<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended September 30, 1996 Commission file number 0-19855
---------------------- -----------
SERAGEN, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-2662345
- ------------------------------- --------------------
(State or other jurisdiction of (I.R.S Employer
incorporation or organization) Identification No.)
97 South Street, Hopkinton, MA 01748
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(508) 435-2331
- -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
16,963,975 shares of Common Stock, par value $.01, were outstanding on
November 4, 1996.
Total Number of Pages: ___
Exhibit Index at Page: ___
<PAGE> 2
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended September 30, 1996 Commission file number 0-19855
---------------------- ------------
SERAGEN, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-2662345
- ------------------------------- --------------------
(State or other jurisdiction of (I.R.S Employer
incorporation or organization) Identification No.)
97 South Street, Hopkinton, MA 01748
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(508) 435-2331
- -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
16,963,975 shares of Common Stock, par value $.01, were outstanding on November
4, 1996.
<PAGE> 3
SERAGEN, INC.
INDEX
Page
----
PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1 - Financial Statements
Balance Sheets -
December 31, 1995 and September 30, 1996................................ 3
Statements of Operations
Three and Nine Months Ended September 30, 1995 and 1996................. 4
Statements of Cash Flows
Nine Months Ended September 30, 1995 and 1996........................... 5
Notes to Financial Statements............................................ 6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations........................... 8
PART II - OTHER INFORMATION
- ---------------------------
Item 1 Legal Proceedings (None)
Item 2 Changes in Securities............................................ 12
Item 3 Defaults upon Senior Securities (None)
Item 4 Submission of Matters to a Vote of Security Holders (None)
Item 5 Other Information (None)
Item 6 Exhibits and Reports on Form 8-K.................................. 12
Signatures .............................................................. 13
-2-
<PAGE> 4
SERAGEN,INC.
<TABLE>
BALANCE SHEETS
(UNAUDITED)
<CAPTION>
ASSETS
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents.............................................. $ 435,460 $ 6,321,560
Restricted cash........................................................ 435,318 435,318
Contract receivable.................................................... 686,055 404,796
Unbilled contract receivable........................................... 496,147 595,631
Prepaid expenses and other current assets.............................. 335,238 207,213
------------- -------------
Total current assets.................................... 2,388,218 7,964,518
Property and equipment, net.............................................. 5,198,136 4,860,076
Investment in affiliate.................................................. 2,599,864 747,596
Deferred commission...................................................... 2,060,000 --
Prepaid interest......................................................... 3,528,677 --
Other assets............................................................. 524,613 80,620
------------- -------------
Total assets............................................ $ 16,299,508 $ 13,652,810
============= =============
LIABILITIES AND STOCKHOLDERS' ( DEFICIT) EQUITY
Current liabilities:
Accounts payable....................................................... 725,326 998,905
Current maturities of long-term debt................................... 248,494 117,657
Accrued commission payable............................................. 300,000 --
Accrued expenses....................................................... 2,413,284 1,815,504
Short-term obligation, less unamortized discount....................... -- 3,956,193
------------- -------------
Total current liabilities............................... 3,687,104 6,888,259
Non-current liabilities:
Long-term debt, less current maturities................................ 12,537,417 --
Deferred revenue....................................................... 5,000,000 --
Long-term obligation, less unamortized discount........................ 3,440,482 --
Affiliate guarantee.................................................... 2,076,000 2,076,000
------------- -------------
Total non-current liabilities........................... 23,053,899 2,076,000
Stockholders'(deficit) equity:
Preferred stock, $.01 par value; 5,000,000 shares authorized
Convertible preferred stock, Series A, $.01 par value;
issued and outstanding 3,566 shares at September 30,
1996, $3,663,432 liquidation preference ........................... -- 3,423,432
Convertible preferred stock, Series B, $.01 par value;
issued and outstanding 23,800 shares at September 30,
1996, $23,800,000 liquidation preference .......................... -- 15,098,938
Convertible preferred stock, Series C, $.01 par value;
issued and outstanding 5,000 shares at September 30,
1996, $5,000,000 liquidation preference ........................... -- 4,967,000
Common stock, $.01 par value; 30,000,000 shares
authorized; issued 16,521,212 shares at December 31,
1995 and 16,823,557 shares at September 30,
1996, respectively ................................................ 165,212 168,235
Additional paid-in capital............................................... 141,759,580 150,849,168
Accumulated deficit ..................................................... (152,273,333) (169,818,222)
------------- -------------
(10,348,541) 4,688,551
------------- -------------
Less treasury stock 14,632 shares at cost at December 31, 1995 .......... (92,954) --
------------- -------------
Total stockholders' (deficit) equity.................... (10,441,495) 4,688,551
------------- -------------
Total liabilities and stockholders' (deficit) .......... $ 16,299,508 $ 13,652,810
============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
-3-
<PAGE> 5
SERAGEN, INC.
<TABLE>
STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
---------------------------- ----------------------------
1995 1996 1995 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenue:
Contract revenue and license fees ....... $ 721,137 $ 1,613,833 $ 2,103,284 $ 9,360,075
------------ ------------ ------------ ------------
Operating expenses:
Cost of contract revenue and license fees 721,137 693,762 2,103,284 3,322,003
Research and development ................ 3,827,738 3,477,591 10,671,731 10,352,922
General and administrative .............. 1,242,866 941,812 3,744,546 5,477,209
------------ ------------ ------------ ------------
5,791,741 5,113,165 16,519,561 19,152,134
------------ ------------ ------------ ------------
Loss from operations .... (5,070,604) (3,499,332) (14,416,277) (9,792,059)
Equity in loss of affiliate ............... -- 210,299 -- 1,852,268
Interest income ........................... 16,969 25,665 54,202 66,774
Interest expense .......................... 591,230 3,666,103 1,109,042 5,278,522
------------ ------------ ------------ ------------
Net loss ................ (5,644,865) (7,350,069) (15,471,117) (16,856,075)
Dividends ................................. -- 662,147 -- 688,814
------------ ------------ ------------ ------------
Net loss applicable to common
stockholders ....................... $ (5,644,865) $ (8,012,216) $(15,471,117 $(17,544,889)
============ ============ ============ ============
Net loss per common share ................. $ (0.34) $ (0.48) $ (0.95) $ (1.06)
============ ============ ============ ============
Weighted average common shares used in
computing net loss per share ............ 16,461,616 16,691,874 16,310,144 16,619,514
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
-4-
<PAGE> 6
SERAGEN, INC.
<TABLE>
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
-------------------------------
1995 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss ............................................. $(15,471,117) $(16,856,075)
------------ ------------
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization .................... 719,226 700,409
Compensation associated with stock issuance ...... -- 20,501
Equity in loss of affiliate ...................... -- 1,852,268
Loss on disposal of property and equipment ....... 2,237 519
Amortization of discount of long-term debt ....... 515,711 515,711
Amortization of prepaid interest ................. 376,007 3,528,677
Amortization of debt issuance costs .............. 43,858 558,411
Changes in operating assets and liabilities:
Contract receivable .............................. (327,694) 281,259
Unbilled contract receivable ..................... 40,686 (99,484)
Prepaid expenses and other current assets ........ 258,889 128,025
Accounts payable ................................. 94,394 273,579
Deferred commission .............................. -- 2,060,000
Accrued commission payable ....................... (300,000) (300,000)
Accrued expenses ................................. (18,590) (597,780)
Deferred revenue ................................. -- (5,000,000)
------------ ------------
Net cash (used in) operating activities ................ (14,066,393) (12,933,980)
------------ ------------
Cash flows from investing activities:
Proceeds from sales of marketable securities ......... 2,034,948 --
Purchases of property and equipment .................. (172,622) (362,868)
Decrease in other assets ............................. 4,050 1,915
------------ ------------
Net cash provided by (used in) investing activities .... 1,866,376 (360,953)
------------ ------------
Cash flows from financing activities:
Net proceeds from stock issuances .................... 192,547 8,838,542
Purchases of treasury stock .......................... (157,562) (89,625)
Proceeds from issuance of long-term debt ............. 9,000,000 11,300,000
Repayments of long term debt ......................... (145,348) (168,255)
Debt issuance costs .................................. (486,945) (116,334)
Dividends paid ....................................... -- (583,295)
------------ ------------
Net cash (used in) provided by financing activities .... 8,402,692 19,181,033
------------ ------------
Net (decrease) increase in cash and cash equivalents ... (3,797,325) 5,886,100
Cash and cash equivalents, beginning of period ......... 5,536,782 435,460
------------ ------------
Cash and cash equivalents, end of period ............... $ 1,739,457 $ 6,321,560
============ ============
Supplemental disclosure of cash flows information
Cash payments for interest ........................... $ 218,206 $ 758,771
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
-5-
<PAGE> 7
SERAGEN, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
----------
1. BASIS OF PRESENTATION
The accompanying financial statements are unaudited and have been prepared by
Seragen, Inc. (the "Company") in accordance with generally accepted accounting
principles.
Certain information and footnote disclosure normally included in the
Company's audited annual financial statements has been condensed or omitted in
the Company's interim financial statements. In the opinion of management, the
interim financial statements reflect all adjustments (consisting of normal
recurring accruals) necessary for a fair presentation of the results for the
interim periods presented.
The results of operations for the interim periods may not necessarily be
indicative of the results of operations expected for the full year, although the
Company expects to incur a significant loss for the year ended December 31,
1996. These interim financial statements should be read in conjunction with the
audited financial statements for the year ended December 31, 1995, which are
contained in the Company's most recent Annual Report on Form 10-K.
2. USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date(s) of the financial statements and
the reported amounts of revenues and expenses during the reported period(s).
Actual results could differ from those estimates.
3. AMENDMENT TO LILLY SALES AND DISTRIBUTION AGREEMENT
On May 28, 1996, Eli Lilly and Company ("Lilly") and the Company amended
the Sales and Distribution Agreement relating to the $5.0 million advance paid
by Lilly in August 1994 against Lilly's future purchases of bulk product from
the Company. Associated with the original agreement was $2,060,000 of deferred
commission expense. The amended agreement states that the $5.0 million payment
is non-refundable and Seragen has no obligation to refund the advance should no
bulk purchases be made by Lilly. Accordingly, the Company recorded $5.0 million
in revenue and $2,060,000 in commission expense in the second quarter of 1996.
4. REGULATION S
On May 29, 1996, the Company raised gross proceeds of $4 million
(approximately $3.8 million net of offering fees) through the sale of 4,000
shares of Seragen convertible Series A Preferred Stock ("Series A Shares") to
investors outside the United States. The Series A Shares are convertible at the
option of the holders, beginning July 15, 1996, into shares of Seragen Common
Stock at a conversion price equal to the lesser of $4.125 or 73 percent of the
average closing bid prices for a five day period prior to the conversion date.
Terms of the Series A Shares also provide for 8% cumulative dividends payable in
shares of Seragen Common Stock at the time of each conversion. The holders of
the Series A Shares are not entitled to vote separately, as a series or
otherwise, on any matter submitted to a vote of the shareholders of the Company.
Each Series A Share has a liquidation preference equal to the sum of (a) $1,000,
plus (b) an amount equal to any accrued and unpaid dividends from the date of
issuance of the Series A Shares so that such amount must be paid on each Series
A Share in the event of a voluntary or involuntary liquidation, dissolution or
winding up of the Company before any distribution or payment is made to any
holders of any shares of the Common Stock or any other class or series of the
Company's capital stock which is junior to the Series A Shares. Any shares which
remain outstanding on November 29, 1997 will be automatically converted into
shares of Seragen Common Stock. As of October 31, 1996, 644 Series A Shares were
converted into 337,715 shares of Common Stock at conversion prices from $2.774
to $1.296 per share. The Series A Shares were reflected at $3,423,432 at
September 30, 1996 which includes accrued dividends payable from the issuance
date through September 30, 1996. Dividend expense related to the Series A Shares
was approximately $106,000.
-6-
<PAGE> 8
SERAGEN, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
----------
5. LOAN RESTRUCTURING
On July 1, 1996, the Company restructured its arrangement with the
guarantors of the Company's $23.8 million loan financing obtained in June 1995
to release the Company from its liability to the banks involved. The new
agreement replaces the lines of credit with convertible Series B Preferred Stock
("Series B Shares"). Each Series B Share is convertible at any time at the
investor's option into a number of shares of Seragen Common Stock determined by
dividing $1,000 by the average of the closing sale prices of the Common Stock as
reported on the Nasdaq Stock Market for the ten consecutive trading days
immediately preceding the conversion date. The holders of Series B Shares are
entitled to receive a cumulative dividend payable in arrears in cash quarterly
on the last day of March, June, September, and December of each year commencing
on September 30, 1996 at an annual rate equal to the prime rate plus 1 1/2%
through June 1999 and at an increasing percentage rate thereafter up to a
maximum rate of the prime rate plus 5% in 2003. The investors also received
warrants to purchase a total of 5,950,000 shares of Seragen Common Stock
(250,000 warrants for every $1,000,000 of preferred stock purchased) at an
exercise price of $4.00 per share. The warrants are exercisable commencing on
January 1, 1997 and expire on July 1, 2006. The holders of the Series B Shares
are entitled to vote, on any matter submitted to a vote of the shareholders of
the Company, and are entitled to the number of votes equal to the product of (x)
the number of Series B Shares held on the record date for the determination of
the stockholders entitled to vote on such matters or, if no record date is
established, in accordance with applicable provisions of Delaware law, and (y)
$1,000, divided by $4.00. Each Series B Share has a liquidation preference equal
to the sum of (a) $1,000, plus (b) an amount equal to any accrued and unpaid
dividends from the date of issuance of the Series B Shares so that such amount
must be paid on each Series B Share in the event of a voluntary or involuntary
liquidation, dissolution or winding up of the Company before any distribution or
payment is made to any holders of any shares of the Common Stock or any other
class or series of the Company's capital stock which is junior to the Series B
Shares. At any time, with the approval of the Company's Board of Directors,
Audit Committee or comparable body, the Company may redeem any or all of the
Series B Shares for cash.
In connection with the restructuring, the Company expensed $3.0 million of
prepaid interest and $558,000 of debt issuance costs associated with the
outstanding loans. The Series B Shares were reflected at $15,098,938 (net of
restructuring costs of $83,111) at September 30, 1996. Dividend expense related
to the Series B Shares was approximately $580,000. The Company has estimated the
average fair market value of the warrants to be $1.45 per warrant or $8,617,951
for the 5,950,000 issued and outstanding warrants. Proceeds ascribed to the
warrants have been reflected in additional paid-in capital.
6. REGULATION D
On September 30, 1996, the Company raised net proceeds of approximately $5
million through the sale of 5,000 shares of the Company's non-voting convertible
Series C Preferred Stock ("Series C Shares") in a private placement to an
institutional investor under Regulation D of the Securities Act of 1933. The
Series C Shares are convertible at the option of the holder into shares of
Seragen Common Stock at a conversion price equal to the lesser of $2.75 or 73
percent of the average closing bid prices for a five day period prior to the
conversion date. Terms of the Series C Shares also provide for 8% cumulative
dividends payable in shares of Seragen Common Stock at the time of each
conversion. Each Series C Share has a liquidation preference equal to $1,000
plus an amount equal to any accrued and unpaid dividends from the date of
issuance of the Series C Shares in the event of a voluntary or involuntary
liquidation, dissolution or winding up of the Company. Series C Shares which
remain outstanding on March 30, 1998 will be automatically converted into shares
of the Company's Common Stock. The Company's Series C Shares were reflected at
$4,967,000 (net of estimated issuance costs of $33,000) at September 30, 1996.
-7-
<PAGE> 9
SERAGEN, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
----------
OVERVIEW
Seragen is engaged in the discovery, research and development of
pharmaceutical products for human therapeutic applications. Since 1985, the
Company has focused substantially all of its efforts and resources on research
and development of its fusion protein technology. The Company's fusion proteins
were developed using proprietary technology and have potential applications in a
wide range of human diseases. To date, the Company has not generated any
revenues from the sale of fusion protein products, and the Company does not
expect to receive any such revenues for several years. The Company has generated
no profit since its inception and expects to incur additional operating losses
over the next several years.
The Company's business is subject to significant risks, including the
uncertainties associated with the regulatory approval process and with obtaining
and enforcing patents important to the Company's business. Seragen expects to
incur substantial operating losses over the next several years due to continuing
expenses associated with its research and development programs, including
pre-clinical testing and clinical trials. Operating losses may also fluctuate
from quarter to quarter as a result of differences in the timing of expenses
incurred.
RESULTS OF OPERATIONS
Three Months Ended September 30, 1996 and 1995. The Company's net loss
applicable to common stockholders for the three-month period ending September
30, 1996 was $8.0 million compared to $5.6 million for the same period in the
prior year. This increase of $2.4 million in 1996 was primarily due to the
expensing of $3.0 millon of prepaid interest associated with the restructuring
of the June 1995 loan guarantees and $662,000 for dividend fees associated with
the Series A and Series B Preferred Stock. This increase in interest and
dividend expense was partially offset by an increase in revenue and a decrease
in total operating expenses.
The Company's revenues for the three months ending September 30, 1996 and
1995 were $1.6 million and $721,000, respectively. In the third quarter of 1996,
revenue consisted of a one-time $1.4 million fee relating to the exercise by a
third party of an option to license certain patents in the field of
transplantation. The remaining $200,000 in revenue in 1996 is associated
primarily with contract revenue from Eli Lilly and Company ("Lilly") for certain
development costs of IL-2 Fusion Protein for cancer therapy as compared to
$721,000 in 1995. The decrease in contract revenue in 1996 is a result of a
restructuring of the terms of a third party clinical trial management contract
which is primarily funded by Lilly.
Total operating expenses decreased $700,000 to $5.1 million in 1996 from
$5.8 million in 1995. Fees associated with the cost of contract revenue and
license fees were substantially unchanged for the three month period ending
September 30, 1996 and 1995. However, there was a decrease of approximately
$500,000 in cost of contract revenue from Lilly because of the change in terms
of the third party clinical trial management contract mentioned above. This
decrease was offset by a $500,000 increase related to a sub-license fee payable
on the patent license revenue mentioned above. Research and development expenses
decreased $300,000 to $3.5 million in the third quarter of 1996 from $3.8
million for the same period of 1995. This decrease was partially due to the
decision by the Company in 1996 to focus it's financial resources on IL-2 Fusion
Protein for cancer and psoriasis therapies thereby reducing clinical development
activity in other indications. An additional decrease was realized through a
reduction in non-reimbursable research grants and outside pre-clinical testing.
General and administrative expenses decreased $300,000 to $942,000 in the third
quarter of 1996 as compared to $1.2 million in 1995. This decrease is primarily
due to a reduction in payroll expense.
