<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to ___________
Commission file number 0-21481
TRANSKARYOTIC THERAPIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 04-3027191
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
195 ALBANY STREET, CAMBRIDGE, MASSACHUSETTS 02139
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 349-0200
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 No XXX
Class Outstanding at November 26, 1996
Common Shares, $0.01 Par Value 16,616,415
<PAGE> 2
Transkaryotic Therapies, Inc.
Quarterly Report on Form 10-Q
For the Period Ended September 30, 1996
INDEX
PART 1. FINANCIAL INFORMATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
Condensed balance sheets as of September 30, 1996 and December 31, 1995
Condensed statements of operations for the three and nine months ended
September 30, 1996 and 1995 and for the period July 7, 1988 (date of
inception) throuth September 30, 1996
Condensed statements of cash flows for the nine months ended September 30,
1996 and 1995 and for the period July 7, 1988 (date of inception) through
September 30, 1996
Notes to condensed financial statements
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 4. Submissions of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
<PAGE> 3
PART 1. FINANCIAL INFORMATION
TRANSKARYOTIC THERAPIES, INC.
(A Company in the Development Stage)
<TABLE>
CONDENSED BALANCE SHEETS
(000's omitted, except share data)
<CAPTION>
September 30, December 31,
1996 1995
--------------------------
(Unaudited) Note
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 11,401 $ 11,539
Marketable securities 39,159 22,945
Prepaid expenses and other current assets 360 97
-------- --------
Total current assets 50,920 34,581
Property and equipment, net 3,519 3,999
Other assets 1,176 637
-------- --------
$ 55,615 $ 39,217
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilites:
Accounts payable $ 709 $ 515
Accrued expenses 936 542
-------- --------
Total current liabilities 1,645 1,057
Long-term portion of deferred rent 112 179
Redeemable Preferred Stock:
Class A redeemable preferred stock, $1.00 par value;
3,000 shares authorized, issued and outstanding 4,598 4,440
Stockholders' Equity:
Class A preferred stock, $1.00 par value;
3,000 shares authorized, issued and outstanding 3 3
Class B convertible preferred stock, $1.00 par value; 60,000 shares
authorized; 49,339 shares issued and outstanding 49 49
Class C convertible preferred stock, $1.00 par value; 1,875,000
shares authorized; 1,015,974 shares issued and outstanding 1,016 1,016
Class D convertible preferred stock, $1.00 par value;
280,367 shares authorized, issued and outstanding 280 280
Class E convertible preferred stock, $1.00 par value;
523,560 shares authorized, issued and outstanding 524 524
Class F convertible preferred stock, $1.00 par value;
1,071,429 shares authorized, issued and outstanding 1,071 1,071
Class G convertible preferred stock, $1.00 par value;
1,136,364, shares authorized; 1,133,589 shares issued and
outstanding in 1996; none authorized, issued or outstanding in 1995 1,134 --
Common stock, $.01 par value; 30,000,000 shares authorized:
5,197,627 and 5,197,662 shares issued and outstanding
in 1996 and 1995, respectively 52 52
Additional paid-in capital 85,440 58,331
Accretion of redeemable preferred stock dividends (1,598) (1,440)
Deficit accumulated during the development stage (33,548) (25,144)
Deferred compensation (5,163) (1,244)
Unrealized gain (loss) on available-for-sale securities -- 43
-------- --------
Total stockholders' equity 49,260 33,541
-------- --------
$ 55,615 $ 39,217
======== ========
<FN>
Note: The balance sheet at December 31, 1995 has been derived from the audited financial statements
at that date but does not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. See accompanying notes to
condensed financial statements. The accompanying notes are an integral part of these financial
statements.
</TABLE>
<PAGE> 4
TRANSKARYOTIC THERAPIES, INC.
(A Company in the Development Stage)
<TABLE>
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
(000's omitted, except share data)
<CAPTION>
For the Period
For the Three Months Ended For the Nine Months Ended July 7, 1988
September 30, September 30, (Date of
------------- ------------- Inception) Through
1996 1995 1996 1995 September 30, 1996
-------------------------- ------------------------- ------------------
<S> <C> <C> <C> <C> <C>
License and contract fee revenues from
Hoechst Marion Roussel, Inc. (HMRI) $ 1,975 $ 1,700 $ 3,950 $13,400 $ 29,350
Costs and expenses:
Research and development 3,503 2,744 10,342 7,950 47,069
General and administrative 1,535 898 3,446 2,635 19,329
------- ------- ------- ------- --------
Total costs and expenses 5,038 3,642 13,788 10,585 66,398
------- ------- ------- ------- --------
Income (loss) from operations (3,063) (1,942) (9,838) 2,815 (37,048)
Other income (expense):
Interest income 646 304 1,434 750 3,893
Interest expense -- -- -- (13) (308)
------- ------- ------- ------- --------
Other income, net 646 304 1,434 737 3,585
------- ------- ------- ------- --------
Income (loss) before provision
for income taxes (2,417) (1,638) (8,404) 3,552 (33,463)
Provision for income taxes -- -- -- 85 85
------- ------- ------- ------- --------
Net income (loss) $(2,417) $(1,638) $(8,404) $ 3,467 $(33,548)
======= ======= ======= ======= ========
Pro forma net income (loss) per share $ (0.17) $ (0.11) $ (0.59) $ 0.24
Shares used in computing pro forma
net income (loss) per share 14,255 14,256 14,255 14,636
</TABLE>
See accompanying notes to condensed financial statements. The accompanying notes
are an integral part of these financial statements.
<PAGE> 5
TRANSKARYOTIC THERAPIES, INC.
(A Company in the Development Stage)
<TABLE>
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(000's omitted)
<CAPTION>
For the Period
For the Nine Months Ended July 7, 1988
September 30, (Date of
------------- Inception) Through
1996 1995 September 30, 1996
-------- -------- -------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ (8,404) $ 3,467 $ (33,548)
Adjustments to reconcile net income (loss) to net
cash provided (used) by operating activities:
Depreciation and amortization 1,183 1,094 5,627
Compensation expense related to
equity issuances 803 358 1,829
Forgiveness of loan and interest receivable
from terminated employee 334
Accrued interest on convertible debt 217
Changes in operating assets and liabilities:
(Increase) decrease in prepaid expenses
and other current assets (263) 79 (419)
Increase (decrease) in accounts payable 194 (109) 709
Increase (decrease) in accrued expenses 327 (80) 1,048
-------- -------- ---------
Net cash provided by (used in) operating activities (6,160) 4,809 (24,203)
OPERATING ACTIVITIES
Sales of marketable securities 42,745 33,471 91,418
Purchases of marketable securities (59,002) (48,322) (130,577)
Property and equipment additions (676) (271) (9,050)
(Increase) decrease in employee loans 31 (20) (410)
License additions (534) 158 (924)
(Increase) in other assets (64) (32) (213)
-------- -------- ---------
Net cash used in investing activities (17,500) (15,016) (49,756)
FINANCING ACTIVITIES
Sale of Class A redeemable preferred
stock (September 1988 and May 1989) 3,000
Sale of Class A preferred stock (February 1990) 3,000
Sale of Class B convertible preferred stock 14,007
Sale of Class C convertible preferred stock 8,075
Sale of Class D convertible preferred stock to HMRI 4,735
Sale of Class E convertible preferred stock to HMRI 9,868 9,868
Sale of Class F convertible preferred stock 14,251
Sale of Class G convertible preferred stock 23,522 23,522
Issuance of convertible debt 5,000
Bank debt proceeds 1,497
Bank debt repayments (1,098) (1,497)
Sale of common stock, net -- -- (98)
-------- -------- ---------
Net cash provided by financing activities 23,522 8,770 85,360
-------- -------- ---------
Net increase (decrease) in cash and cash equivalents (138) (1,437) 11,401
Cash and cash equivalents at beginning of period 11,539 2,607 0
-------- -------- ---------
Cash and cash equivalents at end of period $ 11,401 $ 1,170 $ 11,401
======== ======== =========
SUPPLEMENTAL DISCLOSURE OF NONCASH
FINANCING ACTIVITIES:
Conversion of convertible debt and accrued
interest for Class B convertible preferred stock $ 5,218
</TABLE>
See accompanying notes to condensed financial statements. The accompanying notes
are an integral part of these financial statements.
<PAGE> 6
TRANSKARYOTIC THERAPIES, INC.
(A Company in the Development Stage)
September 30, 1996
Notes to Condensed Financial Statements
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, the
accompanying financial statements include all adjustments, consisting of normal
recurring accruals, necessary for a fair presentation of the financial
condition, results of operations and cash flows for the periods presented. The
results of operations for the interim period ended September 30, 1996 are not
necessarily indicative of the results to be expected for the year ended
December 31, 1996.
These financial statements should be read in conjunction with the
audited financial statements and notes thereto for the year ended December 31,
1995 included in the Company's Registration Statement on Form S-1 as filed with
the Securities and Exchange Commission.
2. PUBLIC OFFERING
On October 22, 1996, the Company completed an initial public offering
of its common stock by selling 2,500,000 shares of its common stock, resulting
in net proceeds to the Company of approximately $34,085,000, after deducting
estimated expenses of the offering. On the same date, the Company sold 333,333
unregistered shares of its Common Stock to Hoechst Marion Roussel, Inc. (HMRI)
for total proceeds of $4,999,995. Concurrent with the completion of the initial
public offering, all shares of Class A, B, C, D, E, F and G preferred stock
were converted into 8,585,455 shares of Common Stock pursuant to the automatic
conversion terms of the Company's Certificate of Incorporation. In connection
with these conversions, all such shares of convertible preferred stock were
canceled effective October 22, 1996.
