Initial Term for Schedule No. 1, and
notwithstanding anything to the contrary in the Lease, upon 90 days prior
written notice to Lessor, Lessee shall either:
<PAGE> 11
No. 1
Purchase AS-IS, WHERE-IS all, but not less than all, of the Equipment
covered under all Schedules to this Lease at the expiration of the
Initial Term for each such Schedule for an amount equal to the
Equipment's Fair Market Value, but in no event for an amount less than
10 percent (10%) or more than twenty percent (20%) of the Equipment's
original purchase price, whereupon Lessor shall issue to Lessee a Bill
of Sale for the Equipment transferring it to Lessee without any
representation or warranty whatsoever, or
No. 2
Extend the Initial Term of all Schedules to this Lease for an
additional twelve (12) months ("Renewal Term") commencing with the end
of the Initial Term of each Schedule at the same monthly rate as under
the Lease. Upon expiration of each Renewal Term, Lessor shall issue to
Lessee a Bill of Sale for the Equipment under the applicable Schedule
transferring it to Lessee without any representation or warranty
whatsoever.
In the event Lessee does not provide 90 days prior written notice as specified
above, Lessee shall be deemed to have selected No. 2 above for all Schedules to
the Lease.
Lessee shall be responsible for all applicable taxes in connection with any
purchase of Equipment by Lessee.
IN WITNESS WHEREOF, the parties hereto have executed this Lease.
PHOENIX LEASING INCORPORATED ATHEROGENICS, INC.
By: W. H. Nelson By: Russell M. Medford
----------------------------- -----------------------------------
Title: Title: Executive Vice President
-------------------------- --------------------------------
Headquarters Location:
3065 Northwoods Circle
Norcross, GA 30071
County of Gwinnet
<PAGE> 1
EXHIBIT 23.01
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated February 18, 2000 in the Registration Statement
(Form S-1) and related Prospectus of AtheroGenics, Inc. for the registration of
shares of its common stock.
Ernst & Young LLP
Atlanta, Georgia
February 18, 2000
<PAGE> 1
EXHIBIT 23.03
[KING & SPALDING LETTERHEAD]
191 PEACHTREE STREET
ATLANTA, GEORGIA 30303-1763
TELEPHONE: 404/572-4600
FACSIMILE: 404/572-5100
DIRECT DIAL: DIRECT FAX:
404/572-4600 404/572-5100
February 25, 2000
CONSENT FORM
The undersigned hereby consents to the use of our name and the Statement with
respect to us that appears under the heading "Experts" in the Registration
Statement on Form S-1 and related prospectus of AtheroGenics, Inc.
KING & SPALDING
/s/ KING & SPALDING
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM OUR AUDITED
FINANCIAL STATEMENTS OF ATHEROGENICS, INC. AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1997 JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1997 DEC-31-1998 DEC-31-1999
<CASH> 0 3,683,423 13,409,450
<SECURITIES> 0 0 0
<RECEIVABLES> 0 0 791,653
<ALLOWANCES> 0 0 0
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 0 4,942,445 14,290,722
<PP&E> 0 1,221,011 2,336,096
<DEPRECIATION> 0 (821,640) (1,101,463)
<TOTAL-ASSETS> 0 5,341,816 15,717,214
<CURRENT-LIABILITIES> 0 9,201,811 1,306,150
<BONDS> 0 0 0
0 14,704,449 38,711,491
0 0 0
<COMMON> 0 281,751 2,209,962
<OTHER-SE> 0 (19,009,507) (26,572,243)
<TOTAL-LIABILITY-AND-EQUITY> 0 5,341,816 15,717,214
<SALES> 0 0 0
<TOTAL-REVENUES> 0 0 5,791,653
<CGS> 0 0 0
<TOTAL-COSTS> 0 0 0
<OTHER-EXPENSES> 5,644,708 10,528,711 11,719,842
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> (485,392) 205,130 60,817
<INCOME-PRETAX> (5,159,316) (10,733,841) (5,988,806)
<INCOME-TAX> 0 0 0
<INCOME-CONTINUING> (5,159,316) (10,733,841) (5,988,806)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (5,519,316) (10,733,841) (5,988,806)
<EPS-BASIC> (2.25) (4.45) (2.45)
<EPS-DILUTED> (2.25) (4.45) (2.45)
</TABLE>