-8-
<PAGE> 10
SERAGEN, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
----------
In the third quarter of 1996, a non-cash charge of $210,000 was recorded to
reflect the potential obligation by the Company to the investors in Seragen
Biopharmaceuticals Ltd. ("SBL") in connection with certain put rights. Interest
income increased by $9,000 to $26,000 in the third quarter of 1996 from $17,000
in the third quarter of 1995 primarily due to higher average balances of cash
equivalents in 1996. Interest expense increased by $3.1 million to $3.7 million
in the third quarter of 1996 from $591,000 in the third quarter of 1995
primarily because of the expensing of $3.0 million of prepaid interest and
$475,000 of debt issuance costs associated with the repayment of the June 1995
loans. In the third quarter of 1996, dividend fees were $662,000 associated with
the Series A and Series B Preferred Stock.
Nine Months ended September 30, 1996 and 1995. The Company's net loss
applicable to common stockholders for the nine-month period ending September 30,
1996 was $17.5 million compared to $15.5 million for the same period in the
prior year. This increase of $2.0 million in 1996 was primarily due to the
expensing of $3.0 million of prepaid interest associated with the restructuring
of the June 1995 guaranteed loans, a non-cash charge of $1.9 million for the
potential obligation by the Company to the investors in SBL in connection with
certain put rights, and $689,000 for dividend fees associated with the Series A
and Series B Preferred Stock. These increases in interest and dividend expense
were partially offset by a net increase in revenue of $2.9 million due to an
amendment to the Sales and Distribution Agreement between the Company and Lilly
in the second quarter of 1996.
The Company's revenues for the nine-month period ending September 30, 1996
were $9.4 million compared to $2.1 million for the nine months ending September
30, 1995. The increase of $7.3 million in revenue in 1996 was the result of a
one-time $1.5 million fee relating to the exercise by a third party of an option
to license certain patents in the field of transplantation, the recognition of
$5.0 million of revenue in the second quarter of 1996 for which cash had been
previously paid by Lilly in August 1994 and an increase of $700,000 primarily in
contract revenue from Lilly associated with the Phase III clinical trial for
IL-2 Fusion Protein for cancer therapy.
Total operating expenses increased $2.7 million to $19.2 million in 1996
from $16.5 million in 1995. Fees associated with the cost of contract revenue
and license fees increased $1.2 million to $3.3 million in 1996 compared to $2.1
million for the same period in the prior year. This increase is due to an
increase of $700,000 for the acceleration of clinical development activity under
the Phase III clinical trial for IL-2 Fusion Protein for cancer therapy and
approximately an increase of $500,000 related to a sub-license fee payable on
the patent license revenue mentioned above. Research and development expenses
decreased $300,000 to $10.4 million in 1996 from $10.7 million in 1995. This
decrease was partially due to the decision by the Company in 1996 to focus it's
financial resources on IL-2 Fusion Protein for cancer and psoriasis therapies
thereby reducing clinical development activity in other indications. An
additional decrease was realized through a reduction in non-reimbursable
research grants and outside pre-clinical testing. General and administrative
expenses increased $1.8 million to $5.5 million in 1996 from $3.7 million in
1995. The increase was primarily the result of a non-cash charge of $2.1 million
in the second quarter of 1996 for commission expense associated with an
amendment to the Sales and Distribution Agreement between the Company and Lilly.
This increase is partially offset by a decrease in patent legal fees and payroll
expense.
In the nine months ending September 30, 1996, a non-cash charge of $1.9
million was recorded to reflect the potential obligation by the Company to the
investors in SBL in connection with certain put rights. Interest income
increased $13,000 to $67,000 in 1996 from $54,000 in 1995 due to higher average
balances of cash equivalents in 1996. Interest expense increased $4.2 million to
$5.3 million in 1996 from $1.1 million in 1995 primarily because of the
expensing of $3.0 million of prepaid interest and $475,000 of debt issuance
costs associated with the repayment of the June 1995 loans and due to higher
loan balances in the first and second quarters of 1996.
-9-
<PAGE> 11
SERAGEN, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
----------
In 1996 dividend fees were $689,000 associated with the Series A and Series B
Preferred Stock.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1996, the Company had approximately $6.3 million in
cash and cash equivalents and $14.0 million invested in property and equipment,
consisting primarily of leasehold improvements to the Company's manufacturing
facility, laboratory facilities and laboratory equipment.
The Company expects to incur further substantial research and development
expenses as it continues development of its fusion proteins. The Company also
expects to incur substantial administrative and commercialization expenses in
the future. The Company's continuing operating losses and requirements for
working capital will depend on many factors, including the progress and costs
associated with its research, pre-clinical and clinical development efforts, and
the level of resources which the Company must devote to obtaining regulatory
approvals to manufacture and sell its products.
The Company anticipates that existing cash, cash equivalents, and the
interest thereon, and reimbursement for clinical costs for the development of
IL-2 Fusion Protein for cancer therapy will be sufficient to fund the Company's
working capital requirements through approximately December 1996. The Report of
Independent Accountants on the Company's Financial Statements for the fiscal
year ended December 31, 1995 includes an explanatory paragraph concerning
uncertainties surrounding the Company's ability to continue as a going concern.
This may adversely affect the Company's ability to raise additional capital.
The Company's ability to finance its operations beyond December 1996 is
dependent upon its ability to raise additional capital through debt or equity
financings, possible additional payments under the strategic alliance with
Lilly, or such other sources of financing, including partnerships, as may be
required.
Any future equity financings could result in dilution to the Company's then
existing stockholders, and there can be no assurance that future arrangements
with collaborative partners or others will be available to the Company, or, if
available, that such arrangements would not require the Company to relinquish
rights to certain products or markets in exchange for funding. No assurance can
be given that additional debt or equity financings will be available on
acceptable terms, if at all, to fund the Company's future working capital
requirements.
UNCERTAINTIES
To the extent that any of the statements contained herein relating to the
Company's products and its operations are forward looking, such statements are
based on current expectations that involve a number of uncertainties and risks.
Such uncertainties and risks include, but are not limited to, the early stage of
the Company's product development and lack of product revenues; the Company's
history of operating losses and accumulated deficit; the Company's limited
financial resources and uncertainty as to the availability of additional capital
to fund its development on acceptable terms, if at all; Boston University's
control of the Company; the Company's reliance on fusion protein technology; the
potential development of competing fusion proteins, products and technologies;
the Company's dependence on its collaborative partner, Eli Lilly and Company,
and the lack of assurance that the Company will receive further funding under
this partnership or develop and maintain other strategic alliances; the lack of
assurance regarding patent and other protection for the Company's proprietary
technology; governmental regulation of the Company's activities, facilities and
products; the Company's limited manufacturing capabilities; the Company's lack
of commercial sales and marketing capabilities; the dependence on key personnel;
the
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<PAGE> 12
SERAGEN, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
----------
development of competing technologies; uncertainties as to the extent of
reimbursement for the costs of the Company's potential products and related
treatment by government and private health insurers and other orgainizations;
the potential adverse impact of government-directed health care reform; the risk
of product liability claims; and general economic conditions. As a result, the
Company's future development efforst involve a high degree or risk. For further
information, refer to the risk factors included in the Company's Registration
Statement on Form S-3, Registration No. 333-12613, relating to the resale of
shares of Common Stock, as filed with the Securities and Exchange Commission.
Actual results may differ materially from such expectations.
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<PAGE> 13
SERAGEN, INC.
PART II
OTHER INFORMATION
----------
ITEM 2. CHANGES IN SECURITIES
On September 30, 1996, the Company filed a Certificate of Designation,
Preferences and Rights of Series C Preferred Stock which amended the Company's
Restated Certificate of Incorporation (which defines the rights of holders
shares of the Company's Common Stock) to add a new series of Preferred Stock
designated as Series C Preferred Stock (the "Series C Shares"). As of November
8, 1996, the Company had issued all 5,000 Series C Shares. Each Series C Share
is convertible into shares of the Company's Common Stock at a conversion price
equal to the lesser of $2.75 or 73 percent of the average closing bid prices for
a five day period prior to the conversion date. The holders of the Series C
Shares also are entitled to receive upon conversion 8% cumulative dividends
payable in shares of Common Stock. The holders of the Series C Shares are not
entitled to vote separately, as a series or otherwise, on any matter submitted
to a vote of the shareholders of the Company. Each Series C Share has a
liquidation preference equal to the sum of (a) $1,000, plus (b) an amount equal
to any accrued and unpaid dividends from the date of issuance of the Series C
Shares so that such amount must be paid on each Series C Share in the event of a
voluntary or involuntary liquidation, dissolution or winding up of the Company
before any distribution or payment is made to any holders of any shares of the
Common Stock or any other class or series of the Company's capital stock which
is junior to the Series C Shares.
ITEM 6. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K
(a) Exhibit Index
Exhibit 3.4 Restated By-Laws of the Registrant, as amended (filed
herewith)
Exhibit 10.64 Employment Agreement, dated November 6, 1996, by and
between the Registrant and Mr. Reed Prior (filed herewith)
Exhibit 10.65 Employment Agreement, dated November 6, 1996, by and
between the Registrant and Jean C. Nichols, Ph.D., (filed
herewith)
Exhibit 10.66 Stockholders Agreement, dated November 6, 1996, by and
between the Registrant and Boston University, Leon C. Hirsch, Turi
Josefsen, Gerald S.J. Cassidy, Loretta P. Cassidy and Reed R. Prior
(filed herewith)
Exhibit 10.67 Retirement and Consulting Agreement, dated November 6,
1996, by and between the Registrant and Mr. George W. Masters
(filed herewith)
Exhibit 27 Financial Data Schedule (Edgar)
(b) Reports on Form 8-K
A Current Report on Form 8-K for September 30, 1996 event, relating to the
Registrant's announcement that it has raised $5.0 million through the sale
of 5,000 shares of Series C convertible preferred stock in a private
placement under Regulation D of the U.S. Securities Act of 1933.
A Current Report on Form 8-K for November 6, 1996 event, relating to the
Registrant's announcement that, effective immediately, the board had
elected Reed R. Prior chairman, chief executive officer and treasurer of
the company. The board also elected Jean Nichols president, chief
technology officer, and a member of Seragen's board of directors. Former
vice chairman and CEO, George Masters, announced his retirement but would
remain as a consultant to the company. In addition, James Howell, stepped
down as chairman, and also retired from the board of directors; and chief
financial officer, Thomas N. Konatich, resigned from the company,
effective November 12th.
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<PAGE> 14
<PAGE> 15
SERAGEN, INC.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SERAGEN, INC.
Date: November 12, 1996 by: /s/ Reed R. Prior
------------------------------------------
Reed R. Prior
Chairman of the Board
and Chief Executive Officer
Date: November 12, 1996 by: /s/ Jean C. Nichols
-------------------------------------------
Jean C. Nichols, Ph.D.
President and
Chief Scientific Officer
(Principal Financial and Accounting Officer)
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<PAGE> 16
SERAGEN, INC.
EXHIBIT INDEX
----------
Exhibit
Number Description Page
- -------------------------------------------------------------------------------
(3.4) Restated By-Laws of the Registrant, as amended
(filed herewith)
(10.64) Employment Agreement, dated November 6, 1996, by and
between the Registrant and Reed Prior (filed herewith)
(10.65) Employment Agreement, dated November 6, 1996, by and
between the Registrant and Jean C. Nichols, Ph.D., (filed
herewith)
(10.66) Stockholders Agreement, dated November 6, 1996, by and
between the Registrant and Boston University, Leon Hirsch
Turi Josefsen, Gerald S.J. Cassidy, Loretta P. Cassidy
and Reed R. Prior (filed herewith)
(10.67) Retirement and Consulting Agreement, dated November 6
1996, by and between the Registrant and Mr. George W.
Masters (filed herewith)
(27) Financial Data Schedule (Edgar)
==============================================================================
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<PAGE> 1
Exhibit 3.4
SERAGEN, INC.
RESTATED BY-LAWS
ARTICLE I - STOCKHOLDERS
--------- ------------
SECTION 1. ANNUAL MEETING. An annual meeting of the stockholders, for the
election of directors to succeed those whose terms expire and for the
transaction of such other business as may properly come before the meeting,
shall be held at such place, on such date, and at such time as the board of
directors shall each year fix.
SECTION 2. SPECIAL MEETINGS. Special meetings of the stockholders, for any
purpose or purposes prescribed in the notice of the meeting, may be called by
the Chairman of the Board, the President or the board of directors, by the
affirmative vote of a majority of the Whole Board, and shall be held at such
place, on such date, and at such time as shall be fixed by the board of
directors or the person calling the meeting. The term "Whole Board" shall mean
the total number of authorized directors, whether or not there exists any
vacancies in previously authorized directorships.
SECTION 3. NOTICE OF MEETINGS. Written notice of the place, date, and time
of all meetings of the stockholders shall be given, not less than ten (10) nor
more than sixty (60) days before the date on which the meeting is to be held, to
each stockholder entitled to vote at such meeting, except as otherwise provided
herein or required by law (meaning, here and hereinafter, as required from time
to time by the Delaware General Corporation Law or the Certificate of
Incorporation of the Corporation, as amended and restated from time to time).
When a meeting is adjourned to another place, date or time, written notice
need not be given of the adjourned meeting if the place, date and time thereof
are announced at the meeting at which the adjournment is taken; provided,
however, that if the date of any adjourned meeting is more than thirty (30) days
after the date for which the meeting was originally noticed, or if a new record
date is fixed for the adjourned meeting, written notice of the place, date, and
time of the adjourned meeting shall be given in conformity herewith. At any
adjourned meeting, any business may be transacted that might have been
transacted at the original meeting.
SECTION 4. QUORUM. At any meeting of the stockholders, the holders of a
majority of the voting power of the outstanding shares of the capital stock of
the Corporation entitled to vote at the meeting, present in person or by proxy,
shall constitute a quorum for all purposes, unless or except to the extent that
the presence of a larger number may be required by law. Where a separate vote by
a class or classes, or series thereof, is required, a majority of the voting
power of the outstanding shares of such class or classes, or series, present in
person or represented by proxy shall constitute a quorum entitled to take action
with respect to that vote on that matter.
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<PAGE> 2
If a quorum shall fail to attend any meeting, the chairman of the meeting
or the holders of majority of the voting power of the shares of stock entitled
to vote who are present, in person or by proxy, may adjourn the meeting to
another place, date, or time.
SECTION 5. ORGANIZATION. Such person as the board of directors may have
designated or, in the absence of such a person, the Chairman of the Board or, in
his absence, such person as may be chosen by the holders of a majority of the
shares entitled to vote who are present, in person or by proxy, shall call to
order any meeting of the stockholders and act as chairman of the meeting. In the
absence of the Secretary of the Corporation, the secretary of the meeting shall
be such person as the chairman of the meeting appoints.
SECTION 6. CONDUCT OF BUSINESS. The chairman of any meeting of
stockholders shall determine the order of business and the procedure at the
meeting, including such regulation of the manner of voting and the conduct of
discussion as may seem to him in order. The date and time of the opening and
closing of the polls for each matter upon which the stockholders will vote at
the meeting shall be announced at the meeting.
Section 7. Notice of Stockholder Business and Nominations.
------- ----------------------------------------------
A. Annual Meetings of Stockholders.
-------------------------------
(1) Nominations of persons for election to the board of directors and
the proposal of business to be considered by the stockholders may be made at an
annual meeting of stockholders (a) pursuant to the Corporation's notice of
meeting, (b) by or at the direction of the board of directors or (c) by any
stockholder of the Corporation who was a stockholder of record at the time of
giving of notice provided for in this Section, who is entitled to vote at the
meeting and who complies with the notice procedures set forth in this Section.
(2) For nominations or other business to be properly brought before an
annual meeting by a stockholder pursuant to clause (c) of paragraph (A) (1) of
this Section, the stockholder must have given timely notice thereof in writing
to the Secretary of the Corporation and such other business must otherwise be a
proper matter for stockholder action. To be timely, a stockholder's notice shall
be delivered to the Secretary at the principal executive offices of the
Corporation not later than the close of business on the sixtieth (60) day nor
earlier than the close of business on the ninetieth (90th) day prior to the
first anniversary of the preceding year's annual meeting; provided, however,
that in the event that the date of the annual meeting is more than thirty (30)
days before or more than sixty (60) days after such an anniversary date, notice
by the stockholder to be timely must be so delivered not earlier than the close
of business on the ninetieth (90) day prior to such annual meeting and not later
than the close of business on the later of the sixtieth (60th) day prior to such
annual meeting or the close of business on the tenth (10th) day following the
day on which public announcement of the date of such meeting is first made by
The Corporation.
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<PAGE> 3
Such stockholder's notice shall set forth (a) as to each person whom the
stockholder proposes to nominate for election or reelection as a director all
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended (the "Exchange Act") (including such person's written consent to
being named in the proxy statement as a nominee and to serving as a director if
elected); (b) as to any other business that the stockholder proposes to bring
before the meeting, a brief description of the business desired brought before
the meeting, the reasons for conducting such business at the meeting and any
material interest in such business of such stockholder and the beneficial owner,
if any, on whose behalf the proposal is made; and (c) as to the stockholder
giving the notice and the beneficial owner, if any, on whose behalf the
nomination or proposal is made (i) the name and address of such stockholder, as
they appear on the Corporation's books, and of such beneficial owner and (ii)
the class and number of shares of the Corporation that are owned beneficially
and held of record by such stockholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence of paragraph (A)
(2) of this Section to the contrary, in the event that the number of directors
to be elected to the board of directors of the Corporation is increased and
there is no public announcement by the Corporation naming all of the nominees
for director or specifying the size of the increased board of directors at least
seventy (70) days prior to the first anniversary of the preceding year's annual
meeting (or, if the annual meeting is held more than thirty (30) days before or
sixty (60) days after such anniversary date, at least seventy (70) days prior to
such annual meeting), a stockholder's notice required by this Section shall also
be considered timely, but only with respect to nominees for any new positions
created by such increase, if it shall be delivered to the Secretary at the
principal executive office of the Corporation not later than the close of
business on the tenth (10th) day following the day on which such public
announcement is first made by the Corporation.
B. Special Meetings of Stockholders.
--------------------------------
Only such business shall be conducted at a special meeting of
stockholders as shall have been set forth in the Corporation's notice of
meeting. Nominations of persons for election to the board of directors may be
made at a special meeting of stockholders at which directors are to be elected
pursuant to the Corporation's notice of meeting (a) by or at the direction of
the board of directors or (b) provided that the board of directors has
determined that directors shall be elected at such meeting, by any stockholder
of the Corporation who is a stockholder of record at the time of giving of
notice of the special meeting, who shall be entitled to vote at the meeting and
who complies with the notice procedures set forth in this Section. In the event
the Corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the board of directors, any such stockholder
may nominate a person or persons (as the case may be), for election to such
position(s) as specified in the Corporation's notice of meeting, if the
stockholder's notice required by paragraph (A) (2) of this Section shall be
delivered to the Secretary at the principal executive offices of the Corporation
not earlier than the ninetieth (90th) day prior to such special meeting nor
later than the close of business of the
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<PAGE> 4
sixtieth (60th) day prior to such special meeting or the tenth (10th) day
following the day on which public announcement is first made of the date of the
special meeting and of the nominees proposed by the board of directors to be
elected at such meeting.