On July 22, 1996, the Board of Directors, and on September 25, 1996,
the stockholders, authorized, subject to completion of the initial public
offering, (i) an increase in the authorized shares of Common Stock to
30,000,000 shares and (ii) 10,000,000 shares of undesignated preferred stock,
par value of $.01 per share.
<PAGE> 7
3. PRO FORMA FINANCIAL INFORMATION
<TABLE>
The following pro forma stockholders' equity summary as of September
30, 1996 gives effect to the conversion of the convertible preferred stock and
issuance of the Common Stock in the Company's initial public offering, and
to HMRI, completed on October 22, 1996:
<CAPTION>
Pro Forma as of
September 30, 1996
------------------
(000's omitted)
<S> <C>
Stockholders' equity:
Undesignated preferred stock, $.01 par value;
10,000,000 shares authorized, no shares issued
and outstanding $ 0
Common stock, $.01 par value, 30,000,000 shares
authorized; 16,616,415 shares issued and
outstanding 166
Additional paid-in capital 131,488
Deficit accumulated in the development stage (33,548)
Deferred compensation (5,163)
--------
Total stockholders' equity $ 92,943
========
</TABLE>
Pro forma net income (loss) per share is computed using the weighted
average number of common shares, including the Common Stock equivalents for
convertible preferred shares, assuming conversion at date of issuance, which
occurred upon the completion of the Company's initial public offering plus
dilutive equivalent shares from stock options and outstanding warrants using
the treasury stock method. Pursuant to the requirements of the Securities and
Exchange Commission, shares and equivalent shares issued by the Company during
the twelve-month period prior to the public offering have been included in the
calculations as if they were outstanding for all periods presented whether or
not they are anti-dilutive (using the treasury stock method). Historical
earnings per share have not been presented since such amounts are not deemed
meaningful due to the significant change in the Company's capital structure as
a result of the initial public offering.
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Transkaryotic Therapies, Inc. is engaged in the development and
commercialization of products based on the Company's proprietary Gene
Activation and gene therapy technologies. For its initial Gene Activation
products, the Company is focusing on currently-marketed proteins that are
medically useful, have been approved by health authorities and have achieved
significant revenues in major markets. For its gene therapy program, the
Company is focusing on the development and commercialization of cell-based
products for the long-term treatment of a broad range of chronic human
diseases. The Company commenced operations in 1988 and is at an early stage of
development.
To date, all revenues received by the Company have resulted from
research and development agreements, license fees, and interest on invested
funds; the Company has not received any revenues from the sale of products and
does not expect to receive any such revenues for at least several years. The
Company has incurred losses in each year of operation since inception, except
1995, and has accumulated losses since inception through September 30, 1996 of
approximately $33,548,000. These losses resulted principally from expenditures
under its research and development programs, and the Company expects to incur
significant operating losses over the next several years primarily due to
expanded research and development efforts, preclinical testing and clinical
trials of its product candidates, the acquisition of additional technologies,
the establishment of manufacturing capability, and the performance of
commercialization activities. In order to commercialize products, the Company
will need to develop genetically engineered cells, scale-up manufacturing,
complete preclinical and clinical testing and obtain regulatory approval.
The Company's success may depend in large part on its ability to obtain
patent protection for its processes and potential products in the U.S. and
other countries and, if necessary, to defend successfully patent infringement
claims that may be brought by competitors against the Company, and to obtain on
commercially acceptable terms licenses to use the patents of others in its
potential products and processes. The Company's failure to obtain such
protection, successfully defend any such claims, and obtain the right to use
such licenses could have a material adverse effect on the Company's business.
Furthermore, the Company's success will also depend on its ability to obtain
FDA approval to market its products. Compliance with applicable government
regulations governing each of the Company's potential products will require a
significant commitment of time, money, and effort by the Company, and there can
be no assurances that any approval will be granted on a timely basis, if at
all.
<PAGE> 9
Results of operations may vary significantly from quarter to quarter
depending on, among other factors, the progress of the Company's research and
development efforts, the receipt, if any, of additional license fees and
milestone payments, the timing of certain expenses, and the establishment of
collaborative research agreements.
RESULTS OF OPERATIONS
For the Three Months and Nine Months Ended September 30, 1996 and 1995
---------------------------------------------------------------------
Strategic alliance revenues from licenses and contract fees earned from
continuing collaborations with Hoechst Marion Roussel, Inc. ("HMRI") totaled
$1,975,000 in the third quarter of 1996, an increase of 16%, compared to
$1,700,000 for the same period in 1995. For the nine months ended September 30,
1996, strategic alliance revenues from HMRI totaled $3,950,000, a decrease of
70%, compared to $13,400,000 in the same period of 1995. The decrease in 1996
is due to a one-time license fee of $10 million received in the nine months
ended September 30, 1995.
The Company's total costs and expenses for the third quarter of 1996
increased by 38% to $5,038,000 from $3,642,000 in the comparable period for
1995. Research and development expenses increased 28% to $3,503,000 from
$2,744,000, principally due to the growth in the Company's Gene Activation and
gene therapy programs, including an increase in the number of employees engaged
in research and development activities and an increase in purchased laboratory
supplies. Other general and administrative expenses increased 70% in the third
quarter of 1996 to $1,535,000 from $898,000 in the comparable 1995 period,
principally due to increased legal expenses for patent filings, an increase in
accrued employee compensation and a one-time consulting fee of $200,000. For the
nine months ended September 30, 1996, total costs and expenses increased by 30%
to $13,788,000 from $10,585,000 in the nine months ended September 30, 1995,
primarily due to the increase in activities in the Company's Gene Activation
and gene therapy programs. Contributing significantly to the increase in
expenses were an increase in the number of employees engaged in research and
development activities, increased purchases of laboratory supplies, increased
equipment depreciation, and an increase in the expense recognized from
amortization of deferred compensation from issuances of stock and stock option
awards.
Interest income increased by 112% to $646,000 in the third quarter
ended September 30, 1996 compared to $304,000 in the comparable period in 1995
due to higher cash and marketable securities following the completion of two
preferred stock offerings in October and December 1995 and July and August
1996. For the nine months ended September 30, 1996, interest income of
$1,434,000 was nearly double the $750,000 interest income for the comparable
period of 1995, due to the higher cash and investment balances throughout 1996.
Interest expense was zero in 1996 compared to a $13,000 expense incurred in the
nine months ended September 30, 1995 prior to the repayment of a bank loan and
an equipment lease line of credit.
<PAGE> 10
For the third quarter ended September 30, 1996, the Company's net loss
totaled $2,417,000, or $0.17 per share, compared to the net loss of $1,638,000,
or $0.11 per share, in the comparable period of 1995, primarily due to the
increases in expenses.
For the nine months ended September 30, 1996, the Company incurred a
net loss of $8,404,000, a loss of $0.59 per share, compared to net income in
the nine months ended September 30, 1996 of $3,467,000, or $0.24 per share,
primarily due to the receipt of one-time up-front license fee revenues in 1995.
LIQUIDITY AND SOURCES OF CAPITAL
At September 30, 1996, the Company had cash, cash equivalents and
marketable securities totaling $50,560,000 compared to $33,484,000 at December
31, 1995. In July and August 1996, the Company sold shares of its Class G
Convertible Preferred Stock in a private placement resulting in proceeds of
$23,522,000 net of offering costs and expenses.
The Company had no material commitments for the acquisition of property
and equipment at September 30, 1996.
The Company expects to incur substantial additional research and
development expenses including continued increases in personnel and costs
related to research, preclinical testing and clinical trials, and for capital
asset expenditures.
On October 22, 1996, the Company completed its initial public offering
resulting in proceeds of approximately $34,085,000, after deducting estimated
expenses of the offering. In addition, the Company sold 333,333 shares of
unregistered Common Stock to Hoechst Marion Roussel, Inc. for an additional
proceeds of $4,999,995. At October 31, 1996 the Company held approximately
$88,931,000 in cash, cash equivalents and marketable securities. The Company
anticipates that the available cash will be adequate to satisfy its operating
expenses and capital expenditure requirements, as presently planned, through
1999. The Company intends to seek additional funding as required through
collaborative arrangements or through public or private financings, but there
can be no assurance that additional financing will be available on acceptable
terms, if at all.
FORWARD LOOKING STATEMENTS
Statements that are not historical facts, including statements about
TKT's confidence and strategies and the Company's expectations about future
products, technologies and opportunities, market demand or acceptance of future
products are forward looking statements that involve risks and uncertainties.
These uncertainties include commercialization or technology delays or
difficulties; timing
<PAGE> 11
and satisfactory completion of clinical trials; patent and proprietary rights
risks; changes in governmental regulations; lengthy approval processes; impact
of competitive products and prices; development of manufacturing, distribution
and marketing capabilities; dependence on collaborative partners; product
demand and market acceptance risks; legal, economic and other risks detailed in
the Prospectus, dated October 16, 1996, contained in TKT's Registration
Statement on Form S-1 (file number 333-10845).
<PAGE> 12
Part II. Other Information.
Item 1. Legal Proceedings.
The Company is currently involved, with respect to the Company's gene
therapy technology, in one interference proceeding requested by the Company and
declared by the U.S. Patent and Trademark Office (the "PTO"), as more fully
described in the Prospectus, dated October 16, 1996, contained in TKT's
Registration Statement on Form S-1 (file number 333-10845). The Company is not a
party to any other legal proceedings.
Item 2. Changes in Securities.
(a) Not applicable.