C. General.
-------
(1) Only such persons who are nominated in accordance with the
procedures set forth in this Section shall be eligible to serve as directors and
only such business shall be conducted at a meeting of stockholders as shall have
been brought before the meeting in accordance with the procedures set forth in
this Section. Except as otherwise provided by law or these by-laws, the chairman
of the meeting shall have the power and duty to determine whether a nomination
or any business proposed to be brought before the meeting was made or proposed,
as the case may be, in accordance with the procedures set forth in this Section
and, if any proposed nomination or business is not in compliance herewith to
declare that such defective proposal or nomination shall be disregarded.
(2) For purposes of this Section, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
Corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Section, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth herein. Nothing in this Section shall be deemed to affect any rights (i)
of stockholders to request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act or (ii) of the holders
of any series of Preferred Stock to elect directors under specified
circumstances.
SECTION 8. PROXIES AND VOTING. At any meeting of the stockholders, every
stockholder entitled to vote may vote in person or by proxy authorized by an
instrument in writing or by a transmission permitted by law filed in accordance
with the procedure established for the meeting. Any copy, facsimile
telecommunication or other reliable reproduction of the writing or transmission
created pursuant to this Section may be substituted or used in lieu of the
original writing or transmission for any and all purposes for which the original
writing or transmission could be used, provided that such copy, facsimile
telecommunication or their reproduction shall be a complete reproduction of the
entire original writing or transmission.
All voting, including on the election of directors but excepting where
otherwise required by law, may be a voice vote. Any vote not taken by voice
shall be taken by ballots, each of which shall state the name of the stockholder
or proxy voting and such other information as may be required under the
procedure established for the meeting. The Corporation may, and to the extent
required by law, shall, in advance of any meeting of stockholders, appoint one
or more inspectors to act at the meeting and make a written report thereof.
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<PAGE> 5
The Corporation may designate one or more persons as alternate inspectors
to replace any inspector who fails to act.
If no inspector or alternate is able to act at a meeting of stockholders, the
person presiding at the meeting may, and to the extent required by law, shall,
appoint one or more inspectors to act at the meeting. Each inspector, before
entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector with strict impartiality and
according to the best of his ability.
Except as otherwise provided in the terms of any class or series of
Preferred Stock of the Corporation, all elections shall be determined by a
plurality of the votes cast, and except as otherwise required by law, all other
matters shall be determined by a majority of the votes cast affirmatively or
negatively.
SECTION 9. STOCK LIST. A complete list of stockholders entitled to vote at
any meeting of stockholders, arranged in alphabetical order for each class of
stock and showing the address of each such stockholder and the number of shares
registered in such stockholder's name, shall be open to the examination of any
such stockholder, for any purpose germane to the meeting, during ordinary
business hours for a period of at least ten (10) days prior to the meeting
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or if not so specified, at the
place where the meeting is to be held.
The stock list shall also be kept at the place of the meeting during the
whole time thereof and shall be open to the examination of any such stockholder
who is present. This list shall presumptively determine the identity of the
stockholders entitled to vote at the meeting and the number of shares held by
each of them.
ARTICLE II - BOARD OF DIRECTORS
---------- ------------------
SECTION 1. GENERAL POWERS, NUMBER AND TERM OF OFFICE.
The business and affairs of the Corporation shall be managed by or under
the direction of its board of directors. The number of directors who shall
constitute the Whole Board shall be such number as the board of directors shall
from time to time have designated. Each director shall be elected for a term of
one year and until his successor shall have been duly elected and qualified,
except as otherwise required by law.
SECTION 2. VACANCIES AND NEWLY CREATED DIRECTORSHIPS.
Subject to the rights of the holders of any class or series of Preferred Stock,
and except as otherwise determined by the board of directors or required by law,
newly created directorships resulting from any increase in the authorized number
of directors or any vacancies in the board of directors resulting from death,
resignation, retirement, disqualification, removal from office or other cause
may be filled only by a majority vote of the directors then in office though
less than a quorum, or the sole remaining director and directors so chosen shall
hold office for a term expiring at the annual meeting of stockholders at which
the term of office of the class to
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<PAGE> 6
which they have been elected expires, if applicable, and if no such classes
shall have been established, at the next annual meeting of stockholders and
until such director's successor shall have been duly elected and qualified. No
decrease in the number of authorized directors constituting the board shall
shorten the term of any incumbent director.
SECTION 3. RESIGNATION. Any director may resign at any time upon written
notice to the Corporation at its principal place of business or to the President
or Secretary. Such resignation shall be effective upon receipt unless it is
specified to be effective at some other time or upon the happening of some other
event.
SECTION 4. REGULAR MEETINGS. Regular meetings of the board of directors
shall be held at such place or places, on such date or dates, and at such time
or times as shall have been established by the board of directors and publicized
among all directors. A notice of each regular meeting shall not be required.
SECTION 5. SPECIAL MEETINGS. Special Meetings of the board of directors
may be called by a majority of the Whole Board or by the Chairman of the Board
and shall be held at such place on such date, and at such time as they or he
shall fix. Notice of the place, date, and time of each such special meeting
shall be given each director by whom it is not waived by mailing written notice
not less than five (5) days before the meeting, by sending written notice by
recognized overnight courier service not less than two (2) days before the
meeting, or by telegraphing or telexing or by facsimile transmission of the same
not less than twenty-four (24) hours before the meeting. Unless otherwise
indicated in the notice thereof, any and all business may be transacted at a
special meeting.
SECTION 6. QUORUM. At any meeting of the board of directors, a majority of
the Whole Board shall constitute a quorum for all purposes. If a quorum shall
fail to attend any meeting, a majority of those present may adjourn the meeting
to another place, date, or time, without further notice or waiver thereof.
SECTION 7. PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE. Members of
the board of directors, or of any committee thereof, may participate in a
meeting of the board of directors or committee by means of conference telephone
or similar communications equipment by means of which all persons participating
in the meeting can hear each other and such participation shall constitute
presence in person at such meeting.
SECTION 8. CONDUCT OF BUSINESS. At any meeting of the board of directors,
business shall be transacted in such order and manner as the board of directors
may from time to time determine, and all matters shall be determined by the vote
of a majority of the directors present, except as otherwise provided herein or
required by law. Action may be taken by the board of directors without a meeting
if all members of the board of directors who are then in office consent thereto
in writing, and the writing or writings are filed with the minutes of
proceedings of the board of directors.
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<PAGE> 7
SECTION 9. POWERS. The board of directors may, except as otherwise
required by law, exercise all such powers and do all such acts and things as may
be exercised or done by the Corporation, including, without limiting the
generality of the foregoing, the unqualified power:
(1) To declare dividends from time to time in accordance with law;
(2) To purchase or otherwise acquire any property, rights or privileges
on such terms as it shall determine;
(3) To authorize the creation, making and issuance, in such form as it may
determine, of written obligations of every kind, negotiable or non-negotiable,
secured or unsecured, to borrow funds and guarantee obligations, and to do all
things necessary in connection therewith;
(4) To remove any officer of the Corporation with or without cause, and
from time to time to devolve the powers and duties of any officer upon any other
person for the time being;
(5) To confer upon any officer of the Corporation the power to appoint,
remove and suspend subordinate officers, employees and agents;
(6) To adopt from time to time such stock option, stock purchase bonus or
other compensation plans for directors, officers, employees and agents of the
Corporation and its subsidiaries as it may determine;
(7) To adopt from time to time such insurance, retirement, and other
benefit plans for directors, officers, employees and agents of the Corporation
and its subsidiaries as it may determine; and
(8) To adopt from time to time regulations not inconsistent herewith, for
the management of the Corporation's business and affairs.
SECTION 10. COMPENSATION OF DIRECTORS. Directors, as such, may receive,
pursuant to resolution of the board of directors, fixed fees and other
compensation for their services as directors, including, without limitation,
their services as members of committees of the board of directors. No such
payment shall preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor.
ARTICLE III - COMMITTEES
----------- ----------
SECTION 1. COMMITTEES OF THE BOARD OF DIRECTORS. The board of directors,
by a vote of a majority of the Whole Board, may from time to time designate
committees of the board of directors, with such lawfully delegable powers and
duties as it thereby confers, to serve at the pleasure of the board of directors
and shall, for those committees and any others provided for herein, elect a
director or directors to serve as the member or members, designating, if it
desires, other directors as alternate members who may replace any absent or
disqualified
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<PAGE> 8
member at any meeting of a committee. Any committee so designated may exercise
the power and authority of the board of directors to declare a dividend, to
authorize the issuance of stock or to adopt a certificate of ownership and
merger pursuant to Section 253 of the Delaware General Corporation Law if the
resolution that designates the committee or a supplemental resolution of the
board of directors shall so provide. In the absence or disqualification of any
member of any committee and any alternate member in his place, the member or
members of the committee present at the meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may by unanimous vote
appoint another member of the board of directors to act at the meeting in the
place of the absent or disqualified member.
SECTION 2. CONDUCT OF BUSINESS. Each committee of the board of directors
may determine the procedural rules for meeting and conducting its business and
shall act in accordance therewith, except as otherwise provided herein or
required by law. Adequate provisions shall be made for notice to members of all
meetings of committees. One-third (1/3) of the members of any committee shall
constitute a quorum unless the committee shall consist of one (1) or two (2)
members, in which event one (1) member shall constitute a quorum; and all
matters shall be determined by a majority vote of the members present. Action
may be taken by any committee without a meeting if all members thereof consent
thereto in writing, and the writing or writings are filed with the minutes of
the proceedings of such committee.
ARTICLE IV - OFFICERS
---------- --------
SECTION 1. GENERALLY. The officers of the Corporation shall consist of a
President, one or more Vice Presidents, a Secretary, a Treasurer and such other
officers as may from time to time be appointed by the board of directors,
including, without limiting the generality of the foregoing, a Chairman of the
Board and a Chief Executive Officer. Officers shall be elected by the board of
directors, which shall consider that subject at its first meeting after every
annual meeting of stockholders. Each officer shall hold office until his
successor is elected and qualified or if earlier, until he dies, resigns, is
removed or becomes disqualified, unless a shorter term is specified by the board
of directors at the time of election of such officer. Any number of offices may
be held by the same person. The salaries of all officers of the Corporation
shall be fixed by the board of directors.
SECTION 2. CHAIRMAN OF THE BOARD. The Chairman of the Board, if any, shall
preside at all meetings of the board of directors and stockholders at which he
is present and shall have such authority and perform such duties as may be
prescribed by these By-Laws or from time to time determined by the board of
directors. The Chairman of the Board shall have power to sign all stock
certificates, contracts and other instruments of the Corporation which are
authorized. The Chairman of the Board shall be an ex-officio member of all
committees of the Board of Directors.
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<PAGE> 9
SECTION 3. CHIEF EXECUTIVE OFFICER AND PRESIDENT. The Chief Executive
Officer, if any, shall have principal responsibility for the day-to-day
operation, decision-making and management of the Corporation, and shall report
solely to the board of directors and shall perform such executive duties as may
be assigned to him from time to time by the board of directors. Except for
meetings at which the Chairman of the Board, if any, presides, the Chief
Executive Officer shall, if present, preside at all meetings of stockholders,
and if a director, at all meetings of the board of directors. If there is no
Chief Executive Officer then serving, the President shall have principal
responsibility for the day-to-day operation, decision-making and management of
the Corporation, and shall report to the board of directors and shall perform
such executive duties as may be assigned to him from time to time by the board
of directors. If the office of Chief Executive Officer is held by someone other
than the President, the President shall, subject to the control and direction of
the Chief Executive Officer, have and perform such powers and duties as may be
prescribed by these by-laws or from time to time be determined by the board of
directors or the Chief Executive Officer. Both the Chief Executive Officer and
the President shall have the power to sign all stock certificates, contracts and
other instruments of the Corporation which are authorized.
SECTION 4. VICE PRESIDENT. Each Vice President shall have such powers and
duties as may be delegated to him by the board of directors. One (1) Vice
President shall be designated by the board of directors to perform the duties
and exercise the powers of the President in the event of the President's absence
or disability.
SECTION 5. TREASURER. The Treasurer shall have the responsibility for
maintaining the financial records of the Corporation. The Treasurer shall make
such disbursements of the funds of the Corporation as are authorized and shall
render from time to time an account of all such transactions and of the
financial condition of the Corporation. The Treasurer shall also perform such
other duties as the board of directors may from time to time prescribe.
SECTION 6. SECRETARY. The Secretary shall issue all authorized notices
for, and shall keep minutes of, all meetings of the stockholders and the Board
of Directors. The Secretary shall have charge of the corporate books and shall
perform such other duties as the board of directors may from time to time
prescribe.
SECTION 7. DELEGATION OF AUTHORITY. The board of directors may from time
to time delegate the powers or duties of any officer to any other officers or
agents, notwithstanding any provisions hereof.
SECTION 8. REMOVAL. Any officer of the Corporation may be removed at any
time, with or without cause, by the board of directors.
SECTION 9. RESIGNATION. Any officer may resign by giving written notice
of his resignation to the Chairman of the Board, if any, the President, or the
Secretary, or to the Board of Directors at a meeting of the Board, and such
resignation shall become effective at the time
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specified therein.
SECTION 10. BOND. If required by the board of directors, any officer shall
give the Corporation a bond in such sum and with such surety or sureties and
upon such terms and conditions as shall be satisfactory to the board of
directors, including without limitation a bond for the faithful performance of
the duties of his office and for the restoration to the Corporation of all
books, papers, vouchers, money and other property of whatever kind in his
possession or under his control and belonging to the Corporation.
SECTION 11. ACTION WITH RESPECT TO SECURITIES OF OTHER CORPORATIONS.
Unless otherwise directed by the board of directors, the President or any
officer of the Corporation authorized by the President shall have power to vote
and otherwise act on behalf of the Corporation, in person or by proxy, at any
meeting of stockholders of or with respect to any action of stockholders of any
other corporation in which this Corporation may hold securities and otherwise to
exercise any and all rights and powers which this Corporation may possess by
reason of its ownership of securities in such other corporation.
ARTICLE V - INDEMNIFICATION OF DIRECTORS AND OFFICERS
--------- -----------------------------------------
SECTION 1. RIGHT TO INDEMNIFICATION. Each person who was or is made a
party or is threatened to be made a party to or is otherwise involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director or an officer
of the Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to an
employee benefit plan (hereinafter an "Indemnitee"), whether the basis of such
proceeding is alleged action in an official capacity as a director, officer,
employee or agent or in any other capacity while serving as a director, officer,
employee or agent, shall be indemnified and held harmless by the Corporation to
the fullest extent authorized by the Delaware General Corporation Law, as the
same exists or may hereafter be amended (but, in the case of any such amendment,
only to the extent that such amendment permits the Corporation to provide
broader indemnification rights than such law permitted the Corporation to
provide prior to such amendment), against all expense, liability and loss
(including attorneys' fees, judgements, fines, ERISA excise taxes or penalties
and amounts paid in settlement) reasonably incurred or suffered by such
Indemnitee in connection therewith; provided, however, that, except as provided
in Section 3 of this Article with respect to proceedings to enforce rights to
indemnification, the Corporation shall indemnify any such Indemnitee in
connection with a proceeding (or part thereof) initiated by such Indemnitee only
if such proceeding (or part thereof) was authorized by the board of directors of
the Corporation.
SECTION 2. RIGHT TO ADVANCEMENT OF EXPENSES. The right to indemnification
conferred in Section 1 of this Article shall include the right to be paid by the
Corporation the expenses (including attorney's fees) incurred in defending any
such proceeding in advance of its final
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disposition; provided, however, that, if the Delaware General Corporation Law
requires, and advancement of expenses incurred by an Indemnitee in his capacity
as a director or officer (and not in any other capacity in which service was or
is rendered by such Indemnitee, including, without limitation, service to an
employee benefit plan) shall be made only upon delivery to the Corporation of an
undertaking, by or on behalf of such Indemnitee, to repay all amounts so
advanced if it shall ultimately be determined by final judicial decision from
which there is no further right to appeal that such Indemnitee is not entitled
to be indemnified for such expenses under this Section 2 or otherwise. The
rights to indemnification and to the advancement of expenses conferred in
Sections 1 and 2 of this Article shall be contracted rights and such rights
shall continue as to an Indemnitee who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the Indemnitee's heirs,
executors and administrators. Any repeal or modification of any of the
provisions of this Article shall not adversely affect any right or protection of
an Indemnitee existing at the time of such repeal or modification.
SECTION 3. RIGHT OF INDEMNITEES TO BRING SUIT. If a claim under Section 1
or 2 of this Article is not paid in full by the Corporation within sixty (60)
days after a written claim has been received by the Corporation, except in the
case of a claim for an advancement of expenses, in which case the applicable
period shall be twenty (20) days, the Indemnitee may at any time thereafter
bring suit against the Corporation to recover the unpaid amount of the claim.
If successful in whole or in part in any such suit, or in a suit brought by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the Indemnitee shall also be entitled to be paid the expenses of
prosecuting or defending such suit. In (i) any suit brought by the Indemnitee to
enforce a right to indemnification hereunder (but not in a suit brought by the
Indemnitee to enforce a right to an advancement of expenses) it shall be a
defense that, and (ii) in any suit brought by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the Corporation
shall be entitled to recover such expenses upon a final adjudication that, the
Indemnitee has not met any applicable standard for indemnification set forth in
the Delaware General Corporation Law. Neither the failure of the Corporation
(including its board of directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
suit that indemnification of the Indemnitee is proper in the circumstances
because the Indemnitee has met the applicable standard of conduct set forth in
the Delaware General Corporation Law, nor an actual determination by the
Corporation (including its board of directors, independent legal counsel, or its
stockholders) that the Indemnitee has not met such applicable standard of
conduct, shall create a presumption that the Indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by the
Indemnitee, be a defense to such suit. In any suit brought by the Indemnitee to
enforce a right to indemnification or to an advancement of expenses hereunder,
or brought by the Corporation to recover an advancement of expenses pursuant to
the terms of an undertaking, the burden of proving that the Indemnitee is not
entitled to be indemnified, or to such advancement of expenses, under this
Article or otherwise shall be on the Corporation.
SECTION 4. NON-EXCLUSIVITY OF RIGHTS. The rights to indemnification and
to the advancement of expenses conferred in this Article shall not be exclusive
of any other right
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which any person may have or hereafter acquire under any statute, the
Corporation's Restated Certificate of Incorporation, these by-laws, any
agreement, any vote of stockholders or disinterested directors or otherwise.
SECTION 5. INSURANCE. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.
SECTION 6. INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE CORPORATION. The
Corporation may, to the extent authorized from time to time by the board of
directors, grant rights to indemnification and to the advancement of expenses to
any employee or agent of the Corporation to the fullest extent of the provisions
of this Article with respect to the indemnification and advancement of expenses
of directors and officers of the Corporation.
ARTICLE VI - STOCK
---------- -----
SECTION 1. CERTIFICATES OF STOCK. Each stockholder shall be entitled to a
certificate signed by, or in the name of the Corporation by, the President or a
Vice President, and by the Secretary or an Assistant Secretary, or the Treasurer
or an Assistant Treasurer, certifying the number of shares owned by him. Any or
all of the signatures on the certificate may be by facsimile.
SECTION 2. TRANSFERS OF STOCK. Transfers of stock shall be made only upon
the transfer books of the Corporation kept at an office of the Corporation or by
transfer agents designated to transfer shares of the stock of the Corporation.
Except where a certificate is issued in accordance with Section 4 of this
Article, an outstanding certificate for the number of shares involved shall be
surrendered for cancellation before a new certificate is issued therefor.
SECTION 3. RECORD DATE. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders, or
to receive payment of any dividend or other distribution or allotment of any
rights or to exercise any rights in respect of any change, conversion or
exchange of stock or for the purpose of any other lawful action, the board of
directors may fix a record date, which record date shall not precede the date on
which the resolution fixing the record date is adopted and which record date
shall not be more than sixty (60) nor less than ten (10) days before the date of
any meeting of stockholders, nor more than sixty (60) days prior to the time for
such other action as hereinbefore described; provided, however, that if no
record date is fixed by the board of directors, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is
given or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held, and, for determining
stockholders entitled to receive payment of any dividend or other distribution
or allotment of rights or to exercise any rights of change, conversion or
exchange
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of stock or for any other purpose, the record date shall be at the close of
business on the day on which record date shall be at the close of business on
the day on which the board of directors adopts a resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
SECTION 4. LOST, STOLEN OR DESTROYED CERTIFICATES. In the event of the
loss, theft or destruction of any certificate of stock, another may be issued in
its place pursuant to such regulations as the board of directors may establish
concerning proof of such loss, theft or destruction and concerning the giving of
a satisfactory bond or bonds of indemnity.
SECTION 5. REGULATIONS. The issue, transfer, conversion and registration
of certificates of stock shall be governed by such other regulations as the
board of directors may establish.
ARTICLE VII - NOTICES
----------- -------
SECTION 1. NOTICES. Except as otherwise specifically provided herein or
required by law, all notices required to be given to any stockholder, director,
officer, employee or agent shall be in writing and may in every instance be
effectively given by hand delivery to the recipient thereof, by depositing such
notice in the mails, postage paid, or by sending such notice by prepaid
telegram, mailgram, recognized courier service or facsimile transmission. Any
such notice shall be addressed to such stockholder, director, officer, employee
or agent at his last known address as the same appears on the books of the
Corporation. The time when such notice is received, if hand delivered, or
dispatched, if delivered through the mails or by recognized courier, facsimile,
telegram or mailgram, shall be the time of the giving of the notice.
SECTION 2. WAIVERS. A written waiver of any notice, signed by a
stockholder, director, officer, employee or agent, whether before or after the
time of the event for which notice is to be given, shall be deemed equivalent to
the notice required to be given to such stockholder, director, officer, employee
or agent. Neither the business nor the purpose of any meeting need be specified
in such a waiver.
ARTICLE VIII - MISCELLANEOUS
------------ -------------
SECTION 1. FACSIMILE SIGNATURES. In addition to the provisions for use of
facsimile signatures elsewhere specifically authorized in these by-laws,
facsimile signatures of any officer or officers of the Corporation may be used
whenever and as authorized by the board of directors or a committee thereof.
SECTION 2. CORPORATE SEAL. The board of directors may provide a suitable
seal, containing the name of the Corporation, which seal shall be in the charge
of the Secretary. If and when so directed by the board of directors or a
committee thereof, duplicates of the seal
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may be kept and used by the Secretary or Treasurer or by an Assistant Secretary
or Assistant Treasurer.
SECTION 3. RELIANCE UPON BOOKS, REPORTS AND RECORDS. Each director, each
member of any committee designated by the board of directors, and each officer
of the Corporation shall, in the performance of his duties, be fully protected
in relying in good faith upon the books of account or other records of the
Corporation and upon such information, opinions, reports or statements presented
to the Corporation by any of its officers or employees or committees of the
board of directors so designated, or by any other person as to matters which
such director or committee member reasonably believes are within such other
person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Corporation.
SECTION 4. FISCAL YEAR. The fiscal year of the Corporation shall be as
fixed by the board of directors.
SECTION 5. TIME PERIODS. In applying any provision of these by-laws that
requires that an act be done or not be done a specified number of days prior to
an event or that an act be done during a period of a specified number of days
prior to an event, calendar days shall be used, the day of the doing of the act
shall be excluded, and the day of the event shall be included.
SECTION 6. PRONOUNS. Whenever the context may require, any pronouns used
in these by-laws shall include the corresponding masculine, feminine or neuter
forms.
SECTION 7. APPROVAL OF EXPENDITURES. Any transaction entered into by the
Corporation which anticipates a total expenditure by the Corporation in excess
of $100,000 shall be subject to the prior approval of the board of directors.
ARTICLE IX - AMENDMENTS
---------- ----------
These by-laws may be amended or repealed by the affirmative vote of
a majority of the Whole Board at any meeting or by the stockholders by the
affirmative vote of a majority of the outstanding voting power of the
then-outstanding shares of capital stock of the Corporation at any meeting at
which a proposal to amend or repeal these by-laws is properly presented.
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Exhibit 10.64
EMPLOYMENT AGREEMENT
--------------------
Employment Agreement dated as of November 6, 1996 between Seragen, Inc.(the
"Company"), having an office at 97 South Street, Hopkinton, Massachusetts 01748
and Reed Prior ("Prior"), presently residing at 1403 Sagemore Drive, Marlton, NJ
08053.
1. Term Of Employment.
------------------
Subject to the terms and conditions of this Agreement, the Company hereby
employs Prior, and Prior hereby accepts employment by the Company, commencing on
November 6, 1996 (the "Effective Date") and continuing until the date Prior is
terminated pursuant to Paragraph 4 of this Agreement, except that any rights or
obligations arising before such date (including the right to future severance
payments) shall remain in full force and effect after such date.
2. Duties.
------
(a) GENERAL. Effective as of the Effective Date, Prior is hereby
engaged to serve as Chief Executive Officer of the Company, with principal
responsibility for the day-to-day operation, decision making and management of
the Company. Prior shall report solely to the Board of Directors, shall perform
such executive duties as may be assigned to the Chief Executive Officer by the
Company's By-Laws or as may be assigned to him from time to time by the
Company's Board of Directors and shall possess such other titles, without
additional compensation, as may be assigned or granted to him from time to time
by the Company's Board of Directors. The Company shall use its best efforts to
solicit and encourage shareholders of the Company to appoint or elect Prior to
be a director of the Company during the term of his employment, and the Board
shall elect Prior to be the Chairman of the Board and a member of
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<PAGE> 2
any Executive Committee or other Committee of the Board (other than Audit or
Compensation), and Prior agrees to serve in such capacities without additional
compensation. Prior agrees to devote his full business time, energy and skill to
the Company's affairs except as may be otherwise permitted pursuant to Paragraph
2(e) below, and shall at all times act with due regard to the best interests of
the Company.
(b) EXCLUSIVE MANAGEMENT OF COMPANY'S BUSINESS. Subject only to the
direction and control of the Company's Board of Directors, Prior shall perform
all services and duties necessary or appropriate for the management of the
Company's business and that of its subsidiaries. The By-Laws of the Company
shall be amended as necessary to state that (i) the president of the Company
shall report to and be subordinate to the Chief Executive Officer, and (ii) if
the By-Laws provide for a Vice Chairman of the Board of Directors the Vice
Chairman shall have no management authority.
(c) NO CHANGE IN DUTIES OR AUTHORITY. Beginning as of the Effective
Date and thereafter throughout the term of his employment hereunder, Prior shall
be elected to, and shall continue in, the offices denominated that of Chairman
of the Board and Chief Executive Officer of the Company in the By-Laws or other
constitutional instruments of the Company, and shall continue exclusively to
perform on behalf of the Company substantially the same functions, and
exclusively to have substantially the same authority, duties and
responsibilities as on the Effective Date.
(d) SUPPORT FACILITIES. The Company shall provide Prior throughout the
term of his employment with support facilities (including office facilities and
secretarial services) that
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are appropriate to his offices and duties as Chief Executive Officer of the
Company and Chairman of the Board of Directors.
(e) OUTSIDE COMMITMENTS. Prior represents and agrees that (i) he is
not currently employed by, nor sits on the Board of Directors of, any other
company or institution; and (ii) during his employment by the Company, he shall
not accept employment by, serve as a consultant to, or agree to sit on the Board
of Directors of, any company or other institution except as provided in the next
sentence or with the prior consent of the Board of Directors of the Company,
which shall not be unreasonably denied. Prior may during his employment with the
Company without the consent of the Board of Directors act as a trustee of any
institution, and sit on the Board of Directors of any company that is not
involved in producing and/or selling fusion toxins, except that until November
1, 1997 Prior will not accept appointment as a director of any for-profit
company without the written consent of the Company, which shall not be
unreasonably denied.
3. COMPENSATION AND OTHER BENEFITS. For all services to be rendered by
Prior and all covenants undertaken by him pursuant to this Agreement, the
Company shall pay and Prior shall accept the compensation set forth in this
Paragraph 3.
(a) SIGNING BONUS. Upon execution of this Agreement the Company shall
pay Prior a signing bonus of One Hundred Thousand ($100,000.00) Dollars.
(b) SALARY. The Company shall pay Prior a salary at the rate of Three
Hundred Fifty Thousand ($350,000) Dollars per annum during the term of his
employment hereunder, payable in accordance with the Company's normal payroll
practices for its senior management. At such time as the Company achieves either
a market capitalization in excess of
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Two Hundred Fifty Million ($250,000,000) Dollars or an operating profit for any
fiscal quarter, the Company and Prior shall negotiate in good faith salary
increases and/or bonus schedules appropriate for the Chief Executive Officer of
a company operating at that level of financial success. In addition, the Company
may, at any time, in the discretion of its Board of Directors increase, but not
decrease, Prior's base salary based upon merit as a result of positive reviews
of Prior's performance by the Board of Directors.
(c) STOCK OPTIONS. The Company shall within 30 days of the date of
execution of this Agreement (the "Effective Date") grant Prior stock options
under the Seragen, Inc. 1992 Long Term Incentive Plan, a true copy of which is
attached as Exhibit D, (the "Plan") to purchase sufficient shares of the
Company's common stock, par value $0.01 per share ("Common Stock"), to equal
8.5% of the then outstanding Common Stock, measured on a Fully Diluted Basis (as
the term is defined in Paragraph 4), at the then fair market value per share of
Common Stock. To the extent permitted by federal income tax law, options issued
under the Plan to Prior shall be "incentive stock options". The stock options
shall be evidenced by an Incentive Stock Option Agreement and, if required, a
Non-Qualified Stock Option Agreement substantially in the form of Exhibits A and
B to this Agreement (the "Stock Option Agreements") except as expressly provided
otherwise herein. For the purposes of issuing Non-Qualified Stock Options
pursuant to this Agreement, the present fair market value per share of Common
Stock shall be the average bid price for a share of Common Stock for the ten
(10) consecutive trading day period ending on the Effective Date as reported on
the NASDAQ National Market. Both Stock Option Agreements shall provide that: (i)
the options issued thereunder shall vest, i.e., become exercisable, 2.0833% on
the Effective Date and on the first
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<PAGE> 5
day of each calendar month thereafter so that Prior shall be fully (100%) vested
on the first day of the month immediately before the fourth anniversary of the
Effective Date; (ii) upon a Change in Ownership (as the term is defined in
Paragraph 4) in place of the vesting schedule provided in clause "i" above the
options shall vest retroactively as of the Effective Date 25% on the Effective
Date and an additional 2.0833% on the first day of each calendar month
thereafter so that Prior shall be fully (100%) vested on the first day of the
month immediately following the third anniversary of the Effective Date; (iii)
upon the termination by the Company of Prior's employment without Just Cause or
Prior's termination for Good Reason (as the terms are defined in Paragraph 4),
in place of the vesting schedules provided in clauses "i" and "ii" above the
options shall vest retroactively as of the Effective Date 25% on the Effective
Date and at the accelerated rate of an additional 3.125% on the first day of
each calendar month thereafter so that Prior shall be fully (100%) vested on the
first day of the month immediately following the second anniversary of the
Effective Date; (iv) options issued shall, to the extent vested, be fully
exercisable until the tenth (10th) anniversary of the Effective Date; (v) the
options shall be exercisable in accordance with the terms of the Plan, including
the right to pay the option exercise price in whole or in part by surrendering
shares of the Company's common stock with an aggregate fair market value equal
to the option exercise price or surrendering vested options with an aggregate
stock option spread equal to the option exercise price, and shall provide that
stock certificates shall be issued outright and free of escrow no later than
three (3) days after the date of exercise; (vi) stock certificates issued
pursuant to the exercise of an option shall not include any legends or be
subject to any transfer restrictions, except for restrictions required by
Section 16 of the Securities Act of 1933, as amended, and the rules and
regulations promulgated
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thereunder; (vii) the Company shall not terminate any option issued to Prior
upon a "Change in Control" as defined in the Plan without Prior's written
approval; (viii) in the event that before a Target Equity Financing (as defined
in Paragraph 4) the Company grants options or other equity interests to
management, employees, directors or consultants or the Company sells shares of
its Common Stock or any equity securities or securities convertible or
exchangeable into any equity securities of the Company, as part of a plan or
series of plans of financing, or the number of shares of Common Stock
outstanding on a Fully Diluted Basis increases as a result of a change in the
conversion ratio of any class of securities convertible or exchangeable into any
equity securities of the Company, the Company shall grant Prior additional stock
options under the Plan covering that number of shares of Common Stock necessary
to cause Prior's proportionate holdings of the outstanding Common Stock, on a
Fully Diluted Basis, immediately after the grant or sale of such options, shares
or other equity interests to equal his proportionate holdings of the outstanding
Common Stock, on a Fully Diluted Basis, immediately prior to such financing but
not to exceed 8-1/2% of the Common Stock on a Fully Diluted Basis; (ix) all
additional stock options shall have the same terms and conditions, and shall
vest as though they were granted on the same date as the initial options that
are required to be issued within 30 days of the Effective Date; (x) each option
shall include all other rights and benefits under the Plan, including Section 11
of the Plan (regarding accelerated vesting on Change in Control); and (xi) the
Company has registered, or within 30 days of the Effective Date shall at its own
expense register, under the Securities Act of 1933 all shares issued or to be
issued pursuant to the exercise of the stock options on Form S-8, the obligation
to maintain such registration to continue following Prior's termination of
employment. Prior agrees that, if requested by an
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underwriter of the Company's securities, Prior will comply with any reasonable
customary lockup periods in connection with the Company's offering of securities
provided that all other executive officers and directors of the Company also
must comply with such restrictions and provided that no such lock-up periods
shall exceed 180 days. The Plan shall be amended as necessary to provide or
permit the issuance of the options described in this Paragraph 3(c).
The Board shall in good faith take all necessary action to effect the terms
of this Agreement and to register the underlying shares of Common Stock under
applicable securities laws as provided herein.
(d) COMMUTING AND LIVING EXPENSE REIMBURSEMENT. The Company shall
within 10 days of receipt of reasonable substantiation reimburse Prior for (i)
the reasonable costs of moving Prior's personal goods from Prior's present New
Jersey apartment to a new apartment to be procured by him in the vicinity of the
Company's principal offices located in Hopkinton, Massachusetts, (ii) the lease
cancellation costs of his New Jersey apartment (approximately Twenty Seven
Hundred ($2,700.00) Dollars), (iii) all reasonable costs incurred by him, up to
a maximum of Four Thousand Five Hundred ($4,500.00) Dollars per month, in
connection with maintaining his residence, automobile parking space and aircraft
hangar space in Massachusetts (or any other place of business to which the
Company requires Prior to relocate), in order to carry out his duties and
responsibilities under this Agreement and weekly travel between such residence
and the location of his family residence located in Darnestown, Maryland, plus
(iv) any federal, state or local income or payroll taxes incurred by Prior with
respect to all payments made under this subparagraph (d), including this clause
(d)(iv), so that Prior shall be made whole on an after tax basis. In the event
Prior is involuntarily terminated or voluntarily
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terminates for Good Reason, then the Company shall immediately reimburse him on
a lump sum basis for the total of any remaining obligations under the new
apartment and hangar leases, subject to one year lease term limits. In the event
of a permanent relocation of Prior's family to Massachusetts or to any other
company-requested location away from his present Maryland family home (while
still in the Company's employ), then the commuting benefits under clauses
(d)(iii) and (d)(iv) above shall thereafter be replaced by a one time relocation
package as usual and customary for chief executive officers.
(e) VACATION AND EMPLOYEE BENEFITS. Prior shall be entitled to paid
vacations in accordance with the policies of the Company from time to time in
effect, subject to a minimum of four (4) weeks per year. Within 15 days after
each anniversary of the Effective Date the Company shall pay Prior for any
vacation not taken during the prior twelve (12) months. Prior shall be eligible
to participate in any pension, profit sharing or similar plan and any health,
hospitalization, medical, accident, disability, sick leave, supplementary income
benefit, life insurance or other similar benefit plan or program of the Company
now existing or hereafter established and available to the Company's employees
generally or to key employees as a group to the extent his age, health, and
other qualifications make him eligible to participate. Furthermore, Prior shall
be entitled to such additional benefits as may be granted to him from time to
time by the Board of Directors of the Company.
(f) TERMINATION AND SEVERANCE. Upon the giving of notice of the
termination of Prior's employment for any reason, the Company shall pay Prior
for up to four (4) weeks of any unused accrued vacation time together with all
salary and other benefits accrued through the date of termination. If either
Prior shall voluntarily terminate his employment for Good Reason
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or Prior's employment hereunder is terminated by the Company without Just Cause,
the Company shall provide Prior with the following severance benefits:
(i) upon the date of the giving of notice of such termination the
Company shall pay Prior as termination and severance pay in a lump sum an amount
equal to one year's salary based on his then salary rate; and
(ii) the Company will continue to provide Prior and his family
without cost or charge of any nature with the same medical and dental insurance
coverage provided to them prior to Prior's termination for the maximum period
provided with respect to group health plan benefits subject to "COBRA"
continuation coverage requirements (provided all applicable deductible and
co-payment amounts shall apply).
Upon the Company giving Prior a notice of termination the Company
shall immediately pay Prior all compensation due to him through the end of the
notice period, including accrued vacation and severance pay. After the Company
or Prior has given to the other party a notice of termination (other than a
Termination for Just Cause), the Company may request in writing that Prior
vacate his office within 3 business days; in that event, Prior shall vacate his
office within the 3 day period and shall not be obligated to perform any
additional services thereafter.