(b) Not applicable.
(c) Since July 1, 1996, the Registrant issued and sold the
following unregistered securities:
On July 10, 1996 and August 7, 1996, the Company sold an aggregate of
1,133,589 shares of Class G Convertible Preferred Stock to certain investors at
a purchase price of $22.00 per share for aggregate consideration of $24,938,958.
All of such shares of Class G Preferred Stock automatically converted into
1,457,559 shares of Common Stock at the closing of the Company's initial
public offering on October 22, 1996.
On October 22, 1996, the Company sold 333,333 unregistered shares of
Common Stock to Hoechst Marion Roussel, Inc. at a purchase price of $15.00 per
share for aggregate consideration of $4,999,995.
No underwriter was engaged in connection with the foregoing sales of
securities. Sales of the shares of Preferred Stock and shares of Common Stock
were made in reliance upon Section 4(2) of the Securities Act of 1933, as
amended (the "Act"), as transactions not involving any public offering. The
Company has reason to believe that all of the foregoing purchasers were familiar
with or had access to information concerning the operations and financial
condition of the Company, and all of those individuals acquired the shares for
investment and not with a view to the distribution thereof. At the time of
issuance, all of the foregoing shares of Preferred Stock and Common Stock were
deemed to be restricted securities for the purposes of the Act, and the
certificates representing such securities bore legends to that effect.
Item 4. Submissions of Matters to a Vote of Security Holders.
On July 5, 1996, prior to the date the Company's registration
statements on Form S-1 and Form 8-A became effective, the Company solicited, by
means of a Written Consent of Stockholders, approval for a Certificate of
Amendment to the Company's Amended and Restated Certificate of Incorporation
authorizing the designation of the Company's Class G
<PAGE> 13
Convertible Preferred Stock ("Class G Stock") consisting of 1,136,364 shares of
Class G Stock.
After giving effect to the conversion into shares of Common Stock of
all outstanding shares of Preferred Stock at the closing of the Company's
initial public offering, a total of 7,663,110 shares of Common Stock were voted
in favor of the proposals described above, no shares were voted against and
4,690,982 shares were not voted.
In addition, on September 25, 1996, also prior to the date the
Company's registration statements on Form S-1 and Form 8-A became effective, the
Company solicited, by means of a Written Consent of Stockholders, approval for
(i) a Certificate of Amendment to the Company's Restated Certificate of
Incorporation to increase the number of shares of Common Stock authorized for
issuance from 15,000,000 shares to 30,000,000 shares;
(ii) a Restated Certificate of Incorporation, to be filed with the
Delaware Secretary of State upon the closing of the Company's initial public
offering, to
(a) authorize a new class of undesignated Preferred Stock,
$.01 par value per share, consisting of 10,000,000 shares, the terms and rights
of which may be designated from time to time by the Board of Directors;
(b) delete Article IV in its entirety and replace it with a
new Article IV such that, effective upon the closing of a public offering in
which all outstanding shares of Preferred Stock automatically convert to Common
Stock, no authorized shares of Preferred Stock shall be reissued;
(c) delete Article VII in its entirety and replace it with a
new Article VII eliminating the liability of directors, except to the extent
that the General Corporation Law of the State of Delaware prohibits the
elimination or limitation of liability of directors for breaches of fiduciary
duty;
(d) delete Article VIII in its entirety and replace it with a
new Article VIII providing for indemnification of directors and officers in the
Certificate of Incorporation;
(e) delete Article IX and replace it with a new Article IX
which eliminates the right of stockholders to act by written consent and
establishes a supermajority threshold of 66 2/3% to subsequently repeal or amend
Article IX;
(f) add a new Article XII which specifies that only the
Chairman of the Board of Directors, the Chief Executive Officer (or if there is
no Chief Executive Officer, the President), the Board of Directors or the
holders of a majority of the capital stock of the Corporation entitled to vote
may call a Special Meeting of Stockholders and establishes a supermajority
threshold of 66 2/3% to subsequently repeal or amend Article XII; and
<PAGE> 14
(g) add a new Article XIII pursuant to which Section 203 of
the General Corporation Law of Delaware, as it may be amended from time to time,
shall apply to the Corporation;
(iii) the Amended and Restated By-Laws of the Company previously
approved by the Board of Directors; and
(iv) an amendment to the Company's 1993 Long-Term Incentive Plan
increasing the number of shares of Common Stock authorized for issuance to
2,250,000 shares (after giving effect to a nine-for-seven stock split declared
by the Board of Directors on August 15, 1996).
After giving effect to the conversion into shares of Common Stock of
all outstanding shares of Preferred Stock at the closing of the Company's
initial public offering, a total of 9,932,588 shares of Common Stock were voted
in favor of the proposals described above, no shares were voted against and
3,879,063 shares were not voted.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. The Exhibits filed as part of this Form 10-Q are listed
on the Exhibit Index immediately preceeding such Exhibits, which Exhibit Index
is incorporated herein by reference.
(b) Reports on Form 8-K. No reports were filed on Form 8-K during the
quarter ended September 30, 1996.
<PAGE> 15
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.
TRANSKARYOTIC THERAPIES, INC.
Date: November 26, 1996 By: /s/ Anthony R. Hall
-------------------------------------
Anthony R. Hall
Vice President, Finance and
Administration, Chief Financial
Officer (Principal Financial
Officer and Principal Accounting
Officer)
<PAGE> 16
EXHIBIT INDEX
-------------
Exhibit No. Description Page
- ----------- ----------- ----
4.1 Amended and Restated Certificate
of Incorporation of the Company
4.2 Amended and Restated By-laws
of the Company
11 Computation of Earnings Per Share
27 Financial Data Schedules (EDGAR)
<PAGE> 1
EXHIBIT 4.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
TRANSKARYOTIC THERAPIES, INC.
Transkaryotic Therapies, Inc., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,
does hereby certify as follows:
1. The Corporation filed its original Certificate of Incorporation with
the Secretary of State of the State of Delaware on July 7, 1988. A Restated
Certificate of Incorporation of the Corporation was filed with the Secretary of
State of the State of Delaware on February 14, 1992, which was subsequently
amended on April 16, 1993 and July 1, 1993. A Restated Certificate of
Incorporation of the Corporation was filed with the Secretary of State of the
State of Delaware on November 5, 1993, which was subsequently amended on May 18,
1994, March 1, 1995, October 26, 1995 and July 9, 1996.
2. At a meeting of the Board of Directors, a resolution was duly
adopted, pursuant to Sections 242 and 245 of the General Corporation Law of the
State of Delaware, setting forth an Amended and Restated Certificate of
Incorporation of the Corporation and declaring said Amended and Restated
Certificate of Incorporation advisable. The stockholders of the Corporation duly
approved said proposed Amended and Restated Certificate of Incorporation by
written consent in accordance with Sections 228, 242 and 245 of the General
Corporation Law of the State of Delaware, and written notice of such consent
<PAGE> 2
has been given to all stockholders who have not consented to said restatement.
The resolution setting forth the Amended and Restated Certificate of
Incorporation is as follows:
RESOLVED: That the Certificate of Incorporation of the Corporation be, and
hereby is, amended and restated in its entirety so that the same shall
read as follows:
ARTICLE I.
The name of the Corporation is Transkaryotic Therapies, Inc.
ARTICLE II.
The address of the Corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, City of Wilmington,
County of New Castle 19801. The name of its registered agent at such address is
The Corporation Trust Company.
ARTICLE III.
The nature of the business of the Corporation and the purposes for
which it is organized are:
1. To engage in research and development in the field of gene therapy
and to pursue various commercial applications of such research;
2. To engage in any other lawful act or activity for which corporations
may be organized under the General Corporation Law of the State of Delaware; and
3. In general, to possess and exercise all the powers and privileges
granted by the General Corporation Law of the State of Delaware or by any other
law of the State of Delaware or by this Certificate of Incorporation, together
with any powers incidental thereto, so far as such powers and privileges are
necessary or convenient to the conduct, promotion or attainment of the business
or purposes of the Corporation.
ARTICLE IV.
The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 40,000,000 shares, consisting of
(i) 30,000,000 shares of Common Stock, $.01 par value per share (the "Common
Stock") and (ii) 10,000,000 shares of Preferred Stock, $.01 par value per share
(the "Preferred Stock").
The following is a statement of the designations and the powers,
privileges and rights, and the qualifications, limitations or restrictions
thereof in respect of each class of capital stock of the Corporation.
- 2 -
<PAGE> 3
A. COMMON STOCK.
1. General. The voting, dividend and liquidation rights of the holders
of the Common Stock are subject to and qualified by the rights of the holders of
the Preferred Stock of any series as may be designated by the Board of Directors
upon any issuance of the Preferred Stock of any series.
2. Voting. The holders of the Common Stock are entitled to one vote for
each share held at all meetings of stockholders (and written actions in lieu of
meetings). There shall be no cumulative voting.
The number of authorized shares of Common Stock may be increased or
decreased (but not below the number of shares thereof then outstanding) by the
affirmative vote of the holders of a majority of the stock of the Corporation
entitled to vote, irrespective of the provisions of Section 242(b)(2) of the
General Corporation Law of Delaware.
3. Dividends. Dividends may be declared and paid on the Common Stock
from funds lawfully available therefor as and when determined by the Board of
Directors and subject to any preferential dividend rights of any then
outstanding Preferred Stock.
4. Liquidation. Upon the dissolution or liquidation of the Corporation,
whether voluntary or involuntary, holders of Common Stock will be entitled to
receive all assets of the Corporation available for distribution to its
stockholders, subject to any preferential rights of any then outstanding
Preferred Stock.