(g) IRREVOCABLE LETTER OF CREDIT. Within 30 days of execution of this
Agreement the Company shall open with a bank an irrevocable letter of credit
(the "ILC") in the amount equal to One Hundred Seventy Five Thousand
($175,000.00) Dollars, naming Prior as beneficiary as partial security for the
payment of severance if Prior shall become entitled to severance benefits under
Paragraph 3(f) of this Agreement and the Company fails to pay in full
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Prior's severance benefits when due. The ILC shall have an initial term of three
years. If near the end of the initial term or any subsequent term of the ILC,
Prior determines in his sole judgment that substantial risks continue to exist
as to the Company's ability to meet its severance obligation after the
expiration of the then term of the ILC, then the Company shall renew the ILC for
an additional one year term. The ILC shall provide for payment upon delivery to
the issuer thereof of a written representation from Prior of Prior's entitlement
to a payment, the amount of the payment and the facts on which Prior bases his
entitlement to the payment and a copy of the written notice of termination of
employment given by Prior or by the Company. A copy of such written
representation shall be delivered to the Company simultaneously with its
delivery to the issuer. The payment of such amount shall be a credit against any
other severance payments due to Prior hereunder.
(h) DEATH OR DISABILITY. If Prior's employment is terminated by death
or disability, the Company shall pay to Prior's estate or to Prior, as the case
may be, the excess, if any, of his then annual salary amount over the amounts
received (i) under any employee life insurance policy maintained by the Company
payable to the beneficiary designated by Prior; or (ii) during the one year
period following such termination under any employee disability policy
maintained by the Company. The Company shall calculate and pay any amounts due
pursuant to clause (ii) herein no less frequently than semi-monthly. For the
purposes of this Paragraph, the word "disability" shall have the same meaning as
in the Company's then-applicable long-term disability policy.
(i) ASSET VALUE REALIZATION BONUS. The Company and its shareholders
presently intend to develop the business of the Company over the long term
through the efforts
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of Prior and the other company employees, which is intended to result in a
substantial increase in the value of the Common Stock and of the options issued
to Prior under Paragraph 3(c) above. If, however, there is a Change of Ownership
of the Company (as defined in Paragraph 4) then the Company shall pay Prior a
bonus (the "Asset Value Realization Bonus") equal to eight and one half (8 1/2%)
percent of the "Net Proceeds" for any acquisition that is part of the Change of
Ownership "Effected" during Prior's employment or at any time before the first
anniversary of Prior's termination of employment, which amount shall be reduced
(but not below zero) by the "Option Stock Gain" recognized by Prior as a result
of the sale by him of Common Stock acquired as a result of exercise of options
issued to him pursuant to subparagraph 3(c) above. The Company shall pay the
Asset Value Realization Bonus, or any increase in the Asset Value Realization
Bonus, on or before the closing of any acquisition that is part of a Change in
Ownership. If any part of the Net Proceeds is payable after closing (the
"Deferred Payments"), however, then the Company may defer the payment of the
part of the Asset Value Realization Bonus allocable to the Deferred Payments
until receipt of the Deferred Payments, provided the payor of the Deferred
Payments has agreed in writing to pay directly to Prior the Asset Value
Realization Bonus allocable to the Deferred Payments as and when such Deferred
Payments are made to the Company or its shareholders. "Net Proceeds" shall mean
the total cash plus any property received directly or indirectly by the Company
or its shareholders in kind with respect to all acquisitions constituting the
Change in Ownership, reduced by all investment banking fees, brokerage fees,
appraisal fees, and other professional expenses directly attributable to the
acquisitions. A transaction shall be "Effected" by a certain date if it is
consummated by that date or is the subject matter of an agreement or memorandum
of intent executed by that date and
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subsequently consummated. "Option Stock Gain" shall mean the difference between
the net proceeds from Prior's sale of Common Stock and the net cost to Prior to
exercise the options for such stock on the assumption that Prior has, in fact,
exercised all vested options and sold all Common Stock received on such exercise
as of the date of the Change in Ownership; Prior shall for this purpose be
deemed to have sold all Common Stock that (i) he owns at the time of the Change
of Ownership or could then own if he exercised all vested options, (ii) he is
permitted to sell, and (iii) in the event of a merger or sale of securities, he
has received an offer to purchase, and is permitted to sell, on the same terms
and conditions as those of the transactions that constitute the Change in
Ownership.
(j) CO-SALE RIGHT AND PAYMENT OF ASSET VALUE REALIZATION BONUS.
Simultaneously with the execution and delivery of this Agreement the Company and
certain principal shareholders shall execute and deliver to Prior an agreement
in substantially the form attached as Exhibit C.
(k) CAPITALIZED TERMS. All capitalized terms shall have the meanings
provided in Paragraph 4 unless provided elsewhere.
(l) EMPLOYMENT. All compensation payable and other benefits provided
under this Paragraph 3 shall be subject to customary withholding for income,
F.I.C.A. and other employment taxes. The value of stock issued pursuant to the
exercise of a non-qualified stock option or incentive stock option shall be
measured solely in accordance with IRS rules and regulations.
4. Termination Of Employment.
-------------------------
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(a) TERMINATION BY COMPANY. The Company may terminate Prior's
employment hereunder at any time without Just Cause, effective upon not less
than thirty (30) day's prior written notice. The Company may terminate Prior's
employment hereunder with Just Cause immediately without notice. If the
termination is for Just Cause, the Company shall provide Prior as soon as
practicable with a written explanation of the facts on which the termination is
based. For the purposes of this Agreement, the Company shall be deemed to have
terminated Prior without Just Cause if (i) Prior shall have notified the Company
in writing that he has Good Reason, as defined below, to terminate employment
with the Company, (ii) the Company shall not have eliminated such Good Reason
within thirty (30) days of such notice, and (iii) Prior shall have given notice
of termination of his employment more than thirty (30) days after delivery of
such notice of Good Reason and less than sixty (60) days after delivery of such
notice of Good Reason.
(b) TERMINATION BY PRIOR. Prior may terminate his employment hereunder
at any time upon not less than thirty (30) days' prior written notice. Upon
Prior's voluntary termination of employment without Good Cause pursuant to this
subparagraph 4(b), Prior shall not be entitled to the severance benefits
described in clauses 3(f)(i) and 3(f)(ii) above and shall take all necessary
acts to permit the Company to terminate the ILC.
(c) DISABILITY AND DEATH. The Company may determine, in its sole and
absolute discretion, that Prior is unable to carry out the functions of his
office as a result of physical or mental sickness or disability. Upon such
determination the Company may terminate Prior's employment upon not less than
thirty (30) day's prior written notice. For all purposes
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<PAGE> 14
of this Agreement termination as a result of Prior's death or disability shall
be treated as a termination without Just Cause.
(d) JUST CAUSE. For the purposes of this Agreement, "Just Cause" shall
mean:
(1) the commission by Prior of a willful act of material fraud in
the performance of his duties on behalf of the Company; or
(2) the conviction or entry of a plea of guilty or nolo
contendere of Prior for commission of a felony or any crime involving moral
turpitude; or
(3) the breach by Prior of any material term of this Agreement or
the continuing willful failure of Prior to perform his material duties to the
Company (other than any such failure resulting from Prior's incapacity due to
physical or mental illness) after written notice thereof (specifying the
particulars thereof in reasonable detail) and a reasonable opportunity to cure
such breach or failure are given to Prior by the Board of Directors of the
Company. No notice, however, shall be due for a breach or failure to perform
that cannot be cured or for any act described in clauses (1) or (2).
For purposes of this subparagraph 4(d), no act, or failure to act, on
Prior's part shall be considered "willful" unless done, or omitted to be done,
by him not in good faith and without reasonable belief that his action or
omission was in the best interests of the Company.
(e) GOOD REASON. For the purposes of this Agreement, "Good Reason"
shall mean:
(i) the Board of Directors refuses to accept a bona fide and
legitimate offer of equity or debt financing brought to it with Prior's good
faith recommendation for approval;
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<PAGE> 15
(ii) the Board of Directors refuses to expeditiously approve any
significant spending cuts or major operational changes proposed by Prior;
(iii) the Company shall have materially breached its obligations
under this Agreement, and such breach is not cured within twenty (20) days of
Prior's sending a written notice of such breach;
(iv) the Company shall have incurred a Change in Ownership;
(v) the Company shall have incurred a Change in Control;
(vi) the Company shall be Insolvent;
(vii) Prior shall at any time during his employment and more than
30 days after the Effective Date not be a member of the Board of Directors, the
Chairman of the Board of Directors or a member of any Executive Committee or
other Committee (other than Audit and Compensation), unless Prior shall have
resigned from or failed to accept such position(s);
(viii) the Company shall have acted in bad faith to cause Prior
to resign from the Company;
(ix) there shall be more than nine (9) members of the Board of
Directors of the Company;
(x) the Stock Option Agreements required under subparagraph 3(c)
and the agreement described in subparagraph 3(j) and attached as Exhibit C shall
not have been properly issued and executed in full and delivered to Prior within
30 days of the execution of this Agreement; or
(xi) the breach by any party other than Prior of any material
term of the agreement with the principal shareholders described in Paragraph
3(j) above, after written
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<PAGE> 16
notice thereof (specifying the particulars thereof in reasonable detail) and a
reasonable opportunity to cure such breach or failure are given to the breaching
party by Prior.
Good Reason shall not arise in any situation in which Prior shall have
given written consent to the act or failure to act of the Company.
(f) TARGET EQUITY FINANCING. Target Equity Financing shall mean all
proceeds of at least Twenty Million ($20,000,000) Dollars from the sale or
issuance of stock of the Company or of debt securities of the Company with
conversion rights, other than (i) stock or debt securities sold or issued to a
shareholder and/or affiliated investment entities who as of the Effective Date
collectively own at least 1% of the Common Stock as measured on a Fully Diluted
Basis; or (ii) stock issued as a result of the exercise of options presently
outstanding or issued pursuant to the Plan.
(g) INSOLVENCY. For the purposes of this Agreement, the Company shall
be Insolvent if (i) it commences any case, proceeding or other action (A) under
the Federal Bankruptcy Code seeking to have an order for relief entered with
respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, liquidation, dissolution, composition
or other relief with respect to it or its debts, or (B) seeking appointment of a
receiver, trustee, custodian or other similar official for it or for all or any
substantial part of its property, or the Company shall make a general assignment
for the benefit of its creditors, or (ii) there shall be commenced against the
Company any case, proceeding or other action of a nature referred to in clause
(i) above, which case, proceeding or other action results in the entry of an
order for relief from which no stay has been granted within sixty (60) days, or,
(iii) for a period in excess of sixty (60) days, the Company shall generally
not, or shall
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<PAGE> 17
be unable to, pay its debts as they become due or shall admit in writing its
inability to pay its debts.
(h) CHANGE IN OWNERSHIP. For purposes of this Agreement, a "Change in
Ownership" of the Company shall mean (i) the acquisition by any "person" or
group of "persons" (as defined in Section 13(d)(3) of the Securities Exchange
Act of 1934 ("Exchange Act")), whether by way of merger, sale of assets, stock
purchase, tender offer or otherwise, of (A) all or substantially all of the
equity securities of the Company or (B) all or substantially all of the
operating assets of the Company and its subsidiaries taken as a whole, or (ii)
the sale or out-licensing after the date hereof of the majority (in value) of
the technology assets of the Company and its subsidiaries taken as a whole.
(i) CHANGE IN CONTROL. For purposes of this Agreement, a "Change in
Control" of the Company shall have the same meaning as provided by Section 11(b)
of the Seragen, Inc. 1992 Long Term Incentive Plan as in effect on the date
hereof.
(j) FULLY DILUTED BASIS. For purposes of this Agreement, "Fully
Diluted Basis" shall mean that all shares of Common Stock issuable upon exercise
of options outstanding under the Plan or any other stock option plan (including
the options granted to Prior pursuant to this Agreement) and all shares of
Common Stock issuable on exercise of all other outstanding options, warrants,
conversion rights or other rights issued by the Company to acquire equity
securities shall be deemed to be outstanding.
5. Confidentiality.
---------------
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<PAGE> 18
a. Prior acknowledges that during the course of his employment with
the Company he will have access to and may obtain, develop or learn of
Confidential Information (as defined below).
b. Prior agrees that while employed by the Company and thereafter he
shall hold such Confidential Information in strictest confidence and that he
shall not at any time, during or after the conclusion of his employment with the
Company, or in any manner, either directly or indirectly, use (for his own
benefit or otherwise), divulge, disclose or communicate to any unauthorized
person, firm or corporation in any manner whatsoever any Confidential
Information, except that for Confidential Information not of a technological or
financial nature, this restriction shall terminate three (3) years after the
termination of Prior's employment with the Company.
c. Under this Agreement, the term "Confidential Information" shall
mean information and know-how, whether or not in writing, regarding diphtheria
fusion toxins or any other technology owned by the Company before Prior's
termination or utilizing technologies utilized in products being developed,
produced, marketed or sold by the Company before Prior's termination, and
information regarding the Company's business or financial affairs other than any
information that (i) is known by Prior or generally known within the industry
before the date of this Agreement or becomes common knowledge within the
industry thereafter; or (ii) is disclosed to Prior by a third party which did
not obtain the information, directly or indirectly, under an obligation of
confidence to the Company; or (iii) Prior is required to disclose by enforceable
legal process.
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d. While an employee of the Company and thereafter, Prior (i) shall
use, divulge, disclose or communicate Confidential Information only in the scope
of his employment with the Company and only as expressly directed or permitted
by the Company, and (ii) shall not for whatever reason, use, divulge, disclose,
or communicate for any purpose any Confidential Information, except that for
Confidential Information not of a technological or financial nature, this
restriction shall terminate three (3) years after the termination of Prior's
employment with the Company.
e. While employed by the Company and thereafter Prior shall not make
or use any notes or memoranda relating to any Confidential Information except
for the benefit of the Company, and will, at the Company's request, return each
original and every copy of any and all notes, memoranda, correspondence,
diagrams or other records, in written or other form, that he may at any time
have within his possession or control that contain any Confidential Information.
6. NON-COMPETITION. Prior acknowledges and recognizes the highly
competitive nature of the business conducted by the Company. Accordingly, Prior
agrees that, in consideration of the premises contained herein, he shall not,
for his own benefit or for the benefit of any other person or entity, while
employed by the Company and for a one-year period thereafter:
(1) become an employer, officer, director, owner, employee, partner,
consultant or other participant in any entity, or assist any
person, which competes with or which is about to compete with the
Company in the business of developing, manufacturing, marketing
or selling
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pharmaceutical products based upon diphtheria fusion toxins or
any other technology owned by the Company before Prior's
termination (a "Competitive Business"); or
(2) own any interest in any entity which engages, or is about to
engage in a Competitive Business; provided, however, that Prior
shall have the right to acquire as a passive investor an equity
interest of not more than one percent (1%) of the issued and
outstanding shares of any publicly traded corporation's stock.
7. COMPANY RIGHT TO INVENTIONS. Prior shall promptly disclose, grant and
assign to the Company for its sole use and benefit any and all inventions,
improvements, technical information and suggestions relating in any way to
diphtheria fusion toxins or other technology created by the Company, which he
may develop or acquire while employed by the Company (whether or not during
usual working hours), together with all patent applications, letters patent,
copyrights and reissues thereof that may at any time be granted for or upon any
such invention, improvement or technical information. In connection therewith:
a. Prior shall without charge, but at the expense of the Company,
promptly at all times hereafter execute and deliver such applications,
assignments, descriptions and other instruments as may be reasonably necessary
or proper in the reasonable opinion of the Company to vest title to any such
inventions, improvements, technical information, patent applications, patents,
copyrights or reissues thereof in the Company and to enable it to obtain and
maintain the entire right and title thereto throughout the world; and
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b. Prior shall render to the Company at its expense (including a
reasonable payment for the time involved in case he is not then in its employ)
all such assistance as it may reasonably require in the prosecution of
applications for said patents, copyrights or reissues thereof, in the
prosecution or defense of interferences which may be declared involving any of
said applications, patents or copyrights and in any litigation in which the
Company may be involved relating to any such patents, inventions, improvements
or technical information.
8. BREACH. In the event of breach by Prior of any provision of Paragraphs
5, 6 and 7 hereof, the remedy at law will be deemed inadequate, and the Company
will be entitled, in addition to any other remedies available by law, to
appropriate injunctive and other relief. Should any provision hereof be adjudged
to any extent invalid by any competent tribunal, such provision will be deemed
modified to the extent necessary to make it enforceable.
9. INDEMNITY. To the extent permitted by law, the Company shall indemnify
Prior and hold him harmless for all acts or decisions made by him in good faith
while performing services for the Company or any designee of the Company and
shall pay or reimburse Prior all expenses as and when incurred, including
attorney's fees, actually and necessarily incurred by Prior in connection with
the defense of any action, suit or proceeding to which Prior may be made a party
by reason of his performing services hereunder and in connection with any
related appeal including the cost of court settlements. The Company shall also
obtain and maintain during the term of this Agreement coverage for him under an
insurance policy reasonably acceptable to Prior covering the other officers and
directors of the Company against lawsuits. In the event of any change in
legislation restricting the ability of the Company to provide indemnification to
Prior, then the Company shall provide Prior with a minimum of Five Million
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($5,000,000.00) Dollars in prepaid personal liability insurance coverage for all
claims arising during his employment by the Company, whether made during or
after such period. In any event, the Company shall during Prior's employment and
for three (3) years thereafter maintain in force a D&O policy in the amount of
at least Five Million ($5,000,000.00) Dollars at no cost to Prior.
10. NOTICES. All notices, requests, demands and other communications
provided for by this Agreement shall be in writing and shall be deemed to have
been given when sent by facsimile or when mailed at any general or branch United
States Post Office enclosed in a certified postpaid envelope and addressed to
the address of the respective party stated below or to such changed address as
the party may have fixed by notice:
To the Company: Seragen, Inc.
97 South Street
Hopkinton, Massachusetts 01748
Fax No.: (508) 435-9805
Attention: President
To Prior: Mr. Reed Prior
17600 Charity Lane
Darnestown, Maryland 20874
Fax No.: (301) 540-1626
11. LEGAL FEES. The Company shall pay Prior's reasonable legal fees
incurred with respect to the negotiation and preparation of this Agreement.
12. MISCELLANEOUS.
(a) CONSTRUCTION. This Agreement shall be construed, interpreted and
governed by the laws of the Commonwealth of Massachusetts without regard to the
conflicts of law provisions thereof.
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(b) BINDING AGREEMENT; ASSIGNABILITY. This Agreement shall be binding
upon and inure to the benefit of Prior, his legal representatives, heirs and
distributees, and the Company, its successors and assigns; provided, however,
that because this Agreement is a personal service contract, Prior shall not
assign any of his employment duties or obligations hereunder and any purported
assignment shall be null and void AB INITIO.