B. PREFERRED STOCK.
Preferred Stock may be issued from time to time in one or more series,
each of such series to have such terms as stated or expressed herein and in the
resolution or resolutions providing for the issue of such series adopted by the
Board of Directors of the Corporation as hereinafter provided. Any shares of
Preferred Stock which may be redeemed, purchased or acquired by the Corporation
may be reissued except as otherwise provided by law. Different series of
Preferred Stock shall not be construed to constitute different classes of shares
for the purposes of voting by classes unless expressly provided.
Authority is hereby expressly granted to the Board of Directors from
time to time to issue the Preferred Stock in one or more series, and in
connection with the creation of any such series, by resolution or resolutions
providing for the issue of the shares thereof, to determine and fix such voting
powers, full or limited, or no voting powers, and such designations, preferences
and relative participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, including without
limitation thereof, dividend rights, special voting rights, conversion rights,
redemption privileges and liquidation preferences, as shall be stated and
expressed in such resolutions, all to the full extent now or hereafter permitted
by the General Corporation Law of Delaware. Without limiting the
- 3 -
<PAGE> 4
generality of the foregoing, the resolutions providing for issuance of any
series of Preferred Stock may provide that such series shall be superior or rank
equally or be junior to the Preferred Stock of any other series to the extent
permitted by law. Except as otherwise specifically provided in this Certificate
of Incorporation, no vote of the holders of the Preferred Stock or Common Stock
shall be a prerequisite to the issuance of any shares of any series of the
Preferred Stock authorized by and complying with the conditions of this
Certificate of Incorporation, the right to have such vote being expressly waived
by all present and future holders of the capital stock of the Corporation.
ARTICLE V.
Except as otherwise provided in Section 3.2 of Article IV, the number
of directors of the Corporation shall be fixed from time to time in the manner
provided in the By-laws of the Corporation and may be increased or decreased
from time to time in the manner provided in such By-laws. Election of directors
need not be by written ballot except and to the extent provided in the By-laws
of the Corporation.
ARTICLE VI.
The Board of Directors of the Corporation is expressly authorized to
make, alter, or repeal the By-laws of the Corporation, but such authorization
shall not divest the stockholders of the power, nor limit their power, to adopt,
amend, or repeal such By-laws.
ARTICLE VII.
Except to the extent that the General Corporation Law of the State of
Delaware prohibits the elimination or limitation of liability of directors for
breaches of fiduciary duty, no director of the Corporation shall be personally
liable to the Corporation or its stockholders for monetary damages for any
breach of fiduciary duty as a director, notwithstanding any provision of law
imposing such liability. No amendment to or repeal of this provision shall apply
to or have any effect on the liability or alleged liability of any director of
the Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment.
ARTICLE VIII.
1. Actions, Suits and Proceedings Other than by or in the Right of the
Corporation. The Corporation shall indemnify each person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation), by
reason of the fact that he is or was, or has agreed to become, a director or
officer of the Corporation, or is or was serving, or has agreed to serve, at the
request of the Corporation, as a director, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust or
other enterprise (including any employee
- 4 -
<PAGE> 5
benefit plan) (all such persons being referred to hereafter as an "Indemnitee"),
or by reason of any action alleged to have been taken or omitted in such
capacity, against all expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him or on his
behalf in connection with such action, suit or proceeding and any appeal
therefrom, if he acted in good faith and in a manner he reasonably believed to
be in, or not opposed to, the best interests of the Corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in, or not
opposed to, the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful. Notwithstanding anything to the contrary in this Article, except
as set forth in Section 6 below, the Corporation shall not indemnify an
Indemnitee seeking indemnification in connection with a proceeding (or part
thereof) initiated by the Indemnitee unless the initiation thereof was approved
by the Board of Directors of the Corporation.
2. Actions or Suits by or in the Right of the Corporation. The
Corporation shall indemnify any Indemnitee who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was, or has agreed to become, a director or
officer of the Corporation, or is or was serving, or has agreed to serve, at the
request of the Corporation, as a director, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan), or by reason of any
action alleged to have been taken or omitted in such capacity, against all
expenses (including attorneys' fees) and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with such action, suit
or proceeding and any appeal therefrom, if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests of
the Corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery of Delaware or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of such liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses (including attorneys' fees)
which the Court of Chancery of Delaware or such other court shall deem proper.
3. Indemnification for Expenses of Successful Party. Notwithstanding
the other provisions of this Article, to the extent that an Indemnitee has been
successful, on the merits or otherwise, in defense of any action, suit or
proceeding referred to in Sections 1 and 2 of this Article, or in defense of any
claim, issue or matter therein, or on appeal from any such action, suit or
proceeding, he shall be indemnified against all expenses (including attorneys'
fees) actually and reasonably incurred by him or on his behalf in connection
therewith. Without limiting the foregoing, if any action, suit or proceeding is
disposed of, on the merits
- 5 -
<PAGE> 6
or otherwise (including a disposition without prejudice), without (i) the
disposition being adverse to the Indemnitee, (ii) an adjudication that the
Indemnitee was liable to the Corporation, (iii) a plea of guilty or nolo
contendere by the Indemnitee, (iv) an adjudication that the Indemnitee did not
act in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the Corporation, and (v) with respect to any criminal
proceeding, an adjudication that the Indemnitee had reasonable cause to believe
his conduct was unlawful, the Indemnitee shall be considered for the purposes
hereof to have been wholly successful with respect thereto.
4. Notification and Defense of Claim. As a condition precedent to his
right to be indemnified, the Indemnitee must notify the Corporation in writing
as soon as practicable of any action, suit, proceeding or investigation
involving him for which indemnity will or could be sought. With respect to any
action, suit, proceeding or investigation of which the Corporation is so
notified, the Corporation will be entitled to participate therein at its own
expense and/or to assume the defense thereof at its own expense, with legal
counsel reasonably acceptable to the Indemnitee. After notice from the
Corporation to the Indemnitee of its election so to assume such defense, the
Corporation shall not be liable to the Indemnitee for any legal or other
expenses subsequently incurred by the Indemnitee in connection with such claim,
other than as provided below in this Section 4. The Indemnitee shall have the
right to employ his own counsel in connection with such claim, but the fees and
expenses of such counsel incurred after notice from the Corporation of its
assumption of the defense thereof shall be at the expense of the Indemnitee
unless (i) the employment of counsel by the Indemnitee has been authorized by
the Corporation, (ii) counsel to the Indemnitee shall have reasonably concluded
that there may be a conflict of interest or position on any significant issue
between the Corporation and the Indemnitee in the conduct of the defense of such
action or (iii) the Corporation shall not in fact have employed counsel to
assume the defense of such action, in each of which cases the fees and expenses
of counsel for the Indemnitee shall be at the expense of the Corporation, except
as otherwise expressly provided by this Article. The Corporation shall not be
entitled, without the consent of the Indemnitee, to assume the defense of any
claim brought by or in the right of the Corporation or as to which counsel for
the Indemnitee shall have reasonably made the conclusion provided for in clause
(ii) above.
5. Advance of Expenses. Subject to the provisions of Section 6 below,
in the event that the Corporation does not assume the defense pursuant to
Section 4 of this Article of any action, suit, proceeding or investigation of
which the Corporation receives notice under this Article, any expenses
(including attorneys' fees) incurred by an Indemnitee in defending a civil or
criminal action, suit, proceeding or investigation or any appeal therefrom shall
be paid by the Corporation in advance of the final disposition of such matter,
provided, however, that the payment of such expenses incurred by an Indemnitee
in advance of the final disposition of such matter shall be made only upon
receipt of an undertaking by or on behalf of the Indemnitee to repay all amounts
so advanced in the event that it shall ultimately be determined that the
Indemnitee is not entitled to be indemnified by the Corporation as
- 6 -
<PAGE> 7
authorized in this Article. Such undertaking may be accepted without reference
to the financial ability of such person to make such repayment.
6. Procedure for Indemnification. In order to obtain indemnification or
advancement of expenses pursuant to Section 1, 2, 3 or 5 of this Article, the
Indemnitee shall submit to the Corporation a written request, including in such
request such documentation and information as is reasonably available to the
Indemnitee and is reasonably necessary to determine whether and to what extent
the Indemnitee is entitled to indemnification or advancement of expenses. Any
such indemnification or advancement of expenses shall be made promptly, and in
any event within 60 days after receipt by the Corporation of the written request
of the Indemnitee, unless with respect to requests under Section 1, 2 or 5 the
Corporation determines, by clear and convincing evidence, within such 60-day
period that the Indemnitee did not meet the applicable standard of conduct set
forth in Section 1 or 2, as the case may be. Such determination shall be made in
each instance by (a) a majority vote of a quorum of the directors of the
Corporation consisting of persons who are not at that time parties to the
action, suit or proceeding in question ("disinterested directors"), (b) if no
such quorum is obtainable, a majority vote of a committee of two or more
disinterested directors, (c) a majority vote of a quorum of the outstanding
shares of stock of all classes entitled to vote for directors, voting as a
single class, which quorum shall consist of stockholders who are not at that
time parties to the action, suit or proceeding in question, (d) independent
legal counsel (who may be regular legal counsel to the Corporation), or (e) a
court of competent jurisdiction.
7. Remedies. The right to indemnification or advances as granted by
this Article shall be enforceable by the Indemnitee in any court of competent
jurisdiction if the Corporation denies such request, in whole or in part, or if
no disposition thereof is made within the 60-day period referred to above in
Section 6. Unless otherwise provided by law, the burden of proving that the
Indemnitee is not entitled to indemnification or advancement of expenses under
this Article shall be on the Corporation. Neither the failure of the Corporation
to have made a determination prior to the commencement of such action that
indemnification is proper in the circumstances because the Indemnitee has met
the applicable standard of conduct, nor an actual determination by the
Corporation pursuant to Section 6 that the Indemnitee has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that the Indemnitee has not met the applicable standard of conduct.
The Indemnitee's expenses (including attorneys' fees) incurred in connection
with successfully establishing his right to indemnification, in whole or in
part, in any such proceeding shall also be indemnified by the Corporation.
8. Subsequent Amendment. No amendment, termination or repeal of this
Article or of the relevant provisions of the General Corporation Law of Delaware
or any other applicable laws shall affect or diminish in any way the rights of
any Indemnitee to indemnification under the provisions hereof with respect to
any action, suit, proceeding or investigation arising out of or relating to any
actions, transactions or facts occurring prior to the final adoption of such
amendment, termination or repeal.
- 7 -
<PAGE> 8
9. Other Rights. The indemnification and advancement of expenses
provided by this Article shall not be deemed exclusive of any other rights to
which an Indemnitee seeking indemnification or advancement of expenses may be
entitled under any law (common or statutory), agreement or vote of stockholders
or disinterested directors or otherwise, both as to action in his official
capacity and as to action in any other capacity while holding office for the
Corporation, and shall continue as to an Indemnitee who has ceased to be a
director or officer, and shall inure to the benefit of the estate, heirs,
executors and administrators of the Indemnitee. Nothing contained in this
Article shall be deemed to prohibit, and the Corporation is specifically
authorized to enter into, agreements with officers and directors providing
indemnification rights and procedures different from those set forth in this
Article. In addition, the Corporation may, to the extent authorized from time to
time by its Board of Directors, grant indemnification rights to other employees
or agents of the Corporation or other persons serving the Corporation and such
rights may be equivalent to, or greater or less than, those set forth in this
Article.
10. Partial Indemnification. If an Indemnitee is entitled under any
provision of this Article to indemnification by the Corporation for some or a
portion of the expenses (including attorneys' fees), judgments, fines or amounts
paid in settlement actually and reasonably incurred by him or on his behalf in
connection with any action, suit, proceeding or investigation and any appeal
therefrom but not, however, for the total amount thereof, the Corporation shall
nevertheless indemnify the Indemnitee for the portion of such expenses
(including attorneys' fees), judgments, fines or amounts paid in settlement to
which the Indemnitee is entitled.
11. Insurance. The Corporation may purchase and 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 (including any employee benefit plan) against any expense,
liability or loss incurred by him in any such capacity, or arising out of his
status as such, whether or not the Corporation would have the power to indemnify
such person against such expense, liability or loss under the General
Corporation Law of Delaware.
12. Merger or Consolidation. If the Corporation is merged into or
consolidated with another corporation and the Corporation is not the surviving
corporation, the surviving corporation shall assume the obligations of the
Corporation under this Article with respect to any action, suit, proceeding or
investigation arising out of or relating to any actions, transactions or facts
occurring prior to the date of such merger or consolidation.
13. Savings Clause. If this Article or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each Indemnitee as to any expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement in
connection with any action, suit, proceeding or investigation, whether civil,
criminal or administrative, including an action by or in the right
- 8 -
<PAGE> 9
of the Corporation, to the fullest extent permitted by any applicable portion of
this Article that shall not have been invalidated and to the fullest extent
permitted by applicable law.
14. Definitions. Terms used herein and defined in Section 145(h) and
Section 145(i) of the General Corporation Law of Delaware shall have the
respective meanings assigned to such terms in such Section 145(h) and Section
145(i).
15. Subsequent Legislation. If the General Corporation Law of Delaware
is amended after adoption of this Article to expand further the indemnification
permitted to Indemnitees, then the Corporation shall indemnify such persons to
the fullest extent permitted by the General Corporation Law of Delaware, as so
amended.
ARTICLE IX.
1. Meetings of the stockholders of the Corporation may be held within
or without the State of Delaware, as the By-laws may provide. The books and
records of the Corporation may be kept within or without the State of Delaware
at such place or places as may be designated from time to time by the By-laws
and/or the Board of Directors of the Corporation.
2. Stockholders of the Corporation may not take any action by written
consent in lieu of a meeting. Notwithstanding any other provisions of law, the
Certificate of Incorporation or the By-Laws of the Corporation, each as amended,
and notwithstanding the fact that a lesser percentage may be specified by law,
the affirmative vote of the holders of at least seventy-five percent (75%) of
the shares of capital stock of the Corporation issued and outstanding and
entitled to vote shall be required to amend or repeal, or to adopt any provision
inconsistent with, this Article IX.
ARTICLE X.
Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in manner as the said court directs. If a majority in number
representing three-fourths in value of the stockholders or class of stockholders
of this Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all
- 9 -
<PAGE> 10
the stockholders or class of stockholders, of this Corporation, as the case
maybe, and also on this Corporation.
ARTICLE XI.
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Amended and Restated Certificate of
Incorporation in any manner now or hereafter prescribed by law, and all rights
conferred upon stockholders herein are granted subject to such reservation.
ARTICLE XII
Special meetings of stockholders may be called at any time by only the
Chairman of the Board of Directors, the Chief Executive Officer (or if there is
no Chief Executive Officer, the President), the Board of Directors or the
holders of a majority of the outstanding capital stock of the Corporation
entitled to vote. Business transacted at any special meeting of stockholders
shall be limited to matters relating to the purpose or purposes stated in the
notice of meeting. Notwithstanding any other provision of law, this Certificate
of Incorporation or the By-Laws of the Corporation, each as amended, and
notwithstanding the fact that a lesser percentage may be specified by law, the
affirmative vote of the holders of at least sixty-six and two-thirds percent
(66 2/3%) of the shares of capital stock of the Corporation issued and
outstanding and entitled to vote shall be required to amend or repeal, or to
adopt any provision inconsistent with, this Article XII.
ARTICLE XIII
Section 203 of the General Corporation Law of Delaware, as it may be
amended from time to time, shall apply to the Corporation.
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
affixed hereto and this Amended and Restated Certificate of Incorporation to be
signed by its President this 22nd day of October, 1996.
TRANSKARYOTIC THERAPIES, INC.
By: /s/ Richard F Selden
----------------------------------
Richard F Selden, M.D., Ph.D.
President
- 10 -
<PAGE> 1
EXHIBIT 4.2
TRANSKARYOTIC THERAPIES, INC.
AMENDED AND RESTATED BY-LAWS
ARTICLE I
OFFICERS
Transkaryotic Therapies, Inc. (the "Corporation") shall maintain a
registered office in the State of Delaware. The Corporation may also have other
offices at such other places either within or without the State of Delaware, as
the Board of Directors may from time to time designate or the business of the
Corporation may require.
ARTICLE II
STOCKHOLDERS
Section 1. Annual Meeting: The annual meeting of Stockholders for the
election of Directors and the transaction of any other business as may properly
come before such meeting shall be held on the first Monday in June of each year,
or as soon after such date as may be practicable, in such City and State and at
such time and place as may be designated by the Board of Directors, and set
forth in the notice of such meeting. If said day be a legal holiday, said
meeting shall be held on the next succeeding business day. At the annual meeting
any business may be transacted and any corporate action may be taken, whether
stated in the notice of meeting or not, except as otherwise expressly provided
by statute or the Certificate of Incorporation
Section 2. Special Meetings: Special meetings of the Stockholders for
any purpose may be called at any time by the Board of Directors, the Chairman of
the Board, or if no Chairman has been elected, by the President and Chief
Executive Officer, and shall be called by the Chairman of the Board or, if none,
by the President and Chief Executive Officer at the request of the holders of a
majority of the outstanding shares of capital stock entitled to vote. Special
meetings shall be held at such place or places within or without the State of
Delaware as shall from time to time be designated by the Board of Directors and
stated in the notice of such meeting. At a special meeting no business shall be
transacted and no corporate action shall be taken other than that stated in the
notice of the meeting.
Section 3. Notice of Meetings: Written notice of the date, time and
place of any Stockholders' meeting, whether annual or special, shall be given to
each Stockholder entitled to vote thereat, by mailing the same to him at his
address as the same appears upon the records or the Corporation not less than
ten (10) nor more than sixty (60) days prior to the date of such meeting. Notice
of any adjourned meeting need not be given other than by announcement at the
meeting so adjourned, unless otherwise ordered in connection with such
adjournment. Such further notice, if any, shall be given as may be required by
law.
<PAGE> 2
Section 4. Waiver of Notice: Notice of meeting need not be given to any
Stockholder who submits a signed waiver of notice, in person or by proxy,
whether before or after the meeting. The attendance of any Stockholder at a
meeting, in person or by proxy, without protesting prior to the conclusion of
the meeting the lack of notice of such meeting, shall constitute a waiver of
notice by him.
Section 5. Quorum: Any number of Stockholders, together holding at
least a majority of the capital stock of the Corporation issued and outstanding
and entitled to vote, who shall be present in person or by proxy at any meeting
duly called, shall constitute a quorum for all purposes except as may otherwise
be provided by law.