(c) PREVIOUS AGREEMENTS. This Agreement supersedes all other
agreements between the Company and Prior.
(d) ENTIRE AGREEMENT. This Agreement, including all agreements
referenced in this Agreement, contains the entire agreement of the parties with
respect to its subject matter, and no waiver, modification or change of any of
its provisions shall be valid unless in writing and signed by the party against
whom such claimed waiver, modification or change is sought to be enforced.
(e) WAIVER. The waiver of any breach of any duty, term or condition of
this Agreement shall not be deemed to constitute a waiver of any preceding or
succeeding breach of the same or of any other duty, term or condition of this
Agreement.
(f) HEADINGS. The headings of the Paragraphs and subparagraphs of this
Agreement are inserted for convenience only and shall not be deemed to
constitute a part hereof or to affect the meaning thereof.
(g) SURVIVAL OF CERTAIN PROVISIONS. The provisions of Paragraph 5, 6,
7 and 9 shall survive termination of this Agreement.
(h) REPRESENTATIONS AND WARRANTIES OF PRIOR. Prior represents and
warrants that his performance of all of the terms of this Agreement and as an
employee of the Company
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does not and will not breach any non-compete agreement or agreement to keep in
confidence proprietary information, knowledge, or data acquired by him in
confidence or in trust from a third party prior to his employment with the
Company.
(I) REPRESENTATIONS AND WARRANTIES OF COMPANY. A. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and is duly qualified to do business in the
Commonwealth of Massachusetts and has full power and authority to operate its
businesses as now operated and to perform this Employment Agreement in
accordance with its terms.
B. The execution and delivery of this Employment Agreement to Prior
and the carrying out of the provisions hereof have been duly authorized by the
Board of Directors of the Company, and the Company shall furnish Prior duly
certified copies of the authorizing resolutions of the Company's Board of
Directors.
C. This Employment Agreement shall be, when duly executed and
delivered, a legal and binding obligation of Company, enforceable in accordance
with its terms.
D. On or before the Effective Date the Company shall have obtained a
$5,000,000 D&O liability insurance policy naming Prior as an insured party and
such policy shall be in full force and effect.
E. Neither the execution nor delivery of this Employment Agreement,
nor the compliance with its terms, shall constitute a violation or breach of the
Certificate of Incorporation, as amended to date, or of the By-laws, as
currently in effect, of the Company or of any agreement between the Company and
any other party.
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(j) SHAREHOLDERS APPROVAL. The execution by the Company of this
Agreement and each other act of the Company required under this Agreement shall
be authorized by the Company's shareholders as soon as practicable if such
execution or other act of the Company is either required by applicable law.
(k) ARBITRATION. Except as provided in Paragraph 8 above, any claim or
controversy arising out of or relating to this Agreement or the breach thereof
shall be settled by arbitration in accordance with the laws of the Commonwealth
of Massachusetts. Such arbitration shall be conducted in the City of Boston in
accordance with the rules then-existing of the American Arbitration Association
for commercial disputes. In any such arbitration each party shall have the right
to demand (i) a written statement setting forth, for each cause of action, a
detailed statement of the facts on which it is based and a description of how
the amount demanded was calculated; and (2) to demand inspection and copying of
relevant documents and things in the possession or control of any of the other
parties, prior to the arbitration hearing. The arbitrator shall have authority
to order compliance with, and shall otherwise supervise, such demands for
written statements and/or for pre-hearing inspection and copying. Judgment upon
the award rendered by the arbitrators may be entered in any court having
jurisdiction thereof.
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IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the day and year first above written.
--------------------------
- ----------------------------------- REED PRIOR
Witness
Seragen, Inc.
[SEAL]
Attest: By:
--------------------------
- ----------------------------------- Jean C. Nichols
Secretary President and Chief
Technology Officer
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<PAGE> 1
Exhibit 10.65
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of
the 6th day of November, 1996, by and between SERAGEN, INC., a Delaware
corporation with its principal place of business at 97 South Street, Hopkinton,
Massachusetts 01748 (the "Company"), and Jean C. Nichols, Ph.D., an individual
residing at 15 Astra, Wayland, Massachusetts 01778 (the "Executive").
WHEREAS, the Executive is currently employed by the Company as its Senior
Vice President pursuant to an Employment Agreement dated January 1, 1995 (the
"1995 Agreement"); and
WHEREAS, the Company desires to continue to employ the Executive, and the
Executive desires to continue to be employed by the Company, on the terms and
conditions contained in this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the parties
hereby agree as follows:
1. TERM OF AGREEMENT. The 1995 Agreement shall be terminated effective as
of November 6, 1996. This Agreement shall commence on November 6, 1996 (the
"Effective Date") and shall continue thereafter, unless sooner terminated
pursuant to Section 4, until November 6, 1999 (the "Term").
2. TITLE; CAPACITY. The Executive shall serve as President, Chief
Technology Officer and a director of the Company, based at the Company's
headquarters in Hopkinton, Massachusetts, or such place or places in the
continental United States as the Chief Executive Officer shall determine. The
Executive shall be subject to the supervision of the Chief
<PAGE> 2
Executive Officer. The Executive hereby accepts such employment and agrees to
undertake the duties and responsibilities inherent in such position and such
other duties and responsibilities as the Chief Executive Officer shall from time
to time reasonably assign to her consistent with the Executive's position. The
Company shall use its best efforts to solicit and encourage shareholders of the
Company to appoint and elect the Executive to the board of directors of the
Company during the term of her employment, and the Executive agrees to serve as
a director of the Company without additional compensation. The Executive agrees
to devote her entire business time, attention and energies to the business and
interests of the Company during the Term.
3. Compensation And Benefits.
-------------------------
3.1 SALARY. The Company shall pay the Executive, in monthly
installments, an annual base salary of $225,000 ("Base Salary").
3.2 FRINGE BENEFITS. The Executive shall be entitled, at the Company's
expense, to participate in all bonus and benefit programs, if any, that the
Company establishes and makes available to its employees to the extent that the
Executive's position, tenure, salary, age, health and other qualifications make
her eligible to participate. The Executive shall be entitled to four (4) weeks
paid vacation per year in addition to other paid holidays provided to all other
Company executives. The Executive shall also be entitled to health insurance for
herself and her family, life insurance and appropriate disability insurance
coverage for an executive of her position and salary level. The Company will pay
for membership in appropriate professional organizations as reasonably required.
2
<PAGE> 3
3.3 REIMBURSEMENT OF EXPENSES. The Company shall reimburse the
Executive for all reasonable travel, entertainment and other expenses incurred
or paid by the Executive in connection with, or related to, the performance of
her duties, responsibilities, or services under this Agreement, upon
presentation by the Executive of appropriate documentation, expense statements,
vouchers and/or such other supporting information in such form as the Company
may reasonably request.
3.4 SEVERANCE. In the event that the Executive's employment is
terminated for any reason other than for "Just Cause" (as defined in Section 4),
whether during or after the Term, the Company shall pay severance compensation
equal to twelve (12) months salary at the annual rate in effect on the date of
notice of termination. During this twelve (12) month period the Company will
continue to pay for all insurance and other benefits being provided by the
Company to the Executive on the date of notice of termination. The severance
payment will be made in twelve (12) equal monthly installments commencing one
month following the date of notice of termination.
3.5 ACCRUED VACATION. On June 30, 1997, the Company shall pay the
Executive for forty-five (45) days of vacation not taken during the period from
the commencement of her employment with the Company until November 4, 1996,
based upon the Executive's Base Salary. The Executive agrees that such payment
shall discharge in full the Company's obligation with respect to vacation earned
prior to November 4, 1996.
3.6 STOCK OPTIONS. The Company shall within 30 days of the Effective
Date grant the Executive stock options under the Seragen, Inc. 1992 Long Term
Incentive Plan (the "Plan") to purchase a number of shares of the Company's
common stock, par value
3
<PAGE> 4
$0.01 per share ("Common Stock"), equal to (a) 1.275% of the outstanding Common
Stock on the date of grant, measured on a fully diluted basis, taking into
account all options, warrants, conversion rights and other rights issued by the
Company to acquire equity securities issued prior to the actual date of grant
and based upon the exercise or conversion price that would apply if such
options, warrants, conversion rights, and other rights were exercised or
converted on the grant date, less (b) the stock options to purchase 54,000
shares of Common Stock previously granted by the Company to the Executive listed
on Schedule I hereto. All stock options previously granted by the Company to the
Executive other than the stock options to purchase 54,000 shares of Common Stock
listed on Schedule I hereto shall be cancelled immediately upon the grant of
options pursuant to this Agreement. To the extent permitted by federal income
tax law, options issued under the plan to the Executive shall be "incentive
stock options". The stock options shall be evidenced by an Incentive Stock
Option Agreement and, if required, a Non-Qualified Stock Option Agreement
substantially in the form of Exhibits A and B to this Agreement (the "Stock
Option Agreements"), except as expressly provided otherwise herein. The exercise
price per share of Common Stock for Incentive Stock Options granted pursuant to
this Agreement shall be the Fair Market Value as defined in the Plan. The
exercise price per share of Common Stock for Non-Qualified Stock Options granted
pursuant to this Agreement shall be the average bid price as reported on the
Nasdaq Stock Market for a share of Common Stock for the ten (10) consecutive
trading day period ending on the Effective Date. Both Stock Option Agreements
shall provide that (i) the options issued thereunder shall vest, i.e., become
exercisable, in monthly installments of 2.7778% commencing on the Effective Date
and on
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<PAGE> 5
the first day of each calendar month thereafter so that the Executive shall be
fully (100%) vested on the first day of the month immediately before the third
anniversary of the Effective Date; (ii) upon a Change in Ownership (as
hereinafter defined) in place of the vesting schedule provided in clause "i"
above the options shall vest retroactively as of the Effective Date 25% on the
Effective Date and an additional 2.0833% on the first day of each calendar month
thereafter so that the Executive shall be fully (100%) vested on the first day
of the month immediately following the third anniversary of the Effective Date;
(iii) upon the termination by the Company of the Executive's employment without
Just Cause or the Executive's termination for Good Reason (as the terms are
defined in Section 4) in place of the vesting schedules provided in clauses "i"
and "ii" above, the options shall vest retroactively as of the Effective Date
25% on the Effective Date and at the accelerated rate of an additional 3.125% on
the first day of each calendar month thereafter so that the Executive shall be
fully (100%) vested on the first day of the month immediately following the
second anniversary of the Effective Date; (iv) options issued shall, to the
extent vested, be fully exercisable until the tenth (10th) anniversary of the
Effective Date; (v) the options shall be exercisable in accordance with the
terms of the Plan, including the right to pay the option exercise price in whole
or in part by surrendering shares of the Common Stock with an aggregate fair
market value equal to the option exercise price or surrendering vested options
with an aggregate stock option spread equal to the option exercise price in
accordance with the terms of the Plan, and shall provide that stock certificates
shall be issued outright and free of escrow no later than three (3) days after
the date of exercise; (vi) stock certificates issued pursuant to the exercise of
an option shall not include any legends or be
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<PAGE> 6
subject to any transfer restrictions, except for restrictions required by
Section 16 of the Securities Exchange Act of 1934, as amended; (vii) the Company
shall not terminate any option issued to the Executive upon a "Change in
Control" (as defined in the Plan) without the Executive's prior written
approval; (viii) in the event that at any time before a Target Equity Financing
(as hereinafter defined), the Company grants options or other equity interests
to management, employees, directors or consultants or the Company sells shares
of its Common Stock or any equity securities or securities convertible or
exchangeable into any equity securities of the Company, as part of a plan or
series of plans of financing, or the number of shares of Common Stock
outstanding on a fully diluted basis increases as a result of a change in the
conversion ratio of any class of securities convertible or exchangeable into an
equity securities of the Company, the Company shall grant to the Executive
additional stock options under the Plan covering that number of shares of Common
Stock necessary to cause the Executive's proportionate holdings of the
outstanding Common Stock, on a fully diluted basis, immediately after the grant
or sale of such options, shares or other equity interests to equal her
proportionate holdings of the outstanding Common Stock, on a fully diluted
basis, immediately prior to the grant or sale of such options, shares or other
equity interests; all additional stock options shall have the same terms and
conditions, and shall vest as though they were granted on the same date as the
initial options that are required to be issued within 30 days of the Effective
Date; (x) each option shall include all other rights and benefits under the
Plan, including Section 11 of the Plan (regarding accelerated vesting on Change
in Control); and (x) the Company has registered, or within 30 days of the
Effective Date shall at its own expense register, under the Securities Act of
1933 all shares issued or
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to be issued pursuant to the exercise of the stock options on Form S-8, the
obligation to maintain such registration to continue following the Executive's
termination of employment. The Executive agrees that, if requested by an
underwriter of the Company's securities, the Executive will comply with any
reasonable customary lock-up periods in connection with the Company's offering
of securities provided that all other executive officers and directors of the
Company also must comply with such restrictions and provided that no such
lock-up periods shall exceed 180 days. The Plan shall be amended as necessary to
provide or permit the issuance of the options described in this Section 3.6. All
additional stock options shall have the same terms and conditions, and shall
vest as though they were granted on the same date, as the options issued
pursuant to this Section. For purposes of determining the outstanding Common
Stock on a fully diluted basis, all shares of Common Stock issuable upon
exercise of options outstanding under the Plan or any other stock option plan
(including the options granted to the Executive pursuant to this Agreement) and
all shares of Common Stock issuable on exercise of all other outstanding
options, warrants, conversion rights or other rights issued by the Company to
acquire equity securities shall be deemed to be outstanding.
The Board shall in good faith take all necessary action to effect the terms
of this Agreement and to register the underlying shares of Common Stock under
applicable securities laws as provided herein.
For purposes of this Agreement, the following terms shall be defined as set
forth below:
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A "Change in Control" of the Company shall have the same meaning as
provided by Section 11(b) of the Seragen, Inc. 1992 Long Term Incentive Plan as
amended through the date hereof.
A "Change in Ownership" of the Company shall mean (i) the acquisition by
any "person" or group of "persons" (as defined in Section 13(d)(3) of the
Securities Exchange Act of 1934 ("Exchange Act"), whether by way of merger, sale
of assets, stock purchase, tender offer or otherwise, of (A) all or
substantially all of the equity securities of the Company or (B) all or
substantially all of the operating assets of the Company, or (ii) the sale or
out-licensing of the majority (in value) of the Company's technology assets.
"Target Equity Financing" shall mean the receipt by the company of proceeds
of at least Twenty Million ($20,000,000) Dollars from the sale or issuance of
stock of the Company or of debt securities of the Company with conversion
rights, other than (i) stock or debt securities sold or issued to a current
shareholder and/or affiliated investment entities; or (ii) stock issued as a
result of the exercise of options presently outstanding or issued pursuant to
the Plan.
4. EMPLOYMENT TERMINATION. Section 1 of this Agreement
notwithstanding, the employment of the Executive by the Company pursuant to this
Agreement shall terminate upon the occurrence of any of the following:
4.1 JUST CAUSE. At the election of the Company, for Just Cause,
immediately upon written notice by the Company to the Executive. For the
purposes of this Section 4.1, "Just Cause" shall mean (a) the commission by the
Executive of a willful act of material fraud in the performance of her duties on
behalf of the Company; (b) the conviction
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<PAGE> 9
of the Executive of, or the entry of a plea of guilty or nolo contendere by the
Executive to, any crime involving moral turpitude or any felony; or (c) the
breach by the Executive of any material term of this Agreement or the continuing
willful failure of the Executive to perform her material duties to the Company
(other than any such failure resulting from the Executive's incapacity due to
physical or mental illness) after written notice thereof (specifying the
particulars thereof in reasonable detail) and a reasonable opportunity to cure
such breach or failure are given to the Executive by the Board of Directors or
the Chief Executive Officer of the Company, PROVIDED that no notice shall be due
for any act described in subparagraphs (a) and (b);
4.2 DEATH OR DISABILITY. Thirty days after the death or total
disability of the Executive. As used in this Agreement, the term "total
disability" shall mean the inability of the Executive, due to a physical or
mental disability, for a period of 90 consecutive days or 150 days in the
aggregate, during any 360-day period to perform the services contemplated under
this Agreement. A determination of total disability shall be made by a physician
satisfactory to both the Executive and the Company, PROVIDED THAT if the
Executive and the Company do not agree on a physician, the Executive and the
Company shall each select a physician and these two together shall select a
third physician, whose determination as to disability shall be binding on all
parties; or
4.3 WITHOUT JUST CAUSE. Upon notice of termination given at the
election of the Company without Just Cause, which shall include in the event
that the Company shall have incurred a Change in Ownership or a Change in
Control, PROVIDED THAT the Executive shall be entitled to the severance payment
provided in Section 5.3 in such event.
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4.4 TERMINATION BY THE EXECUTIVE. The Executive may terminate her
employment hereunder at any time upon not less than thirty (30) days' prior
written notice. Upon the Executive's voluntary termination of employment without
Good Reason pursuant to this Section 4.4, the Executive shall not be entitled to
the severance benefits described in Section 3.4 above. Upon the Executive's
termination of employment for Good Reason pursuant to this Section 4.4, the
Executive shall be entitled to the severance payment provided in Section 5.3 in
such event.
4.5 GOOD REASON. For purposes of this Agreement, "Good Reason" shall
mean:
(i) the Company shall have materially breached its obligations
under this Agreement, and such breach is not cured within twenty (20) days of
the Executive's sending a written notice of such breach;
(ii) the Company shall have incurred a Change in Ownership;
(iii) the Company shall have incurred a Change in Control;
(iv) the Executive shall at any time during her employment and
more than 30 days after the effective Date not be a member of the Board of
Directors or the President, unless the Executive shall have resigned from or
failed to accept such position(s); or
(v) the Company shall have acted in bad faith to cause the
Executive to resign from the Company.
Good Reason shall not arise in any situation in which the Executive
shall have given prior written consent to the act or failure to act of the
Company.
5. EFFECT OF TERMINATION.
---------------------
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5.1 TERMINATION FOR JUST CAUSE. In the event the Executive's
employment is terminated for Just Cause pursuant to Section 4.1, the Company
shall pay to the Executive the compensation and benefits otherwise payable to
her under Section 3 through the last day of her actual employment by the
Company.
5.2 TERMINATION FOR DEATH OR DISABILITY. If the Executive's employment
is terminated by death or because of disability pursuant to Section 4.2, the
Company shall pay to the estate of the Executive or to the Executive, as the
case may be, both (i) the compensation which would otherwise be payable to the
Executive up to the end of the month in which the termination of her employment
because of death or disability occurs and (ii) the severance payment provided in
Section 3.4.
5.3 TERMINATION WITHOUT JUST CAUSE. If the Executive's employment is
terminated by the Company without Just Cause or by the Executive for Good Reason
pursuant to Section 4.3, the Company shall pay to the Executive both (i) the
compensation and benefits otherwise payable to her under Section 3 through the
last day of her actual employment by the Company and (ii) the severance payment
provided in Section 3.4.