Section 6. Adjournment of Meetings: If less than a quorum shall attend
at the time for which a meeting shall have been called, the meeting may be
adjourned from time to time by a majority vote of the Stockholders present or by
proxy and entitled to vote thereat, without notice other than by announcement at
the meeting until a quorum shall attend. Any meeting at which a quorum is
present may also be adjourned in like manner and for such time or upon such call
as may be determined by a majority vote of the Stockholders present in person or
by proxy and entitled to vote thereat. At any adjourned meeting at which a
quorum shall be present, any business may be transacted and any corporate action
may be taken which might have been transacted at the meeting as originally
called.
Section 7. Voting: Each Stockholder entitled to vote at any meeting may
vote either in person or by proxy, duly appointed by instrument in writing
subscribed by such Stockholder and bearing a date not more than eleven months
prior to said meeting, unless said proxy provides for a longer period. The
holders of Common Stock shall be entitled to one vote in respect of each share
held on all matters submitted to a vote of shareholders. When a quorum is
present at any meeting, the holders of a majority of the stock present or
represented and voting on a matter (or if there are two or more classes of stock
entitled to vote as separate classes, then in the case of each such class, the
holders of a majority of the stock of that class present or represented and
voting on a matter) shall decide any matter to be voted upon by the Stockholders
at such meeting, except when a different vote is required by express provision
of law, the Certificate of Incorporation or these By-laws. Any election by
Stockholders shall be determined by a plurality of the votes cast by the
Stockholders entitled to vote at the election.
Section 8. Nomination of Directors: Only persons who are nominated in
accordance with the following procedures shall be eligible for election as
Directors. Nomination for election to the Board of Directors of the Corporation
at a meeting of Stockholders may be made by the Board of Directors or by any
Stockholder of the Corporation entitled to vote for the election of Directors at
such meeting who complies with the notice procedures set forth in this Section
8. Such nominations, other than those made by or on behalf of the Board of
Directors, shall be made by notice in writing delivered to mailed by first class
United States mail, postage prepaid, to the Secretary, and received not less
than 60 days nor more than 90 days prior to such meeting; provided, however,
that if less than 70 days' notice or prior public disclosure of the date of the
meeting is given to Stockholders, such nomination shall have been mailed or
delivered to the Secretary not later than the close of business of the 10th day
following the date on which the notice of the meeting was mailed or such public
disclosure was made, whichever
- 2 -
<PAGE> 3
occurs first. Such notice shall set forth (a) as to each proposed nominee (i)
the name, age, business address and, if known, residence address of each such
nominee, (ii) the principal occupation or employment of each such nominee, (iii)
the number of shares of stock of the Corporation which are beneficially owned by
each such nominee, and (iv) any other information concerning the nominee that
must be disclosed as to nominees in proxy solicitations pursuant to Regulation
14A under the Securities Exchange Act of 1934, as amended (including such
person's written consent to be named as a nominee and to serve as a Director if
elected); and (b) as to the Stockholder giving the notice (i) the name and
address, as they appear on the Corporation's books, of such Stockholder and (ii)
the class and number of shares of the Corporation which are beneficially owned
by such Stockholder. The Corporation may require any proposed nominee to furnish
such other information as may reasonably be required by the Corporation to
determine the eligibility of such proposed nominee to serve as a Director of the
Corporation.
The chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
foregoing procedure, and if he should so determine, he shall so declare to the
meeting and the defective nomination shall be disregarded.
Section 9. Notice of Business at Annual Meetings: At an annual meeting
of the Stockholders, only such business shall be conducted as shall have been
properly brought before the meeting. To be properly brought before an annual
meeting, business must be (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors, (b)
otherwise properly brought before the meeting by or at the direction of the
Board of Directors, or (c) otherwise properly brought before an annual meeting
by a Stockholder. For business to be properly brought before an annual meeting
by a Stockholder, if such business relates to the election of Directors of the
Corporation, the procedures in Section 8 must be complied with. If such business
relates to any other matter, the Stockholder must have given timely notice
thereof in writing to the Secretary. To be timely, a Stockholder's notice must
be delivered to or mailed and received at the principal executive offices of the
Corporation not less than 60 days nor more than 90 days prior to the meeting;
provided, however, that in the event that less than 70 days' notice or prior
public disclosure of the date of the meeting is given or made to Stockholders,
notice by the Stockholder to be timely must be so received not later than the
close of business on the 10th day following the date on which such notice of the
date of the meeting was mailed or such public disclosure was made, whichever
occurs first. A Stockholder's notice to the Secretary shall set forth as to each
matter the Stockholder proposes to bring before the annual meeting (a) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (b) the name and
address, as they appear on the Corporation's books, of the Stockholder proposing
such business, (c) the class and number of shares of the Corporation which are
beneficially owned by the Stockholder, and (d) any material interest of the
Stockholder in such business. Notwithstanding anything in these By-laws to the
contrary, no business shall be conducted at any annual meeting except in
accordance with the procedures set forth in this Section 9 and except that any
Stockholder proposal which complies with Rule 14a-8 of the proxy rules (or any
successor provision) promulgated under the Securities Exchange Act of 1934, as
amended, and is to be included in the Corporation's proxy statement for an
- 3 -
<PAGE> 4
annual meeting of Stockholders shall be deemed to comply with the requirements
of this Section 9.
The chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that business was not properly brought before the meeting
in accordance with the provisions of this Section 9, and if he should so
determine, the chairman shall so declare to the meeting that any such business
not properly brought before the meeting shall not be transacted.
Section 10. Action Without Meeting: Unless otherwise provided in the
Certificate of Incorporation, any action required or permitted to be taken by
Stockholders for or in connection with any corporate action may be taken without
a meeting, without prior notice and without a vote, if a consent or consents in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted and shall be delivered to the
Corporation by delivery to its registered office in Delaware by hand or
certified or registered mail, return receipt requested, to its principal place
of business or to an officer or agent of the Corporation having custody of the
book in which proceedings of meetings of stockholders are recorded. Each such
written consent shall bear the date of signature of each Stockholder who signs
the consent. No written consent shall be effective to take the corporate action
referred to therein unless written consents signed by a number of Stockholders
sufficient to take such action are delivered to the Corporation in the manner
specified in this paragraph within sixty days of the earliest dated consent so
delivered.
If action is taken by consent of Stockholders and in accordance with
the foregoing, there shall be filed with the records of the meetings of
stockholders the writing or writings comprising such consent.
If action is taken by less than unanimous consent of Stockholders,
prompt notice of the taking of such action without a meeting shall be given to
those who have not consented in writing and a certificate signed and attested to
by the Secretary of the Corporation that such notice was given shall be filed
with the records of the meetings of stockholders.
In the event that the action which is consented to is such as would
have required the filing of a certificate under any provision of the General
Corporation Law of the State of Delaware, if such action had been voted upon by
the Stockholders at a meeting thereof, the certificate filed under such
provision shall state, in lieu of any statement required by such provision
concerning a vote of Stockholders, that written consent has been given under
Section 228 of said General Corporation Law and that written notice has been
given as provided in such Section 228.
Notwithstanding the foregoing, if at any time the Corporation shall
have a class of stock registered pursuant to the provisions of the Securities
Exchange Act of 1934, as amended, for so long as such class is registered, any
action by the Stockholders of such class must be taken at an annual or special
meeting of Stockholders and may not be taken by written consent.
- 4 -
<PAGE> 5
Section 11. Organization. The Chairman of the Board, or in his absence
the Vice Chairman of the Board designated by the Chairman of the Board, or the
President, in the order named, shall call meetings of the Stockholder to order,
and shall act as chairman of such meeting; provided, however, that the Board of
Directors may appoint any Stockholder to act as chairman of any meeting in the
absence of the Chairman of the Board. The Secretary of the Corporation shall act
as secretary at all meetings of the Stockholders; but in the absence of the
Secretary at any meeting of the Stockholders, the presiding officer may appoint
any person to act as secretary of the meeting.
ARTICLE III
DIRECTORS
Section 1. Number and Qualifications: The Board of Directors shall
consist of not less than three (3) nor more than seven (7) Directors. The
Directors need not be Stockholders.
Section 2. Responsibilities: The general management of the affairs of
the Corporation shall be vested in the Board of Directors, which may delegate to
Officers, employees and to committees of Directors such powers and duties as it
may from time to time see fit, subject to the limitations hereinafter set forth,
and except as may otherwise be provided by law.
Section 3. Election and Term of Office: The Directors shall be elected
by the Stockholders at the annual meeting of Stockholders. If the election of
Directors shall not be held on the day designated by the By-laws, the Directors
shall cause the same to be held as soon thereafter as may be convenient. The
Directors chosen at any annual meeting shall hold office except as hereinafter
provided, until the next annual election and until the election and
qualification of their successors.
Section 4. Removal and Resignation of Directors: Any Director may be
removed from the Board of Directors, only for cause, by the holders of
two-thirds of the shares of outstanding stock entitled to vote at any special
meeting of the Stockholders called for that purpose, and the office of such
Director shall forthwith become vacant. Any Director may resign at any time.
Such resignation shall take effect at the time specified therein, and if no time
be specified at the time of its receipt by the Chairman of the Board or if no
Chairman has been elected, by the President and Chief Executive Officer, or by
the Secretary. The acceptance of a resignation shall not be necessary to make it
effective, unless so specified therein.
Section 5. Filling of Vacancies: Any vacancy among the Directors,
occurring from any cause whatsoever, may be filled by a majority of the
remaining Directors, though less than a quorum, provided, however, that the
Stockholders removing any Director may at the same meeting fill the vacancy
caused by such removal, and provided further, that if the Directors fail to fill
any such vacancy, the Stockholders may at any special meeting called for that
purpose fill such vacancy. In case of any increase in the number of Directors,
the additional Directors may be elected by the Directors in office prior to such
increase. Any person elected to fill a vacancy shall hold office, subject to the
right of removal as hereinbefore provided, until the next annual election and
until the election and qualification of his successor.