5.4 SURVIVAL. The provisions of Sections 3.4, 4, 5, 6 and 7 shall
survive the termination of this Agreement.
6. Non-Compete.
-----------
(a) During her employment and for a period of one (1) year after
the termination or expiration thereof, the Executive will not directly or
indirectly:
(i) as an individual proprietor, partner, stockholder,
officer, employee, director, joint venturer, investor, lender, or in any other
capacity whatsoever
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(other than as the holder of not more than one percent (1%) of the total
outstanding stock of a publicly held company), engage in the business of
developing, producing, marketing or selling products competitive with the
products, and using technologies which are utilized in the products, developed
or being developed, produced, marketed or sold by the Company while the
Executive was employed by the Company;
(ii) recruit, solicit or induce, or attempt to induce, any
employee or employees of the Company to terminate their employment with, or
otherwise cease their relationship with, the Company; or
(iii) solicit, divert or take away, or attempt to divert or
to take away, the business of any of the clients, customers or accounts, or
prospective clients, customers or accounts, of the Company which were contacted,
solicited or served by the Company during the last 24 months of the employment
of the Executive.
(b) If any restriction set forth in this Section 6 is found by
any court of competent jurisdiction to be unenforceable because it extends for
too long a period of time or over too great a range or activities or in too
broad a geographic area, it shall he interpreted to extend only over the maximum
period of time, range of activities or geographic area as to which it may be
enforceable.
(c) The restrictions contained in this Section 6 are necessary
for the protection of the business and goodwill of the Company and are
considered by the Executive to be reasonable for such purpose. The Executive
agrees that any breach of this Section 6 will cause the Company substantial and
irrevocable damage and therefore, in the event of any
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such breach, in addition to such other remedies which may be available, the
Company shall have the right to seek specific performance and injunctive relief.
7. PROPRIETARY INFORMATION AND DEVELOPMENTS.
----------------------------------------
7.1 PROPRIETARY INFORMATION.
-----------------------
(a) The Executive agrees that all information and know-how,
whether or not in writing, of a private, secret or confidential nature
concerning the Company's business or financial affairs (collectively
"Proprietary Information") is and shall be the exclusive property of the
Company. By way of illustration, but not limitation, Proprietary Information may
include inventions, products, processes, methods, techniques, formulas,
compositions, compounds projects, developments, plans, research data, clinical
data, financial data of the Company, whether or not generated during normal
working hours or on the premises of the Company. Proprietary Information shall
not include any information that (i) is generally known within the industry
before the date of this Agreement or becomes common knowledge within the
industry thereafter, (ii) is disclosed to the Executive by a third party which
did not obtain the information, directly or indirectly, under an obligation of
confidence to the Company, or (iii) the Executive is required to disclose by
enforceable legal process.
(b) The Executive agrees that all files, letters, memoranda,
reports, records, data, sketches, drawings, laboratory notebooks, program
listings, or other written, photographic, or other tangible material containing
Proprietary Information, whether created by the Executive or others, which shall
come into her custody or possession, shall be and are
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the exclusive property of the Company to be used by the Executive only in the
performance of her duties for the Company.
(c) The Executive agrees that her obligations not to disclose or
use information, know-how and records of the types set forth in paragraphs (a)
and (b) above, also extends to such types of information, know-how, records and
tangible property of customers of the Company or suppliers to the Company or
other third parties who may have disclosed or entrusted the same to the Company
or to the Executive in the course of the Company's business.
7.2 DEVELOPMENTS.
------------
(a) The Executive will make full and prompt disclosure to the
Company of all inventions, improvements, discoveries, methods, developments,
software, and works of authorship, whether patentable or not, which are created,
made, conceived or reduced to practice by the Executive or under her direction
or jointly with others during her employment by the Company, whether or not
during normal working hours or on the premises of the Company (all of which are
collectively referred to in this Agreement as "Developments").
(b) The Executive agrees to assign and does hereby assign o the
Company (or any person or entity designated by the Company) all her right, title
and interest in and to all Developments and all related patents, patent
applications, copyrights and copyright applications. However, this Section
7.2(b) shall not apply to Developments which do not relate to the present or
planned business or research and development of the Company and which are made
and conceived by the Executive not during normal working hours, not on the
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Company's premises and not using the Company's tools, devices, equipment or
Proprietary Information.
(c) The Executive agrees to cooperate fully with the Company at
the Company's expense, both during and after her employment with the Company,
with respect to the procurement, maintenance and enforcement of copyrights and
patents (both in the United States and foreign countries) relating to
Developments. The Executive shall sign all papers, including, without
limitation, copyright applications, patent applications, declarations, oaths,
formal assignments, assignment of priority rights, and powers of attorney, which
the Company may deem necessary or desirable in order to protect its rights and
interests in any of the Developments.
7.3 OTHER AGREEMENTS. The Executive hereby represents that she is
not bound by the terms of any agreement with any previous employer or other
party to refrain from using or disclosing any trade secret or confidential or
proprietary information in the course of her employment with the Company or to
refrain from competing, directly or indirectly, with the business of such
previous employer or any other party. The Executive further represents that her
performance of all the terms of this Agreement as an employee of the Company
does not and will not breach any agreement with any previous employer or other
party to keep in confidence proprietary information, knowledge or data acquired
by her in confIdence or in trust prior to her employment with the Company.
8. NOTICES. All notices required or permitted under this Agreement
shall be in writing and shall be deemed effective upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mall,
postage prepaid, addressed to the other
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party at the address shown above, or at such other address or addresses as
either party shall designate to the other in accordance with this Section 8.
9. PRONOUNS. Whenever the context may require, any pronouns used in
this Agreement shall include the corresponding masculine, feminine or neuter
forms, and the singular forms or nouns and pronouns shall include the plural,
and vice versa.
10. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties and supersedes all prior agreements and understandings,
whether written or oral, relating to the subject matter of this Agreement.
11. AMENDMENT. This Agreement may be amended or modified only by a
written instrument executed by both the Company and the Executive.
12. GOVERNING LAW. This Agreement shall be construed, interpreted and
enforced in accordance with the laws of the Commonwealth of Massachusetts.
13. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon id
inure to the benefit of both parties and their respective successors and
assigns, including any corporation with which or into which the Company may be
merged or which may succeed to its assets or business, PROVIDED, HOWEVER, that
the obligations of the Executive are personal and shall not be assigned by her.
14. LEGAL FEES. The Company shall pay the Executives reasonable legal
fees incurred with respect to the negotiation and preparation of this Agreement.
15. Miscellaneous.
-------------
15.1 NO WAIVER. No delay or omission by the Company in exercising
any right under this Agreement shall operate as a waiver of that or any other
right. A waiver or
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consent given by the Company on any one occasion shall be effective only in the
instance and shall not be construed as a bar or waiver of any right on any other
occasion.
15.3 CAPTIONS. The captions of the sections of this Agreement are
for convenience and reference only and in no way define, limit or affect the
scope or substance of any section of this Agreement.
15.3 SEVERANCE. In case any provision of this Agreement shall be
invalid, illegal or otherwise unenforceable, the validity, legality and
enforceability of the remaining provisions shall in no way be affected or
impaired thereby.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year set forth above.
SERAGEN, INC.
By:
-----------------------------
Reed R. Prior
Chairman of the Board
and Chief Executive Officer
EXECUTIVE
--------------------------------
Jean C. Nichols, Ph.D.
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Schedule I
----------
Number of
Grant Date Type Of Option Option Shares Exercise Price
- ---------- -------------- ------------- --------------
12/4/86 Incentive Stock
Option 4,000 $0.75
2/5/92 Non-Qualified
Stock Option 50,000 $1.50
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<PAGE> 1
Exhibit 10.66
STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT made as of November 6, 1996 by and among Boston
University, a nonprofit corporation existing under the laws of Massachusetts
("Boston University"), Leon C. Hirsch, Turi Josefsen, Gerald S.J. Cassidy and
Loretta P. Cassidy (individually, a "Stockholder" and collectively, the
"Stockholders"), and Reed R. Prior ("Mr. Prior"), and Seragen, Inc., a Delaware
corporation (the "Company").
WHEREAS, the Stockholders are the holders of outstanding securities (the
"Shares"), of the Company;
WHEREAS, the Company has entered into an employment agreement with Mr.
Prior of even date herewith (the "Employment Agreement");
WHEREAS, the Stockholders and Mr. Prior desire to promote their mutual
interests and the interests of the Company by providing in this Agreement for
the terms and conditions governing certain transfers of shares of the Company's
outstanding securities, the management and operation of the Company, the
relations among the Stockholders and certain other matters; and
WHEREAS, the Board of Directors of the Company has determined that it is in
the best interests of the Company that the Company enter into this Agreement;
NOW, THEREFORE, in consideration of the covenants and agreements set forth
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby mutually acknowledged, the parties hereto
covenant and agree as follows:
1. GENERAL PROVISIONS
1.1 SHARES SUBJECT TO THIS AGREEMENT. The Stockholders expressly agree that the
terms and restrictions of this Agreement shall apply to all Shares which any of
them now owns or hereafter acquires by any means, including without limitation
by purchase, assignment or operation of law, or as a result of any stock
dividend, stock split, reorganization, reclassification, whether voluntary or
involuntary, or other similar transaction, and to any shares of capital stock of
any successor in interest of the Company, whether by sale, merger, consolidation
or other similar transaction, or by purchase, assignment or operation of law.
1.2 NO PARTNERSHIP RELATIONSHIP. Notwithstanding, but not in limitation of, any
other provision of this Agreement, the parties understand and agree that the
creation, management and operation of the Company shall not create or imply a
general partnership between or among the parties and shall not make any party
the agent or partner of any other party for any purpose.
<PAGE> 2
1.3 TERM AND TERMINATION. This Agreement shall become effective commencing on
the date hereof and shall continue until Mr. Prior's employment is terminated
pursuant to Paragraph 4 of the Employment Agreement.
2. BOARD OF DIRECTORS
2.1 NUMBER OF DIRECTORS. Each Stockholder shall take or cause to be taken such
actions as may be required from time to time to establish and maintain the
number of persons comprising the Board of Directors of the Company at nine (9).
Without limiting the generality of the foregoing, at each annual meeting of the
stockholders, and at each special meeting of the stockholders called for the
purpose of electing directors of the Company, and at any time at which the
stockholders have the right to, or shall, elect directors of the Company, then,
and in each event, the Stockholders shall vote all Shares owned by them (or
shall consent in writing in lieu of a meeting of stockholders, as the case may
be) to set the number of directors of the Company in accordance with the
preceding sentence.
2.2 ELECTION OF DIRECTORS DESIGNATED BY OR AFFILIATED WITH BOSTON UNIVERSITY.
Each Stockholder shall take or cause to be taken such actions as may be required
from time to time not to elect to the Company's Board of Directors more than two
(2) persons designated by or affiliated with Boston University. Without limiting
the generality of the foregoing, at each annual meeting of the stockholders, and
at each special meeting of the stockholders called for the purpose of electing
directors of the Company, and at any time at which stockholders have the right
to, or shall, elect directors of the Company, then, and in each event, the
Stockholders shall vote all Shares owned by them (or shall consent in writing in
lieu of a meeting of stockholders, as the case may be) to elect persons as
directors of the Company in accordance with the preceding sentence.
2.3 ELECTION OF DIECTORS APPROVED BY MR. PRIOR. Each Stockholder shall take or
cause to be taken such actions as may be required from time to time to elect to
the Company's Board of Directors Mr. Prior plus three (3) outside directors with
expericence in the pharmaceutical industry reasonably acceptable to Mr. Prior.
Without limiting the generality of the foregoing, at each annual meeting of the
stockholders, and at each special meeting of the stockholders called for the
purpose of electing directors of the Company, and at any time at which
stockholders have the right to, or shall, elect directors of the Company, then,
and in each event, the Stockholders shall vote all Shares owned by them (or
shall consent in writing in lieu of a meeting of stockholders, as the case may
be) to elect persons as directors of the Company in accordance with the
preceding sentence.
3. PARTICIPATION IN SALES
3.1 CO-SALE RIGHT. In the event that Boston University (the "Offeree") receives
a bona fide offer from a third party or parties other than the Company or any
other Stockholder (the "Purchaser") to purchase in one transaction or in a
series of related transactions fifty percent (50%) or more of the shares of
common stock, $.01 par value, of the Company ("Common
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Stock") currently owned by the Offeree, measured on a fully diluted basis,
taking into account all shares of Common Stock issuable upon exercise or
conversion of options, warrants, conversion rights and other rights to acquire
equity securities ("Convertible Securities") currently held by the Offeree (the
"Co-Sale Shares"), for a specified price payable in cash or otherwise and on
specified terms and conditions (the "Offer"), and the Offeree proposes to sell
or otherwise transfer the Co-Sale Shares to the Purchaser pursuant to the Offer,
Mr. Prior shall have the right to sell to the Purchaser, at the same price per
Share and on the same terms and conditions as stated in the Offer, such number
of shares of Common Stock (the "Prior Co-Sale Shares") equal to the Co-Sale
Shares multiplied by a fraction, (a) the numerator of which is the aggregate
number of shares of Common Stock then owned by Mr. Prior ("Mr. Prior's Shares"),
assuming that all Convertible Securities held by Mr. Prior have been exercised
or converted, whether or not such Convertible Securities are then exercisable or
convertible, and (b) the denominator of which is the aggregate number of shares
of Common Stock then outstanding, assuming that all outstanding Convertible
Securities have been exercised or converted, whether or not such Convertible
Securities are then exercisable or convertible. If the Offer is for the purchase
of Convertible Securities, the Offer shall be deemed to be an offer for the
number of shares of Common Stock into which the Convertible Securities are then
exercisable or convertible for purposes of determining the number of the Prior
Co-Sale Shares, and the Offeree shall negotiate with the Purchaser to acquire
the Prior Co-Sale Shares in shares of Common Sock in lieu of Convertible
Securities.
3.2 NOTICES OF OFFER AND INTENT TO PARTICIPATE. The Offeree shall provide notice
to Mr. Prior stating the name of the Purchaser, the terms of the Offer and the
period of time available to Mr. Prior for notifying the Offeree of his intent to
participate in the sale (the "Notice Period"). The Offeree shall, if reasonably
possible, provide Mr. Prior with a Notice Period of up to thirty (30) days, but
in no event will the Offeree provide Mr. Prior with a Notice Period of less than
ten (10) days. If Mr. Prior wishes to participate in any sale pursuant to
Section 3.1, he shall notify the Offeree in writing of such intention as soon as
practicable after his receipt of the notice from the Offeree and in any event
within the Notice Period. If the Offeree does not receive such notice from Mr.
Prior within the Notice Period, the Offeree shall be free to consummate the
proposed transaction without any obligation to include Mr. Prior's Shares in
such transaction.
3.3 SALE OF CO-SALE SHARES. The Offeree and Mr. Prior shall sell to the
Purchaser all, or at the option of the Purchaser, any part of the shares
proposed to be sold by him at not less than the price and upon other terms and
conditions, if any, not more favorable to the Purchaser than those stated in the
Offer; provided, however, that any purchase of less than all of such shares by
the Purchaser shall be made from the Offeree and Mr. Prior pro rata based upon
the relative amount of the shares that the Offeree and Mr. Prior are otherwise
entitled to sell pursuant to Section 3.1.
3.4 LOAN OF COMMON STOCK. To enable Mr. Prior to exercise his co-sale rights
pursuant to Section 3.1 hereof, the Company shall lend to Mr. Prior an amount
(the "Loan Amount")
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equal to the greater of (a) the Prior Co-Sale Shares and (b) the number of
shares of Common Stock issuable upon exercise of the vested portion of stock
options issued to Mr. Prior pursuant to Paragraph 3(c) of the Employment
Agreement, multiplied by the exercise price(s) for such options. Mr. Prior shall
deliver to the Company a promissory note in the principal amount of the Loan
Amount, which note shall be due and payable at the closing of the sale of the
Co-Sale Shares and shall bear simple interest at the rate of six percent (6%)
per annum.
4. ASSET VALUE REALIZATION BONUS
4.1 ASSET VALUE REALIZATION BONUS. The Stockholders agree and consent to the
provisions of Paragraph 3(i) of the Employment Agreement providing for the
payment of an Asset Value Realization Bonus (as defined in the Employment
Agreement) to Mr. Prior in the circumstances described therein. Boston
University agrees that in the event that an Asset Value Realization Bonus is due
to Mr. Prior in connection with a sale of all or substantially all of the equity
securities of the Company as part of a Change of Ownership (as defined in the
Employment Agreement), and the Company fails to pay such fee at closing, Boston
University immediately will pay its pro rata share of such fee based on the
number of Shares sold by it in relation to the total number of equity securities
sold.
5. PUBLIC ANNOUNCEMENTS
5.1 PUBLIC ANNOUNCEMENTS. Boston University agrees that it will not issue any
press releases or otherwise make any public statement with respect to the
business, operations, products or prospects of the Company, except for any
disclosures it may be required by law to make by virtue of being a stockholder
of the Company or as may be approved by the Company.
6. REPRESENTATIONS AND WARRANTIES
6.1 REPRESENTATIONS AND WARRANTIES OF CORPORATE STOCKHOLDERS. Each Stockholder
that is a corporation hereby represents and warrants to each other party as
follows:
(a) Organization and Authority. Such Stockholder is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated. Such Stockholder has the
corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby.
(b) Corporate Action. Such Stockholder has taken all corporate action
necessary for it to enter into this Agreement and to consummate the
transactions contemplated hereby.
(c) Absence of Violation. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
constitute a
4
<PAGE> 5
violation of, or default under, or conflict with, or require any consent
under any term or provision of the certificate of incorporation or by-laws
of such Stockholder or any contract, commitment, indenture, lease or other
agreement to which such Stockholder is a party or by which such Stockholder
or any of its assets is bound.
(d) Binding Obligation. This Agreement constitutes a valid and binding
obligation of such Stockholder, enforceable in accordance with its terms,
except to the extent that such enforceability may be limited by bankruptcy,
insolvency and similar laws affecting the rights and remedies of creditors
generally, and by general principles of equity and public policy.
6.2 REPRESENTATIONS AND WARRANTIES OF INDIVIDUAL STOCKHOLDERS AND MR. PRIOR.
Each Stockholder who is an individual and Mr. Prior hereby represents and
warrants to each other party as follows:
(a) Absence of Violation. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
constitute a violation of, or default under, or conflict with, or require
any consent under any term or provision of any contract, commitment,
indenture, lease or other agreement to which such party is a party or by
which such party or any of his or her assets is bound.
(b) Binding Obligation. This Agreement constitutes a valid and binding
obligation of such party, enforceable in accordance with its terms, except
to the extent that such enforceability may be limited by bankruptcy,
insolvency and similar laws affecting the rights and remedies of creditors
generally, and by general principals of equity and public policy.