- 5 -
<PAGE> 6
Section 6. Regular Meetings: The Board of Directors shall hold an
annual meeting for the purpose of organization and the transaction of any
business immediately after the annual meeting of the Stockholders, provided a
quorum is present. Other regular meetings may be held at such times as may be
determined from time to time by resolution of the Board of Directors.
Section 7. Special Meetings: Special meetings of the Board of Directors
may be called at any time by the Chairman of the Board of Directors, if any, or
by the President and Chief Executive Officer.
Section 8. Notice and Place of Meetings: Regular meetings of the Board
of Directors may be held without notice at such time and place as shall be
designated by resolution of the Board of Directors. Notice shall be required,
however, for special meetings. Notice of any special meeting shall be
sufficiently given if mailed to each Director at his residence or usual place of
business at least two (2) days before the day on which the meeting is to be
held, or if sent to him at such place by telegraph or cable, or delivered
personally or by telephone not later than 24 hours prior to the time at which
the meeting is to be held. No notice of the annual meeting shall be required if
held immediately after the annual meeting or the Stockholders and if a quorum is
present. Notice of a meeting need not be given to any Director who submits a
signed waiver of notice before or after the meeting, nor to any Director who
attends the meeting without protesting the lack of notice prior thereto or at
its commencement.
Section 9. Business Transacted at Meetings: Any business may be
transacted and any corporate action may be taken at any regular or special
meeting of the Board of Directors at which a quorum shall be present, whether
such business or proposed action be stated in the notice of such meeting or not,
unless special notice of such business or proposed action shall be required by
law.
Section 10. Quorum: A majority of the entire Board of Directors shall
be necessary to constitute a quorum for the transaction of business, and the
acts of a majority of the Directors present at a meeting at which a quorum is
present shall be the acts of the Board of Directors, unless otherwise provided
by law, the Certificate of Incorporation or these By-laws. If a quorum is not
present at a meeting of the Board of Directors, a majority of the Directors
present may adjourn the meeting to such time and place as they may determine
without notice other than announcement at the meeting until enough Directors to
constitute a quorum shall attend. When a quorum is once present to organize a
meeting, it is not broken by the subsequent withdrawal of any Directors.
Section 11. Action Without a Meeting: Any action required or permitted
to be taken by the Board of Directors or any committee thereof may be taken
without a meeting if all members of the Board or the committee consent in
writing to the adoption of a resolution authorizing the action. The resolution
and the written consents thereto by the members of the Board or committee shall
be filed with the minutes of the proceedings of the Board or committee.
Section 12. Participation by Telephone: Any one or more members of the
Board or any committee thereof may participate in a meeting of the Board or such
committee by means of a conference telephone or similar communications equipment
allowing all persons participating in
- 6 -
<PAGE> 7
the meeting to hear each other at the same time. Participation by such means
shall constitute presence in person at a meeting.
Section 13. Compensation: The Board of Directors may establish by
resolution reasonable compensation of all Directors for services to the
Corporation as Directors, including a fixed fee, if any, incurred in attending
each meeting. Nothing herein contained shall preclude any Director from serving
the Corporation in any other capacity, as an Officer, agent or otherwise, and
receiving compensation therefor.
ARTICLE IV
COMMITTEES
Section 1. Executive Committee: The Board of Directors, by resolution
passed by a majority of the entire Board, may designate three (3) or more
Directors to constitute an Executive Committee to hold office at the pleasure of
the Board, which Committee shall, during the intervals between meetings of the
Board of Directors, have and exercise all of the powers of the Board of
Directors in the management of the business and affairs of the Corporation,
Subject only to such restrictions or limitations as the Board of Directors may
from time to time specify, or as limited by the Delaware General Corporation
Law, and shall have power to authorize the seal of the Corporation to be affixed
to all instruments which may require it. Any member of the Executive Committee
may be removed at any time, with or without cause, by a resolution of a majority
of the entire Board of Directors. Any person ceasing to be a Director shall ipso
facto cease to be a member of the Executive Committee. Any vacancy in the
Executive Committee occurring from any cause whatsoever may be filled from among
the Directors by a resolution of a majority of the entire Board of Directors.
Section 2. Other Committees: Other committees whose members are to be
Directors, may be appointed by the Board of Directors, which committees shall
hold office for such time and have such powers and perform such duties as may
from time to time be assigned to them by the Board of Directors or the committee
appointing them. Any member of such a committee may be removed at any time, with
or without cause, by the Board of Directors or the committee appointing such
committee. Any vacancy in a committee occurring from any cause whatsoever may be
filled by the Board of Directors or the committee appointing such committee.
Section 3. Resignation: Any member of a committee may resign at any
time. Such resignation shall be made in writing and shall take effect at the
time specified therein, or, if no time be specified, at the time of its receipt
by the Chairman of the Board, if any, the President and Chief Executive Officer
or the Secretary. The acceptance of a resignation shall not be necessary to make
it effective unless so specified therein.
Section 4. Quorum: A majority of the members of a committee shall
constitute a quorum. The act of a majority of the members of a committee present
at any meeting at which a quorum is present shall be the act of such committee.
The members of a committee shall act only as a committee, and the individual
members thereof shall have no powers as such.
- 7 -
<PAGE> 8
Section 5. Record of Proceedings: Each committee shall keep a record of
its acts and proceedings, and shall report the same to the Board of Directors
when and as required by the Board of Directors.
Section 6. Organization, Meetings, Notices: A committee may hold its
meetings at the principal office of the Corporation, or at any other place upon
which a majority of the committee may at any time agree. Each committee may make
such rules as it may deem expedient for the regulation and carrying on of its
meetings and proceedings, Unless otherwise ordered by the Executive Committees
any notice of a meeting of such committee may be given by the Secretary or by
the chairman of the committee and shall be sufficiently given if mailed to each
member at his residence or usual place of business at least five (5) days before
the day on which the meeting is to be held, or if sent to him at such place by
telecopy, telegraph or cable, or delivered personally or by telephone not later
than 24 hours prior to the time at which the meeting is to be held.
Section 7. Compensation: The members of any committee shall be entitled
to such compensation as may be established by resolution of the Board of
Directors.
ARTICLE V
OFFICERS
Section l. Number: The Officers of the Corporation shall be a President
and Chief Executive Officer, a Secretary and a Treasurer, and such Vice
Presidents and other Officers as may be appointed in accordance with the
provisions of Section 3 of this Article V. The Board of Directors, in its
discretion, may also elect a Chairman of the Board of Directors.
Section 2. Election, Term of Office and Qualifications: The Officers,
except as provided in Section 3 of this Article V, shall be chosen annually by
the Board of Directors. Each such Officer shall, except as herein otherwise
provided, hold office until the selection and qualification of his successor.
Any two or more offices may be held by the same person, except the offices of
President and Chief Executive Officer and Secretary.
Section 3. Other Officers: Other Officers, including, without
limitation, one or more Vice Presidents, Assistant Secretaries and Assistant
Treasurers, may from time to time be appointed by the Board of Directors, which
other Officers shall have such powers and perform such duties as may be assigned
to them by the Board of Directors or the Officer or committee appointing them.
All such Officers shall be corporate officers of the Corporation with the power
to hind the Corporation by acts within the scope or their authority.
Section 4. Removal of Officers: Any Officer of the Corporation may be
removed from office, with or without cause, by a vote of a majority of the Board
of Directors.
Section 5. Resignation: Any Officer of the Corporation may resign at
any time. Such resignation shall be in writing and shall take effect at the time
specified therein, and if no time be specified, at the time of its receipt by
the Chairman of the Board, if any, the President and
- 8 -
<PAGE> 9
Chief Executive Officer or the Secretary. The acceptance of a resignation shall
not be necessary in order to make it effective, unless so specified therein.
Section 6. Filling of Vacancies: A vacancy in any office shall be
filled by the Board of Directors.
Section 7. Compensation: The compensation of the Officers shall be
fixed by the Board of Directors, or by any committee upon whom such power may be
conferred by the Board of Directors.
Section 8. Chairman of the Board of Directors: The Chairman of the
Board of Directors, if one is elected, shall be a Director and shall preside at
all meetings of the Board of Directors and of the Stockholders at which he shall
be present. He shall have power to call special meetings of the Stockholders or
of the Board of Directors or of the Executive Committee at any time and shall
have such power and perform such other duties as may from time to time be
assigned to him by the Board of Directors.
Section 9. President and Chief Executive Officer: The President and
Chief Executive Officer shall have responsibility for the general direction of
the business affairs and property of the Corporation, and of its several
Officers, and shall have and exercise all such powers and discharge such duties
as usually pertain to the office of President and Chief Executive Officer. He
shall have responsibility for the day-to-day affairs of the Corporation, subject
to the control of the Board of Directors. He shall perform such duties as may be
assigned to him from time to time by the Board of Directors and shall, in the
absence of the Chairman of the Board, perform and carry out the functions of the
Chairman of the Board.
Section 10. Secretary: The Secretary shall attend all meetings of the
Board of Directors and of the Stockholders and record all votes and the minutes
of all proceedings in a book to be kept for that purpose, and shall perform like
duties for any Committee appointed by the Board. He shall give or cause to be
given notice of all meetings of Stockholders and special meetings of the Board
of Directors and shall perform such other duties as may be prescribed by the
Board of Directors. He shall keep in safe custody the seal of the Corporation
and affix it to any instrument when so authorized by the Board of Directors.