7. MISCELLANEOUS
7.1 NOTICES. All notices, requests, consents and other communications hereunder
shall be in writing, shall be addressed to the receiving party's address set
forth below or to such other address as a party may designate by notice
hereunder, and shall be either (i) delivered by hand, (ii) made by telex,
telecopy or facsimile transmission, (iii) sent by overnight courier, or (iv)
sent by registered mail, return receipt requested, postage prepaid.
If to the Stockholders or Mr. Prior: to the address set forth on
Schedule I hereto.
If to the Company: Seragen, Inc.
97 South Street
Hopkinton, MA 01748
Fax: (508) 435-9805
5
<PAGE> 6
Attention: President
With a copy to: Jeffrey M. Wiesen, Esq.
Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
Fax: (617) 542-2241
All notices, requests, consents and other communications hereunder shall be
deemed to have been given either (i) if by hand, at the time of the delivery
thereof to the receiving party at the address of such party set forth above,
(ii) if made by telex, telecopy or facsimile transmission, at the time that
receipt thereof has been acknowledged by electronic confirmation or otherwise,
(iii) if sent by overnight courier, on the next business day following the day
such notice is delivered to the courier service, or (iv) if sent by registered
mail, on the fifth business day following the day such mailing is made.
7.2 ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior oral or written agreements and understandings
relating to the subject matter hereof. No statement, representation, warranty,
covenant or agreement of any kind not expressly set forth in this Agreement
shall affect, or be used to interpret, change or restrict, the express terms and
provisions of this Agreement.
7.3 MODIFICATIONS AND AMENDMENTS. The terms and provisions of this Agreement may
be modified or amended only by written agreement executed by all parties hereto.
7.4 WAIVERS AND CONSENTS. The terms and provisions of this Agreement may be
waived, or consent for the departure therefrom granted, only by written document
executed by the party entitled to the benefits of such terms or provisions. No
such waiver or consent shall be deemed to be or shall constitute a waiver or
consent with respect to any other terms or provisions of this Agreement, whether
or not similar. Each such waiver or consent shall be effective only in the
specific instance and for the purpose for which it was given, and shall not
constitute a continuing waiver or consent.
7.5 ASSIGNMENT. The rights and obligations under this Agreement may not be
assigned by any party hereto without the prior written consent of the other
parties.
7.6 BENEFIT. All statements, representations, warranties, covenants and
agreements in this Agreement shall be binding on the parties hereto and shall
inure to the benefit of the respective successors and permitted assigns of each
party hereto. Nothing in this Agreement shall be construed to create any rights
or obligations except among the parties hereto, and no person or entity shall be
regarded as a third-party beneficiary of this Agreement.
6
<PAGE> 7
7.7 GOVERNING LAW. This Agreement and the rights and obligations of the parties
hereunder shall be construed in accordance with and governed by the law of the
Commonwealth of Massachusetts, without giving effect to the conflict of law
principles thereof.
7.8 ARBITRATION. Any controversy, dispute or claim arising out of or in
connection with this Agreement, or the breach, termination or validity hereof,
shall be settled by final and binding arbitration to be conducted by an
arbitration tribunal in Boston, Massachusetts, pursuant to the rules of the
American Arbitration Association. The arbitration tribunal shall consist of
three arbitrators. The party initiating arbitration shall nominate one
arbitrator in the request for arbitration and the other party shall nominate a
second in the answer thereto within thirty (30) days of receipt of the request.
The two arbitrators so named will then jointly appoint the third arbitrator. If
the answering party fails to nominate its arbitrator within the thirty (30)-day
period, or if the arbitrators named by the parties fail to agree on the third
arbitrator within sixty (60) days, the office of the American Arbitration
Association in Boston, Massachusetts shall make the necessary appointments of
such arbitrator(s). The decision or award of the arbitration tribunal (by a
majority determination, or if there is no majority, then by the determination of
the third arbitrator, if any) shall be final, and judgment upon such decision or
award may be entered in any competent court or application may be made to any
competent court for judicial acceptance of such decision or award and an order
of enforcement. In the event of any procedural matter not covered by the
aforesaid rules, the procedural law of the Commonwealth of Massachusetts shall
govern.
7.9 JURISDICTION AND SERVICE OF PROCESS. Any legal action or proceeding with
respect to this Agreement shall be brought in the courts of the Commonwealth of
Massachusetts or of the United States of America for the District of
Massachusetts. By execution and delivery of this Agreement, each of the parties
hereto accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. Each of the parties
hereto irrevocably consents to the service of process of any of the
aforementioned courts in any such action or proceeding by the mailing of copies
thereof by certified mail, postage prepaid, to the party at its address set
forth in Section 7.1 hereof.
7.10 SEVERABILITY. In the event that any court of competent jurisdiction shall
determine that any provision, or any portion thereof, contained in this
Agreement shall be unenforceable in any respect, then such provision shall be
deemed limited to the extent that such court deems it enforceable, and as so
limited shall remain in full force and effect. In the event that such court
shall deem any such provision, or portion thereof, wholly unenforceable, the
remaining provisions of this Agreement shall nevertheless remain in full force
and effect, provided, that if without such invalid provisions, the fundamental
mutual obligations of the parties cannot be achieved, then any party may
terminate this Agreement without penalty by written notice to the others.
7.11 INTERPRETATION. The parties hereto acknowledge and agree that: (i) each
party and its counsel reviewed and negotiated the terms and provisions of this
Agreement and have
7
<PAGE> 8
contributed to its revision; (ii) the rule of construction to the effect that
any ambiguities are resolved against the drafting party shall not be employed in
the interpretation of this Agreement; and (iii) the terms and provisions of this
Agreement shall be construed fairly as to all parties hereto and not in favor of
or against any party, regardless of which party was generally responsible for
the preparation of this Agreement.
7.12 HEADINGS AND CAPTIONS. The headings and captions of the various
subdivisions of this Agreement are for convenience of reference only and shall
in no way modify or affect the meaning or construction of any of the terms or
provisions hereof.
7.13 ENFORCEMENT. Each of the parties hereto acknowledges and agrees that the
rights acquired by each party hereunder are unique and that irreparable damage
would occur in the event that any of the provisions of this Agreement to be
performed by the other parties were not performed in accordance with their
specific terms or were otherwise breached. Accordingly, in addition to any other
remedy to which the parties hereto are entitled at law or in equity, each party
hereto shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement by any other party and to enforce specifically the terms and
provisions hereof in any federal or state court to which the parties have agreed
hereunder to submit to jurisdiction.
7.14 NO WAIVER OF RIGHTS, POWERS AND REMEDIES. No failure or delay by a party
hereto in exercising any right, power or remedy under this Agreement, and no
course of dealing among the parties hereto, shall operate as a waiver of any
such right, power or remedy of the party. No single or partial exercise of any
right, power or remedy under this Agreement by a party hereto, nor any
abandonment or discontinuance of steps to enforce any such right, power or
remedy, shall preclude such party from any other or further exercise thereof or
the exercise of any other right, power or remedy hereunder. The election of any
remedy by a party hereto shall not constitute a waiver of the right of such
party to pursue other available remedies. No notice to or demand on a party not
expressly required under this Agreement shall entitle the party receiving such
notice or demand to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the party giving such
notice or demand to any other or further action in any circumstances without
such notice or demand.
7.15 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties made by the parties hereto in this Agreement or in any other
agreement, certificate or instrument provided for or contemplated hereby, shall
survive (i) the execution and delivery hereof, and (ii) any investigations made
by or on behalf of the parties, and shall remain in full force and effect for a
period of four (4) years following the date hereof. No claim shall be made by a
party for any alleged misrepresentation or breach of warranty by the other party
unless notice for such claim shall have been given to the other party in
accordance with the notice provision hereof prior to the expiration of the
survival period specified above with respect to such representation or warranty.
8
<PAGE> 9
7.16 EXPENSES. Each of the parties hereto shall pay its own fees and expenses
(including the fees of any attorneys, accountants, appraisers or others engaged
by such party) in connection with this Agreement (except that the Company shall
pay Mr. Prior's expenses) and the transactions contemplated hereby whether or
not the transactions contemplated hereby are consummated.
7.17 NO BROKER OR FINDER. Each of the parties hereto represents and warrants to
the others that no broker, finder or other financial consultant has acted on its
behalf in connection with this Agreement or the transactions contemplated hereby
in such a way as to create any liability on the other. Each of the parties
hereto agrees to indemnify and save the others harmless from any claim or demand
for commission or other compensation by any broker, finder, financial consultant
or similar agent claiming to have been employed by or on behalf of such party
and to bear the cost of legal expenses incurred in defending against any such
claim.
7.18 PUBLICITY. No party shall issue any press releases or otherwise make any
public statement with respect to the transactions contemplated by this Agreement
without the prior written consent of the other parties, except as may be
required by law.
7.19 COUNTERPARTS. This Agreement may be executed in one or more counterparts,
and by different parties hereto on separate counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused this Agreement to be executed by their duly authorized representatives,
as of the date first written above.
STOCKHOLDERS:
BOSTON UNIVERSITY
By:
-----------------------------
Name:
Title:
By:
-----------------------------
Leon C. Hirsch
By:
-----------------------------
Turi Josefsen
9
<PAGE> 10
By:
-----------------------------
Gerald S.J. Cassidy
By:
-----------------------------
Loretta P. Cassidy
MR. PRIOR
By:
-----------------------------
Reed R. Prior
COMPANY:
SERAGEN, INC.
By:
-----------------------------
Jean C. Nichols, President and Chief
Technology Officer
10
<PAGE> 11
Schedule I
----------
Stockholders
- ------------
Leon C. Hirsch
150 Glover Avenue
Norwalk, CT 06856
Fax: (203) 846-59880
Turi Josefsen
150 Glover Avenue
Norwalk, CT 06856
Fax: (203) 846-5988
Gerald S.J. Cassidy and
Loretta P. Cassidy
c/o Cassidy and Associates, Inc.
700 12th St., N.W., Suite 400
Washington, DC 20005
Fax: (202) 347-2708
Mr. Prior
- ---------
Reed R. Prior
17600 Charity Lane
Darnestown, MD 20874
Fax: (301) 540-1626
11
<PAGE> 1
Exhibit 10.67
SERAGEN, INC.
97 South Street
Hopkinton, MA 01748
November 6, 1996
Mr. George W. Masters
16 Brown Street
Falmouth, ME 04105
Re: Retirement and Consulting Agreement
-----------------------------------
Dear George:
Reference is made to the Letter Agreement dated March 18, 1993 between
Seragen, Inc. ("Seragen") and you (the "Agreement"). This letter will set forth
our understanding regarding the termination of your employment under the
Agreement and as an employee of Seragen.
1. Seragen and you have agreed upon the termination of your employment with
Seragen.
2. Your last day of employment will be November 6, 1996. On that date, you
will deliver to Seragen (a) a resignation as Vice Chairman, Chief Executive
Officer, President and a director of Seragen, effective as of the date hereof,
(b) a resignation as President and a director of Seragen Technology, Inc.,
effective as of the date hereof, and (c) a resignation as a director of Seragen
Biopharmaceuticals, Ltd. ("SBL"), effective as of the next meeting of SBL's
board of directors.
3. Seragen will continue to pay for all insurance and other employee
benefits being provided by Seragen to you on the date hereof through December
31, 1997, provided that if your consulting arrangement is terminated during the
Additional Consultive Period, your benefits shall continue for a period of 90
days after notice of termination or, if earlier, until December 31, 1997.
4. (a) It is agreed that you will be paid your deferred bonus for fiscal
year 1995 in the amount of $30,000 after January 1, 1997 and not later than
January 7, 1997.
(b) You have agreed to act as a consultant to Seragen for the period
beginning November 6, 1996 and ending December 31, 1996 (the "Initial Consulting
Period"). Your compensation will be at the rate of $12,500 per month during the
Initial Consulting Period, but neither you nor Seragen have any obligation for
any fixed number of days of consulting.
<PAGE> 2
(c) You have agreed to act as a consultant to Seragen for an
additional period beginning January 1, 1997 and ending December 31, 1997 (the
"Additional Consulting Period"). Your compensation during the Additional
Consulting Period will be at the rate of $5,000 per month, but neither you nor
Seragen have an obligation for any fixed number of days of consulting. Either
party may terminate the consulting arrangement during the Additional Consulting
Period upon 30 days' prior written notice to the other party, and Seragen shall
have no obligation to pay further compensation under this Section 4(c) after the
date of such termination.
(d) You will also be reimbursed for out-of-pocket expenses incurred in
connection with such consulting at the request or with the approval of Seragen
upon presentation of itemized statements accompanied by receipts.
(e) Your consulting services pursuant to Sections 4(b) and 4(c) shall
consist primarily of participating at the direction of and with the prior
approval of the Chief Executive Officer of Seragen in possible discussions
regarding the merger of Seragen with, or the sale of all or substantially all of
its assets to, another entity. If such a merger or sale of assets is consummated
and you actively participated in the consummation of such transaction, Seragen
agrees to pay you a fee of $100,000 upon the closing of such transaction.
(f) Within thirty (30) days after the date hereof, the Company will
grant to you non-qualified stock options under the Seragen, Inc. 1992 Long Term
Incentive Plan (the "Plan") to purchase 50,000 shares of the Company's common
stock, $.01 par value, at an exercise price equal to $5.00 per share. The
options shall become exercisable 50% on the date of grant and 50% on the first
anniversary of the date of grant. The options shall terminate ten years after
the date of grant.
5. You will return to Seragen, on or before December 31, 1997, all property
and documents of Seragen in your custody and possession.
6. In consideration of the covenants set forth herein, and more
particularly the monies and benefits to be provided to you, and Seragen's
release of you, and other good and valuable consideration, you, your agents,
heirs, legatees, successors and assigns (collectively hereinafter the
"Employee-Releasors"), hereby irrevocably and unconditionally release, remise,
and forever discharge Seragen, its divisions, subsidiaries and affiliates, and
its and their respective owners, stockholders, agents, directors, officers,
employees, representatives, attorneys, and their predecessors, successors,
heirs, executors, administrators and assigns, and all persons acting by,
through, under or in concert with any of them, (collectively hereinafter the
"Seragen-Releasees"), of and from any and all actions, causes of actions, suits,
debts, charges, complaints, claims, liabilities, obligations, promises,
agreements, controversies, damages, and expenses (including attorneys' fees and
costs actually incurred), of any nature whatsoever, in law or equity
(collectively "Claims"), which Employee-Releasors had, now have, or hereafter
may have against the Seragen-Releasees or any of
- 2 -
<PAGE> 3
them from the beginning of time to the date of this Agreement arising from or
related to Employee's relationship with Seragen as an employee, officer,
director or shareholder, or the termination thereof including, without
limitation: (i) Claims under the following statutes (as enacted and amended):
the Massachusetts Wage Statute, M.G.L. c.149, the Massachusetts Fair Employment
Practices Statute, M.G.L. c.15lB, the Massachusetts Equal Rights statute, M.G.L.
c.93, [Section] 102; the Massachusetts Workers Compensation Statute, M.G.L. c.
152, the Age Discrimination in Employment Act, 29 U.S.C. [Section] 621 ET SEQ.,
the Civil Rights Act of 1964, 42 U.S.C. [Section] 2000e-l ET SEQ., the Civil
Rights Act of 1991, the Fair Labor Standards Act, the Americans With
Disabilities Act, the Family Medical Leave Act of 1993, the Employee Retirement
Income Security Act; (ii) Claims for wrongful discharge, breach of express or
implied contract, breach of a covenant of good faith and fair dealing, violation
of public policy, defamation, interference with contractual relations,
intentional or negligent infliction of emotional distress, invasion of privacy,
misrepresentation, deceit, fraud, negligence; or (iii) any other statutory or
common law Claim under any state or federal law. Notwithstanding the foregoing,
this paragraph shall not release Seragen from any obligation set forth in this
Agreement, nor shall this paragraph be deemed to waive any rights you have to
vested benefits pursuant to Seragen's stock option plans, Employee Stock
Purchase Plan, 401(k) plan, and Seragen's medical, dental and life insurance
programs.
7. In consideration of the promises contained herein, and other good and
valuable consideration, Seragen hereby releases and forever discharges you from
any and all Claims (as defined in the prior paragraph), which Seragen had, now
has, or may have in the future, relating in any manner to your service as an
employee, officer or director of Seragen, so long as you were acting within the
scope of your authority in the performance of such duties.
Notwithstanding the foregoing, this paragraph shall not release you from
any obligation set forth in this Letter Agreement.
In accordance with the terms of Seragen's Certificate of Incorporation and
By-Laws, Seragen hereby confirms that you will remain covered by the
indemnification provisions thereof to the extent set forth therein, as well as
by Seragen's Directors and Officers Liability Insurance, as in effect from
time-to-time, to the extent set forth therein. This paragraph is not intended to
create any indemnification rights or coverage rights under Seragen's Directors
and Officers Liability Insurance that did not previously exist, but only to
confirm that this Agreement is not intended to affect the rights you would
otherwise have.
8. Except as expressly provided for herein or in provisions of the
Agreement which expressly survive the termination thereof, this Letter Agreement
supersedes any and all prior oral and/or written agreements, and sets forth the
entire agreement between Seragen and you. No variations or modifications hereof
shall be deemed valid unless reduced to writing and signed by the parties
hereto. The terms of this Letter Agreement are severable, and if for any reason
any part hereof shall be found to be unenforceable, the remaining terms and
conditions shall be enforced in full.
- 3 -
<PAGE> 4
9. You hereby acknowledge that you have read this Letter Agreement
carefully, that you have been afforded sufficient time to understand the terms
and effects of this Letter Agreement, that you have been given the opportunity
to consult with legal counsel, that you voluntarily are entering into and
executing this Letter Agreement and that neither Seragen nor its agents or
representatives have made any representations inconsistent with the terms and
effects of this Letter Agreement.
10. The parties acknowledge that you have been given a period of at least
twenty-one (21) days to consider the terms of this Letter Agreement. In
addition, should you accept the terms of this Letter Agreement by signing below,
you may rescind your assent to this Letter Agreement if, within seven (7) days
after the date you sign this Letter Agreement, you deliver to Mr. Reed Prior at
Seragen, Inc., 97 South Street, Hopkinton, Massachusetts 01748, a written notice
of recision. To be effective, such recision must be postmarked within the seven
(7) day period and sent by certified mail, return receipt requested, to Mr.
Prior.
If the foregoing accurately sets forth our understanding, please so
indicate by signing and returning the enclosed duplicate copy of this letter,
whereupon it will take effect as a legally binding agreement under seal between
us, governed in accordance with the laws of the Commonwealth of Massachusetts.
Very truly yours,
SERAGEN, INC.
By
---------------------------
Reed R. Prior
Chairman and Chief
Executive Officer
Accepted and Agreed:
- ---------------------
George W. Masters
- 4 -
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<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 6,756,878
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0
23,489,370
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