Section 11. Treasurer: The Treasurer shall have custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositaries as may be designated by the Board of
Directors. He shall disburse the funds of the Corporation as may he ordered by
the Board, taking proper vouchers for such disbursements, and shall render to
the President and Chief Executive Officer and Directors at the regular meetings
of the Board, or whenever they may require, an account of all his transactions
as Treasurer and of the financial condition of the Corporation. He may be
required to give bond for the faithful discharge of his duties.
- 9 -
<PAGE> 10
ARTICLE VI
CAPITAL STOCK
Section 1. Issue of Certificates of Stock: Certificates of capital
stock shall be in such form as shall be approved by the Board of Directors. They
shall be numbered in the order of their issue, and shall be signed by the
Chairman of the Board of Directors, the President and Chief Executive Officer or
any Vice President, and by the Treasurer or any Assistant Treasurer or the
Secretary or any Assistant Secretary, and the seal of the Corporation or a
facsimile thereof shall be impressed, affixed or reproduced thereon. In case any
Officer or Officers who shall have signed any such certificate or certificates
shall cease to be such Officer or Officers of the Corporation, whether because
of death, resignation or otherwise, before such certificate or certificates
shall have been delivered by the Corporation, such certificate or certificates
may nevertheless be adopted by the Corporation and be issued and delivered as
though the person or persons who signed such certificate or certificates have
not ceased to be such Officer or Officers of the Corporation.
Section 2. Registration and Transfer of Shares: The name of each person
owning a share of the capital stock or the Corporation shall be entered on the
books of the Corporation together with the number of shares held by him, the
numbers of the certificates covering such shares and the dates of issue of such
certificates. The shares of stock of the Corporation shall be transferable on
the books of the Corporation by the holders thereof in person, or by their duly
authorized attorneys or legal representatives, on surrender and cancellation of
certificates for a like number of shares, accompanied by an assignment of power
of transfer endorsed thereon or attached thereto, duly executed, and with such
proof of the authenticity of the signature as the Corporation or its agents may
reasonably require. A record shall be made of each transfer. The Board of
Directors may make other and further rules and regulations concerning the
transfer and registration of certificates for stock.
Section 3. Lost, Destroyed and Mutilated Certificates: The holder of
any stock of the Corporation shall immediately notify the Corporation of any
loss, theft, destruction or mutilation of the Certificates therefor. The
Corporation may issue a new certificate of stock in the place of any certificate
theretofore issued by it and alleged to have been lost, stolen or destroyed. The
Board of Directors may, in its discretion, require the owner of the lost, stolen
or destroyed certificate, or his legal representatives, to give the Corporation
a bond, in such sum not exceeding trouble the value of the stock and with such
surety or sureties as they may require, to indemnify it against any claim that
may be made against it by reason of the issue of such new certificate and
against all other liability in the premises, or may remit such owner to such
remedy or remedies as he may have under the laws of the State of Delaware.
- 10 -
<PAGE> 11
ARTICLE VII
DIVIDENDS AND SURPLUS
Section 1. General Discretion of Directors: The Board of Directors
shall have power to fix and vary the amount to be set aside or reserved as
working capital of the Corporation, or as reserves, or for other proper purposes
of the Corporation, and, subject to the requirements of the Certificate of
Incorporation, to determine whether any part of the surplus or net profits of
the Corporation shall be declared in dividends and paid to the Stockholders, and
to fix the date or dates for the payment of dividends.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section l. Fiscal Year: The fiscal year of the Corporation shall
commence on the first day of January and end on the last day of December.
Section 2. Corporate Seal: The corporate seal shall be in such form as
approved by the Board of Directors and may be altered at its pleasure. The
corporate seal may be used by causing it or a facsimile thereof to be impressed,
affixed or reproduced by the Secretary or Assistant Secretary of the
Corporation.
Section 3. Notices: Except as otherwise expressly provided, any notice
required by these By-laws to be given shall be sufficient if given by depositing
the same in a post office or letter box in a sealed wrapper with first class
postage prepaid thereon and addresses to the person entitled thereto at his
address, as the same appears upon the books of the Corporation, or by
telecopying, telegraphing or cabling the same to such person at such address;
and such notice shall be deemed to be given at the time it was mailed,
telecopied, telegraphed or cabled.
Section 4. Waiver it Notice: Any Stockholder or Director may at any
time, by writing or by telecopy, telegraph or cable, waive any notice required
to be given under these By-laws, and if any Stockholder or Director shall be
present at any meeting his presence shall constitute a waiver of such notice.
Section 5. Contracts, Checks, Drafts: The Board of Directors, except as
may otherwise be required by law, may authorize any Officer or Officers, agent
or agents, in the name of and on behalf of the Corporation to enter into any
contract or execute or deliver any instrument. All checks, drafts or other
orders for the payment of money, notes or other evidences of indebtedness issued
in the name of the Corporation, shall be signed by such Officer or Officers,
agent or agents of the Corporation, and in such manner, as shall be designated
from time to time by resolution of the Board of Directors.
Section 6. Deposits: All funds of the Corporation shall be deposited
from time to time to the credit of the Corporation in such bank or banks, trust
companies or other depositaries as the Board of Directors may select, and, for
the purpose of such deposit, checks, drafts, warrants and other orders for the
payment of money which are payable to the order of the Corporation, may be
endorsed for deposit, assigned and delivered by any Officer of the Corporation,
or by
- 11 -
<PAGE> 12
such agents of the Corporation as the Board of Directors, the Chairman of the
Board, if any, or the President and a Chief Executive Officer may authorize for
that purpose.
Section 7. Voting Stock of Other Corporations: Except as otherwise
ordered by the Board of Directors or the Executive Committee, the Chairman of
the Board, if any, or the President and Chief Executive Officer shall have full
power and authority on behalf of the Corporation to attend and to act and to
vote at any meeting of the stockholders of any corporation of which the
Corporation is a stockholder and to execute a proxy to any other person to
represent the Corporation at any such meeting, and at any such meeting the
Chairman of the Board, if any, or the President and Chief Executive Officer or
the holder of any such proxy, as the case may be, shall possess and may exercise
any and all rights and powers incident to ownership of such stock and which, as
owner thereof, the Corporation might have possessed and exercised if present.
The Board of Directors or the Executive Committee may from time to time confer
like powers upon any other person or persons.
Section 8. Indemnification of Officers and Directors: The Corporation
shall indemnify any and all of its Directors or Officers, who shall serve as an
Officer or Director of this Corporation or of any other corporation at the
request of this Corporation, to the fullest extent permitted under and in
accordance with the laws of the State of Delaware.
ARTICLE IX
AMENDMENTS
Section 1. By the Board of Directors: These By-laws may be altered,
amended or repealed or new by-laws may be adopted by the affirmative vote of a
majority of the Directors present at any regular or special meeting of the Board
of Directors at which a quorum is present.
Section 2. By the Stockholders: Except as otherwise provided in Section
3, these Bylaws may be altered, amended or repealed or new by-laws may be
adopted by the affirmative vote of the holders of a majority of the shares of
the capital stock of the Corporation issued and outstanding and entitled to vote
at any regular or special meeting of Stockholders, provided notice of such
alteration, amendment, repeal or adoption of new by-laws shall have been stated
in the notice of such regular or special meeting.
Section 3. Certain Provisions: Notwithstanding any other provision of
law, the Certificate of Incorporation or these By-laws, and notwithstanding the
fact that a lesser percentage may be specified by law, the affirmative vote of
the holders of at least seventy-five percent (75%) of the shares of the capital
stock of the Corporation issued and outstanding and entitled to vote shall be
required to amend or repeal, or to adopt any provision inconsistent with
Sections 2, 7, 8, 9, 10 and 11 of Article II, Article III or Article IX of these
By-laws.
Dated: September 25, 1996.
- 12 -
<PAGE> 1
<TABLE>
Exhibit 11 - Statement Re: Computation of Earnings (Loss) Per Share - Pro Forma
(000's omitted, except per share data)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Weighted average common shares outstanding 5,197 5,198 5,197 5,196
Effect of preferred stock - assumed converted
at date of issuance 5,777 5,777 5,777 5,663
Weighted average common stock equivalent shares
resulting from stock options and warrants -- -- -- 496
Effect of common and common stock equivalent
shares issued by the Company during the twelve
month period immediately preceding the Company's
initial public offering in October 1996 (using the
treasury stock method) 3,281 3,281 3,281 3,281
------- ------- ------- -------
Shares used in computing pro forma
net income (loss) per share 14,255 14,256 14,255 14,636
======= ======= ======= =======
Net income (loss) $(2,417) $(1,638) $(8,404) $ 3,467
Pro forma net income (loss) per share $ (0.17) $ (0.11) $ (0.59) $ 0.24
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 11,400,986
<SECURITIES> 39,159,386
<RECEIVABLES> 30,812
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 50,920,753
<PP&E> 8,985,378
<DEPRECIATION> 5,466,332
<TOTAL-ASSETS> 55,615,271
<CURRENT-LIABILITIES> 1,644,688
<BONDS> 0
<COMMON> 51,977
4,597,773
4,077,258
<OTHER-SE> 45,131,575
<TOTAL-LIABILITY-AND-EQUITY> 55,615,271
<SALES> 0
<TOTAL-REVENUES> 3,950,000
<CGS> 0
<TOTAL-COSTS> 13,788,411
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (8,404,249)
<INCOME-TAX> 0
<INCOME-CONTINUING> (8,404,249)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,404,249)
<EPS-PRIMARY> (.59)
<EPS-DILUTED> (.59)
</TABLE>
